The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for March 10, 2000
Copyright © Brakke Consulting, Inc.
Company Earnings Releases
 Degussa-Huls reported that for their shortened financial year of October – December 1999, the feed additives division continued to suffer from strong price pressure and reported a considerable drop in earnings. (company website)
 Veterinary Pet Insurance reported year-end 1999 revenues of $24.8 million, an increase of 60% over 1998 revenues of $15.5 million.  The company is forecasting revenues of $100 million by the year 2003.  The company also reported a 68% increase in policy renewals.  Revenue growth has in part been driven by corporations offering pet insurance as an employee benefit, with over 100 corporations and veterinary clinics participating in VPI’s employee benefits program. (Veterinary Practice News)
 Heinz reported financial results for the nine months ended January 26, 2000.  Pet Products sales were $931 million, down 5.5% from the comparable period in 1999.  Lower sales were primarily attributed to lower pricing on pet food as a result of the company’s decision to refocus its marketing to achieve more competitive price points on the shelf.  (PRNewsWire)
 Embrex, Inc. announced record revenues and earnings for the year ended December 31, 1999.  Fiscal year revenues increased $5.1 million, or 18%, to $33.8 million for the year ended December 31, 1999 from revenues of $28.6 million for 1998.  Net income for 1999 was $5.7 million, an increase of 101% compared to net income of $2.8 million for 1998.  Fiscal year 1999 net income improved principally from Inovoject system revenue. (PRNewswire)
, Inc. announced its results for the nine months ended December 31, 1999.  Sales for the nine months were $11.6 million, an increase of 52% over sales of $7.6 million for the comparable period in fiscal 1999.  The reported net loss for the nine months ended December 31, 1999 was $472,563 versus a net loss of $258,973 for the comparable period in fiscal 1999.  PetMedExpress also announced today that its common stock has been delisted from the OTC Bulletin Board. PetMedExpress has previously filed a registration statement with the Securities and Exchange Commission; however, the registration statement was not declared effective in time for the company to maintain its OTC Bulletin Board listing.  PetMedExpress anticipates that the registration statement will be declared effective by the SEC in the near future thus clearing the way for reapplication to the OTC Bulletin Board. (PRNewswire)

Company News Releases
 Destron Fearing announced that it has signed a letter of intent to be acquired by Applied Digital Solutions, Inc. (ADS), an e-business solutions provider.  The transaction is expected to close by mid-June.  Under the agreement, Destron Fearing would be merged into Digital Inc, a subsidiary of ADS.  Destron Fearing’s CEO, Randolph Geissler, would become chairman and CEO of Digital  The proposed transaction would be a stock-for-stock exchange, using an exchange ration of .75 shares of ADS common stock for each share of Destron’s common stock and adjusted to ensure that Destron shareholders receive a minimum of $6 or maximum of $12 per share. According to Bloomberg News, this would make the deal worth $130-160 million. (company press release)
 Idexx began shipping its recently approved Snap Canine Combo Heartworm Antigen/Ehrlichia canis Antibody test.  The test is designed to detect significant antibody levels to E. canis and heartworm infections.  In conjunction with the product launch, Idexx began a national E. canis/Heartworm Awareness Project, designed to gather data on the geographic prevalence of these two diseases. (Veterinary Practice News)
 announced the launch of “The Natural Store”, the first online store dedicated to natural food and health products for dogs and cats. The Natural Store is a one-stop shop offering over 175 natural products, in-depth natural pet care information and product reviews and a number of community based activities.  Pet owners can discover a wealth of information in the Natural Health section including tips on how to select a qualified holistic practitioner and important information about essential herbs, vitamins and even acupuncture. (Business Wire)
 announced that it has opened a new 300,000 sf distribution center in Greenwood, Indiana.  The new distribution center will primarily service customers east of the Mississippi, enabling the company to continue to provide them with fast, efficient delivery while significantly reducing shipping costs for the company.  With the Greenwood facility and’s first distribution center, located in Union City, CA, can provide delivery to over 90% of the United States in 1-3 working days using ground shipping. (Business Wire)

Animal Health News
 According to scientists at the USDA, increasing concerns of drug-resistant coccidia in poultry have generated new interest in the development of novel approaches to control avian coccidiosis.  Recent studies on the relationship of nutrition, infection and immunity showed that infections can exert adverse effects on the nutritional status of the host.  Diets low in crude fiber have been shown to reduce lesion formation after Eimeria infection, and soybean supplementation reduced the number of invasive stages of coccidia. Food sources high in omega-3 fatty acids were also cited as showing a protective effect against Eimeria species, although results were variable. (Feedstuffs)
 With support from the Canada Alberta Beef Industry Development Fund, scientists are attempting to identify biochemical and genetic markers to help the beef industry select animals that will produce marbled beef, generally recognized as a hallmark of juicy, flavorful beef. By identifying biochemical or genetic markers for marbling, scientists feel they should be able to develop a practical tool that could improve the rate of selection of high marbling animals.  It is believed that it will take 5-10 years of further research before this technology will become commercially available. (Canada Alberta Beef Industry Development Fund)

Agribusiness News
 Monsanto, DuPont, Novartis and other biotech companies have set this summer as the launch for a big television ad campaign to help build support for genetically enhanced crops. “The ground that we’ve lost in the acceptance of biotechnology in the marketplace is a war that we have lost, because we didn’t show up to fight the battle,” John Sorenson, a Novartis Seeds official, said last week in Washington.  Will their ad blitz be too little, too late? Hopefully not. But the anti-biotech forces have had their way nearly unchallenged for some time, and that puts the biotech companies at a disadvantage to start with. (AgWeb – Pro Farmer)
 Bayer AG entered a $200 million research agreement with Exelixis Pharmaceuticals with the goal of identifying new insecticides and nematacides through gene-based technology.  The main focus of the research agreement is in the crop protection area. (Veterinary Practice News)
 Growers are increasingly turning to the Internet to gather information and make business decisions, according to an opinion poll E-Markets conducted during the 2000 Commodity Classic. 82% of the leading corn and soybean growers attending the event have Internet access, and of those, nearly 56% use the Web more than three times per week to gather agribusiness-related news and information.  These findings were part of an opinion poll of 350 growers here by E-Markets.  (E-markets)

Brakke Consulting Viewpoint

The Veterinary Pet Insurance and Embrex revenues reports are two of the most positive sales growth messages presented by any firm in the animal health industry.  The announcement of the acquisition of Destron Fearing by Applied Digital Solutions at a multiple of 8X sales and 40X earnings demonstrates the value some firms outside our industry see in new technology that have the capability of improving animal production and food safety. In contrast, it was little more than a year ago that most of the animal health companies had an opportunity to invest in or purchase Destron Fearing and declined.   New technology is clearly a promising area for animal health; it is time for the animal health leaders to recognize this fact and act on it.

We at Brakke Consulting have been saying for several years now that the successful animal health business in the 21st century will require new management approaches to growing their business.  E-commerce and information technologies will have a major place in those who succeed.  Brakke Consulting can help you determine how your company needs to change to meet the challenges of the coming years.  Have you scheduled your business model audit yet?
 [Ron Brakke]
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