» 1999

Animal Health News & Notes for November 5, 1999 11/5/1999

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Brakke Consulting’s
Animal Health News & Notes for November 5, 1999

Company earnings releases
 In plant & animal health, Rhone-Poulenc recorded net sales of 494 million euros ($532 million) in the third quarter 1999, down 15.6% excluding the impact of exchange rates. Income from operations in plant & animal health were 94 million euros ($101 million), down 29.5%, a result of the decline in operating income. Earnings benefited however from a significant contribution from Merial, which recorded good sales of the anti-parasitic, Frontline.
 Virbac SA announced 9-months 1999 sales of $220 million (FF1,330 million), up 25% over the same period in 1998. 
 Virbac Corporation, the US subsidiary of Virbac SA, announced 3rd quarter sales of $12.9 million, up 4% over 1998.  For the nine months ended 9/30/99, sales were $35 million, up 7.7% over 1998. 
 Hoffmann La Roche announced 9-months 1999 sales of feed additives were $950 million (CHF 1,456 million).  Feed additives accounted for 56% of the sales for the vitamin and fine chemicals division, up from 50% in 1998.
 Ralston Purina announced fourth quarter 1999 for the fiscal year ended September 30, 1999 sales were $1.2 billion compared to $1.15 billion in the prior year fourth quarter. Earnings from continuing operations before unusual items were $113 million compared to $98 million in the prior year. Sales for the Company's Pet Products' segments increased 6 percent in the quarter and 5 percent for the year primarily on higher volumes and also on the inclusion of sales from the December 1997 acquisition of Edward Baker Petfoods in the year.

Company News Releases
 American Home Products Corp. and Warner-Lambert Co. said they’re in merger talks to form the world’s largest drugmaker.  A transaction, valued at about $70 billion, would combine two New Jersey neighbors into a company with drug sales topping industry leader AstraZeneca Plc.
 Pfizer Inc announced that it has made an offer to acquire all of the outstanding shares of Warner-Lambert Company in a merger transaction at a price valued at $96.40 per share, or $82.4 billion.  The proposed transaction represents a 30% premium over the last month's average closing price of Warner-Lambert stock.  Pfizer had previously indicated over the past several weeks in correspondence and direct contact its interest in a business combination with Warner-Lambert.  Warner-Lambert’s announcement of an agreement to merge with American Home Products Corp, terminates a prior standstill provision between Pfizer and Warner-Lambert that Warner-Lambert used to prevent Pfizer from making an offer to acquire Warner-Lambert.
 Purina Mills, Inc. announced that, as part of an overall financial restructuring, the Company and 10 of its affiliates commenced reorganization cases under Chapter 11 of the United States Bankruptcy Code.  The Company said it will promptly file a proposed plan of reorganization, underscoring its goal of completing its reorganization and emerging from Chapter 11 as quickly as possible. During the restructuring, the Company's operations and ingredient supply will not be affected. Purina Mills is not affiliated with Ralston Purina Company
 Petstore.com announced the closing of a $97 million round of funding and the formation of a broad strategic alliance with Discovery Communications. With this second round of funding, total investment in Petstore.com now exceeds $110 million. This partnership includes an exclusive license to Animal Planet content and the Animal Planet URL. Animal Planet is the fastest growing cable television network of the 1990's.
 Petstore.com unveiled its first national advertising campaign and will follow later this week with a newly designed web site. Set to debut today in New York and San Francisco, the $15 million plus campaign will air on all of the major networks during prime time, late night and early morning programming. Petstore.com will expand the campaign into another eight markets later this month, and will advertise on a number of national cable stations.
 IGI, INC. announced that it has completed loan which provide for term, credit, and capital expenditure facilities of up to $29.0 million of which approximately $24.5 million is currently available.  These loans have allowed the Company to replay in full, all of its former outstanding bank debt of $18.6 million and to provide $4.5 million for working capital and capital expenditures.
 PETsMART, Inc. in November will debut The PETsMART Report. The publication presents a lavish array of fun and lifestyle- and health-enhancing pet products, many of which are exclusive to PETsMART. It is estimated some 8.6 million people will view the magazine. All items will be available for purchase at PETsMART locations or by ordering on the company's affiliated website, www.PETsMART.com
 Destron Fearing announced that it has received two orders for Pocket Reader(R) and Pocket Reader-EX(R) scanners from Merial (the world leader in animal health) totaling approximately $500,000.  Taken together, these orders are the largest scanner orders ever received by the company for a specific European country.
 Seven big vitamin makers signed an agreement Wednesday to pay $1.05 billion to purchasers because the manufacturers fixed the prices of bulk vitamins used in foods and animal feeds. The companies pleaded guilty earlier this year to criminal price-fixing charges brought by the U.S. government. The seven companies are Roche Holding, Hoechst AG, BASF AG, Rhone-Poulenc SA, Takeda Chemical Industries Ltd., Eisai Co. Ltd., and Daiichi Pharmaceutical Co. Ltd. Roche will pay the biggest chunk of the settlement, likely more than half. The companies sold about $7 billion worth of vitamins between 1990 and 1998 to U.S. companies, such as Kraft and Kellogg, lawyers for the plaintiffs said.
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Animal Health News
 Agribrands is marketing a new proprietary blend of enzymes developed for use in cattle. The product will be marketed as Promote Natural Energy Technology, or Promote N.E.T. Results verified in five dairy trials and nine feedlot trials show the enzyme technology package at optimal dosage can boost cattle feed efficiency, along with average daily gain or milk yield, by approximately 5 to 10 percent. Secondary benefits include less manure volume and more diet flexibility.
 Smart Drug Systems Inc. a new company committed to the development of high quality products for animal health based on innovative delivery technology, today announced the completion of a $5 million placement of Series A preferred stock. The proceeds from the financing will allow SDS to establish its technologies and advance several lead products into clinical trials in different target species.
 Britain won a major victory over France last Friday when a panel of European Commission scientists ruled that British beef was safe to eat despite French arguments for a continued ban to guard against so-called mad cow disease. Three weeks ago France submitted a 600-page report claiming new scientific evidence of the risks associated with the meat. But after two days of deliberations, the panel of 16 European Commission scientists found that British exports "are as safe as those in other European member states."
 Preliminary beef demand data for the first three quarters of 1999 shows that beef demand increased 4.59% during the third quarter of 1999, compared to demand during the same period last year.  The rate of decline of beef demand has been slowing since 1996, according to the Beef Demand Index, which is calculated by leading independent economics and industry experts using USDA per capita beef consumption data and USDA Choice retail beef prices adjusted for inflation.
 Researchers in Denmark have demonstrated the transmission of resistant bacteria in animals to humans where the bacteria remains resistant to antibiotics in humans. A report in the New England Journal of Medicine stated that DNA fingerprinting was able to track a deadly outbreak of salmonella disease from 27 infected people back to the retail shop where pork products were purchased, back to the slaughterhouse, and eventually, to the farms where herds of swine carried the resistant bug.
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Agribusiness News
 AgrEvo and Strategic Diagnostics Inc. have agreed to jointly develop tests that will detect the presence of food ingredients directly related to AgrEvo’s LibertyLink genetic trait.  The test kits can be used by food companies to determine compliance with European labeling requirements for GM ingredients.
 Ag Services of America Inc. announced the launch of http://www.Powerfarm.com , a comprehensive information and e-commerce website with the support and participation of leading agriculture manufacturers.  The site includes current agricultural news, weather, market quotes and comprehensive product data as well as flexible financing and the most extensive selection of name brand agriculture products available on the Internet.  The site initially features products produced by Monsanto, Dekalb, Novartis Seed, Asgrow, Garst, American Cyanamid, Zeneca and Bayer.

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The Brakke Consulting Viewpoint

Several of the articles this week reflect how technology is changing our industry via various methods.  A traditional name brand company like Purina Mills finally accepts that they will go Chapter 11 while an upstart Petsores.com is able to raise another $97 million for its Internet marketing concept.  This follows PetsMart raising another $50 million to further develop its Internet product marketing system.  IGI, a small older animal health company, is able to do some refinancing to keep it operating for a few more quarters.  Another startup company, Smart Drug Systems, raised and initial $5 million from venture capital to move its drug delivery system forward. 

The investment community is clearly demonstrating by its actions that it is more interested in new business technology concepts and models than it is in the traditional business with brand names in the livestock area.  This trend will continue to put pressure on those firms that are not making good choices in rapidly changing their business model.  While there has been some recent positives in livestock prices, these should be viewed as temporary and will not have much impact on the overall trend of the industry.     

It looks like Pfizer may be more interested in Warner Lambert than AHP.  This will be an interesting auction to watch.  We'd like to learn more about this offer before we make any comments on the impact on the animal health industry.  We will keep you advised of our observations.
 
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