Animal Health News & Notes for December 5, 2003

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 Brakke Consulting’s
 Animal Health News & Notes for December 5, 2003
 Copyright © Brakke Consulting, Inc.
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IN THE NEWS:
 
earnings:
Bioniche
Dainippon
Del Monte
 
other news:
Animix LLC
AVI BioPharma
Banfield
Bioniche
Butler
ConAgra
Degussa
Eklin Medical Systems
Embrex
eMerge Interactive
Ferno Veterinary Systems
Fort Dodge
Hartz Mountain
Iowa Premium Pork
Nestle Purina
Newsham Genetics
Pennexx Foods
Pfizer
Smithfield
 
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COMPANY EARNINGS RELEASES
 
>  Dainippon Pharmaceuticals reported that sales of its animal science division for the first half of 2003 ended September 30, 2003 increased by 11.2% to  30,818 million yen ($275 million) compared with the prior-year period. This increase is mainly due to the acquisition of the animal health business of Tanabe Seiyaku in November 2002. (company news)
 
>  Del Monte Foods Company reported lower Pet Products sales for the second quarter ended October 26, 2003.  The lower sales reflected the continued anticipated reduction in sales of the non-core portions of the Pet Products portfolio and the impact of a price increase on 9Lives cat food. (Business Wire)  
 
>  Bioniche Life Sciences Inc. announced financial results for the first quarter ended September 30, 2003. Animal Health product sales during the first quarter were $5.6 million, a decrease of $0.4 million, or 7%, from the same period last year. This decrease is mostly attributable to the strengthening Canadian dollar as compared to the US dollar. The prolonged BSE crisis in the Canadian cattle industry has had a negative impact on revenue growth in Canada, but was mitigated by sales growth in other global markets including China most recently. (company website)   
 
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THE 2003 FLEA & HEARTWORM STUDY IS HERE!
 
Brakke Consulting’s 2003
US Flea Control and Heartworm Markets
 
This year’s report includes an all-new veterinarian survey, exploring such topics as K9 Advantix, ProHeart 6, the use of prescription fulfillment services, and the impact of internet and pet store sales of the products traditionally sold through veterinarians.  Other features include:
  – Discussion of pet owner compliance, the latest hot-button topic in small animal veterinary practice. 
  – Discussion of the impact of retail sales of veterinary flea products
  – Up-to-date product sales and trends for the veterinary products
  – An overview of the trends in OTC sales
 
The report will be available until December 19, 2002 at an early-order price of $4,000.  Studies ordered after the Christmas holiday will be priced at $4,500.
 
For more information, call 972-243-4033 or email Dr. Lynn Fondon at lfondon@brakkeconsulting.com.
 
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COMPANY NEWS RELEASES
 
>  Fort Dodge Animal Health announced the introduction of a line of West Nile-Innovator/Encephalomyelitis combination vaccines.  Available in time for the 2004 mosquito season, the USDA-approved vaccines provide proven protection against West Nile virus, as well as all prevalent strains of encephalomyelitis. The new West Nile-Innovator vaccines are available in four different combinations to protect against West Nile virus, Eastern equine encephalomyelitis (EEE), Western equine encephalomyelitis (WEE), and Venezuelan equine encephalomyelitis (VEE).  Two of the formulations include tetanus. (company press release)
 
>  Embrex, Inc. announced that it will acquire the first Gender Sort prototype system developed exclusively for Embrex by Advanced Automation, Inc.  Pursuant to the terms of the agreement with Advanced Automation, Embrex will purchase the prototype system for $2.3 million and Advanced Automation will repay its term loan due to Embrex in the same amount. (company website)
 
>  Degussa has commenced construction in Antwerp, Belgium, of what will be the world’s largest plant for producing the amino acid methionine. The 350 million Euro ($425 million) facility is slated for completion in 2005. At 150,000 metric tons per year, it will expand Degussa’s current methionine production capacity by 60%. (Pig International)  
>   Bioniche Life Sciences has applied to Canadian and US regulators for approval to sell its E. coli vaccine for cattle as early as next year. Trials of the vaccine were conducted at the University of Nebraska earlier this year, where researchers tested more than 4,000 fecal samples from 360 vaccinated steers and a control group of 248. The vaccine reduced bacteria shed by more than 60%. Once regulators approve the vaccine, Bioniche will first target the 25 million head of cattle in North American feedlots. (Drovers Alert)
>  Ferno Veterinary Systems announced that The Butler Company is now the exclusive distributor of Ferno’s Veterinary product line. Ferno Veterinary Systems is the leader in aquatic therapy products for the Veterinary market. Butler will distribute the Ferno Veterinary Systems complete line of Veterinary-specific products including the Aqua Paws Underwater Treadmill System, Omnisound Vet 500 and Omnistim FX2 Pro Vet electrotherapy systems, and Liquid Ice cold compression wraps. (company press release) 
 
>  Banfield, The Pet Hospital, opened its first overseas veterinary hospital in Manchester, England in late September 2003.  A second hospital is planned for early 2004.  Unlike the US Banfield hospitals which are located in PETsMART stores, the Manchester Banfield was placed in the Mypetstop Pet Resort and Care Center.  Mypetstop provides a variety of pet services under one roof. (Pet Product News)
 
>  Pennexx Foods Inc. has filed a lawsuit against Smithfield Foods, Inc. and two of its officers in US District Court in Philadelphia.  The $226 million cross-claim suit alleges that Smithfield used illegal practices — including fraud, breach of fiduciary duty, tortuous interference and breach of contract — to seize Pennexx’s assets and take over its operations. The suit alleges that Smithfield misrepresented to Pennexx that the two companies would form a joint venture with Smithfield paying to renovate Pennexx’s new plant, with the intent of driving Pennexx out of business. The suit also alleges that Smithfield misdesigned the new plant and shorted Pennexx on product, contributing to the company’s financial meltdown. (Meating Place)
 
>  The Hartz Mountain Corporation reported that there was a fire at its LM Animal Farm facility in Pleasant Plain, Ohio.  The fire occurred around 1:00 a.m. on December 2.  The facility was partially operational at the time of the fire, which was confined to two of the eight buildings at the facility.  There were no injuries to employees or emergency service personnel. The fire’s cause is still under investigation. The remainder of the facility was undamaged and completely operational for the next shift. The company stated that there will be no disruption of supply to customers as a result of a fire. (PRNewswire)
 
>  eMerge Interactive Inc. announced the completion of a private placement of common stock with an existing shareholder, raising $1 million in proceeds.  The proceeds, combined with $3 million in accelerated lease payments from Excel Corp. for three VerifEYE carcass inspection systems, provide the company with $4 million in additional working capital.  (company press release)
 
>  ConAgra Foods, Inc. announced that its board of directors has authorized the repurchase of up to $1 billion worth of the company’s common stock in the open market and in privately negotiated transactions. $1 billion equates to approximately 40 million shares; 40 million shares represents close to 7% of the company’s existing common stock. (Business Wire) 
 
>  Newsham Genetics announces its Belgian sister company, Gentec NV, and researchers at the University of Liege have discovered a new gene marker for daily gain in swine. The patent-pending marker is linked to more than 0.055 pounds per day of variation in daily gain in slaughter pigs, calculated from birth to slaughter, according to a molecular geneticist at Gentec. The marker has no negative influence on backfat thickness, lean-meat percentage or meat-quality characteristics. (Pork Alert) 
 
>  Iowa Premium Pork Company has reached an agreement to buy the former PM Beef Holdings plant in Hartley, Iowa, subject to approval of IPPC’s 1,400 cooperative membership and pending SEC approval. Now in its fourth year of operations, IPPC markets about 1 million hogs annually.  IPPC plans to use the plant to expand further pork processing operations through the cooperative’s subsidiary, the Majestic Food Group. Financial details were not disclosed. (Meating Place) 
 
>  Eklin Medical Systems announced the introduction of the Eklin Digital Practice, an integrated architecture for a  completely filmless medical imaging environment.  The Eklin Digital Practice integrates capture, view, share, store, and print functions in an all-digital environment. Eklin concurrently announced its first service offerings through Eklin.net, Eklin’s web-based imaging services gateway.  (company press release) 
 
>  Animix LLC, a subsidiary of Nutritional Products & Services owned by Nutritional Overseas Investment BV of the Netherlands, announced that it has been acquired by members of its management.  Janusz Sowinski, Animix president, became principal shareholder of the company and also became president of Nutritional Products & Services. Financial details were not disclosed.  The company is based in Juneau, Alaska. (Feedstuffs)   
 
>  EU   Pfizer Animal Health reported that the European Commission has granted the company a central marketing authorization for Draxxin (tulathromycin) to treat and prevent respiratory disease in pigs and cattle. It is indicated for treating Mycoplasma hyopneumoniae, Actinobacillus pleuropneumoniae and Pasteurella multocida. The antimicrobial represents a new class called triamilides and was developed specifically as a veterinary treatment. Additional worldwide launches are planned, subject to regulatory approval. (Pig International)
 
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Brakke Consulting’s
2004 Animal Health and Nutrition Overview
“Your Customers, Now and in the Future”

The Brakke Consulting team is spending a great deal of time creating our 2004 Annual Overview Presentation of the industries we serve. The 2004 Overview will focus on the following areas:

 -How the customer has changed, and how that will impact your business in the future
 -Insights from our Practice Management Group on the small and large animal veterinary markets
 -Analysis and projections for the OTC animal markets
 -Analysis and review of the consolidation in food animals
 -How product mixes have changed and will change in the future
 -How management and personnel has changed, and will need to change to successfully meet future challenges
 -How companies will need to change in their recruitment and training programs to keep pace with the needs of a changing market
 -Brakke Consulting’s views on successes and challenges for the leading companies
 -Brakke Consulting’s industry projections for 2004        
 
Your first opportunity to attend the 2004 Industry Overview is in New York City on January 12, 2004.  The Overview will also be presented at the North American Veterinary Conference in Orlando and at the Western Veterinary Conference in Las Vegas.  For more details or to reserve your seat, please call Jane Morgan at 972-243-4033 or email jmorgan@brakkeconsulting.com, or register online at www.brakkeconsulting.com.
 
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ANIMAL HEALTH NEWS
 
>  US    Lawmakers and White House officials, negotiating details of the overdue government spending bill, have agreed to delay country-of-origin labeling on food products for two more years. The labeling law was imposed in the 2002 Farm Bill, with mandatory labeling scheduled to begin in September 2004. The House voted last summer to block funding for COOL, but the Senate voted to keep the program on track. Officials continue to hammer out budget details, but the Senate could vote on the spending bill within the next week. The House vote is scheduled for early December. (Drovers Alert)
 
>  EU   The European Commission’s Animal By-Products Regulation 1774/2002 came into force in the EU on May 1 2003. As of January 1, 2004 all manufacturers who want to bring petfood into circulation within the EU, must fulfill all conditions of this legislation. Only animal by-products derived from healthy animals slaughtered for human consumption, with the appropriate pre- and post-mortem veterinary inspection, will be allowed in petfood.  Due to this complete implementation, several major exporters of petfood in non-member states in the EU are facing the danger of being put off the EU market beginning January 1. As a consequence of further comments from these countries, the European Communities put forward a Draft Proposal. If accepted, this new derogation will allow several petfood companies in non-member EU states to stay in EU business for some extra, but limited, time. One part of the derogation shall apply from January 1 2004 until 30 April 2004, another part will apply until 31 October 2005. (PETS International)
 
>  FRANCE   The British National Farmers Union (NFU) has finally won a hard-fought legal action against the French ban on British beef. The highest civil court in France has ruled that the country was wrong to continue to block imports of British beef once the European Commission lifted its BSE ban in August 1999.  The NFU has been awarded costs of Euro 3,000, the maximum available under French law. France was the only country to continue to stop the import of British beef after the Commission ban was lifted and continued to do so until October 2002. (Wattnet Meatnews)
 
>  JAPAN    Brand name beef associated with certain areas in Japan is a big selling point among consumers, and new regulations being created by the Ministry of Agriculture, Forestry and Fisheries are expected to require labels on beef to state where an animal spent most of its life if that location differs from the region the brand name refers to. The rule is expected to go into effect in the summer. For example, the brand “Omi beef” could only be applied to meat from an animal that was born and raised for most of its life in the Shiga Prefecture, which is the region associated with that brand. If an animal spent most of its life elsewhere and was moved to the prefecture for slaughter or shipping, the label would have to state where the animal spent most of its time. The ministry also plans to remove a rule that allowed imported cattle to be labeled as domestic beef if the animals were fattened in Japan for three months. (Meating Place)
 
> UK   A Judicial Review of broiler breeding methods in the UK has thrown out criticisms over welfare from the animal rights group, Compassion in World Farming.  CIWF had claimed that the British Government’s Department of Environment, Food and Rural Affairs (Defra) was not properly implementing the EU farm animal welfare Directive.  The judge backed Defra over the two complaints from CIWF and he ordered CIWF to pay two thirds of the government costs.  The Judge threw out CIWF allegations on the welfare of breeder chickens, ruling that controlled feeding of breeding chickens is in proper compliance with EU and UK animal welfare rules. He concluded that there is no evidence that broiler breeders are sufficiently hungry to compromise their wellbeing. (Wattnet Meatnews)
 
>  US   Researchers at Georgia Institute of Technology are field-testing a new technology that could lead to the automation of many visual-inspection tasks in the poultry processing industry. The technology, called a systemic screener, is currently on trial at a commercial poultry processing plant. The systemic screener is installed near the front end of the chicken-processing line where cameras look for defects such as improperly bled birds and those afflicted by systemic diseases, such as septicemia and toxemia.  Unique software and algorithms reportedly provide the intelligence for translating visual data from the system’s cameras into the appropriate mechanical commands for dispensation of each chicken. Those that pass the screening proceed to the next step, while unfit chickens are quickly and automatically removed from the processing line. (Wattnet Meatnews)
 
>  US   AVI BioPharma, Inc. announced that the company’s proprietary NEUGENE antisense agents was evaluated for efficacy against calicivirus by the Greenhill Humane Society shelter in Eugene, Ore., which had been forced to close due to an outbreak of feline calicivirus. The NEUGENE drug was administered subcutaneously to infected kittens once a day for five days. Veterinarians at the shelter observed that of the 20 kittens that received the NEUGENE antisense drug, 17 survived. Of the approximately 30 kittens that were not treated, all died within 24 to 96 hours after the onset of symptoms. AVI previously reported similar positive results from a feline calicivirus outbreak in an Atlanta animal shelter. (Business Wire)
 
>  Results from a Nestlé Purina study confirm the link between body fat and certain health conditions in dogs. The article, recently published in the Journal of Nutrition, also established a link between the length of time dogs were overweight, their longevity, and how early in life certain health conditions became clinically evident. The findings are additional results from the landmark Purina Life Span Study, the first completed lifelong canine diet restriction study. (company press release)
 
>  CANADA   A team of researchers has cloned the DNA sequence encoding bovine epidermal growth factor (EGF), a first step toward the development of a feed additive that would benefit cattle producers.  Bovine EGF is a naturally occurring protein with excellent potential to improve feed efficiency and reduce intestinal infection in cattle according to the lead researcher.  Following the cloning, researchers successfully inserted the bovine EGF into vectors for expression in both E. coli and P. pastoris bacteria with the aim of producing large amounts of protein for further studies.  Further research will be needed to determine the biological activity of bovine EGF.  (AnimalNet – Alberta Beef Producers)
 
>  EU  The European Commission proposed issuing wallet-sized passports for dogs, cats and ferrets in an effort to make it easier for pets to travel with their owners in Europe.  The owners would be able to use a standardized blue booklet listing vaccinations and certifying that the pet is rabies-free.  The passports would identify animals by microchip, tattoo, or an optional photograph.  The document would replace the current pet travel papers issued nationally by the 15 EU governments.  Veterinarians would be responsible for issuing and detailing each animal’s medical history in the passport. (AnimalNet – AP) 
 
>  US   Six federal agencies have joined together to launch www.recalls.gov, which is described as a “one-stop shop” for posting US government recalls in a variety of product categories, including food, drugs, cosmetics and other types of products.  The regulatory agencies involved are the Consumer Product Safety Commission (CPSC), Coast Guard, Environmental Protection Agency, Food and Drug Administration, Food Safety Inspection Service and National Highway Traffic Safety Administration. The General Services Administration operates www.recalls.gov in partnership with the CPSC. (Meating Place)
 
>  US   Newman’s Own Organics announced the introduction of its own line of premium pet food for dogs and cats.  Newman’s Own Organics PetFood will be formulated with no antibiotics, hormones, chemical ingredients or artificial preservatives, colors or additives, according to the company.  After-tax profits from the petfood sales will be donated to organizations supporting animals’ well-being.  (Petfood Industry)
 
>  UK   The British Hardware Federation Group has formed the Pet Product Retail Association, a new organization designed to provide business services to independent pet shops.  The PPRA will have its own retail committee.  At its launch, the PPRA announced a number of British petfood suppliers as members.  (Petfood Industry) 
 
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BRAKKE CONSULTING VIEWPOINT
 
The news this week seems to be limited to smaller product and technology improvements versus any blockbusters.  Most companies now seem to be working hard to close out 2003 with a strong December. It will be interesting to see how many firms actually limit year-end deals to customers because they already have their 2003 budget performance in hand. Remember, nothing good ever happens to excess inventory. It either goes out of date, gets damaged, or comes up missing.  Or you have to finance it for the customer for several months.  We’ve noted in our Practice Management Group that inventory levels of some product lines in veterinary clinics has been reduced in 2003 while other manufacturers seem to believe that a full years supply is one way of having a loyal customer.

What may seem like a good business practice for the manufacturer may not be a good business practice for the customer. Don’t be surprised if some of this excess inventory comes home to haunt a few companies in the first two quarters of 2004.

Have a great weekend.
 
Ron Brakke
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