Animal Health News & Notes for January 26, 2001

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Brakke Consulting’s
Animal Health News & Notes for January 26, 2001
Copyright © Brakke Consulting, Inc.
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Company Earnings Releases

>  Pfizer reported fourth quarter sales of Animal Health were down 30% to $292 million, reflecting the size of the initial distribution of Revolution requested by veterinarians in the U.S. in the fourth quarter of 1999, competitive pressures on key brands, continuing weakness in U.S. and European livestock markets, and the negative impact of foreign exchange.  Full-year 2000 animal health sales were $1,055 million, a decrease of 22% over 1999. (PRNewswire)

> Schering-Plough reported fourth quarter sales of animal health products were up 14% to $216 million (23% when foreign exchange is excluded), with the increase primarily due to the June 2000 acquisition of the animal health business of Takeda Chemical Industries, Ltd. in Japan. Worldwide sales of animal health products in 2000 totaled $720 million, up 7% (12% when foreign exchange is excluded), primarily due to the June 2000 acquisition of the Takeda animal health business. (PRNewswire)

> Ralston Purina Company announced first quarter earnings before unusual items of $81 million compared to pro forma earnings from continuing operations before unusual items of $89 million the prior year.  Pro forma comparisons are necessary because Ralston spun off its Battery Products business on April 1, 2000. First quarter sales were $731million compared to $728 million in the prior year first quarter. Sales for North American Pet Foods decreased 2% in the quarter on lower volumes and an unfavorable size mix, partially offset by a favorable product mix.  International Pet Foods’ sales increased 6% in the quarter. Sales for Golden Products increased 13% in the quarter due to significant volume increases in scooping litter and new product introductions in the third quarter of the prior year.  (PRNewswire)

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Company News Releases

>  Bayer AG asked Tweedy, Browne Co., one of its major U.S. shareholders, to provide more details on a proposal to split the company into pharmaceutical, chemical and farm chemical units.
Tweedy, Browne, which holds 1 million Bayer shares in its Global Value Fund, sent a letter to Bayer last month seeking a vote on a split-up, which it says would boost investor returns. Tweedy said it expects to reply to Bayer’s requests in a week. Bayer shares currently trade at 18 times expected earnings for next year. That compares with 42 times expected earnings for Aventis SA, the drugmaker that was created through the combination of Hoechst AG of Germany and Rhone-Poulenc SA. The company last year hired Deutsche Bank AG and Credit Suisse First Boston to help it explore options for its units. (Bloomberg)

> Fort Dodge announced issuance of a conditional license from the USDA for a vaccine to prevent equine protozoal myeloencephalitis (EPM).  Conditional licenses are issued for a product shown to be pure and safe that demonstrates a reasonable expectation of efficacy, while data to establish efficacy and potency are obtained.  After six months, the data collected regarding the vaccine’s efficacy, potency and performance will be evaluated to determine whether a regular license will be issued. (Veterinary Practice News)

>  Blue Ridge Pharmaceuticals launched its new SNAP Foal IgG Test.  The test kits enable veterinarians to test for IgG levels at the foal’s side within minutes, instead of waiting 24 to 48 hours for results from a reference laboratory.  (DVM Newsmagazine)

>  Heska announced the introduction of its new Chem-Elite Advanced Chemistry System.  The Chem-Elite System provides blood chemistry analysis designed for high volume veterinary practices.  Veterinarians can run individual tests, pre-programmed batteries of tests or customized profiles.  (company press release)

>  Synbiotics announced USDA approval of its new feline heartworm test, Witness FHW.  The test is an antibody detection test that offers a quicker, less-complicated format that its older Assure FH product.  (Veterinary Practice News)

>  The FDA approved an abbreviated new animal drug application (ANADA) filed by Med-Pharmex, Inc. The ANADA provides for oral use of ivermectin solution in horses for the treatment and control of various species of internal and cutaneous parasites. (AnimalNet – Federal Register)

>  Operation Bass, the nation’s largest bass fishing tournament organization, has signed a sponsorship agreement with ALPO dog food, a Friskies PetCare Inc. brand. The multi-level partnership will support the 2001 Wal-Mart FLW Tour, EverStart Series and Wal-Mart Bass Fishing League.  (Business Wire)

>  Biopure Corporation announced that it has contracted with three established veterinary distributors to support European sales of the company’s intravenous Oxygen Therapeutic solution, Oxyglobin, for the treatment of canine anemia.  This distribution network will provide veterinarians in the European Union access to a treatment option previously available only in the United States.  Oxyglobin received marketing clearance from the U.S. FDA in January 1998 and from the European Commission in November 1999. Biopure plans to introduce Oxyglobin in selected European countries within the next three months.  The European distributors are Arnolds Veterinary Products Ltd. in the United Kingdom, A. Albrecht GmbH + Co. in Germany and
Centravet in France.  England-based Dales Pharmaceuticals Ltd. will import, store and release the product to the European market. (PRNewswire) 

>  Distributors Processing Inc., introduced a new anticoccidial feed additive at the Atlanta International Poultry Expo January 17-19, 2001. The product has received regulatory approval in seven countries, with pending approvals in 19 additional countries.  Cocci-Guard’s patented active ingredient is neither an ionophore nor a synthetic chemical and offers poultry producers a new option for rotation and shuttle programs.  The product has no pre-slaughter withdrawal and is compatible with all growth promoting antibiotics.  Long term feeding and passage studies have demonstrated a low potential for the development of coccidial resistance. (company press release)

> Aspen Pet Products Holdings, Inc., a newly formed holding company, has acquired Aspen Pet Products, Cider Mill Farms Company, and Snuffy’s Pet Products.  BancBoston Capital, the leading investor in the new entity, partnered with Aspen’s executive management team and other investors in the transaction. (Pet Business)

>  ALR Technologies, Inc. formally debuted the ALRT Pet Reminder, a pharmaceutical administration reminder product, at the 2001 North American Veterinary Conference (NAVC), where it received a positive response from attending veterinarians and veterinary technicians. In response to this positive feedback, ALR Tech is increasing production of the ALRT Pet Reminder in order to have enough product to allow expansion to the West Coast within 60 days. Designed to increase pet owner compliance in the administration of monthly and daily pharmaceuticals, ALRT Pet Reminder uses both visual and audio cues to remind pet owners when to administer animal health medications, such as heartworm preventives, flea control products and arthritic medications. (Business Wire)

> Webvan Group, Inc. announced a strategic relationship with PETsMART.com that will create a pet store on webvan.com. PETsMART.com will appear as a stand-alone “store-within-a-store” on
webvan.com, adding popular pet foods, supplies, and accessories to Webvan’s Web store. In addition, Webvan customers will be able to link directly to the PETsMART.com site, which carries a full assortment of pet products and information. Initially about 1,000 PETsMART.com products will be offered. (Business Wire)

>  VetCareNet.com, a web-based veterinary benefits company, was launched January 1.  The company promises to bring demographically appealing clients to veterinary hospitals by offering clients free veterinary exams, promotional specials and manufacturer rebates.  To date, the company has about 500 participating veterinarians, including National PetCare Centers, a veterinary consolidator.  (Veterinary Practice News)

> VetBuyersnet.com, an online resource for more than 1,500 veterinarians throughout the country, announced that it has purchased an e-marketplace that will aggregate its member veterinary practices and hospitals’ procurement processes while providing marketplace members with the opportunity to buy and sell products throughout the country. VetBuyersnet.com’s marketplace will contain a variety of products, including diagnostic and monitoring equipment, instruments, laboratory supplies, medical and surgical supplies, office supplies, pharmaceuticals, biologicals and practice equipment.  (Business Wire)
 
> Allpets.com, a wholly-owned subsidiary of PetQuarters, Inc. has launched an online Virtual Catalog located at www.allpets.com, which further integrates the web site and catalog by creating a unique and user friendly way to browse online.  The new Virtual Catalog will have the same layout, product offering and descriptions as the Allpets mail catalog.  (PRNewswire)

> Dairy.com announced the successful launch of its e-market pilot. The pilot includes several of the founding partners of Dairy.com and will validate the site’s functionality prior to opening the
site to the entire dairy industry. Seven companies, 66 plants and 69 traders and schedulers were involved in the pilot. Dairy.com is on schedule to launch its first release in March 2001 with live trading of select commodities including milk and cream, logistics estimating tools, and industry-focused content. In addition, Dairy.com is working aggressively to build out additional functionality for future releases which will include spot and long-term trading of other dairy commodities including butter, cheese, and powders as well as direct replenishment and farm management tools. (Business Wire)

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Animal Health News

> The European Union estimated that dealing with the mad cow crisis across Europe would cost the EU about $1 billion, possibly putting other agricultural programs at risk. The EU’s executive office said that the costs of carrying out mandated BSE tests on cattle over 30 months, in addition to spending money on a so-called “purchase for destruction’’ program, could cut deeply into the EU’s agricultural budget for this year. To combat mad cow disease, EU countries this month initiated a mass slaughter program, which foresees buying and incinerating up to 2 million head of cattle by the end of June, to restore public confidence in beef consumption. Beef sales have slumped by 27% across the EU as a result of the latest outbreak. (AP)

>  Alleged voting problems with the pork checkoff referendum and claims that the USDA’s action in the matter was too hasty rang true for a federal court judge. Saturday the judge granted a temporary restraining order preserving the current system, and preventing the termination of the pork checkoff program until a “full and fair hearing” occurs, according to an announcement from the National Pork Producers Council. A group of pork producers filed suit on Jan. 12.  The lawsuit contends that USDA acted unlawfully in holding a binding referendum despite having no legal authority to do so. In addition, the group says that even if the referendum could be held, USDA ran the system in a manner that was “filled with irregularities, that failed to apply consistent standards or to count all lawfully cast ballots.” The checkoff lost by about 1,500 votes and there were about 2,000 questionable ballots in the process. (DirectAg)

>  Federal health regulators are investigating 1,000 cattle that were quarantined in Texas after a feed mill disclosed it may have violated rules designed to prevent mad cow disease. Mad cow disease, or bovine spongiform encephalopathy, has never been found in any U.S. cattle. However, as a precautionary measure, in 1996 the government banned cows and sheep from being given feed made from animal parts. The feed maker notified the FDA that it may have mixed up ingredients, letting some cattle eat bone meal made from other U.S. (AP)

>  State regulators have fined four large eastern North Carolina hog farms that were targeted by Gov. Mike Easley for waste storage problems.  Problems with hog farms in North Carolina have received national attention after floods during Hurricane Floyd in 1999 caused waste storage tanks to overflow and leak tons of waste into rivers. (AP)

>  The USDA proposed to stop putting quality grades on imported beef and other meat.  U.S. producers say that stamping foreign meat with USDA grades gives consumers the false impression that the meat is domestically grown. About 10% of beef sold in the United States is imported. (AP)
 
>  Korea has stepped back from a new country-of-origin labeling rule for meat that U.S. officials argued would have completely choked off U.S. beef and pork exports to Korea.  Korea late last month agreed to delay implementation of the rule by one year, after Secretary of Agriculture Dan Glickman and Deputy U.S. Trade Representative Richard Fisher told Korean officials that the U.S. could not implement the rule as written and so could not export beef and pork to Korea, which is the third largest market for U.S. beef exports. (DirectAg – Farm Progress)

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CORRECTION
In the January 19 newsletter, the NCVEI was incorrectly identified as the National Consortium on Veterinary Economic Issues.  The proper name is the National Commission on Veterinary Economic Issues.

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Agribusiness News

>  Myriad Genetics, Inc. announced that it has completed DNA sequencing of the entire rice genome in collaboration with the Torrey Mesa Research Institute, TMRI, (formerly Novartis Agricultural Discovery Institute, Inc.), a subsidiary of Syngenta.  Myriad completed the
high-throughput sequencing component of the genome six months ahead of schedule and under budget, triggering a $3 million cash bonus payment to Myriad.  The rice genome map is better
than 99.5% complete, compared with the human genome map, which still contains a number of large gaps and is estimated to be approximately 90 – 95% complete. (PRNewswire)

>  An action initiated by 17 state attorneys general yielded a new binding contractual agreement with Aventis regarding StarLink corn this week. The new binding contract aims to help growers and elevators who may suffer losses as a result of the unintended mixing of food-approved corn and StarLink. Among the main terms are that Aventis will pay 25 cents per bushel to StarLink growers and buffer growers to control corn grown from StarLink hybrids and corn grown within 660 feet of corn grown with StarLink hybrids, and move such corn to approved sites and uses through Aventis’s “StarLink Enhanced Stewardship” program, or SES. February 15, 2001, is the deadline for farmers to opt to participate in the SES program. The grain must be marketed or fed by Sept. 15.  (DirectAg)

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Brakke Consulting Viewpoint
 
It looks like everyone is finally back from the holidays and conferences.  We seem to be starting off with some positive activities for the year.  This is our longest newsletter in some time.

Diagnostics seem to be a new area of interest and development.  There are even a few stories about the dotcom niche players that feel they have reason for being in the animal health or pet markets.  We still believe that the Internet evolution will be important to our industry.  It helps to have some of the Internet revolution history behind us.

And yes, consolidation will continue in all segments of the market, so be nice to your investment bankers and consultants.  We’ll be there when you need us.

[Ron Brakke]
 
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