The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for October 27, 2000

Copyright © Brakke Consulting, Inc.
Company Earnings Releases

>  Pfizer reported that third quarter sales of Animal Health were $208 million, down 38% from the comparable period in 1999.  The decline in sales reflected the size of the initial distribution of Revolution requested by veterinarians in the U.S. in the third quarter of 1999, competitive pressures on key brands, continuing weakness in U.S. and European livestock markets, and the negative impact of foreign exchange.  On October 2, 2000, Pfizer announced that it was selling its medicinal feed additives business to Phibro Animal Health. (PRNewswire, company news)

>  Novartis reported that nine month 2000 sales in its Animal Health division were CHF 789 million ($455 million), an increase of 5% over the comparable period in 1999.  The positive trend in the Farm Animal business continued, led by the anti-infective tiamulin, which posted high double-digit growth. As expected, the companion animal business had to contend with strong competition in the flea and heartworm treatment segment, constraining sales of Sentinel (combined flea, intestinal and heartworm treatment for dogs), Program (flea prevention) and Interceptor (heartworm treatment).  As expected, sales development remained sluggish in the US and reflected the earlier start to the fall sales campaign in 1999. The trend was positive in Asia and LATAM as well as in Europe, where sales were boosted by Vericore (mainly farm animal vaccines and parasiticides), which was acquired in November 1999.  (company website)

>  Schering-Plough reported that worldwide sales of animal health products in the third quarter totaled $176 million, up 9% (12% when foreign exchange is excluded) due to the June 2000 acquisition of a majority interest in a joint venture with Takeda Chemical Industries, Ltd. in Japan.  Worldwide sales of animal health products in the first nine months increased 4% to $508 million (8% when foreign exchange is excluded). (PRNewswire)

>  Akzo Nobel reported that its third quarter 2000 Pharma unit results were helped by better than expected margins in Intervet, its animal health care unit, which were approaching the human pharma margins. Earnings of the animal healthcare activities more than doubled, due to strong volume growth and the integration of Hoechst Roussel Vet.  The acquisition of Bayer’s Animal Biological business in North America further strengthened Intervet’s worldwide leading position.  Details were not provided. (Reuters)

>  Ralston Purina Co. reported its fiscal fourth-quarter earnings from continuing operations were higher than pro-forma results a year earlier, as international pet food sales rose and costs dropped.  Earnings in the fourth quarter ended Sept. 30, excluding one-time items, rose to $79.8 million compared with $73.6 million in the year-earlier period. Pro-forma results reflect the spinoff of Ralston’s battery products unit in April.  Fourth-quarter net sales fell to $675.9 million from $682.9 million a year ago.  Sales of pet foods in North America fell 5% in the quarter, while international pet food sales increased 13%. (Reuters)

>  Colgate reported that, for the third quarter 2000, Hill’s Pet Products unit volume rose 2%, with sales up 1%. (Reuters)

>  Heska Corporation reported its financial results for the third quarter ended September 30, 2000.  Total revenue decreased 3%, to $12.7 million compared to $13.1 million for the third quarter of 1999.  The lower revenue in the third quarter of 2000 was primarily attributable to the sale and elimination of unprofitable businesses and product lines during the past year, as part of the restructuring of Heska’s business.  The growth in product revenue from the Company’s continuing core business was approximately 30% during the third quarter of 2000 as compared to the third quarter of 1999.  The Company’s net loss for the third quarter of 2000 declined to $4.7 million compared with a loss of $8.3 million for the third quarter of 1999.  For the nine months ended September 30, 2000, total revenue increased by 12%, to $41.3 million compared to $37.0 million for the comparable period in the previous year.  The net loss for the nine months ended September 30, 2000 was $16.4 million compared with a loss of $23.1 million for the nine months ended September 30, 1999.  (PRNewswire)

Company News Releases

>  Brakke Consulting announced that Bert Honsch, MBA, has joined the company as a senior consultant.  Bert Honsch has spent 28 years in the animal health care industry with Pfizer, Novartis, and most recently with National Logistics Services.  Having held positions that included vice president of sales and marketing for the U.S., Far East, and Europe with major animal health manufacturers, Bert brings a wealth of experience and knowledge that compliments Brakke’s outstanding team of consultants and the services they provide.  (company press release)

>  Intervet announced the purchase of a new state-of-the-art Research and Development center in Schwabenheim, Germany.  Intervet will employ around 150 people at the Rhineland-Palatinate site, which will focus on innovative pharmaceuticals for the global market. The first departments will be operational early next year.  Schwabenheim will be one of Intervet’s main research and development centers. (Business Wire)
>  Heska Corporation and Valentis, Inc. announced that Heska has licensed gene delivery and DNA manufacturing technology from Valentis.  The technology will be used by Heska to complete development of a novel gene medicine for the treatment of canine cancer.  Specific terms of the agreement, which include an up-front license fee, milestone payments and a royalty, were not disclosed.  Results of research studies of the canine cancer therapy were presented at the 20th Annual Meeting of the Veterinary Cancer Society last week.  This research demonstrated that treatment of canine soft tissue sarcomas with the gene medicine resulted in shrinking or elimination of several of the tumors.  In addition, the intra-tumoral administration of the gene medicine was safe and well tolerated. (PRNewswire)
>  ProdiGene announced that they have been awarded a patent for a process that uses plants to develop oral vaccines that can immunize humans and animals against viral diseases. ProdiGene’s patented system makes possible the creation of pharmaceutical products in plants for human and animal consumption.  The resulting genetically enhanced plant can be used as an immunizing feedstock for animals or introduced into food products for human consumption. Safety concerns are minimized because plants are incapable of harboring human or animal pathogens.  (AgWeb)

>  Embrex, Inc. announced that it has been awarded a $270,000 Phase II Small Business Innovation Research (SBIR) grant to support development of an automated device for sorting poultry eggs by gender.  The grant was supported by the USDA’s Cooperative State Research, Education and Extension Service (CSREES). Embrex has made substantial progress in developing a gender-sorting device; in laboratory trials, they have determined gender in a series of eggs with 100% accuracy.  The company plans to use the grant to further advance development of a novel device used to sort avian eggs by gender.  Currently, a chicken’s gender is determined primarily by two methods: feathering and manual vent inspection.  Embrex’s goal is to develop an alternative approach that meets the stringent cost, throughput and sensitivity requirements necessary for a successful commercial product.  (PRNewswire)

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Animal Health News

>  The FDA plans to ban two fluoroquinolone antibiotics widely used by poultry farmers because of a risk that humans could become infected with germs that resist treatment.  It would be the first time the government has pulled any drug to combat infections that have grown resistant to antibiotics.  Abbott Laboratories will reportedly withdraw Saraflox immediately.  Bayer, who makes Baytril, might contest the proposed ban.  About 1.5% of chickens are treated with the antibiotics, according to industry sources. The FDA is also reviewing the use of fluoroquinolones in cattle as part of a comprehensive examination of all agricultural antibiotic use. (AP)

>  Sales of chicken in Hong Kong have plummeted after chickens on a farm in the New Territories tested positive for the bird flu virus, which killed six people three years ago. One worker at a poultry stall which also supplies restaurants said sales had plunged between 30 and 40%.  The government carried out further testing on Saturday and tested chickens from 19 farms in the New Territories. All the farms were found to be “clean.” (AnimalNet – Agence France Presse English)

>  Cases of mad cow disease have increased sharply in France this year, prompting the recall of beef from supermarkets and the destruction of a herd of cows over the weekend. A total of 73 cases of bovine spongiform encephalopathy, commonly known as mad cow disease, have been reported since January – compared with 31 for all of last year. The Carrefour supermarket chain said it had urgently cleared the shelves of 39 supermarkets in northern France and the Paris region that were selling meat that may have come from infected cows. (AP)

>  The Senate has given final approval to legislation requiring the USDA to improve enforcement of the Packers and Stockyards Act and better regulate the hog and cattle markets. The legislation would require the USDA to implement the General Accounting Office’s (GAO) recent recommendations to develop investigation methods to handle allegations of unfair competition and involve attorneys from the beginning of an investigation. In addition, the USDA would be required to work with the U.S. Justice Department and the Federal Trade Commission (FTC) on these investigations of “unfair and anticompetitive” practices. These provisions were included in the U.S. Grain Standards Reauthorization Act of 2000, which the House passed on Oct. 20. (AgWeb)

>  Experts are telling hog producers to enjoy a good year while they can, because the financial devastation of 1998 and 1999 could repeat itself a year from now. The gloomy assessment for the latter part of 2001 is the result of a potential mismatch in the number of hogs being raised and the capacity of the packing industry to slaughter them. In December 1998, packers dropped their bids to the lowest levels in history after their facilities were overrun with hogs. Prices began to climb after hog producers cut back their herds. But once again, enticed by this year’s profits, producers are expanding their breeding herds and flirting with a repeat. (AgWeb – Omaha World-Herald)

>  A group of cattle industry investors in Canada have joined to form Viewtrak Technologies Inc., a Web-based asset management program. is a registry and tracking system which compiles information on growth, inoculations and parentage. The system is based on the Jan. 1, 2001, Canadian requirement of all beef cattle to be identified with serial-numbered eartags. Registration is on the basis of $99 for initial setup, and $1.50 a head for the life of each beast, comparable to the ear-tag registration cost. (AnimalNet – The Edmonton Journal)

>  France’s food safety agency has ordered the recall of all antiparasitic lotions for use on dogs containing diazinon.  In April 2000, the agency ordered the withdrawal of products containing diazinon for use on dogs.  However, continued reports of serious side effects have prompted the agency to call for all companion animal antiparasitics containing diazinon to be returned to veterinarians.  (Animal Pharm)

>  A fair and accurate reporting system for manufactured dairy products is one step closer to becoming a reality, now that the U.S. Senate has unanimously passed the Dairy Market Enhancement Act of 2000. The legislation is designed to restore confidence in America’s dairy price reporting system. The bill also requires independent verification for price reporting and implements measures to ensure compliance with reporting and verification requirements.  (AgWeb)

>  VoicePals L.L.C. announces the launch of a revolutionary product for your beloved pets aptly named PeTalk.   Utilizing ISD’s ChipCorder technology for its excellent sound reproduction, you can now record a short, loving message to your pet. You then set the message to automatically playback every 1, 2, 3 or 4 hours while you are gone or if your pet is away from home.  PeTalk will be on pet store shelves this November. (Business Wire)

Agribusiness News

>  The release of two test kits by DuPont Qualicon will allow food processors themselves to determine if biotech ingredients are present in their food products rather than have the products tested at a lab.  The Qualicon test kits look for specific DNA sequences that can be detected in raw materials, ingredients and finished products. The BAX System PCR Assay for Screening Qualitative GMO can indicate whether a sample of raw or processed soy or corn food, ingredient or crop, contains a threshold level of genetically enhanced components. (DirectAg)

>  ADM, Cargill, Cenex Harvest States, DuPont and Louis Dreyfus announced the formation of Pradium Inc., a separate company that will operate an online business-to-business marketplace and information resource expected to begin trading cash grains, oilseeds, and commodity by-product exchanges in 60-90 days.  Pradium’s online marketplace will initially feature nine virtual trading pits devoted to trading cash corn and soybeans, as well as commodity by-products. Future product pits will include wheat, soybean meal, oats, grain sorghum, barley, and non-refined vegetable oils among others. The site plans to offer additional services such as integrated back-office transactions, financial services, risk management, logistics and supply chain management tools. (Business Wire)

Brakke Consulting Viewpoint

It makes it easier to comment when there is a great deal to report.  It was a big week for quarterly sales and earning reports. There was a mix of good and not so good news from some of the leading companies.  It remains a difficult market for companies to generate double-digit growth.  We believe the reported results reflect some of the positive consolidations that have occurred the past two years.  Those companies that have been aggressive in the acquisition area and have integrated the operations with a firm hand are producing some strong numbers.

We believe that when 2000 is put to bed, we will not see double-digit growth in the companion animal area. The pace of the past 5 years has been dramatic with several new $100 million plus products. There will be a cooling-off period until a new group of products or technologies arrive.  We look forward to a new wave of technologies and services to fuel the industry over the next few years.  How many new $50 plus million products do you have in your pipeline?  Look out for some real market share fights over the next couple of years.

 [Ron Brakke]
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