The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for April 7, 2000

Copyright © Brakke Consulting, Inc.
Company Earnings Releases
>  Doane Pet Care Company reported net income of $9.5 million for its fourth quarter ended January 1, 2000 on net sales of $205.1 million and net income of $21.4 million for the fiscal year ended January 1, 2000 on net sales of $770.6 million. The Company stated that results for the 1999 fiscal year were not comparable to the reported results for 1998 due to its 1998 acquisitions of Ipes Iberica, S.A. in April 1998 and Windy Hill Pet Food Company, Inc. in August 1998 and its related refinancing on November 12, 1998. (PRNewswire)

Company News Releases

>  Ralston Purina Company completed the tax-free spin-off of Energizer Holdings, Inc. on April 1 and now is focused exclusively on its global pet products business.  Ralston had pet products sales of $2.72 billion in fiscal year 1999. (PRNewswire)

>  Pharmacia Corporation, formed through the merger of Monsanto Company and Pharmacia & Upjohn, officially began trading as a public company on Monday, April 3, with its listing on the New York Stock Exchange.  The new company will trade under the stock ticker symbol “PHA” both in New York and on the Stockholm Stock Exchange. (PRNewswire)

>  Heska Corporation announced that it has sold the worldwide rights to its PERIOceutic Gel product for the treatment of periodontal disease in dogs to Pharmacia & Upjohn Animal Health.  Under the terms of the agreement, Pharmacia & Upjohn will begin marketing the product after a transition period. In addition, Atrix Laboratories, Inc., who developed the product with Heska, will continue to manufacture the product for sale by Pharmacia & Upjohn. Financial terms of the agreement were not disclosed. (PRNewswire)

> A settlement has been reached in the lawsuit over Neogen Corporation’s tort claims for damages against Vicam L.P. and its president, with Vicam paying an undisclosed sum of money to Neogen.  In 1996, Vicam and Radlo sent a letter to a large number of companies and other entities alleging that one of Neogen’s diagnostic tests infringed two patents licensed to Vicam.  Neogen filed the lawsuit seeking a declaratory judgment of non- infringement and for money damages for defamation, product disparagement, and tortuous interference with business.  As part of the settlement, Vicam and Radlo agreed to issue a joint letter with Neogen assuring customers that they are free to purchase and use Neogen’s AC-5 aflatoxin detection test kit without concern that legal action will be taken against them by Vicam. (PRNewswire)

>  PETsMART, Inc.  announced that its board of directors has approved the purchase of an aggregate of $20 million of its common  stock or its convertible debentures during the current fiscal year.  The purchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. This stock and convertible debenture purchase program follows a 1999 program under which PETsMART purchased 5,550,000 shares at a cost of $25 million. (Business Wire)

> Veterinary Centers of America, Inc. announced that two class action suits have been filed, one in Los Angeles Superior Court and one in the Court of Chancery of the State of Delaware in connection with the definitive merger agreement with Green Equity Investors III L.P., entered into on March 30, 2000. VCA has not had an opportunity to review the complaints and therefore has no comment regarding the suits at this time. Veterinary Centers of America, Inc. owns and operates the largest network of free-standing, full service animal hospitals in the country and the largest network of veterinary-exclusive laboratories in the nation. (Business Wire)

>  Purina Mills, Inc. announced that the U.S. Bankruptcy Court for the District of Delaware has confirmed the Company’s Second Amended Joint Plan of Reorganization, paving the way for Purina to emerge from Chapter 11.  The Plan of Reorganization, which was approved by more than 95% of the Company’s creditors that voted on the Plan, provides the blueprint for the reorganization of Purina Mills and 10 of its affiliates that filed voluntary petitions for Chapter 11 reorganization on October 28, 1999. (PRNewswire)

>  Doane Pet Care Company and Menu Foods Limited have mutually agreed to discontinue discussions regarding a combination of the two pet food companies, in order to allow each party to re-evaluate the potential for a transaction.   Doane is a leading global provider of private label pet food, with over 30 manufacturing facilities in North America and several throughout Europe.  Menu is the premier provider of wet private label pet food in North America, with three manufacturing facilities located in Canada and the U.S. (PRNewswire)

> International Absorbents Inc. announced that Absorption Corp, the Company’s wholly owned subsidiary, is rolling out its new dog litter product at the H.H. Backer Pet Industry Spring Trade Show in Atlantic City, New Jersey, March 31 to April 2.  The initial product rollout will be under the brand name, Puppy Go Potty. The Company acquired the rights to this brand name and dog training system from a California developer earlier this year.  The Company’s dog litter products target the estimated $200 million housebound dog litter market and the $20 million (dog) house training market. (PRNewswire)

> introduced its Pets.complete line of super-premium private label products.  The Pets.complete line includes 19 SKUs of super-premium dry dog and cat food, dog biscuits and cat litter. Later this quarter, the line will expand to include super-premium canned dog and cat food. (Business Wire)

>  ValueVision International, Inc. will launch a weekly pet show series on ValueVision’s SnapTV network beginning next week.  Called The Show, the series will be co-produced by ValueVision and  The show will be a live, one-hour show featuring pet-related education, entertainment, and shopping. In addition to being aired on the television network, The Show will be an interactive event, appearing on both ValueVision’s converged television and Internet channels. Future shows will also be simulcast on’s own web site. (PRNewswire)

> and Veterinary Medicine Publishing/Thomson Healthcare (VMP), announced an industry-exclusive, multi-year agreement to provide pet healthcare information for all properties. The partnership also provides with immediate access to established experts who work with the VMP journal, Veterinary Medicine, a well-respected, peer-reviewed clinical publication for veterinarians. (Business Wire) 

Animal Health News

>  Bioject Medical Technologies Inc. and the Animal Medical Center today announced the introduction of a DNA-based vaccine treatment for melanoma in animals.  Previous clinical studies in mice have indicated that the vaccine, when delivered with the Biojector 2000 jet injector, elicits a statistically significant higher immune response than the vaccine delivered with needle and syringe.  The DNA-based melanoma vaccine was developed by researchers at Memorial Sloan-Kettering Cancer Center.  The treatment will be available exclusively at the Animal Medical Center, a leading companion animal veterinary hospital located in New York City. (PRNewswire)

> The USDA has reported that the number of US beef cow operations in 1999 were down 1% from 1998 and 3% from 1997.  Milk cow operations in 1999 were down 5% from 1998 and 10% from 1997.  The total number of cattle and calves in the US at the end of 1999 was 98 million head, 1% below last year and 2% below 1997.  Beef cattle as of 1/1/00 were down 1% from 1998, while milk cows were up 1% from the prior year. (USDA-NASS)

>  Most livestock markets in South Korea were ordered closed Tuesday to prevent the spread of foot-and-mouth disease. Officials feared the disease could become a national epidemic. As a preventive measure, the Seoul government decided to inoculate all 11 million cattle and pigs in South Korea. As a first step, it ordered vaccines from Britain for 2 million cattle. So far, hundreds of cattle and pigs believed to have been infected have been slaughtered. The disease virtually wiped out Taiwan’s hog herds three years ago. The markets closed account for 85 percent of all livestock markets in South Korea. Also Tuesday, Japan confirmed that it was facing an outbreak as well. (AP)

>  Nutrition labels would be required on packages of fresh meat and poultry under a House bill introduced on Tuesday. The legislation, sponsored by Rep. Nita Lowey (D – NY) would force grocers or meat companies to adopt the same kinds of labels that are already used on most other packaged foods. Processed meats such as hot dogs, burritos and corned beef were required to add the labels in 1993. The USDA currently has a voluntary nutrition labeling system for raw meat and poultry, but relatively few companies display the information on charts in their meat departments, Lowey said. (Reuters)

Agribusiness News

> A USDA survey of over 63,000 US farmers shows that farmers intend to raise 24% fewer acres of GM corn.  Growers in the eight major soybean-producing states planned to plant 52% of their acreage with GM soybeans, down from 57% last year. In the five largest cotton-producing states, growers planned to plant 48% of their acreage with GM cotton, down from 55% last year.  (Wall Street Journal)

> Researchers at the University of Washington, under the sponsorship of Monsanto Company, have produced a working draft of the rice plant genome. This will give scientists the potential to dramatically improve the production of rice, a vital food source for half of the world’s population.  Rice is the largest genome and first plant to be mapped in a working draft form. (PRNewswire)

> EDEN Bioscience introduces Messenger, a new class of crop production and plant protection technology.  EPA registration is anticipated within the next few weeks.  The active ingredient in Messenger is harpin, a naturally occurring protein produced by bacteria commonly found in the environment.  When Messenger is applied to a plant, harpin protein binds to the plant’s receptors.  Upon binding, the Messenger-treated plant initiates a set of complex signaling pathways, causing natural gene expression and activating the plant’s natural defense and growth systems.  Messenger has been found to be virtually non-toxic to mammals, birds, honeybees, plants and aquatic species. (PRNewswire)

>  Several companies have co-founded The Council for Biotechnology Information. CBI was founded by leading biotechnology companies to create a public dialogue and share information about biotechnology that is based on objective scientific research, independent expert opinion and peer-reviewed published reports.  The founders of the Council are:  Aventis CropScience, BASF, Biotechnology Industry Organization, Dow Chemical, DuPont, Monsanto, Novartis, and Zeneca Ag Products, Inc. (organization website)

>  Russian veterinary authorities have seized two rail cars carrying frozen U.S. chicken leg quarters believed to be contaminated with a chemical compound, the USA Poultry and Egg Export Council said on Wednesday. The council said in a statement that the chicken was part of a shipment of food aid sent to Russia from the United States.  The poultry was certified as safe by the U.S. Department of Agriculture before leaving the U.S., and by German and Russian veterinary inspectors while on the way to Russia across Germany. U.S. and Russian investigators are now trying to establish where the food was contaminated. (Reuters)

Brakke Consulting Viewpoint

Comments on the AAHA meeting
The 67th meeting of the American Animal Hospital Association concluded in Toronto Canada this week.  The attendance exceeded 2,200 veterinarians, technicians, and hospital staff.  Everyone I spoke with felt both the scientific and management programs were the strongest they have experienced.  The moderated panel discussions were extremely popular and informative.  AAHA
deserves congratulations once again for continuing to set the highest standards for the veterinary profession.   Make your plans now to attend their 68th meeting next year in San Antonio, Texas.  

[Roger Cummings, CVPM]

Comments on the Petfood Forum meeting
One of the biggest topics of conversation at the annual Petfood Forum held this week in Chicago was the purchase of Iams by Procter and Gamble, and its subsequent move into the grocery channel.  Several concerns were voiced:  (1) traffic in retail pet stores may decrease as consumers source their super-premium petfood at the supermarket; (2) prices and margins of super-premiums will drop due to grocery pricing strategies; and (3) the cost of competing will increase as P&G raises the advertising ante. 

It’s interesting to note the parallels between the petfood industry and the animal health industry.  Slow overall market growth, consolidation and more intense competition are the order of the day.  No doubt some companies will be swept way in the tide of change.  Yet others will thrive as they adapt innovative, streamlined and more customer-focused business models.  Historically, the animal health industry has relied on Research to fuel growth.  Now it’s Marketing’s turn to step up to the plate.

[John Volk – Brakke Consulting]
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