Animal Health News & Notes for August 3, 2001

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Brakke Consulting’s
Animal Health News & Notes for August 3, 2001
Copyright © Brakke Consulting, Inc.
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Company Earnings Releases

>  Aventis reported that in the first half of 2001, sales by the animal health business Merial rose 10% to € 944 million ($800 million).  This figure includes the poultry genetics business. (company press release)

>  Akzo Nobel reported revenues for Intervet for the second quarter of 2001 were € 282 million ($240 million), an increase of 12% over the second quarter of 2000.  Revenues for the first half of 2001 were € 539 million ($460 million), an increase of 10% over the first half of 2000.  (company website)

>  Alpharma Inc. announced financial results for the second quarter and six months ended June 30, 2001. Animal Pharmaceuticals revenue was basically flat in the second quarter at $81.7 million when compared to the same period last year.  Significant increases in swine product sales were offset by declines in poultry product sales.  Conditions in the U.S. poultry market, including the impact of reduced customer inventory levels, together with softness in Asian markets, were the cause of the decline.  This mix resulted in operating income of $9.2 million, 25% lower than the prior year period.  For the six months ended June 30, 2001, Animal Pharmaceuticals revenue was $165.2 million, an increase of 35% over the comparable period in 2000.  Operating income for the first half was $21.9 million, an increase of 14% over the comparable prior-year period. (PRNewswire)

>  Virbac SA reported sales for the second quarter of 2001 were 91 million euros ($77 million), an increase of 9% over the second quarter of 2000.  Sales for the first six months of 2001 were 171.6 million euros ($146 million), an increase of 8% over the comparable period in 2000.  Growth was particularly strong in Asia, North America, and a number of European markets (Germany, England, Spain), mainly due to the successful launch of recent products. (company website)

>  Tyson Foods, Inc. third quarter 2001 sales were $1.89 billion compared to $1.81 billion last year, an increase of 4.8%.  Earnings for the third quarter of fiscal 2001 were $19.4 million compared to $40.5 million for the same period last year. Sales for the nine months of fiscal 2001 were $5.46 billion compared to $5.38 billion last year, an increase of 1.6%.  Earnings for the nine months of fiscal 2001 were $40.3 million compared to $133.2 million for the same period last year.  (PRNewswire)

>  Virbac Corporation reported record sales results for the second quarter and six months ended June 30, 2001.  Net sales for the quarter rose 21% to $16.0 million from $13.2 million for the quarter ended June 30, 2000.  Net income for the second quarter of 2001, increased to $497,000, compared to $480,000 in the comparable quarter in 2000.  Sales for the six months ended June 30, 2001, rose 22% to $31.0 million from $25.5 million in the corresponding period last year. Net income for the six months ended June 30, 2001, was $1.1 million, versus $482,000 in the comparable period of 2000. (Business Wire)

>  Heska Corporation reported financial results for its second quarter and year-to-date periods ended June 30, 2001. For the quarter ended June 30, 2001, the Company’s net loss was reduced to $4.7 million from $5.7 million in the second quarter of the prior year, representing an 18% improvement.  Revenue from the Company’s proprietary pharmaceuticals, vaccines and diagnostic (PVD) products grew by 19% and revenue from sales of veterinary medical instrumentation products grew 5% over the second quarter of the prior year.  Total revenue, however, declined to $10.9 million from $14.2 million for the second quarter of 2000.  The prior year’s total revenue included $1.4 million from a subsidiary that was sold last year.  The decline in total revenue was also due to reduced sales at the Company’s Diamond Animal Health subsidiary, where cancelled and delayed orders from customers resulted in a 50% decline in Diamond’s second quarter revenues, compared to the previous year. (PRNewswire)

>   Embrex, Inc. announced revenues and earnings for the second quarter ended June 30, 2001. Second-quarter revenues for 2001 were $10.8 million, an increase of 11% over revenues of $9.7 million for the same period in 2000.  Second-quarter net income was $1.9 million, an increase of 19% over net income of $1.6 million for the same period in 2000. The company’s second-quarter revenue increase was primarily attributable to additional installations of Inovoject systems and increased injection activity in North America, Asia, and Latin America, as well as Inovoject system sales in Japan.  In addition, sales of Bursaplex in ovo bursal disease vaccine were up 10% over the second quarter of 2000, contributing to the revenue increase.  For the six months ended June 30, 2001, revenues were $21.6 million, a 14% increase over revenues of $19.0 million during the same period of 2000.  Net income for the first half of 2001 rose 26% to $4.0 million from $3.2 million for the first six months of 2000.   (PRNewswire) 

Correction:  Last week’s newsletter reported earnings results for Fort Dodge and Pharmacia as the second quarter 2000.  The results should have read “second quarter of 2001.”  The editor apologizes for being “asleep at the wheel” last week.

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Company News Releases

>  The European Union Commission reported that it will clear Swiss food giant Nestle SA’s $10.1 billion purchase U.S. pet food maker Ralston Purina, provided that Nestle take steps to preserve competition in Spain, Italy and Greece.  The Commission said final approval will be granted once the conditions have been met.  Nestle has notified the Commission of its intention to divest some assets in Spain, Greece and Italy.  The deal still must be approved in the United States, where analysts say it faces a tougher time because of Ralston’s much larger market share there. (AP)

>  Merial announced the appointment of Jose Barella as Head of the Companion Animal Global Enterprise and Member of the Merial Animal Health Management Committee. Jose joins Merial from Aventis where he has held various senior positions in global product management, commercial operations and manufacturing, and most recently has been Head of the Aventis Environmental Science business. (company website)

>  The Animal and Plant Health Inspection Service (APHIS) has issued a conditional United States Veterinary Biological Product License to American Home Products (Fort Dodge) for the
manufacture and distribution of West Nile Virus Vaccine, Killed Virus.  A conditional veterinary biological product license may be issued to meet an emergency situation, limited market, local situation, or special circumstance. The special circumstance addressed here is the need for a product to aid in the prevention of disease caused by the West Nile virus in horses. Conditionally licensed products are required to be pure and safe, and have a reasonable expectation of  efficacy.  APHIS will continue to evaluate potency and efficacy data throughout the conditional licensure period. The conditional license will expire in one year. (AnimalNet – United States Department of Agriculture)

>   Merial announced the launch of www.merial.com.  Veterinary professionals, channel partners, pet owners, livestock producers and equine enthusiasts can find industry-specific information on animal diseases and products, upcoming events, animal health updates, links to relevant sites and an opt-in e-mail service to keep them up to date on new products and consumer and producer promotions.  Merial.com offers veterinarians a “Vet Locator” tool that lists veterinary practices and their contact information, as well as “Reminder Services” for pet owners, designed to improve compliance and allow veterinarians and pet owners to provide better health care for pets. In the future, Merial’s Web site will include online purchasing. (company press release)

>  Microcide Pharmaceuticals, Inc. announced an amendment of its research collaboration and license agreement with Schering-Plough Animal Health that increases the level of research at Microcide funded by Schering-Plough.  This joint research program is focused on the discovery and development of improved veterinary antimicrobial drugs using Microcide’s state-of-the-art technology and knowledge of bacterial efflux pumps and other resistance mechanisms.  Under the terms of the basic agreement announced in November 2000, Schering-Plough Animal Health has worldwide rights to products resulting from the collaboration.  Microcide received an upfront payment and receives research support payments over a two-year period and milestone and royalty payments on products emerging from the collaboration.  (PRNewswire)

>  Lohmann Animal Health International has made a five-year pledge to contribute $225,000 to help fund the University of Georgia’s Global Avian Health Initiative, an effort dedicated to improving poultry health worldwide.  Through the initiative, UGA’s College of Veterinary Medicine is seeking a total of $7.65 million in private and public funds to endow the Caswell S. Eidson Eminent Scholar position and to expand facilities at the Poultry Diagnostic and Research Center in Athens. (company press release)

>  Origen Therapeutics, Inc. and Embrex, Inc. announced they have been awarded an
Advanced Technology Program (ATP) grant totaling $4.7 million from the National Institute of Science and Technology (NIST), a division of the U.S. Department of Commerce. The four-year grant will help fund a project, with a proposed budget of $9.7 million, for development of technology aimed at the large-scale production of poultry utilizing avian embryonic stem (ES) cells and in ovo technology. (PRNewswire)

>   Infigen, Inc. announced today the birth of the first lamb to be cloned in North America.  Born July 22, the female makes Infigen the only organization in North America to have successfully cloned three different species of farm animals.  The company previously announced clones of dairy and beef cattle as well as domestic pigs.  Infigen has already produced the world’s largest number of transgenic and non-transgenic cloned bovine and porcine, numbering over 165 animals. (AnimalNet – company press release)

>  Orchid BioSciences, Inc. announced that it has established a commercial genotyping service agreement with PIC International Group PLC.  Under the terms of the agreement, Orchid will perform single nucleotide polymorphism (SNP) genotyping services designed to enhance PIC’s breeding methods.  Further details of the agreement were not disclosed. (PRNewswire)

>  The PETCO Foundation has developed a national campaign that will offer pet owners information and assistance about the spay and neuter alternative, called Spay Today 2001. Funds to support the “Spay Today 2001” campaign will come from customer donations at PETCO Animal Supplies, Inc. stores and a grant from the PETCO Foundation.  From Sunday, July 29 through Sunday, August 19, customers at PETCO stores will be asked to “Round UP” their purchases to help local spay/neuter organizations.  For example, a customer whose purchase is $18.56 will be asked to “round up” to $19.00 or perhaps $20.00.  All proceeds from this campaign will go to fund local animal welfare organizations that provide spay/neuter assistance. (PRNewswire)

>  Ag Services of America, Inc. announced a new relationship with Valley Vet Supply which will add a new product catalog to the Powerfarm.com site for animal health and equine products. This new catalog will also include an extensive selection of pet supplies.  With a primary focus on supplying name brand crop inputs and flexible financing packages administered by Ag Services of America, Powerfarm.com has also assembled an extensive selection of products and services in additional areas such as animal health, machinery, parts and small equipment, general farm supplies and farm specific software. (Business Wire)

>  HOLLAND   Shares of Pharming Group NV, with plans to extract medicines from the milk of genetically engineered farm animals, hit an all-time low on Wednesday.  Management this week effectively put the company up for sale after securing just 15 million euros ($13.22 million) in new debt financing, half the sum it had been looking for and enough to bankroll the business for only another 10 months.  The group is now examining its options, including selling the company, which
has a market value of 47 million euros.  The company is still more than two years away from getting a product to market. (Reuters)

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Brakke Consulting, Inc.
Due Diligence Seminar

Brakke Consulting announces an ANIMAL HEALTH INDUSTRY DUE DILIGENCE SEMINAR to be held in Chicago September 25-26, 2001. 

Whether your company is licensing in or out, buying, or selling, this seminar will help you design an efficient, effective due diligence process that will help you test strategic assumptions, determine fair market value, uncover potential problems, and avoid costly mistakes or surprises.  The speakers at the seminar will be Brakke Consultants Eli Thommsen, Ron Brakke, John Volk and John Short, and Senior investment bankers from Bear Stearns, NYC. All of the speakers have extensive experience in product and compound licensing, divestitures, and acquisitions.  We encourage you to visit our web site www.BrakkeConsulting.com to register for this seminar or to learn more about it.

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Animal Health News

>  UK   Wales will cull more sheep infected with foot-and-mouth disease, and thousands more animals will be tested in England in what farm officials say is a big blow to Britain’s costly fight against the epidemic.  Officials in the Brecon Beacons in Wales and Yorkshire in northern England say they are worried the number of cases is set to rise and will drag the livestock epidemic into the dangerous cooler months.  A spokeswoman for the National Farmers Union in Wales said a further 1,700 sheep would be slaughtered after testing positive for the disease, adding to the 4,000 that were culled last week. (Reuters)

>  US   The USDA’s Agricultural Research Service scientists have cracked the biochemical code of the herpesvirus that causes Marek’s disease.  Although vaccines made from benign or disabled Marek’s strains are commercially available, some are failing to immunize the birds against virulent new forms of the virus that have emerged.  In recently published studies, ARS researchers led an effort to chart the nucleotide sequences for two Marek’s disease strains,  MDV1-Md5 vv and MDV1-GA, and a non-disease-causing variant in turkeys called serotype 3, which is used to vaccinate chickens.  They’ve also begun using gene-splicing techniques to design recombinant vaccines to better protect chickens from GA and Md5 vv, as well as other virulent Marek’s disease strains. (AnimalNet – USDA ARS News Service)

>  CANADA   A Canadian team at the University of Guelph, Ontario reported in the Aug. issue of Nature Biotechnology that they have genetically modified pigs so that they excrete less phosphorus, thus easing one of the biggest pollution problems in livestock farming. The 25 GM swine have had a gene added which causes their saliva glands to produce phytase, an enzyme that is needed to digest plant phosphorus but is naturally absent in porkers, which reduced phosphorus in their excretions by 75%.  Until now, the usual way to reduce manure phosphorus was to supplement pigfeed with phytase, so that the unwanted element was fully digested. This
can cut the excreted phosphorus by 56%, but it is expensive and raises pollution worries in its own right. (AnimalNet – Agence France Presse)

>  US   Keeping barn lights on a timer may increase dairy cows’ milk production by 8 – 10%, according to a North Dakota State University dairy specialist.  Manipulating photoperiod (the ratio of light to darkness) can increase milk production of your cows by altering the hormone melatonin.  Melatonin increases when the barn becomes dark.  Increasing the photoperiod decreases melatonin and increases the hormone insulin-like growth factor (IGF-1), which prompts an increase in milk production. (AnimalNet – AgWeb News)

>  US   U.S. commercial pork production totaled 1.555 billion pounds in May, with exports representing 10.89% of production, a record high. Exports as a percent of U.S. pork production have risen each year for the past decade.  Through May, pork exports are up 32.6% compared to the first five months of 2000.  Much of the surge in pork exports this year is undoubtedly due to Europe’s problems with foot-and-mouth disease. (DirectAg)

>  US   Want to see a dog undergo cataract surgery, the birth of a foal, or the de-horning of a goat? These medical procedures and more will be featured on a new Animal Planet show, “Vet School Confidential,’’ a 13-part television series filmed at Michigan State University. The weekly, half-hour series is scheduled to begin airing Aug. 7 on the cable channel. Each episode features an actual case at Michigan State’s Veterinary Teaching Hospital. (AP)

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Agribusiness News

>   A New Zealand Royal Commission, the most far-reaching investigation a New Zealand government can order, rejected the idea of a GM-free country by recommending loosened curbs on low-risk GM applications while calling for rigorous case-by-case testing. The Commission concluded that GM food was safe to eat, that regulations governing the experimentation, release and use of GM ingredients in foods were rigorous and that people could make informed choices on labeled products. Australian and New Zealand food regulations are administered by the ANZFA but the agency does not have any real legal clout. (Reuters)

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Brakke Consulting Viewpoint

There was a lot of positive news this week in the sales and earnings reports and other activities in the industry. Most of you must be back from the July vacation.

Earlier in the newsletter I hope you noticed the announcement related to our Animal Health Industry Due Diligence Seminar.  We believe that this seminar will provide a much needed service to the industry we serve.  During the 15-plus years of Brakke Consulting existence we have been involved in over 60 projects related to licensing, divestitures, or acquisitions.  We have acted as agents, brokers, consultants, and advisors on all types of transactions.  It has always been our intent to provide quality services that improved the quality of our clients’ decisions.  In addition, it has been our philosophy to utilize our firm’s expertise to help improve our clients’ knowledge and processes. We believe that by helping our clients grow and succeed that we in turn will prosper.  We are truly interested in your long term growth and not just another transaction. This seminar has been designed with this business philosophy in mind.  

Finally, we believe the alliance Brakke Consulting has developed with Bear Stearns over the past five years is a unique and valuable asset for the animal health industry.  This relationship combines the large investment banking firm resources and expertise with our industry knowledge.  Some of our clients have already benefited from this alliance.  We would hope to see many of our client companies represented at the September Due Diligence Seminar.

Have a good weekend.
 
[Ron Brakke]
 
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