Animal Health News & Notes for December 10, 1999

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Brakke Consulting’s
Animal Health News & Notes for December 10, 1999

Company earnings releases
 Cobequid Life Sciences announced record revenues for the year ended August 30, 1999 of $7.1 million and net profit of $1.07 million.  These results mark the third consecutive year of significantly increased profits underlining several key factors, including the company’s successful approach to business development.
 H. J. Heinz Company reported that second quarter Fiscal 2000 net income increased $14.6 million to $234.8 million. Sales for the quarter increased $21.7 million or 0.9%. Asked if the pet food division was on the block, Chief Financial Officer Paul Renne said, “It’s not. Right now we’re trying hard to fix it and our goal is getting it back into good shape.” The pet food division has been a drag on earnings for about a year as it struggles with disappointing sales trends.
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Company News Releases
 Pharmacia & Upjohn announced that it has appointed Stephen P. MacMillan as Sector Vice President, Global Specialty Operations to lead a newly created business unit consisting of the company’s Consumer Healthcare, Animal Health, Diagnostics, Pharmaceutical Commercial Services and Plasma operations.
 American Home Products Corp. has approached advisors to Pharmacia & Upjohn Co., suggesting a takeover if American Home’s merger with Warner-Lambert fails, the London-based Financial Times reported in its Friday editions.  American Home is competing with Pfizer Inc. to buy Warner-Lambert Co. Most analysts are betting Pfizer’s higher bid will eventually win the battle. The takeover fight is now in a Delaware court as all three companies have sued each other.  Spokesmen for American Home and Pharmacia & Upjohn refused to comment on the reported merger talks.
 Fort Dodge received USDA approval for Cydectin Pour-On to be used in lactating cows, dry cows, calves and heifers.  Cydectin is now labeled for internal and external parasite control in dairy cattle of all ages and stages of lactation, except veal calves.  There is no milk withholding period and zero slaughter withdrawal.
 Swiss pharmaceutical giant Roche (Hoffmann-La Roche) reported it plans to spin off its fragrances and flavors division in a move to focus on its health care business. It said the spinoff will involve no major restructuring.  Last year, the division had sales of more than $1.27 billion and an operating profit of $166 million.
 Ralston Purina Company announced it has acquired the assets related to the dry pet food business of Bonnie Pet Foods, an Australian pet food manufacturer.  Terms were not disclosed.  The business will be operated as part of RP Australia Pty Limited, a wholly owned subsidiary of Ralston.  Ralston’s Chairman stated that the acquisition will provide a manufacturing base for Purina to supply high quality pet food products to the Asia Pacific region.  Bonnie Pet Foods’ dry pet food business had sales of $3.6 million (U.S.) last year and employs approximately 20 people.
 Virbac Corporation announced the signing of an agreement with Virbac S.A., Carros, France, to distribute Virbac Corporation’s U.S. products internationally. Virbac Corporation, headquartered in Ft. Worth, Texas, will continue to focus on growing the North American markets and Virbac SA will distribute Virbac Corporation products throughout the remainder of the world.
 American Scientific Laboratories, the independent poultry subsidiary of Schering Plough, is now using the Schering Plough name to be consistent between its US and international affiliates.  The name change marks the completion of an 18 month program to establish the business’ commitment to poultry products.
 Sergeant’s Pet Products, Inc. announced that Eckerd Corporation has agreed to carry the Sergeant’s Vetscription Health Care for Pets line of well-being products for pets in their drug stores.  The decision by Eckerd Corporation to carry the Sergeant’s Vetscription products is Eckerd’s first full-time entry into the pet health segment. Additionally, it is Sergeant’s first placement of the Vetscription line in a major national drug store chain.  The Sergeant’s Vetscription Health Care for Pets product line includes nutraceuticals and herbal products for pets in addition to traditional pet health products.
 The Federal Trade Commission said Tuesday it conditionally approved the proposed merger of  Hoechst AG and Rhone-Poulenc SA to create a huge new pharmaceutical firm, Aventis SA. The FTC voted 5-0 to support a proposed consent decree with Hoechst and Rhone-Poulenc, which will now be issued for public comment. Hoechst and Rhone-Poulenc agreed to divest most of its interest in Rhodia, a specialty chemicals subsidiary that produces cellulose acetate, and to divest assets associated with Revasc, a drug produced by Rhone-Poulenc.
 Pala-Tech has launched its first products: Canine Joint Health Granules, Canine Joint Health Chewable Tablets, and Canine Aspirin Chewable Tablets.  Pala-Tech is a startup company formed by former Heska and Solvay marketing executive Ray Cooper.
 Petopia.com announced that it has raised an additional $35 million in venture financing from existing investors, Technology Crossover Ventures, PETCO Animal Supplies, Inc., Europ@web, the Internet investment company established by Group Arnault and new investors Attractor Investment Management, Inc., BancBoston Ventures and Comdisco, Inc.    
 Online pet store PETsMART.com said it was buying Acmepet.com, although the two sites will continue to operate independently. Acmepet.com focuses on providing pet information and has an active chat community, something Petsmart.com said will provide expanded content for its site.
 Pets.com announced that it has raised a $15 million fourth round of funding which included several new strategic partners.  This is a follow-on financing from Pets.com’s Nov. 5, 1999 nearly $35 million round which included Amazon.com, Hummer Winblad Venture Partners, Bowman Capital and Phoenix Partners. Combined with nearly $95 million raised by Pets.com in its first three rounds of funding, the investment in the online pet site totals nearly $110 million.
 PETsMART.com has launched the Holiday Feast for pets.  Pet owners will receive free dog or cat food when they buy pet gifts, pet supplies and millenium-themed products at PETsMART.com during the Holiday Feast, which runs through December 20, 1999.  Online shoppers can receive up to 44lbs. of free pet food with their qualifying purchase.
 Pet food and supply retailer PetFoodDirect.com acquired ThePetCenter.com, an Internet animal hospital. Financial terms were not disclosed. Under the terms of the agreement, ThePetCenter.com will remain a separate site, but will be linked and co-branded with PetFoodDirect.com.
 Pets.com announced it has taken the first step in its worldwide expansion by signing a letter of intent to make an equity investment in Petspark.com, a U.K.-based online pet store and community site. Under the agreement, which Pets.com expects will be completed this month, Pets.com will be able to leverage its commitment to consumers, expertise in the pet e-commerce space, and deep knowledge of the pet industry with a local understanding of the trends, needs and interests of U.K. pet owners.
 PetPlanet.com announced the opening of its holiday gift boutique.  PetPlanet.com’s holiday boutique adds new holiday-themed pet products and helps consumers easily find gifts for their pets.  The holiday boutique is the best way to begin a search through PetPlanet.com’s 10,000 products.
 Tyson Foods, Inc. announced that the Company was unable to reach a definitive agreement related to the purchase of Tyson’s wholly owned subsidiary, The Pork Group, Inc., by Smithfield Foods, Inc. Negotiations were mutually terminated because certain inherent operational characteristics of Tyson’s Pork Group did not fit into Smithfield’s expectations or long term plans.  Tyson previously announced that the Company had recorded a loss on this anticipated sale in the fourth quarter of fiscal 1999 that ended October 2, 1999.
 Food conglomerate ConAgra Inc. is buying the poultry division of Seaboard Corp. for $375 million in cash.  The companies said in announcing the deal on Monday they expect to complete it in early 2000.  Seaboard Farms supplies chicken products for restaurant chains and fast-food outlets. It has annual sales of about $480 million. Based in Athens, Ga., Seaboard Farms has six processing facilities in Georgia, Kentucky and Tennessee.  ConAgra has annual sales of about $25 billion and is the nation’s leading supplier to foodservice outlets. Its consumer brands include Healthy Choice, Banquet, Van Camp’s and Wesson.

Animal Health News
 Bruce Andrews, president of Alpharma Animal Health, has been appointed president of COMISA, the world federation of the animal health industry.  Mr. Andrews, formerly with Brakke Consulting, is also a member of the Board of Directors of the US Animal Health Institute (AHI) and of the American Feed Industry Association (AFIA).
 The European Union on Wednesday delayed a decision on whether to resume imports of U.S. hormone-free beef, dashing hopes of a quick resolution to a transatlantic dispute over the EU’s ban on meat treated with growth hormones.  EU vets extended until mid-February the deadline for the United States to provide guarantees that shipments of beef were free of hormone traces, but said they had received strong U.S. commitments to improve health checks.  No import ban on hormone-free beef nor on any other meat and meat product will therefore be imposed before February 15, 2000.
 Neozyme recently completed a 12-month field trial of the patented Neozyme biocatalyst, EcoSystem Plus, at an 18,600-head hog facility.  Results showed a significant reduction in odor levels throughout the facility and a 20% reduction in total nitrogen levels and a 50% reduction in phosphorus levels in its 28 million-gallon lagoon. Neozyme manufactures and sells its patented line of biocatalysts in several other markets worldwide including municipal and industrial wastewater treatment, hydrocarbon remediation and industrial metal cleaning.  All Neozyme products are nontoxic, 100% biodegradable and can be used safely around humans, animals, marine life and vegetation.
 Medical researchers using gene therapy have figured out a way to make young hogs grow 40 per cent larger and faster.  The key to the new technology is a synthetic chemical that’s inserted into a biodegradable piece of DNA, then injected into the leg of a 2-week-old pig. The chemical in turn causes the pig’s pituitary gland to secrete higher than normal levels of growth hormone. Two months after the injection, treated pigs weighed 92 pounds (42 kg), compared with 65 pounds (30 kg) for an untreated hog. Schwartz was cited as saying in an interview Tuesday that the treated pigs eat 25 per cent less feed, which would amount to huge savings for the farmer, and they are ready for slaughter two weeks earlier. The price of feed alone accounts for half the cost of raising a hog.  The pigs also are, according to this story, expected to produce less manure, he said.
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Agribusiness News
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Brakke Consulting Viewpoint

All areas of e-commerce are booming these days, while biotechnology seems to be struggling.  As evidenced by the additional financing obtained by both Petopia.com and Pets.com, e-commerce companies selling pet products seem to have no trouble raising capital.  On the other hand, a recent Wall Street Journal article pointed out that biotechnology IPO’s (including human health companies) are at an all-time low.

Most of the news this week relating to animal health and pet markets appears to be reposturing:  consolidation of brands, new distribution outlets and additional species approvals for current products.  Nothing appears to be new or innovative.  Instead, it’s focused on “how do we get more out of what we already have, in order to show some sales growth next year?”

[Ron Brakke]
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Are you planning on attending the North American Veterinary Conference in Orlando in January?  Brakke Consulting president Ron Brakke will be there, and will be presenting an Overview of the Animal Health Industry on Monday, January 15.  Registration is $250 and seating is limited, so if you would like to attend, please call Roger Cummings at (972) 243-4033 to reserve your place.

Also attending the conference will be Brakke Consultants Dick Wilson, Roger Cummings, Dr. Lynn Fondon and Dr. Jim Guenther.  If you would like to schedule an appointment during the conference with any of these consultants, please call the Dallas office at (972) 243-4033.

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