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Brakke Consulting’s
Animal Health News & Notes for May 9, 2003
Copyright © Brakke Consulting, Inc.
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COMPANY EARNINGS RELEASES
> Bayer reported that first quarter 2003 sales for its animal health division were 179 million euros ($193 million), a decrease of 12% over the first quarter of 2002. The company stated that sales decreased because of shifts in exchange rates, and because of the delay in receiving marketing approval for the antiparasitic treatment K9 Advantix in California. (company website)
> Alltech International Holdings, Inc. announced net sales and net income for the year ended December 31, 2002. Net sales for the year ended December 31, 2002, were $42 million with net income of $836,307. Comparable amounts for the year ago period ended December 31, 2001, were net sales of $41 million with a net loss of ($858,749). The improved earnings were attributable to four primary factors. They are 1) Reduction in operation expense, 2) Improved margins, 3) International sales expansion and 4) More favorable foreign exchange adjustments. (Business Wire)
> Virbac Corporation reported financial results for its first quarter ended March 31, 2003. Net sales were $15.4 million, compared with $15.9 million in the first quarter of 2002. Sales for the Veterinary Division were $6.3 million compared with $8.4 million in the first quarter of 2002, reflecting a temporary backlog in production mainly due to the company’s manufacturing relocation. Net loss for the first quarter 2003 was ($659,000) compared with net income of $786,000 for the comparable quarter of 2002. First quarter performance was impacted by the temporary backorders in the Veterinary Division, which has a significant impact on profit due to its higher than average gross profit margins. (Business Wire)
> Synbiotics Corp. announced that net income for the first quarter ended March 31, 2003, was $1.4 million compared to a loss of ($10.8 million) for the prior year quarter. The results for the quarter ended March 31, 2003, include a one-time litigation settlement gain of $515,000, whereas the prior year quarter was negatively impacted by one-time charges related to retention bonuses and goodwill impairment totaling $11.3 million. Synbiotics’ revenues were $6.2 million for the first quarter ended March 31, 2003, a decrease of 6% from $6.5 million for the prior year quarter. (Business Wire)
> Heska reported financial results for the first quarter ended March 31, 2003. Quarterly revenues were $13.3 million, an increase of 31% from the first quarter of 2002. Gross profit from product sales was $5.1 million, the best first quarter result in Heska history. The first quarter net loss was ($2.5 million), an improvement over the net loss of ($3.9 million) in the first quarter of 2002. (company press release)
> Doane Pet Care Company reported results for its first quarter ended March 29, 2003. For the three months ended March 29, 2003, the Company’s net sales increased 18.1% to $260 million from the first quarter of 2002. First quarter 2003 sales performance benefited from increased sales volume primarily from new business awarded in 2002 as well as the favorable currency exchange rate between the dollar and Euro. The Company reported a net loss of ($7.9 million) for the 2003 first quarter compared to net income of $8.5 million for the 2002 first quarter. The Company’s net loss in the 2003 first quarter included an $11.1 million non-cash charge associated with the bond offering and debt refinancing. (PRNewswire)
> Sound Technologies Inc reported first quarter 2003 results. Total sales for the quarter increased 23% year over year, to $3.8 million. Operating income for the quarter increased 12% year over year to $476,074. Included in the first quarter operating results, was a one-time negative adjustment of approximately $167,000 for the revaluation of trade-in and pre-owned inventory. Ultrasound, Telemedicine, and Specialist Consulting units of the Company continue to operate strongly. (company press release)
> OurPet’s Company reported financial results for its first quarter ended March 31, 2003. Net sales for the first quarter were $1,276,000, an increase of 36% compared to $936,000 for the prior year first quarter. Net income for the quarter was $10,000 compared to a net loss for the prior year quarter of ($118,000). (Business Wire)
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COMPANY NEWS RELEASES
> Boehringer Ingelheim Corporation announced the appointment of George Heidgerken to the position of Chief Operating Officer and President of Boehringer Ingelheim Vetmedica, Inc., the US division of Boehringer Ingelheim Vetmedica. Prior to his appointment, Mr. Heidgerken was responsible for United States domestic sales and marketing, Research and Development, and manufacturing. (PRNewswire)
> Sound Technologies and GE Medical Systems announced the launch of the new TruDigital GE LogiqBook Ultrasound. The TruDigital GE LogiqBook Ultrasound is the first veterinary ultrasound to deliver TruDigital Color-Flow Doppler, 3D Imaging, Anatomic M-Mode, TruDigital Workflow and TruDigital Work-product technologies. LogiqBook captures dynamic video clips, archives patient data, stores patient reports, produces 3-D Views, creates M-Modes, generates on-board reports, and performs real-time optimizations on stored images. (company press release)
> Biovet Inc. announced the beginning of construction work on a new development center and laboratories. The Biovet team intends to move into its new premises during the summer of 2003. (AnimalNet)
> Bayer announced a $1 Million Hole-in-One Charity Challenge to benefit local charities during their Bayer Advantage Celebrity Pro-Am in Kansas City. The Challenge will take place during 2nd round Tournament play, when each of the 93 professional and celebrity participants plays the 16th hole at The National. The prize money will benefit Kansas City life sciences initiatives and area children’s’ education through The Pride of Kansas City Foundation, a non-profit organization dedicated to enhancing the quality of life in Kansas City. (PRNewswire)
> Novartis Animal Health is sponsoring the “Free From Pain” campaign in May, a consumer outreach program designed to help dog owners more easily recognize signs of canine arthritis pain. The goal is to get dog owners to recognize the signs of canine arthritis pain and schedule an arthritis exam with their veterinarians if those signs appear. The campaign will support the launch of Novartis’ canine arthritis prescription medication, Deramaxx. (company press release)
> Agenix Limited announced the initiation of Alternative Dispute Resolution (ADR) proceedings against its former distributor Synbiotics Corporation in accordance with the terms of the recently terminated Distribution Agreement.
Synbiotics is disputing the termination of the former Distribution Agreement, however under the terms of this agreement Agen’s position is that the contract was properly terminated consistent with the terms of the agreement.
Agenix will continue to vigorously act to protect its best interests in these matters and is actively seeking to re-establish US supply through alternative distribution partners. (company press release)
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ANIMAL AGRICULTURE ALLIANCE STAKEHOLDERS SUMMIT MAY 12-14, 2003
There is still time to register for the second industry-wide Stakeholders Summit, sponsored by the Animal Agriculture Alliance. This two-day conference, “Challenges to the U.S. Animal Protein Businesses: Domestic and International Responses, Risks and Repositioning,” will be held May 12–14, at the Hyatt Regency Crystal City Hotel in Arlington, Virginia. In cooperation with Rabobank International and Brakke Consulting, Inc., the Summit is targeted at senior management of all companies involved from “farm to fork.”
For registration prior to April 19th, the cost for attendance is $375 per person, or $350 per person for more than one attendee from the same organization. After April 19th, the cost is $425 and $400 respectively. Registration for the Summit can be made securely via the Alliance website at www.AnimalAgAlliance.org.
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ANIMAL HEALTH NEWS
> AUSTRALIA The Australian Therapeutic Goods Administration has banned over 200 products and is considering criminal charges as it continues an investigation into Pan Pharmaceuticals Ltd., the country’s largest manufacturer of alternative medicines. The TGA has already uncovered falsification of test results and substitution of ingredients. Although the investigation was prompted by a human travel pill, six veterinary products are included on the recall list as well. (Sydney Morning Herald )
> CZECH REPUBLIC A suspected fifth case of BSE has been detected in the Czech Republic, seven months after the confirmation of the fourth case. Results of further tests were expected to be known later in the week. (Animalnet – Agence France Presse)
> US A Minnesota mare has tested positive for West Nile virus, the nation’s first case in a horse this year. Minnesota veterinarians and health officials had expected the mosquito-borne disease to emerge in late June or July, but it hit
nearly 2 months early. The virus has now been detected in all but 6 states. (Minneapolis Star Tribune)
> GERMANY German veterinary officials have uncovered what they believe may be the first case of avian influenza. Tests on a farm near the Dutch border have raised a “serious suspicion” that the disease may have crossed the frontier, and all poultry within one kilometer of the farm were ordered to be slaughtered as a precaution. Final results confirming whether the bird flu is indeed present will not be known for a week. (AnimalNet)
> US The United States and Russia have resolved a long-running dispute over health standards at US poultry plants that had threatened American chicken exports to Russia. The Russians agreed to conduct plant inspections with the mutual understanding that plants may use “diverse approaches’’ on separation of work zones and temporary refrigeration in meeting Russian standards for safety and quality. Russia is the largest importer of U.S. poultry. (Wattnet Meatnews)
> US The FDA published the final two food safety proposed regulations required by the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which gave FDA new authority to protect the nation’s food supply. These two proposals deal with establishing and maintaining records among food firms and the administrative detention of foods that may pose a risk to public health. (Meating Place)
> US The EPA has reportedly been privately negotiating with large, highly concentrated livestock farms to offer them amnesty from the Clean Air Act and existing Superfund laws. Instead of enforcing the environmental laws, the EPA would monitor pollution levels at 30 or so large hog and chicken operations. Environmental groups and former enforcement officials at the agency criticized the plan as too lenient, given that the agency already has the authority to order many farms to monitor air pollution. The story cites a report from the National Academy of Sciences released last December which warned that increasing water regulations for farms might actually lead to increased air pollution, as farms diverted the chemicals from the water into the air. (AnimalNet – New York Times)
> EU The European Commission has revealed the results of the IDEA (Electronic IDentification of Animals) project, a large-scale experiment running from March 1998 to December 2001 in which one million farm animals were electronically identified in six EU countries. The results confirmed the feasibility of electronic tagging of cattle, sheep and goats. The Commission said that conventional systems based on ear tags, tattooing and marking can be modified and are not always reliable, potentially rendering them ineffective. (AnimalNet – Meatnews.com)
> EU The European set an autumn deadline for the US to end tax breaks for exporters or face multi-billion dollar trade sanctions. The EU listed 95 categories of US products on which it could impose additional duties of up to 100% that range from dairy, cereal, meat and vegetables products, to wood, leather, fur and textiles. The EU sanctions could total $4 billion annually. (Meating Place)
> US The Pet Salon now offers PetSpa Systems, a breakthrough pet cleaning therapy. The unique “spa,” developed in Europe by a team of veterinarians, animal behaviorists and engineers, offers a safe, efficient and pleasurable alternative to current hand-bathing methods used in pet care and grooming industry. The pet is put in a specially designed cabin that washes and blow- dries dogs, cats and other animals in less than 30 minutes. In addition, the system offers hydro-muscular massage and delivers a variety of shampoos and conditioners at exact amounts and intervals. (PRNewswire)
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AGRIBUSINESS NEWS
> Valent BioSciences Corporation announced that it has entered into an exclusive research partnership agreement with the National Research Council of Canada’s Plant Biotechnology Institute (NRC-PBI). Under the agreement, Valent and the NRC will cooperate to investigate agricultural applications of synthetic analogs of abscisic acid (ABA). The agreement provides Valent with the first option to license the NRC technology for commercial development on a worldwide basis. The synthetic ABA analogs developed by NRC-PBI could lead to the development of effective tools to allow plants to survive adverse environmental conditions such as drought and extreme temperatures. Recently, Valent announced that it had licensed proprietary manufacturing technology for development and commercialization of natural ABA molecules from LOMON Biotechnology Corporation of Sichuan, China. (PRNewswire)
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BRAKKE CONSULTING VIEWPOINT
Perhaps it is because I am heading off to the Animal Agriculture Alliance Stakeholders’ Summit next week, but the news seems to have a high degree of regulatory content. The item with the biggest impact will probably be the ongoing negotiations between the US and Russia on imported poultry. The proportion of dark meat chicken that goes to Russia affects the price of breast meat and all other meats in the US. We have conducted two studies on poultry producers’ interest in new products, and their economic situation certainly colors their attitudes. As suppliers to much bigger industries, the Animal Health companies must always be aware of their customers’ financial health. This is an often overlooked component of strategic planning.
The news item on Australia’s action against alternative medicines refutes the notion that such items, including nutraceuticals, are free and clear of the regulatory process. The EPA news may be more about politics than agriculture, but again reminds us that the methods of raising livestock that we have become accustomed to will face increased scrutiny, at least in the US.
Otherwise, the companies continue to show mixed results, often clouded by so-called one-time charges. The accounting for such charges is another area where regulators will step in if the companies and their auditors do not police themselves.
Have a great weekend, and I hope to see you at the Summit.
John Mannhaupt
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