» 2003

Animal Health News & Notes for June 20, 2003 6/20/2003

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Brakke Consulting’s
Animal Health News & Notes for June 20, 2003

Copyright © Brakke Consulting, Inc.
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COMPANY EARNINGS RELEASES

>  Veterinary Pet Services, Inc., the parent company of Veterinary Pet Insurance Company (VPI) and its subsidiary, DVM Insurance Agency, announced a 36.5% increase in revenue for the quarter ended March 31, 2003.  Revenue grew to $11.3 million compared to $8.3 million for the same period in 2002.  Net income also grew from $437,000 in the first quarter of 2002 to $611,000 in the first quarter of 2003, an increase of 40%.  The company wrote approximately 36% more pet insurance policies in the first quarter of 2003 than in the comparable period of 2002. (company press release)

>  PetMed Express, Inc. announced results for the fiscal year ended March 31, 2003. Net income was $3.3 million, including a tax benefit of $581,000 which was recognized in the fourth quarter of fiscal 2003, compared to net income of $825,000 for fiscal 2002. Net sales for the fiscal year ended March 31, 2003 were $55 million, compared to $32 million for the year ended March 31, 2002, an increase of 72%. PetMed Express also reported new customer growth of approximately 414,000 customers in fiscal 2003. In addition, net sales for the first two months of the first fiscal quarter ended June 30, 2003 increased 96% over the same period in the prior year. (Business Wire)

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BRAKKE CONSULTING, INC.
Do You Know Where Your Company Is Going?

Brakke Consulting is an excellent resource in the strategic planning process.  Brakke Consulting’s past assistance in strategic planning has included:
- reviewing the revenue estimates and success probability of the product pipeline,
- reviewing the timing of various new product introductions versus probable timing of competitive introductions, and estimating the impact of various scenarios
- benchmarking various functions against company competitors in the larger markets, which might include sales force size, technical services, and/or R&D spend vs. sales
Brakke Consulting can provide insights and professional assistance that improves the likelihood of success.  Please contact us if you would like the benefit of professional assistance in any of these areas. Contact information for all offices is available on our website at www.brakkeconsulting.com.


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COMPANY NEWS RELEASES

>  Pennexx Foods Inc., which defaulted last month on a $12 million loan by Smithfield Foods Inc., has signed over the deed to its plant to Smithfield. Filings on June 12 with the Securities and Exchange Commission show that in addition to the deed transfer, Smithfield has sold almost all the personal property assets of Pennexx in a private sale. As a result, Pennexx owns no remaining tangible personal property and is, in effect, out of business. (Meating Place)

>  Farnam Companies Inc. announced that it has formed a product distribution alliance with Horsesense Ltd, part of the Tangerine Group based the UK.  Under the alliance, Horsesense will be exclusively distributing Farnam's equine products in England and Ireland. (company press release)

>  IGEN International, Inc. announced that Aviagen, Inc. has adopted the company's Pathigen Salmonella test method for use in surveillance of their poultry breeding stock.  The Pathigen test method utilizes IGEN's proprietary Origen technology for presumptive identification of Salmonella and is the only rapid method approved for use by the National Poultry Improvement Plan (NPIP).  NPIP support for approval of the Pathigen Salmonella test method was based upon results that showed equal or enhanced sensitivity when compared to conventional non-rapid methods.  Aviagen has purchased several IGEN instruments and will deploy them at each of its North American sites. (AnimalNet)

>  Stewart Pet Products announced that it has been acquired by MiracleCorp.  Stewart Pet Products offers a variety of pet treats developed for pets eating special and therapeutic diets.  The treats are available through veterinary clinics.  Financial terms were not disclosed. (company press release)

>  CANADA   Foragen Technologies S.E.C., Innovatech Qu├ębec, Fondaction CSN and a private investor announced today an investment of C$ 5.35 million in TGN Biotech Inc., a biotech company active in the production of recombinant proteins for therapeutic use. TGN Biotech’s platform technology is its patented Semenesis technology, which involves using the pig seminal gland as a bioreactor to produce recombinant proteins that are active drug ingredients. The first products under development with this technology will be used to treat animal and human diseases.  (company press release)

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BRAKKE CONSULTING ANNOUNCES
UPCOMING MULTIUSER STUDY ON
VETERINARY DRUG COMPOUNDING

In the past year or two, the exhibit halls at veterinary conferences have seen a proliferation of veterinary compounding pharmacies.  In response to frequent questions about this topic, Brakke Consulting will be conducting a study of the phenomenon of veterinary compounding.  The study will answer questions such as

- what do veterinary compounders offer?
- what types of companies are offering compounding services?
- how many and how big are they?
- how frequently are veterinarians using compounding services?
- are there differences in veterinary usage between equine and small animal practitioners?
- are veterinary compounders taking business away from traditional pharmaceutical manufacturers?

The study will be completed in July 2003, and is available at a price of $3,250.  For more information, please call 972-243-4033 or email info@brakkeconsulting.com .

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WORLD PORK EXPO
DES MOINES, IOWA     JUNE 5 - 7

The 15th Annual World Pork Expo held last week in Des Moines, Iowa drew 475 exhibitors and thousands of attendees from around the world. Industry consolidation has had its impact, with lower exhibitor and producer participation than in previous years.  Still, many exhibitors reported strong traffic and buying interest.

Hot topics at World Pork Expo included a positive economic outlook, strong feelings about country-of-origin labeling (COOL), and new automatic sorting technology. 

Agricultural economist Glenn Grimes, at the pre-Expo Pork Academy, projected average live-weight prices of $37 to $39/cwt for 2003, and average prices above $40 cwt for 2004 and 2005.  ADM Alliance Nutrition attracted big mid-day crowds to its exhibit area with a series of panel discussions on COOL.  There was decided sentiment against it.  A two-hour seminar on the benefits of automatic weight sorting sponsored by Elanco and Farmweld, Inc. pulled in an overflow crowd of more than 400, mostly producers and veterinarians.  Auto-sorting equipment was much in evidence in the trade show.

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ANIMAL HEALTH NEWS

>  US   New Mexico producers are facing the prospect of having to test their cattle for bovine tuberculosis, the result of several dairy cattle in Roosevelt County testing positive for bovine tuberculosis. The New Mexico Cattle Growers Association says the detection means New Mexico will be reclassified from its tuberculosis-free status. Reclassification will require beef and dairy cattle owners transporting cattle out of New Mexico to test for tuberculosis. Under the USDA tuberculosis rule, the state must now develop a plan on how it will regain its tuberculosis-free status. (Meating Place)

>  US   The first comprehensive trade agreement between the USA and a South American country has been signed.
The agreement between the USA and Chile comes about 12 years after it was first moved and after two years of trade negotiations. According to the office of the US Trade Representative, when fully implemented the agreement eliminates bilateral tariffs, lowers trade barriers, promotes economic integration and expands opportunities for the peoples of both countries.  US farmers' access to Chilean markets will be as good or better than the European Union or Canada, both of which already have FTAs with Chile. (Wattnet Meatnews)

>  US   McDonald's is directing some meat suppliers to stop using antibiotic growth promoters altogether and encouraging others to cut back. The deputy commissioner of the FDA’s Center for Veterinary Medicine, who also reviewed McDonald's proposal, was quoted as saying, "When a very large and international company does something like this, it's an important step. They will set the tone in the marketplace." The McDonald's policy will prohibit its direct suppliers, which mainly provide chicken, from using 24 growth promoters that are closely related to antibiotics used in human medicine. The firm, in deciding which independent farmers will supply its beef, chicken and pork, will consider it a "favorable factor" if the supplier avoids growth promoters. The policy will be effective worldwide by the end of 2004 and will require suppliers to keep records and submit to regular audits. (AnimalNet – Washington Post)

>  US   According to Science magazine, the assembly of the draft sequence of the chicken genome is expected in March 2004. The chicken genome project had its origins in a number of genome mapping projects started 10 years ago, in which the nature of quantitative traits, such as growth, body weight, carcass composition, egg production, fatness, ascites, feather pecking, stress, etc., was of primary interest. The development of e-tools and resources in the chicken has facilitated large-scale studies to map monogenic and more than 200 quantitative trait loci (QTLs) for a wide range of traits. (AnimalNet – Science)

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BRAKKE CONSULTING VIEWPOINT

Two items in the news this week strike me as something that the animal health industry must face.  The first one I'd like to address is the Pet-Med Express financial results for 2002.  While we have nothing against the free enterprise system, we are concerned that a company like PetMed Express, which has been demonstrated to be circumventing the veterinarian-client relationship, can generate the sales and profit growth they report at the expense of the veterinary community.  How does a firm like PetMed Express obtain the veterinary products it markets to generate $55 million in sales? Our opinion is that some veterinarians and organizations are willing to sabotage the well-being of the whole veterinary profession and industry in exchange for a few short-term dollars.

Second, what are the suppliers doing to keep this from happening? The executives in the companies whose products are involved seem to have a "we're not guilty; it's the other guys" attitude. If your product appears on the product lists of companies like PetMed Express, you're responsible to your veterinary customers for determining how it got there.  Regardless of whether the products got there through legitimate channels or not, veterinarians will not look favorably on companies whose “veterinary exclusive” products are widely available elsewhere.

The second news item is the announcement by McDonalds that they will require certain suppliers to provide antibiotic and growth hormone-free meat. While this announcement appears to be aimed at the poultry industry (where there are few, if any, antibiotics or hormones used these days), we believe we'll see an expansion of these directives to all meats sold in some retail outlets. We're rapidly moving into an environment and business model of Branded Meats versus commodity products. Our firm has spent a great deal of time the past few years assisting companies in evaluating and developing strategies to meet the needs of producers who supply animal protein that meets the specifications of these demanding food companies. We'd be pleased to assist your firm in providing an audit and suggestions related to how your firms programs can improve in this area. Your future sales may depend on it.

Ron Brakke

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