The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for February 16, 2001

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  Novartis reported results for the year 2000.  Animal Health sales were CHF 1,083 million ($672 million), an increase of 17% over 1999 (9% increase in local currencies).  Interceptor and Fortekor posted solid growth, and the farm animal business grew overall driven by Tiamulin sales.  The acquisitions of Vericore, the Biostar product range, and Cobequid also made important contributions to sales.  2000 Operating income for the Animal Health group were CHF 179 million ($111 million), a decrease of 17% from 1999.  The decline was attributed to one-time acquisition and separation costs and product-mix changes.  Increase in research and development increased from 7% to 8% of sales. (company website)

>  Eli Lilly reported that sales for animal health division Elanco in the fourth quarter 2000 were $197.3 million, an increase of 3% compared with the fourth quarter of 1999.  For the full year of 2000, animal health sales increased 6% to $668.5 million. Excluding the effect of exchange rates, sales grew by 7% for the quarter and 10% for the year. (company website)

>  Pharmacia reported sales for the animal health division were $118 million in the fourth quarter of 2000, a decrease of 9% from the comparable period in 1999.  Sales for the full year 2000 were $442 million, an increase of 5% over 1999. (company website)

>  Smithfield Foods, Inc. reported earnings for the third quarter ended January 28, 2001 of $80.8 million compared to $17.5 million a year ago. Results in the quarter included a nonrecurring, pretax gain of $76.5 million from the sale of 6.7 million shares of IBP, Inc.  Excluding this nonrecurring gain, net income totaled $37.2 million. Net income in the first nine months of fiscal 2001 was $170.0 million compared with net income of $46.6 million in the same period last year.  Excluding the nonrecurring gain, net income totaled $126.3 million. The third quarter and first nine months of fiscal 2001 benefited from the acquisition of Murphy Farms, which effectively doubled the size of the company’s hog raising operations.  The third quarter and nine-month results for fiscal 2000 included only a one-month contribution from Murphy.  Sales in the third quarter were $1.5 billion, up from $1.4 billion in the same period a year ago.  Sales for the first nine months of fiscal 2001 were $4.4 billion, compared to $3.7 billion last year, a 17% increase. (PRNewswire)

Company News Releases

> Schering-Plough launched a new topical preparation for treating otitis externa in dogs.  Mometamax contains the active ingredients gentamicin sulfate, clotrimazole, and mometasone furoate monohydrate and is indicated for is indicated for the treatment of otitis externa associated with yeast (Malassezia pachydermatis) and/or bacteria susceptible to gentamicin in dogs. (CVM – Federal Register)

>  The FDA approved an abbreviated new animal drug application (ANADA) filed by Blue Ridge Pharmaceuticals, Inc. for use of pyrantel pamoate chewable tablets for the removal of certain gastrointestinal parasites and prevention of reinfection in puppies and dogs.  (AnimalNet – Federal Register)

>  Neogen Corporation announced the introduction of a test kit for the leading cause of gastroenteritis, just in time to aid food producers comply with pending governmental regulation. Neogen’s new test kit, Reveal for Salmonella enteritidis, provides commercial egg producers with a quick and easy method of detecting the dangerous pathogen, as the FDA prepares to implement Se-reduction regulations.  Se became the leading cause of salmonellosis in the U.S. in 1994.  The foodborne illness caused by Se is generally due to eating raw, incompletely cooked, or recontaminated eggs.  Ingestion of Se-contaminated poultry meat is the second leading cause of this illness. (PRNewswire)

>  Ralston Purina Company announced the launch of a consumer Web site that supports the company’s product line in the pet treat category.  This launch reinforces last year’s introduction of the Purina Right Bites product line into the market.  Developed for both dogs and cats, the product line combines treats with nutrients to support pets’ overall health.  Varieties include Overall Health, Immune System, Bones & Teeth, and Skin & Coat for dogs, and Hairball,
Overall Health, Tartar Control & Bone Building, and Antioxidant for cats. (PRNewswire)

>  Farnam Livestock Products, a division of Farnam Companies, Inc., announced that it has developed an innovative, practically fool-proof printing system for livestock ear tags. New Z
with DuraMark Printing stays on because it is protected by a clear layer permanently heat-bonded to the tag.  The same tough, durable material is used to laminate bullet-proof glass. (company press release)

>  Grocery giant Safeway is looking at ways to use genetic tests that lead to the production of healthier, more flavorful beef for shoppers.  The grocery chain is developing alliances with a beef grower, Future Beef, and a biotech firm, AniGenics, to use the genetic tests. These tests would identify bulls and cows with traits including fast weight gain, disease resistance and tenderness. Cattle ranchers could use the information to breed the best animal, improve beef quality and be part of a profit-sharing alliance.  AniGenics will develop fast, inexpensive DNA sampling tests that will track cattle, which will be tagged and tracked for two years before they reach the packing plant. Data will be recorded on how long the animals take to reach certain weight targets, how often they get sick and how much feed they consume. (AnimalNet – AgWeb)

> VPL announced that, as exclusive licensee of the Pilling Weck veterinary surgical line, the brand name will now be known as VPL Weck.  Under the new partnership, the manufacture and design of the instruments will stay the same and VPL Weck will continue to offer the same warranties and services.  This includes the service of sharpening and repair of
surgical instruments, regardless of brand.  (company press release)

>  GenomicFX and Incyte Genomics, Inc. announced that GenomicFX will utilize Incyte’s gene databases and custom genomic services to develop advanced genetic information tools, which can be used to improve meat quality, food safety, and livestock production efficiency. Through this partnership, GenomicFX will have access to Incyte’s LifeSeq Gold and Zooseq databases.  Incyte will provide custom services that will enable GenomicFX to create proprietary database resources for cattle and swine.  The databases will facilitate GenomicFX’s development of new
diagnostic and evaluation tools that improve livestock breeding programs and production practices.  Financial terms were not disclosed. New products created by GenomicFX may include a blood test to help livestock breeders select animals that produce higher-quality meat, and an
identification system that can verify the breed or origin of a cut of meat in the retail meat case. (PRNewswire)

>  Gold Kist Inc. has voluntarily recalled more than 420,000 pounds of chicken that may be contaminated with an agricultural insecticide. A South Carolina farmer who raises chickens for the company told Gold Kist on Jan. 25 that about 2,200 chickens suddenly died. Laboratory tests revealed the chickens ate lethal amounts of a crop insecticide called Aldicarb. Gold Kist said it shipped meat from unaffected chickens after two laboratory tests showed no insecticide residues. But after further reviewing the test data, the USDA requested a voluntary recall. (AP)

>  Hydromer, Inc. announced the signing of a license and supply agreement with Kleencare Hygiene for Hydromer’s patented T-HEXX ORO Barrier Teat Dip for the treatment and prevention of mastitis in dairy cattle. Under the agreement, Kleencare will manufacture, distribute and sell T-HEXX ORO under a non-exclusive license in Western Europe Hydromer will supply the
patented T-HEXX Barrier concentrate, and provide marketing and technical support as it does with its current North American licensees. (Business Wire)

  New Technology

Brakke Consulting continually monitors for technology advances that may have application in animal health and nutrition. Much of what we currently see are technologies that require new thinking and new business models to fully exploit their commercial potential. From the latest, amongst others, in diagnostics, food safety, vaccines and immunotherapeutics we have contacts in universities and biotechnology startups.

John Short works with many of these contacts and has over 30 years of experience in the animal health business as a leader in R&D and manufacturing on an international basis. If you would like to discuss your technology requirements and need help in determining how best to fit these new
technologies with your current R&D strengths and business needs please contact John Short at (828) 236 0585 or our Dallas office at (972) 243 4033.

Brakke Consulting has the experience, insight, abilities, and contacts that provide our clients with the highest quality services in the animal health, pet, veterinary, and specialty chemicals markets.  Please contact any of our offices for a confidential consultation on our range of services.  Contact information for all offices are available on our website at and click on a starred location on the world map.

Animal Health News

>   The drug industry boosted its estimate of antibiotic use in chickens, cows and other animals but said the drugs mostly were for treatment or prevention of disease, not growth promotion. About 20.5 million pounds of drugs were given to animals in 1999, up 15% from 1998, according to a survey released by the Animal Health Institute. More than 80% of the antibiotic use found in the latest survey was for therapeutic purposes, as opposed to growth promotion. Many of the antibiotics can be used for both purposes, however. (AP)

>  The Canadian Cattle Identification Agency (CCIA) announced six additional tag options have been approved for use in the Canadian Cattle Identification Program. These tags have been tested under trial conditions and have met the Program’s criteria for retention, readability and ability to withstand tampering. Ketchum Manufacturing Reyflex Extra Large Tag, Focus Industries Dakota Brand Medium Tag, Dominion Veterinary Labs Leader Large Tag, Dominion Veterinary Labs Leader Extra Large Tag, Ram-Bull Ltd. CAN-TAG Dalesman Large Tag, and Destron Fearing Duflex Extra Large Tag.  The Canadian Cattle Identification Program began on January 1, 2001. All cattle in Canada are to be tagged with an approved CCIA ear tag by the time
they leave the herd of origin. There are now 17 approved tags made by seven manufacturers. CCIA-approved tags bear the trademark half maple leaf with letters CA, a visual 9-digit individual ID number, and either a barcode or electronic chip for automatic reading. (AnimalNet – CCIA News Release)

> A new company called Canitech is being formed to create a genomic map of a dog. The company is currently seeking angel investors to back the firm. The company is on the verge of creating a team of staff and completing technology licensing agreements. The high resolution genomic map created by Canitech will be used to aid the development of new medical products for the welfare of humans as well as dogs. Part of the genomic mapping process involves following a gene as it alters from generation to generation. Pedigree records of pure breed dogs actually make it easier to follow the progress of a gene in pure breed dogs than in humans. (AnimalNet – The Electronic Telegraph)

>  Two major British food retailers will be the first to offer meat products from animals fed with non-genetically modified (GM) feed. In a poll of more than 1,000 British consumers conducted by one of the retail chains, about two-thirds said they would prefer products from animals fed on a non-GM diet. (AnimalNet – The Meating Place)

>  Australia’s biotechnology industry will benefit from a $A 66 million injection of new  commonwealth funding as a result of an announcement backing Australia’s Ability. The Minister for Industry, Science and Resources said that the increased funding was a clear indicator of the Government’s ongoing support for biotechnology and builds on the $A 30 million National Biotechnology Strategy announced last year. (Avcare)

>  Two USDA scientists have won a technology transfer award for providing the beef industry with a computer model that helps ranchers and farmers use up-to-date research information to match feed and genetic resources to best meet market demands.  The computer model, named DECI (Decision Evaluator for the Cattle Industry), explores “what if?” management scenarios to help producers avoid costly mistakes or missed opportunities. DECI ties several databases together in
a way that allows producers to use large amounts of research information.  The most recent DECI version, released in November 2000, includes considerations of feedlot performance and carcass characteristics of beef cattle. More than one thousand copies of the DECI have been issued to
date, including 12 at various universities. (AnimalNet – The

Western Veterinary Conference – Las Vegas, Nevada

The 73rd annual Western Veterinary Conference ended this week in Las Vegas, Nevada.  Record-setting attendance included over 5,800 veterinarians, 2,560 technicians, 51 veterinary students and over 1,900 exhibitors.  Dr. Steve Crane and the Officers and Directors of the WVC have succeeded in making it one of the largest veterinary meetings in the world.

Agribusiness News

>  The European parliament voted overwhelmingly in favor of tough rules to test and monitor the safety of GM food and crops before they can be authorized for sale, marketing or even planting in the EU.  No new GM crops have been approved by the EU since April 1998 and a de facto moratorium on further approvals has been in place since June 1999.  Many countries have argued that it is politically unacceptable to restart the stalled approvals process until stricter rules governing the use of GM food can be put in place.  With yesterday’s vote a tough new regulatory framework is ready to be implemented. Strict regulations governing the labeling and traceability of GM food are also on the way. David Bowe, the Labour MEP who steered the legislation through said that this effectively means the end of the moratorium.  New GM approvals will probably arrive before the autumn, and this time next year there will probably be new GM crops in British fields. The European commission is desperate to lift the moratorium as soon as possible because it fears it will be sued by increasingly frustrated US multinationals such as Monsanto.  Although the legislation will take 18 months to become law, the EC has made no secret of the fact that it wants it to take immediate effect provided GM firms give their word that they will abide by the new rules in the meantime. (Emarkets – The Guardian Unlimited)

Brakke Consulting Viewpoint
This week’s newsletter points out both the new and the old.  We’ve been saying for several years that the food production and marketing companies will start driving the production of animal protein.  As we discuss in the Brakke 2001 Animal Health Industry Overview, we believe the future for genetics when incorporated into a health system that results in improved animal protein has a bright future.  Those that do not have products or services that fit into this new business model will have a difficult time in the future.  Now is the time to think outside of the box if you’re planning to be one of the leaders serving the animal protein business in the future.

As for the old, just another case of contaminated poultry meat that was caused by one or more producers that have poor quality control within their operations.  The compound involved to my knowledge is not approved for use on or in poultry in any form.  These types of incidences contribute to consumers the concern with the animal protein that they are purchasing at the super

Finally, what a great Western Veterinary Conference. If you missed it, you missed one of the best meetings in some time.  Dr. Crane should receive lots of thank you cards and calls from the industry for the major changes taking place in the management of this meeting.  He even provided us with a room to present the Overview that had background music for the first few minutes. 

[Ron Brakke]
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