» 2002

Animal Health News & Notes for April 26, 2002 4/26/2002

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Brakke Consulting’s
Animal Health News & Notes for April 26, 2002

Copyright © Brakke Consulting, Inc.

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Company Earnings Releases

>  Akzo Nobel reported that animal health division Intervet continued its growth pattern, increasing sales and improving margins.  Sales for the first quarter 2002 increased 7% to 275 million euros ($239 million). (Business Wire)

>  Bayer reported that first quarter 2002 sales for its animal health division were up 13% to 203 million euros ($177 million).  The increase was due primarily to a strong upward trend in products for companion animals in North America. Operating income was 50 million euros ($44 million), a 127% increase over the first quarter of 2001. (company website)

>  Wyeth reported that first quarter 2002 revenues for its animal health division Fort Dodge were $161.5 million, a decrease of 1% over the comparable period in the prior year.  The decline was primarily due to the continuing weakening in the global livestock markets, partially offset by sales of ProHeart 6.  (company website)

>  Novartis reported that first quarter 2002 sales of its animal health division were CHF 252 million ($150 million), an increase of 5% over the first quarter of 2001.  Operating income was CHF 42 million ($25 million), a decrease of 2% over the first quarter of 2001.  The acquisition of Grand Laboratories in January 2002 contributed the majority of the increase, with the remainder coming from ex-US sales.  US sales for the first quarter were lower, owing to a shift in the spring sales offer.  (company website)

>  Pharmacia reported that sales of its animal health division for the first quarter 2002 were $119 million, an increase of 5% over the first quarter of 2001.  US animal health sales were $60 million, a 4% increase over the first quarter in the prior year.  Revenues were driven by a 25% increase in sales of Naxcel/Excenel.  (company website)

>  IDEXX Laboratories, Inc. reported net income of $7.2 million for the quarter ended March 31, 2002, compared to net income of $7.6 million, for the same period in the prior year. Net income for the quarter includes a pre-tax charge of $2.9 million related to the retirement of David Shaw, the Company’s former CEO. Net income would have been $9.1 million without this charge. Revenues for the first quarter of 2002 increased to $96.6 million from $91.4 million for the first quarter of 2001. (company website)

>  VCA Antech, Inc. reported financial results for its first quarter ended March 31, 2002.  Revenue for the first quarter ended March 31, 2002 increased 9.4% to a record $104.7 million from revenue of $95.7 million in the same quarter last year.  Operating income for the first quarter of 2002 increased to $20.3 million from $9.3 million in the first quarter of the prior year. Operating income for the first quarter 2001 includes $5.1 million of certain expenses and $2.3 million of amortization of goodwill that did not occur in 2002. Excluding these expenses from 2001, operating income for the first quarter 2002 increased $3.7 million, or 22.0% from the prior year quarter, as adjusted. (Business Wire)

>  Land O'Lakes, Inc. reported a first quarter 2002 net loss of $1.0 million, as compared to net earnings of $13.0 million for the first quarter of 2001.  Sales for the quarter were $1.52 billion, up 10.8% from one year ago, primarily the result of the October 2001 Purina Mills acquisition.  Excluding Purina Mills, sales would have declined 4.8%. Land O'Lakes reported positive momentum as the quarter closed, with $10.7 million in net earnings for March.  The company reported $3.5 million in pretax earnings in its Feed business for the quarter, as compared to $2.2 million in the first quarter of 2001. Company officials indicated the integration of Purina Mills into Land O'Lakes Farmland Feed was progressing as planned, on time and on budget. Commercial Feed volumes, particularly in the beef feed area, were adversely affected by warmer-than-normal weather conditions.  The company did report significant increases in milk replacer, horse feed and Western Feed volumes. (PRNewswire)

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Company News Releases

>  Pharmacia Animal Health announced that it is now offering Veterinarians and producers Personal Digital Assistant (PDA) versions of Pharmacia Animal Health cost-advantage calculators.  The calculators can now be downloaded for mobile use on PDAs from various websites.  A repull calculator allows beef feedlot managers to estimate the cost of repulls by examining the impact of repulls on medicine costs, labor, reduced weight gain and reduced quality grades.  Dairy producers can calculate how improved reproduction results can enhance their bottom line, and figure out how much lost milk is costing the farm. (company press release)

>  Amid speculation on Farmland Industries' financial position, the company is citing improved liquidity since mid-April, due to its petroleum refinery being back at full production and the spring fertilizer season generating additional sales revenues.  The company says that the fertilizer business has returned to profitability, and shipments are now on course to exceed two of the last three years. The company is currently honoring all its obligations.  While filing for protection under Chapter 11 was one possibility cited in the company's quarterly filing with the SEC, Farmland has no current plans to exercise that option, calling it merely the “worst case scenario."  (Meating Place)

>  Diamond Pet Foods is investing $18 million to turn an old canning plant in South Carolina into a new, high-tech petfood manufacturing facility.  The company is also building a warehouse on the site.  Both facilities are expected to open in October 2002. (Animal Pharm)

>  Scientists at the University of Georgia and ProLinia, Inc. have produced the first calf ever cloned from cells of a slaughtered cow. The calf was delivered by Caesarian section. This breakthrough has the potential to revolutionize beef cattle production by allowing producers to select cells from the highest quality meat after it has been graded to clone animals to stock their herd. (company press release)

>  Oncura Partners announced the release of its new internet-based comprehensive cancer service.  The website is designed to enhance all veterinarians’ access to multiple levels of oncology services.  (company press release)

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BRAKKE CONSULTING, INC.
STRATEGIC PLANNING AND BENCHMARKING

Many companies gave been spending a reasonable amount of time the past few weeks in reviewing their 3- and 5-year strategic plans.  This often starts with, and includes, a review of R&D projects.  This is then followed by a comparison of last year’s revenue estimates for the current product line versus strategic plan.

We want to remind our subscribers that Brakke Consulting can be an excellent resource for you 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.

Brakke Consulting has the experience, insight, abilities, and contacts that provide our clients with the highest quality services in the animal health, pet, veterinary, and specialty chemicals markets.  Please contact any of our offices for a confidential consultation on our range of services.  Contact information for all offices are available on our website at www.brakkeconsulting.com http://www.brakkeconsulting.com and click on a starred location on the world map.

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Animal Health News

>  US   University of Kentucky researchers advised horse farmers Monday to keep pregnant mares out of pastures until midday Tuesday because of cooler overnight temperatures.  Scientists still do not know what caused more than 500 foals to die and thousands of early term pregnancies to be terminated on central Kentucky horse farms last year, costing the state's billion-dollar horse industry nearly $350 million.  They believe, however, that stark changes in the weather during this exact time frame may have played a role in the development of the mysterious illness, dubbed Mare Reproductive Loss Syndrome. So far this season, scientists have yet to see any sign of a recurrence of the disease.  (AP)

>  US   The FDA’s top official called for eliminating chronic wasting disease (CWD), an illness spreading through deer and elk populations that is similar to BSE.  CWD is one of a family of diseases known as transmissible spongiform encephalopathies. Unlike BSE, which can be a transmitted to humans, chronic wasting disease is not considered a threat to human health. The disease is not known to spread to cattle, but scientists say that can't be ruled out. So far, cattle are only believed to have contracted the disease when injected with the infectious agent in a laboratory.  CWD was believed until a few years ago to be largely confined to wild deer and elk in a small area of Colorado, but it has now been discovered in wild deer and captive elk herds in several states and Canada. There is no known cure or treatment for CWD, and the only way to determine for certain that an animal is infected is to kill it and examine its brain. (AP)

>  US   Virginia state officials have confirmed the first case of avian flu outside the Shenandoah Valley, at a Cargill turkey operation in Greene County.  A spokesman for the Virginia Poultry Federation told the newspaper that the farm is geographically separated from the other farms by the Blue Ridge Mountains, so there is little likelihood of further outbreak from this location. How the disease got across the Blue Ridge Mountains into Greene County is unknown.  As of last week, 79 poultry farms containing more than 1.9 million chickens and turkeys had been quarantined.  Poultry companies have killed 1.1 million birds to keep the virus from spreading. Another 752,700 have been quarantined and are awaiting slaughter. (Meating Place)

>  US   The FDA reported that, for the year 2001, there were 2 new chemical entities approved for veterinary use: nitenpyram (Capstar, Novartis) and ponazuril (Marquis, Bayer).  Other significant approvals included 6 products for use in new animal species, 9 new product combinations, and 2 new product dosage forms. (FDA veterinarian)

>  EUROPE   The EU's Scientific Committee on Veterinary Measures relating to Public Health (SCVPH) has released a report that says the use of growth hormones in cattle production does pose a potential health risk to consumers. That's the basis of the ban put in place in 1988 which the U.S. has repeated challenged via world trade rules. This marks the third opinion on the matter from the SCVPH, as it said in 1999 and 2000 that it found potential health risks to humans as well.  (AnimalNet – AgWeb)

>  US   The American Meat Institute Foundation announced that research it sponsored may lead to the commercialization of a microorganism that, when incorporated into feed, can reduce the concentration of the deadly E. coli O157:H7 in live cattle by up to 50 percent. Texas Tech University researchers report that a strain of Lactobacillus acidophilus, a bacterium commonly added to yogurt and milk, cut the concentration of E. coli in cattle feces by half. The trial was conducted during the summer months, when cattle typically shed more E. coli O157:H7.  A complete report of the research is available on the AMIF website (www.amif.org). (Meating Place)

>  US   DogFriendly.com introduced a new addition to its travel guide product line. Now available is a paperback book, "DogFriendly.com's California and Nevada Dog-Friendly Travel Guide -- 2002 Edition." The book focuses on finding places that allow well-behaved dogs of all sizes. The book offers over 1,800 listings of dog-friendly accommodations, attractions, parks and outdoor restaurants throughout California and Nevada.  The book also contains listings of emergency veterinarians. (Business Wire)

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Agribusiness News

>  The gap in sales between the world's seven largest agrochemical companies has narrowed, according to 2001 sales reports. Syngenta continued to maintain highest revenues, with nearly US$5.4 billion in pesticide and seed sales.  However, Bayer's anticipated purchase of Aventis CropScience may increase Bayer's 2002 sales to over US$6 billion. Monsanto reported $3.75 billion in revenues in 2001, while BASF reported the highest revenue increase of 39.4% to $3.1 billion, primarily the result of its 2000 acquisition of Cyanamid.   (Agrow)

>  Monsanto Co. reported that first-quarter earnings rose sharply, despite a 7% drop in sales, because of an accounting change that drastically reduced the value of year-ago results. Monsanto posted a net profit of $86 million during the first three months of 2002, compared with $55 million a year ago.  Sales in the quarter dropped to $1.22 billion from $1.31 billion a year ago. Sales of seeds and traits rose 17% but were more than offset by lower sales of Roundup herbicide. (AP)

>  EDEN Bioscience announced financial results for its first quarter ended March 31, 2002. Revenue for the first quarter of 2002 was $555,000, which compares to revenue of $2.5 million in the first quarter of 2001. Revenue is derived solely from sales of Messenger to distributors. Net loss in the first quarter was $5.5 million compared to a net loss of $2.5 million in the first quarter of 2001. However, the company estimates that distributors sold approximately 144,000 ounces to growers in the first quarter of 2002, compared with approximately 91,000 ounces in the same period in 2001.  In addition, the majority of Messenger sales were made in the second and third quarters of 2001.  (Business Wire)

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Brakke Consulting Viewpoint

The past few weeks have been one of those periods filled with project presentations, client presentations, and more airport security lines than I’d like to count.  While it’s been a tough travel schedule, I’ve had some great dinners and lunches that have been both informative and challenging.

I’m most impressed with some of the positive attitudes and programs that companies have developed to grow the animal health market.  Every market segment and niche has room for growth.  We need to be creative and positive.  Programs that are developed should help the channel influencers (veterinarians, staff, retailers and distributors) move more product to consumers and producers.  If new trials of products were increased by 10 – 15%, and product usage or compliance were improved by 10 – 15%, we’d have an industry that would grow at a rate exceeding the growth rates of the parent companies overall.

The opportunity is there for those that want to be aggressive.

[Ron Brakke]

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