Animal Health News & Notes for May 25, 2001

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Brakke Consulting’s
Animal Health News & Notes for May 25, 2001
Copyright © Brakke Consulting, Inc.
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Company Earnings Releases

>  PETsMART, Inc. announced financial results for the first quarter of fiscal 2001, which ended April 29, 2001. The company reported first quarter net income of $1.2 million, including the full results of PETsMART.com. That compares with reported net income of $587,000 and a pro-forma net loss of ($6.9) million for the same period last year. In order to draw a meaningful year-over-year comparison, pro-forma results for last year’s first quarter include the full results of PETsMART.com. Consolidated results for the first quarter of 2001 include $28.2 million in sales and a ($7.0) million operating loss related to the company’s direct marketing subsidiaries, PETsMART.com and PETsMART Direct.  Net sales for the first quarter increased 9% to $582.0 million, compared with $534.0 million for the same period last year. Comparable store sales increased 3.2%. (Business Wire)

>  Biopure Corporation announced its financial results for the second fiscal quarter ended
April 30, 2001.  Total revenues were $838,000 for the second quarter of fiscal 2001, compared with $710,000 for the corresponding period in 2000.  This 18% increase reflects initial European sales and 13% growth in U.S. sales of Oxyglobin, the company’s veterinary drug for the treatment of canine anemia.  For the quarter, the company reported a net loss of $17.5 million, compared with a net loss of $9.9 million for the corresponding period in 2000. The net loss for the second fiscal quarter of 2001 includes $6.4 million, or $0.25 per common share, of non-cash compensation expense for stock options and warrants issued to consultants, contract parties and certain directors. (PRNewswire)

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Company News Releases

>  Ralston Purina announced that its shareholders approved a plan to merge with Nestle Holdings, Inc. at a special meeting.  The merger is, among other things, subject to regulatory clearances, including clearance from the U.S. Federal Trade Commission (FTC).  The vote required approval by holders of two-thirds of all of the outstanding shares of Ralston Purina common stock. (PRNewswire)

>  Hill’s Pet Nutrition, Inc. is sponsoring Arctic Blast 2001, a four-month educational dog sled expedition to the North Pole, by feeding the expedition’s sled dogs with Science Diet Endurance.  Endurance is a unique formula created specifically for polar and arctic sled dog expeditions. Unlike domesticated pets, Polar Huskies need to consume approximately 6,000 calories of food daily while training and performing in arctic conditions, many times more than average active large breed dogs.  A high-calorie diet, Endurance allows dogs to eat less while receiving the energy they need to perform.  This unique formulation helps dogs manufacture water in their bodies, reducing the amount of water they normally need to intake.  (PRNewswire)

>  Cargill Inc. has acquired a significant stake in Purina Mills Inc.  In filings with the Securities and Exchange Commission, Cargill said it and CFSC Wayland Advisers Inc, an investment fund run by the company’s financial services subsidiary, have acquired an 8.6% stake in Purina Mills.
Cargill, a privately held company, agreed last year to buy Agribrands International Inc. for $580 million. Both Agribrands and Purina Mills are spin-offs of Ralston Purina.  Purina Mills was Ralston’s domestic feed business, Agribrands its international feed business. (E-markets – AP)

>  International Absorbents Inc. announced that the company expects to roll out 20 new products over the next year.  The rollout of a new line of enrichment treats for small animals under the CareFRESH brand and a new “all pet litter” under the ECOfresh brand is already underway. The Company’s new line of CareFRESH environment enrichment treats for small animals will include products such as alfalfa treats, apple treats and “Busy Bed” nesting material.  The new “all pet litter” will be sold in the pet specialty channel as a litter box filler for ferrets and rabbits, and as a substrate for reptiles. It will utilize the same technology as the Company’s ECOfresh cat litter but as a niche product, will have stronger margins. (PRNewswire)

>  Safeway Foods announced plans to develop an alliance with AniGenics and Future Beef Organization to produce more flavorful, tender and wholesome beef.  AniGenics will develop a DNA sampling test for bulls and cows that tracks cattle to determine the optimal genetics for high-performance cattle that produce high-quality beef.  Future Beef ranchers can then use that information to select and breed animals for beef quality and safety.  (Feedstuffs)

>  Balchem Corporation announced that its wholly owned subsidiary BCP Ingredients, Inc. has entered into an agreement for the purchase of certain assets relating to the choline animal feed, human choline nutrient, and encapsulated products businesses of DCV, Inc. and its affiliate, DuCoa L.P., including DuCoa’s manufacturing facility in Verona, Missouri. The agreement calls for a purchase price of $14.98 million, subject to certain adjustments, and the assumption by the buyer of certain obligations relating to the acquired businesses.  It also calls for possible contingent payments up to a maximum of $3 million based on select businesses of the acquired product lines achieving certain gross margin levels over the three year period following the closing. The agreement calls for a closing in the second quarter 2001.  Balchem Corporation reported Year 2000 sales of $33 million, of which human, animal, and industrial encapsulated ingredients accounted for $13 million.  The segments of the DCV/DuCoa business being acquired is expected to have sales of approximately $17 million, predominantly in the North American marketplace, and would broaden Balchem’s portfolio in the human and animal health markets. (PRNewswire)

>  Vion Pharmaceuticals, Inc. announced initial results of a canine dose-escalating research trial of systemically (intravenously) administered injections of its ’unarmed’ TAPET vector (VNP20009) in thirty-three dogs with advanced cancers. The intent of the research was to determine the safety and maximum tolerated dose of weekly or every-other-week injections of VNP20009, and to assess the behavior of VNP20009 in a large species similar to humans that develops naturally occurring tumors. The study demonstrated that VNP20009 was safe to administer and also produced significant anti-tumor responses in 24% of the dogs, all of which had measurable tumors and had failed or were not candidates for standard therapies. TAPET is a modified Salmonella vector that demonstrates preferential accumulation in tumors in preclinical studies, and is being developed for its potential to deliver anticancer agents directly to tumors. (PRNewswire)

>  IRELAND  Early warning test kits for foot and mouth disease are, being developed by Marks & Spencer in partnership with an Irish company that specializes in health tests for humans and animals. The devices will indicate problems by a simple change of color. They will be used on farms and in abattoirs to detect a range of other diseases by testing animals’ saliva for abnormal levels of proteins.  If development work goes to plan, simple versions of the kits could be available within a year.  It is claimed that the tests can alert farmers to the fact that their animals’ immune systems are under stress because they are fighting attacks from viruses or bacteria even when they show no clinical signs of illness.  The kits are being developed with Tridelta, a research company based near Dublin.  (AnimalNet – Electronic Telegraph)

CORRECTION:  At the company’s request, Wellmark International, the original founder and current producer of Vet-Kem products, would like to clarify a detail that appeared in an article in the May 18 issue of Brakke Animal Health News & Notes.  Wellmark International was formerly known as the Zoëcon Corporation.  However, the company has retained the Zoëcon name for its professional line of pest control products.

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FIELD SALES AND MIDDLE MANAGEMENT RECRUITING SERVICES

We look forward to providing our clients with these New Services immediately.  In the past we have been reluctant to offer these services because we did not have a consultant that was focused on the area.  Now we have solved that problem with the addition of Ken Berkholtz to the Brakke team.   We believe providing searches in these specialty areas is a natural extension of our current executive search business.  Please contact Ken at kenberk@gate.net to discuss this new service.

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Animal Health News

>  EU    European Food Safety Commissioner David Byrne said he would propose lowering the age at which some cattle had to be tested for BSE to 24 months from 30. The lower age ceiling would apply to animals at risk, a category that includes those found dead on farms or those sent for normal slaughter but then found to be sick at ante mortem inspection.  Meat from such animals would not be allowed to enter the food chain unless tests proved negative for BSE.  Byrne said his decision followed widespread testing for BSE, undertaken since January, that had shown a far higher incidence of the brain-wasting disorder in animals at risk. (Reuters)

>  US   According to experts, the mystery illness that has killed hundreds of young horses and caused mares to miscarry or give birth to stillborn foals appears to have subsided, and scientists are looking at caterpillars as a possible culprit.  Tent caterpillars feed on wild cherry tree leaves, which are highly poisonous and can produce cyanide-like toxins in the caterpillars’ stomachs.  Apparently, heavy infestations of tent caterpillars were reported throughout central Kentucky this spring and last.   (Reuters)

>  BRAZIL   Brazil confirmed a fresh outbreak of foot-and-mouth disease in its southernmost state over the weekend and said cattle slaughtering would begin immediately. It is Brazil’s fifth case of foot-and-mouth in the past two weeks and comes two days after the state sacrificed hundreds of livestock. (AnimalNet – Reuters)

>  US   The USDA corrected six weeks’ worth of erroneous livestock pricing reports and began evaluating the financial impact of the errors on cattle producers and meatpackers.  The errors in the reporting system, a new system that began operating April 2, generally understated the prices that packers receive for beef. Producers and packers use the price reports to negotiate deals and to track fluctuations in beef demand.  The department will now use the corrected reports to determine how much money the beef industry may have lost by relying on the inaccurate reports.  (Emarkets – AP Online)

>  US   Researchers at Louisiana State University have discovered that a bovine coronavirus, virus not previously believed to cause respiratory-tract infections in cattle, is associated with several outbreaks  of shipping-fever pneumonia. The virus has been detected among cattle in 11 different states in the southern and western United States.  According to researchers, approximately 90% of cattle involved in two major U.S. outbreaks of shipping-fever pneumonia were infected with the coronavirus.  (AnimalNet – LSU press release)

>  UK   Britain’s agriculture ministry has relaxed livestock movement restrictions on more than 3,000 farms in areas of England after experiencing its first day free of new foot-and-mouth cases. Farmers in four areas, not badly hit by the foot-and-mouth epidemic, can now move their animals to abattoirs for slaughter if the journey took less than four and a half hours and it was not to a place without a case. (Reuters)

>  UK   UK farmers were urged not to drop their guard following a fresh outbreak of foot-and-mouth disease.  Four new cases were diagnosed in the Settle area of North Yorkshire, bringing the total to 15 in just 10 days. Concern has also been raised after the disease was confirmed at a farm nine miles south of the nucleus of the current outbreak. (AnimalNet – PA News)

>  US   According to “Antimicrobial Drug Use and Veterinary Costs in U.S. Livestock Production,” a report just released by the USDA’s Economic Research Service, antimicrobial drugs fed to livestock likely have some impact on microbial resistance to antibiotics. However, citing data compiled by the U.S. Congress Office of Technology Assessment, the report indicates that as little as 10% of the problems of drug-resistant pathogens in humans originate in livestock husbandry practices.  The report states that two of the greatest sources of drug-resistant pathogens observed in humans are from drug-resistant pathogens encountered during hospitalization and misuse of antimicrobial drug prescriptions by both doctors and patients. (AnimalNet – The Meating Place)
 
>  AUSTRALIA  Some of Australia’s first GeneSTAR DNA-tested cattle went on sale last week.  GeneSTAR Marbling is a DNA gene marker technology developed in partnership by CSIRO and Meat and Livestock Australia, designed to predict meat marbling capacity in cattle. Of the steers carrying two copies of the gene, twice as many animals were of top grade marbling compared with those which did not carry two copies. If both sire and dam of the bull carry two stars, all progeny will have top marbling ability.   The technology represents a new way of evaluating and marketing cattle based on a combination of DNA results and the performance of an animal and its relatives. (AnimalNet – Scientific and Industrial Research for Australia)

>  NEW ZEALAND   According to New Zealand’s Sunday Star-Times, the Ministry of the
Environment (MfE) is considering imposing a heavy tax on animal emissions, a move that could drive up the price of New Zealand meat.  The proposal could cost farmers $2.1 billion a year.
Since New Zealand must reduce its greenhouse emissions to comply with the Kyoto protocol, an international treaty intended to halt global warming, government officials have concluded that emissions from the country’s 46 million sheep and nine million cattle should be taxed to either reduce the number of livestock or pay for emissions reductions in other industries. MfE documents show that 55% of New Zealand’s greenhouse gas emissions come from methane and nitrous oxide released by agriculture.  By comparison, transportation emits just 16 percent of the country’s greenhouse gases.  (AnimalNet – The Meating Place)

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Agribusiness News

>  Nearly 5 million pounds of genetically modified rice — the first of its kind — is to be buried in a landfill next week under orders from the company that had it grown in Brazoria County, Texas.
Aventis, which took a public relations hit when its bioengineered StarLink corn was mistakenly released to consumers, apparently has decided to destroy its first crop of genetically altered rice rather than risk its being shipped outside the United States, where it has not been approved. (E-markets – Knight Ridder Tribune)

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Brakke Consulting Viewpoint

A nice mix of news on several fronts this week.  The earnings releases of a couple of the small biotech firms demonstrates just how hard it is to start a business with a limited product line or product and produce a profit.  It is not difficult to understand why venture funds can be difficult to find for these types of firms.  The industry needs innovation but there is also a need for shareholder reward. 

Second, several of the stories report the continued consolidation that is occurring across the industry.  There is not a segment of the animal industry that is not touched in some way.  Those still operating with the sense that it is business as usual environment will be the next ones in the news related to consolidation. 

Have a great Memorial Day Weekend!!  Do your share for the animal protein business. 

[Ron Brakke]
 
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