The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for November 17, 2000
Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  Tyson Foods, Inc. reported fourth quarter earnings for the fourth quarter ended September 30 were $18 million compared to $41 million for the same period last year. Total fourth quarter sales for fiscal 2000 were $1.78 billion compared to $1.82 billion last year, a decrease of 1.9%. Earnings for fiscal 2000 were $151 million compared to $230 million from the same period last year.  Sales for fiscal 2000 were $7.16 billion compared to $7.36 billion last year, a decrease of 2%. The decrease in sales is mainly due to the sale of seafood and other non-core businesses during fiscal 1999.  The results for fiscal 2000 were adversely affected by a $24 million charge related to the January 31, 2000, bankruptcy filing by AmeriServe. (PRNewswire)

>  Doane Pet Care Company reported net income of $1.6 million for its third quarter ended September 30, 2000 on net sales of $225.7 million, and net income of $4.6 million for the nine months ended September 30, 2000 on net sales of $640.9 million.  The Company stated that results for the third quarter and nine months ended September 30, 2000 were not comparable to the reported results for the same fiscal 1999 periods due to the Company’s acquisition of Arovit in the second quarter of 2000 and certain non-recurring charges. (PRNewswire)
>  IGI, Inc. reported a net loss of $10.7 million for the third quarter ending September 30, 2000.  This compared to a net loss of $334,000 for the comparable period in 1999.  For the nine months ended September 30, 2000, the Company reported a net loss of $11.3 million, compared to a net loss of $785,000 for the comparable period in 1999.  The third quarter loss includes a loss from discontinued operations and a tax expense resulting in an increase in a tax valuation allowance.  Revenues for the quarter ended September 30, 2000 were $4.3 million, which represents a decrease of 20% compared to revenues $5.4 million for the quarter ended September 30, 1999.  The decrease is primarily due to lower Companion Pet sales that were discontinued and recalled at the FDA’s request, and lower Consumer Product revenues.  Revenues for the nine months ended September 30, 2000 were $14.8 million, a decrease of 7% the comparable period in 1999.  The decrease is primarily due to the same reasons, as noted above, which affected the third quarter sales. On September 15, 2000, the Company sold the assets of its Vineland Laboratories Poultry division, receiving $12.5 million in cash.  The buyer also assumed $2.3 million of liabilities.  (PRNewswire)
Company News Releases

>  At a regularly convened meeting, the Supervisory Board of Aventis S.A. gave the Board of Management its consent to develop further steps to focus the company on pharmaceuticals. The agricultural business Aventis CropScience, which has been operating as an independent legal entity since Aventis was founded, would be divested by the end of 2001. The Animal Nutrition business is in the process of being sold. The 50% stake in the animal health joint venture Merial will be retained. (company press release)

>  Smithfield Foods is offering to acquire all outstanding shares of IBP Inc., through a tax-free merger. The deal would give IBP shareholders $25 per share, a bit higher than the $22.25 offered by a management buyout announced at the end of September. Smithfield Foods, and another group — Brandes Investment Partners — were not included in the management buyout. Smithfield Foods already has 6.6% of the outstanding shares of the company. Smithfield management points out that its offer provides a 19.8% premium over last Friday’s closing price for IBP common stock, a 12.4% premium over the management buyout and 36.5% premium over IBP’s closing price September 29 (the day before the management buyout offer). (DirectAg)

> Neogen Corporation’s new quantitative test for capsaicin, Veratox for Capsaicin, provides testers with a quicker, less expensive alternative to methods currently used. Capsaicin is the compound that gives peppers their hotness.  The compound is used in a wide range of concentrations in the production of spicy food products, such as salsa, sauces, seasonings and mixes.  More than 300 companies in the United States alone use capsaicin in their products, and many of them test for capsaicin levels to ensure product consistency and labeling accuracy. (PRNewswire)

> H.J. Heinz Co. executives outlined a plan to revive its pet food sales, hinting that Morris the Cat, the finicky spokesperson for 9-Lives cat food to make a comeback in advertising next year. An ad campaign set to start in four or five months will tout new recipes and packaging for pet foods in an attempt to boost pet food sales. In its most recent quarter, which ended Aug. 2, Heinz said its pet food sales were down 6% to $276.6 million. Executives in Heinz’s U.S. division said they are unhappy that the pet food business has been unable to improve sales this year. (AP)

> PIC, the world’s leading swine genetics and agbio-technology company, continues to grow its technical alliances with its execution of an agreement with Keygene N.V.  Keygene’s core business function centers on the structure and function of genetic material.  With this intensive partnership agreement, AFLP technology will be used in detection of DNA markers associated with value-added traits in swine.  AFLP is a unique technology patented by Keygene that has allowed scientists to successfully develop gene maps and identify trait genes in plants and other organisms. (PRNewswire)
> PETsMART, Inc. announced that it plans to acquire a controlling interest in The company also announced that it anticipates reporting lower-than-expected financial results for the third quarter of fiscal 2000.  Under the terms of the proposed agreement with, PETsMART, Inc. will contribute $20 million in cash, as well as its pet catalog business which is valued at approximately $10 million, to form an integrated direct marketing subsidiary. The entire transaction will be self funded through inventory reductions resulting from the maturation of the company’s new forward distribution centers and ongoing generation of cash from operations. As a result of the transaction, PETsMART will hold an 81% interest in The transaction is expected to close in November. (Business Wire)

> announced the addition of six new animal health and productivity partners. As a result of these new partnerships, has more than doubled its livestock product offerings, expanding its equine line and launching into livestock equipment.  The new animal health partners on are Allied Precision Industries, Co-Line Welding, Cut Heal Animal Care Products, High Country Plastics, Hot-Shot Products and Vets Plus. (company press release)

>  Pet Food Express, Inc., will expand its profitable e-commerce program to a stronger national level in the wake of the failure of last week. The firm’s two year old website, top rated by for customer confidence, generates 60% of its revenue from national sales. (Business Wire)


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Animal Health News

>  The USDA – APHIS will now require under certain conditions that ruminants, swine and horses (and dogs) imported from regions of the world where the screwworm is endemic to be inspected and treated for infestation. Screwworm was eradicated from the United States in 1966. But in July 1999 and again in February and March 2000, screwworm larvae were found in horses imported from Venezuela and Argentina, leading the APHIS staff to tighten the regulations. (AnimalNet)

>  South African agricultural officials have declared that more than a million animals will be vaccinated after an intensive culling program failed to stem a two-month outbreak of foot-and-mouth disease. The story says that some 6,643 cattle, pigs, sheep and goats have been slaughtered since mid-September to try to contain the outbreak, which has led to a ban on meat and livestock exports from KwaZulu-Natal provinces by a host of countries. Veterinary teams will now focus on vaccinating 1.3 million animals in an area of 20,000 square kilometers. (AnimalNet – Reuters)

> The USDA reported that cattle and calves on feed for slaughter (for feedlots with 1000 or more head) totaled 11 million head on October 1, 2000, an increase of 7% over October 1, 1999, and 13% above October 1, 1998. (USDA – NASS)

> Beginning in April 2001, fast food giant McDonald’s says its restaurants in Germany will stop serving products from animals fed biotech feed. A significant amount of the corn and soy meal used in German livestock production is imported from the United States, Canada and Argentina. McDonald’s new policy for its German restaurants follows on the heels of rival Burger King’s announcement that it will only offer poultry products from birds raised without GE feed, beginning next year in its German restaurants. (AgWeb)

>  As pets live longer and become more like family members, drug companies are devoting more resources to them.  Advances in treating pets, which have traditionally trailed human medicine, are closing the gap.  About one-third of US dogs and cats are over 10 years of age, and as many as 30% may take medication for chronic ailments.  (Wall Street Journal)

> A new Canadian web company, Viewtrack Technologies, dedicated to tracking individual animals from farm of origin through the production cycle to the retail level, says beef producers could streamline production and boost earnings by as much as $80 to $120 per head. Viewtrack
uses the identification number supplied by the Canadian Cattle Identification Agency (CCIA), to allow participants in the beef industry to record every event in the animal’s life. (AnimalNet – Meat Online)

AHI Meeting on Biotech

The Animal Health Institute (AHI) brought together a host of high-powered speakers for their recent meeting in Charleston, South Carolina, entitled “The Biotech Revolution – Implications for Animal Health.”  Two key themes surfaced throughout the meeting: 1) the industry must prevent a StarLink-like incident in animal health; and 2) animals add a new set of ethical and emotional issues to the biotech debate, that extend beyond the core issues of science and safety.  The second point was elucidated by a comparison of the US and European attitudes toward biotechnology, emphasizing that government regulation may not address all consumer concerns.

Dr. Stephen Sundlof, Director of the FDA’s Center for Veterinary Medicine (CVM), indicated in his talk that the FDA intends to regulate genetically engineered or enhanced animals, with key issues being vector safety and potential for the genetically altered animals escaping and breeding with existing populations. 

The status and direction of cloning technology was also reviewed at the meeting.  Current efforts are small scale and aimed at the “best of the best” in various species.  But cloning on a large scale, capable of reducing the lag time for genetic improvement substantially, is on the near-term horizon.

[Bert Honsch]

Agribusiness News

> Syngenta AG shares fell 6.5% in first-day trading of the company, created by the combination of the agricultural units of AstraZeneca Plc and Novartis AG.  AstraZeneca and Novartis spun off the crop chemicals business to existing shareholders to focus on making drugs. Syngenta said it will buy back as much as 10% of its shares in the next two weeks. No shares will be repurchased in the U.S. AstraZeneca and Novartis are funding the buyback program. Syngenta is the largest company in the $28 billion market for so-called crop-protection products, such as pesticides and fungicides. (Bloomberg)

Brakke Consulting Viewpoint

Much of the news this week in all of the sectors seems to be about the continuing industry consolidation.  Whether your a food company, packer or food processor, it seems like big is supposed to be better.  However, when you look at some of the numbers of the big companies it does not appear that one plus one always adds up to three, as presented to shareholders prior to the merger.  The two largest companies in animal health are the only two companies in the top 10 reporting declines in sales for the first three quarters of 2000 versus prior year.

I’ve spent the better part of this week in Europe observing and listening to market conditions.  The BSE problem in France is big news and serious for the beef industry.  Food safety is a major issue and anything that negatively impacts the consumers’ perception of the safety of food is not good for the animal industry. 

Next week, many of you will be enjoying the Thanksgiving Holiday.  We would like to thank all of our clients at this time of year for their support and business this year. We wish all of you and your families a safe and fun Thanksgiving. 

 [Ron Brakke]
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