The Experts in Animal Health

Brakke Consulting’s
Animal Health News & Notes for January 14, 2000

Company Earnings Releases
 Destron Fearing reported record first quarter sales and profits for the quarter ended 12/31/99.  Net sales increased 3% to $4.2 million.  Net income was $552,000, compared to the previous first quarter of $239,000.

Company News Releases
 Warner Lambert reversed course and said it would hold merger talks with Pfizer.  The decision came two months after Warner-Lambert agreed to be acquired by American Home Products.  Warner-Lambert’s board said that “in light of changing circumstances” it had concluded Pfizer’s offer “is better financially for Warner-Lambert shareholders than the proposed merger with American Home Products.”   Either combination would create the world’s largest drugmaker. Investors had pressured Warner-Lambert executives to re-evaluate its decision to unite with American Home Product, especially in light of the rising value of Pfizer’s offer. Pfizer’s offer is now worth about $75 billion. American Home’s bid is valued at less than $51 billion. The difference between the offers has widened in recent weeks due to Pfizer’s rising stock price and American Home’s falling stock price.
 Synbiotics Corp. announced that it has acquired W3Commerce LLC, a privately-held, San Diego-based Internet systems and services provider.  W3Commerce specializes in information and e-commerce networks that develop direct channels for manufacturers to supply retail and business consumers.  Emphasizing the importance of this acquisition, Synbiotics also announced that it will ask shareholders to approve changing its corporate name to W3 Inc.   W3 Inc. will function essentially as a holding company, owning and operating its two complementary business units, Synbiotics and W3Commerce.  W3 Inc.’s initial focus will be to grow the worldwide direct-to-vet sales of its animal health unit, which will continue to be known as Synbiotics. Ken Cohen will continue as President & CEO, and Michael Green will serve as senior vice president & CFO, of the holding company. Paul A. Rosinack, currently vice president and general manager of Synbiotics’ animal health business, will become president of the Synbiotics operating unit.
 Virbac Corporation announced that it had entered into an agreement with Virbac SA, Carros, France, whereby Virbac Corporation is named the exclusive licensee in the United States and Canada for use and sale of products currently in development by Virbac SA. In addition, Virbac Corporation has the first right of refusal to be appointed the exclusive licensee in the US and Canada for previously developed products by Virbac SA dedicated to companion animals, equine and food-producing animals. Virbac Corporation, located in Fort Worth, Texas, is a companion animal health company formed on March 5, 1999, through the merger of Virbac, Inc., a subsidiary of Virbac SA, and Agri-Nutrition Group Limited.
 Milk Specialties Co announced that the company has completed a transaction that resulted in a buyout by management, complete recapitalization and a major equity infusion.  The transaction was concluded between a small group of senior management and a major Midwest financial organization.
 VetLife, the sales and marketing division of Ivy Animal Health, has deployed Webridge Partner Express to create personalized eBusiness web sites for up to a thousand key business customers. The majority of VetLife customers, including some of the country’s largest beef cattle producers, subscribe to the company’s Benchmark Performance Program — a value-added service that includes the collection and analysis of vast amounts of cattle performance information.  Now, with Webridge Partner Express, current Benchmark data, personalized for each customer, is available 24 hours a day in a variety of report formats through the Partner Express extranet sites.
 Doane Pet Care Company and Menu Foods Limited have signed a letter of intent providing for the merger of the two companies.  The terms of the transaction were not disclosed.  Menu is the premier provider of wet (canned) private label pet food in North America and complements Doane’s private label leadership in the pet food categories for dry, biscuits and treats.  
 Central Garden & Pet Company announced that its Pennington subsidiary has acquired Unicorn Laboratories. Unicorn serves the U.S. animal health and lawn and garden industries as a private label and branded manufacturer. Terms of the transaction were not disclosed.  Unicorn has annual sales of approximately $15 million and has approximately 25 employees. Unicorn holds 212 U.S. Environmental Protection Agency registrations, and as a result of the acquisition, Central and its subsidiaries will hold more pesticide product registrations than all but one other company in the U.S.
 Demegen, Inc. and AviGenics, Inc. announced that they have entered into a collaborative research and development agreement to develop chickens that are resistant to coccidiosis and other avian enteric diseases such as Salmonella and Campylobacter.  The collaboration between the two companies, if successful, is expected to produce new lines of chickens that not only are resistant to disease, but also use feed more efficiently.  The result will be commercial lines of birds that require less feed and a lower cost of drugs to treat and prevent diseases. Over eight billion broilers are produced annually in the United States.
 announced December data from Nielsen//NetRatings that keep on top for two consecutive months in terms of web site ‘stickiness.’ A much coveted ranking in online commerce, ‘stickiness’ is a key indictor of a visitor’s involvement with a web site. These results indicate that visitors to are spending more time on its site and are going deeper into its content.

Animal Health News
 Genzyme Transgenics Corporation and Alexion Pharmaceuticals, Inc. announced that they have signed an agreement to produce a recombinant protein using Genzyme’s transgenic manufacturing system.  In the first phase of this program, Genzyme will develop transgenic animals that produce the recombinant protein in their milk, for which Genzyme will receive development and milestone fees from Alexion.  Genzyme has successfully produced over 60 human proteins in animals’ milk.

Agribusiness News
 The federal government is not likely to require U.S. manufacturers and grocery stores to put labels on genetically modified food, U.S. Agriculture Secretary Dan Glickman said on Monday.   “I, at this stage, do not see any of what I call mandatory or regulatory activities taking place from the government which will order anybody to do anything with respect to these issues, whether its labeling or anything else,” Glickman told reporters at a news conference to discuss USDA’s priorities for this year.
 Nearly three-fourths of American consumers would support genetically modified crops if the technology means farmers can reduce pesticide use, according to a survey released Tuesday by the American Farm Bureau. Some 1,002 consumers were interviewed for the survey in July and August, with the majority indicating they had heard more about the drawbacks of biotechnology rather than benefits. More than half said they would support gene-altered corn, soybeans, squash and other crops if the technology would improve the taste and nutritional value of foods. Some 73% of consumers surveyed favored biotech crops if they would help farmers cut back on pesticides.
 Scientists have genetically engineered a type of rice that could end vitamin A deficiency in the developing world, a problem that is a common cause of blindness and other health problems in millions of children. The researchers at a Swiss laboratory spliced three genes into the rice to make it rich in beta carotene, the source of vitamin A, according to a report on their findings appearing Friday in Science magazine. The new crop, dubbed “golden rice’’ because of the hue the beta carotene gives it, is not expected to be available to farmers for several years. 

Brakke Consulting Viewpoint

Is technology starting to win some battles or are they just small skirmishes?  The answers to those questions probably depends on your viewpoint. If you’re a larger company, these maybe viewed as insignificant.  However, if you’re a distributor or a small company, these may be the first of some big victories with more to come.  What technology are we talking about?  We’re talking about the Internet and the impact it is having and will have on all industries including animal health.  The Internet is giving everyone equal access to customers and consumers without regard to size or distribution agreements. 

Note that Synbiotics plans to use e-commerce as a way to level the playing field in reaching veterinarians and pet owners.  VetLife announced that their system will allow feedlot customers to measure and compare performance of food animals with millions of others rapidly via the Internet.  Is that not Benchmarking of beef production in the new digital age? 

The two consolidations announced this week were just a continuation of old techology or products finding a new home in hopes of generating a little more cash.   The survey of consumers related to GMO seeds is interesting.  Does this say that if the consumer is educated with choices and alternatives that there is a good future for GMO products?  Perhaps it indicates that agribusiness has done a better job of educating consumers here in the US than in other parts of the world before the anti-GMO activists got a foot in the door.  Alternatively, the US consumers in general may put more trust in the food regulatory agencies, and thus be less concerned with issues of drug residues and genetic modification, than their European counterparts.

In 1999, Brakke Consulting, Inc. did benchmarking projects in various the markets we serve. We will be contacting many of you in the next few weeks about benchmarking projects for your firm in 2000.   We have some strong feelings about the new business models that are developing quickly.  Have you had an audit of your business model in the past year?  We would be pleased to have the opportunity to review our new business model audit with you.  Please call for an appointment to discuss this with us.

[Ron Brakke]
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