Animal Health News & Notes for April 19, 2002

******************************************************************
Brakke Consulting’s
Animal Health News & Notes for April 19, 2002
Copyright © Brakke Consulting, Inc.

******************************************************************
Company Earnings Releases

>  Pfizer announced that in the first quarter 2002, Animal Health sales increased to $239 million, up 9% (up 14% excluding the impact of foreign exchange) compared to the same period in 2001. This performance reflected double-digit growth (excluding the impact of foreign exchange) in both the companion animal and livestock product lines, and in both the U.S. and international markets. Companion animal product Revolution and the livestock medicines Dectomax and RespiSure/Stellamune continued to show strong growth. (company press release)

>  Eli Lilly announced that worldwide sales of animal health division Elanco in the first quarter 2002 were $167.8 million, an increase of 2% when compared with the first quarter of 2001. Excluding the effect of exchange rates, sales grew by 5% for the quarter. (company website)

>  Schering-Plough reported that first quarter sales of animal health products were down 2% (up 1% when foreign exchange is excluded) to $150 million. (company website)

>  Colgate-Palmolive Company reported that, for the first quarter 2002, Hill’s Pet Nutrition (13% of company sales, or approximately $285 million) increased unit volume and sales by 4.0% and 2.5%, respectively. Excluding foreign exchange, sales increased 5% and operating profit increased 11%. Dollar operating profit increased 5% versus the year ago period.  (Business Wire)

> Neogen Corporation reported that its third quarter was its 35th straight profitable quarter from operations, and the 41st quarter of the last 45 when the Company reported increases in revenue compared to the prior year.  Neogen’s third quarter revenues were $9.7 million, a 12% increase compared to $8.6 million in the prior year’s comparable quarter.  Revenues for the Company’s first 9 months were $30.1 million, a 17% increase compared to $25.7 million in the prior year.
The Company’s Animal Safety Division year-to-date revenues are 16% over the prior year’s comparable period. Its increase was led by a 40% surge in sales of Neogen’s Triple Crown equine products and a 50% growth in sales of veterinary instruments. (company website)

>  Alcide Corporation announced net sales and earnings for its third fiscal quarter and nine-month period ended February 28, 2002.  Net sales of $5.5 million for the quarter and $16.6 million for the nine-month period ending February 28, 2002 were 32% and 27% higher than for the respective periods last year.  At the end of the quarter, 34 poultry plants and 6 red meat plants were utilizing the Sanova System to improve the quality of their product. (company website)

>  Cargill Inc.’s third-quarter earnings surged 63% on strong performances by most of its businesses.  For the quarter ended Feb. 28, Cargill earned $161 million, up from $99 million a year earlier.  For the first nine months of fiscal 2002, Cargill earned $683 million, up 53% from $445 million a year earlier. The majority of our food ingredient businesses in Europe and North America, animal nutrition at home and abroad, the egg, pork and poultry processing units, and the export-oriented grain and oilseeds businesses delivered improved results compared to a year ago.  Earnings were below last year’s level for its beef processing business due to the slower U.S. economy and weaker exports for beef and beef byproducts. Cattle feeding losses, however, were reduced from the second quarter. (AP)

>   McDonald’s Corp. reported lower earnings for a sixth straight quarter, a 33% decline reflecting the sluggish global economy and a mad-cow scare that has hurt sales in Japan. The fast-food chain beat Wall Street’s lowered expectations, however, citing a resurgence of sales in Europe, where consumers also had been wary of beef safety for months.  (AP)

******************************************************************
Company News Releases

>  Neogen Corporation announced the opening of its sales and distribution center in Shanghai, China. This expansion will allow the company to better serve the expanding food safety market, as well as more closely oversee its current Chinese animal safety operations.  The majority of these products are shipped to the United States for use by veterinarians, farmers and ranchers.
Neogen Food Safety products of most interest in the Chinese market include rapid tests for the detection of natural toxins in grains, foodborne bacteria and pesticides, as well as dehydrated culture media. In many cases, Neogen’s products in China will be used by the same large, U.S.-based multinational companies that use Neogen’s products domestically.  (company website)

>  Sheppard & Greene, a division of Farnam, introduced its most complete, advanced ferret food formula ever.  Sheppard & Greene Super Premium Ferret Food, available in both adult and senior formulas, is guaranteed to minimize litter box odor and includes antioxidants to promote a healthy immune system.  To address the problem of pet and litter box odor – the biggest drawback to ferret ownership – Sheppard & Greene’s Super Premium Ferret Food is formulated without fish and fish oils.  It also incorporates yucca shidigera, a natural odor-reducing additive. (company press release)

>  ABAXIS, Inc. announced it has completed a private financing that has raised approximately $5.8 million. Of that amount, $3.75 million was sold during the fiscal year that ended March 31, 2002. After accounting for fees and expenses associated with its financial and legal advisers, ABAXIS received approximately $5.3 million in net proceeds from the offering, which will be used for general working capital purposes. (company website)

>  Capitalizing on the growth of instant messaging (IM), Nestle Purina PetCare Company unveiled two unique Yahoo! Messenger IMVironments, the interactive, themed backgrounds for Yahoo! Messenger conversations that appear directly in the IM window and are shared virally among users.  People can now select Purina Yahoo! Messenger IMVironments with either a dog or a cat background that includes sound and animation effects. This initiative is part of a continuing marketing relationship between Nestle Purina and Yahoo.  (Business Wire)

*******************************************************************
BRAKKE CONSULTING, INC.
       BUYING, SELLING, OR HOLDING
       
       When is the right time to sell my business?  What is the value today?

       When is the right time to purchase another business?       

       What type of business should I purchase to add value?

       What should I be doing right now to obtain maximum value?

Most companies have a shortfall in the new products area for the next 3 years so they are aggressively looking for opportunities to purchase companies, products, or technologies to improve their sales during this period.  Others need to expand either geographically or in the species covered in order to create the critical mass necessary to compete in the consolidating marketplace.  It is not business as usual for most firms.  This provides an opportunity for small and medium sized companies to maximize shareholder value by organizing and managing the process instead of reacting to market place shifts.

Brakke Consulting has handled a number of projects related to acquisitions or divestitures.  We have acted as agent of record, or finder of record on a number of transactions the past several years.  We have assisted with valuations and due diligence on confidential transactions, and provided executive counsel on several other potential transactions.

Brakke Consulting has the experience, insight, abilities, and contacts that provide our clients with the highest quality services in the animal health, pet, veterinary, and specialty chemicals markets.  Please contact any of our offices for a confidential consultation on our range of services.  Contact information for all offices are available on our website at www.brakkeconsulting.com https://brakkeconsulting.com and click on a starred location on the world map.

*******************************************************************
Animal Health News

>  US   A first round of tests failed to rule out the possibility that two sheep seized last year from a Vermont farm carried BSE.  Additional tests taking two or three years will be done to see if the sheep suffered from mad cow disease or a similar common ailment, scrapie, that poses no harm to humans.  (AP)

>  US   Despite emergency biosecurity methods enacted by farmers and the state Department of Agriculture, avian influenza continues to spread in Virginia.  More than 1 million birds have been slated to die after flocks at several more farms tested positive for the virus.  A major outbreak of the virus in the Eastern United States in 1983 and 1984 resulted in the destruction of more than 17 million birds, at a cost of nearly $65 million. That outbreak also caused retail egg prices to jump more than 30 percent. (AnimalNet – Knight-Ridder Tribune)

>  EUROPE   The European Standing Committee on the Food Chain and Animal Health has backed European Commission proposals over classical swine fever (CSF) in Germany and Spain.  For Germany, in response to outbreaks of CSF, the export of live pigs and porcine semen, ova and embryos from a part of Rhineland-Palatinate has been banned.  For Spain, the existing measures, which are in force until 30 April, will be extended until 31 May. The proposal enters immediately into force and is applicable until 30 June 2002.  In Spain, in spite of all the restrictive measures that have been in place for several months, outbreaks of CSF continue to be reported.  Due to this situation, the existing measures, including a ban on the export of live pigs and porcine semen, ova and embryos from several provinces and comarcas, now applicable until 30 April, will be extended until 31 May. (Meating Place)

>  UK   Final test results on a suspected case of foot-and-mouth disease in northern England have proven negative.  The affected farm in North Yorkshire was sealed off last week after a cow was found to be displaying symptoms associated with the disease.  A ban on livestock movements within an eight kilometer zone around the affected premises has been lifted.  Veterinarians have said more suspected outbreaks are likely as farms begin to restock premises emptied by last year’s outbreak. (AnimalNet – Reuters)

>  US   Health officials believe a 22-year-old British woman living in Florida has a human brain illness linked to BSE – the first known case in the United States.  But officials with the Florida Department of Health emphasized that there is no reason to suspect cattle in the United States have BSE.  The woman in Florida is believed to have caught the disease by eating beef products in Britain at the height of that country’s BSE epidemic in the late 1980s or early 1990s.  (AP)

>  US   Russia lifted its five-week embargo on U.S. poultry imports; however, a six-month ban remains on poultry coming from North Carolina, Maine, Pennsylvania and Virginia, because of the presence of avian influenza.  New requirements for U.S. chicken meat will be introduced in Russia within two or three months, and after that, U.S. producers will have to subject their products to control in accordance with the new requirements that will include gene analysis, an antibiotics analysis and other types of analysis.  (Meating Place)

>  US   USDA officials are reviewing scientific data and research results in consideration of the establishment of upper limits on Campylobacter in poultry products, according to a special report for Meatingplace.com.  A petition by consumer activists asked for the same progress in reduction of Campylobacter as was implemented for Salmonella.  Studies have suggested that in-plant procedures that reduce salmonella contamination would be less effective against Campylobacter, and that isolation, identification and quantification of the pathogen is far more expensive and time-consuming than it is for salmonella.  Some experts contend that USDA cannot establish and enforce a realistic and achievable Campylobacter standard, given the current technology for detection and control. To date, irradiation is the only completely effective and approved method of eliminating Campylobacter.  (Meating Place)

>  US   Merger and acquisition activity in the food industry took a downward turn in 2001, according to a market analyst for the Food Institute.  The Food Institute tracked 516 mergers and acquisitions in 2001, 125 fewer, or 20 percent less, than were documented the prior year and the lowest level tracked since 1993. Among the segments with the sharpest declines: restaurant and foodservice (down 30 to 61); packaging and equipment suppliers (down 24 to 28); and food processing firms (down 26 to 146), and this included meat and poultry acquisitions. (Meating Place)

>  US   According to economists, the aftershock of Russia’s embargo on U.S. poultry exports has caused pork and beef prices to fall.  The embargo prompted stores to offer bargain prices on chicken and turkey to sell the unexported supply.  Pork prices have fallen to nearly 28 cents a pound for live hogs, or around $32 per hog, although prices were climbing toward 40 cents
per pound earlier this year.  Beef prices also sank. Cattle are being traded at nearly $65 a head, compared to around $75 a head more than a month ago.  (AP)

*******************************************************************
Agribusiness News

>  The European Union cleared Bayer AG’s $6.4 billion purchase of Aventis SA’s agrochemical unit pending “substantial divestitures’’ by Bayer, including a best-selling insecticide and several fungicides.  The EU’s executive commission concluded those commitments were sufficient to guarantee that no dominant position will be created or strengthened on any market.  The deal, which is still undergoing antitrust review in the United States, would create the world’s No. 2 supplier of farm chemicals and seeds.  The commission said the most important concession was Bayer’s agreement to sell to a single purchaser a group of Aventis insecticides and fungicides
including Fipronil, which Bayer had touted as a major asset.  Bayer said the list of businesses it plans to sell involves total product sales of $540 million, or 9 percent of the combined business in 2000.  The expanded unit will be called Bayer CropScience and would trail only Syngenta AG in the sector.  (AP)

*******************************************************************
Brakke Consulting Viewpoint

We are in a world economy whether we like it or not.  The impact of this comes home to roost in the cash prices for swine and beef in the US caused by the embargo of poultry in Russia these past few months.  Even McDonalds finds itself in a difficult position based on the issues related to beef in Japan. These market conditions will have an impact on animal health sales in the food animal sector over the next few quarters.  We want to remind each of you that food safety is still an issue for our industry, which means that there are opportunities for those that find solutions.  Have you increased your R&D budget in 2002?

The first quarter reports remain encouraging. Companies in both the companion animal and food animal areas seem to be making progress in taking costs out of the system and still increasing sales.  Having spent the last two weeks on the road in various parts of the US, I’m encouraged by the initiatives that some companies are making in the face of slow real market growth.  We need everyone in the animal health industry to be involved by investing and supporting positive programs for the products and services that are provided to consumers. We’ll all gain from this in future years. 

[Ron Brakke]

********************************************************************
This electronic newsletter is the sole property of Brakke Consulting, Inc.
Any use of the contents herein should be approved by and appropriately attributed to Brakke Consulting, Inc.

For more information about Brakke Consulting’s services and syndicated studies, visit our website at www.brakkeconsulting.com.

If this email was forwarded to you and you would like to be added to the circulation list, please send an email to info@brakkeconsulting.com (mailto:info@brakkeconsulting.com) with “add” typed in the subject line, and your name, title, and company affiliation in the body of the message, and you will be added to the mailing list.  If you would like for us to remove your name from the circulation list, please send an email to info@brakkeconsulting.com (mailto:info@brakkeconsulting.com) with “remove” and your name typed in the subject line.