The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for September 24, 1999

 Takeda Chemical Industries, Ltd., the leading Japanese pharmaceutical company, has announced that the company decided to reduce employee numbers from 9,139 to less than 5,000 by 2005, and may sell its subsidiary companies such as bulk chemical, agrochemical & animal health products, and vitamin & food additive business in order to focus on its human pharmaceutical business. The company sold a subsidiary feed additive business to BASF this summer. Takeda is the #2 animal health company in Japan, with an estimated $115 million in sales.
 Novartis AG dampened speculation on Tuesday that it would quickly spin off its beleaguered agribusiness and said its crucial drug sales were bottoming out in a weak third quarter. Speaking at a presentation on its drug pipeline to equity analysts in New York, Chairman Daniel Vasella said Novartis would not be rushed into deciding what to do with its agribusiness, which faces slumping sales and profit margins.
 Cell Genesys, Inc. announced a research collaboration with Pharmacia & Upjohn in which Cell Genesys will provide its proprietary adenoviral and adeno-associated viral (AAV) gene delivery technologies to Pharmacia & Upjohn to evaluate certain applications of gene therapy in animal health.  Under the collaboration, Pharmacia & Upjohn will perform safety and efficacy studies in animals using gene therapy vectors produced by Cell Genesys. 
 Roche Vitamins announced that Avatec (lasalocid) has been approved by the USDA for use with Pfizer’s Stafac (virginiamycin) in turkeys.  The combination prevents mortality due to coccidiosis, significantly improves weight gain and feed conversion, and exhibits no toxicity.
 Smithfield Foods, Inc. announced that its wholly owned subsidiary, Smithfield Foods of Mexico, has completed the formation of a joint venture with Jorge Mazon and Fernando Hernandez to own and operate a vertically integrated pork processing operation in the State of Sonora, Mexico. Agrofarms is the largest hog farming concern in Mexico with approximately 12,500 sows in production.
 The FDA has approved Revolution™, from Pfizer Animal Health, for the control of American dog tick infestations in dogs.  The FDA had previously approved Revolution for protection against heartworm, fleas and ear mites in cats and dogs as well as sarcoptic mange (scabies) in dogs and hookworm and roundworm in cats.
 Heska Corporation announced that its PERIOceutic(TM) Gel has been approved by the European Commission for marketing and distribution in Europe.  The product is the first veterinary product indicated for the treatment and control of periodontal disease in dogs.
 Purina Mills Inc is expected to meet with note-holders to discuss a possible debt restructuring, but it is anticipated that a management restructuring or even bankruptcy filing may result.  Purina Mills reported a net loss of $52 million in 1998, mainly attributable to recent collapses in grain and hog prices.  Purina Mills was acquired by Koch Agriculture in 1998.
 The Southern California, Texas and Hawaii Veterinary Medical Associations announced the launch of  The family-oriented site provides pet owners access to a rich resource of information and services.  In addition, the site’s goals include establishing an interactive veterinary professional community centered around the veterinary association.
 American AGCO will handle all pick, pack and ship fulfillment activities for pet products ordered online at, as well as manufacturer relations. Through the course of this partnership, customers will have access to over 20,000 name brand products. American AGCO currently distributes to over 2,000 traditional retailers in 10 states.
 announced that it has retained the Internet Practice Group at Emerge Corporation to explore and lead a $100 million dollar U.S. and international strategic acquisition effort. completed its first acquisition last month and continues to actively pursue value added on-line and off-line companies.
 A study released by the Agriculture Department’s Economic Research Service put the annual costs of Salmonella infections at either $500 million or $2.3 billion, depending on which of two methods of analyzing lost earnings and the value of a life is used. A new study of food-borne illnesses by the federal Centers for Disease Control and Prevention (CDC) estimates that there are 1.4 million Salmonella cases each year, and fewer than 600 deaths.
 According to the USDA ARS News Service, at least one of every 10 pigs born alive dies within days, and others may grow more slowly than their littermates.  Mindful that getting more pigs off to a good start could improve production efficiency, ARS scientists are researching hormones to find ways to enhance pigs’ appetites, manage stress and reduce sickness and deaths. Just shortening by one day the average time from birth to market could lower housing and feeding costs enough to boost annual net income for the nation’s swine producers by tens of millions of dollars.
, the first and largest agricultural community of its kind, has signed-up over 45,000 farmers since its debut on July 13, 1999. In addition to offering products for sale, the Web site recently upgraded and expanded its service to include commodity news, weather forecasts, prices on futures contracts, and information on herbs.

The Brakke Consulting Viewpoint

This week’s report seems to mirror our animal health industry overview presentation.  We seem to be calling several industry trends correctly.  The announcement that Takeda is open to offers for its animal health business touches the continuing consolidation issue.  It is not often that Japanese companies decide to divest.  Is this the first of others? 

A new intensified marketing and sales battle is about to occur in the veterinary flea and tick market with Pfizer now shipping their new product “Revolution”.  Will another quality flea and tick product with a heavy consumer media campaign keep increasing the market through veterinarians?   We hope so, for the benefit of all the companies and the veterinary profession.  However, as we indicate in Brakke Consulting’s annual report on the US flea products industry, the total market has not grown significantly in the past two years, and much of the activity seems to be in the redivision of market share.

Food safety continued to get more than its fair share of headlines along with several more e-commerce opportunities.  Who is going to visit all of those web pages selling mainly readily available OTC pet products?  If we had to bet on one, it looks like PetsMart is serious about making theirs work. 

Finally, the announcement that Purina Mills may file chapter 11 could be the final ending for a brand that dominated the animal feed industry for many years.  As we’ve said before, companies need to keep changing their business model to meet the demands of consumers and the changing marketplace, or bankruptcy judge will change it for them.

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