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Durham company coping with bird flu
http://washington.bizjournals.com/triangle/stories/2006/04/17/story6.html?t=printable
Durham company coping with bird flu
Development of a vaccine may help Embrex in the long run
Triangle Business Journal - April 14, 2006
by Leo John
DURHAM - The outbreak of bird flu in Europe has resulted in slumping sales for two Embrex customers that contributed 28 percent of the vaccine company's 2005 revenue - and the threat of the disease migrating to North America is looming over Embrex's 2006 outlook.
Pilgrim's Pride Inc., which last year provided 11 percent of Embrex's $53 million in revenue, on March 1 withdrew its previously reported financial guidance for the 2006 second quarter and also for the full year because the bird flu scare has hurt chicken consumption in Europe.
"The results for the second quarter and full year are expected to be less than previously forecasted primarily because of depressed prices for U.S. chicken leg quarters due to continued weakness of international demand," Pilgrim's Pride said in a statement.
Tyson Foods, which generated 17 percent of Embrex's 2005 revenue, has said that some of its chicken inventory is being used as pet food as overseas demand has fallen.
Both meat processors use Embrex's technology to inoculate eggs to produce healthier chicken.
Sporadic reports of avian influenza have dominated recent headlines, prompting consumers to curtail chicken purchases.
Chicken sales have fallen 70 percent in Italy, 30 percent in France and 80 percent in Turkey after cases of avian flu were discovered in those countries, according to news reports.
Embrex's revenue from Tyson and Pilgrim's Pride is primarily linked to U.S. operations, and U.S. health officials have said it is only a matter of time before a domestic case of bird flu is discovered.
Embrex Chief Executive Officer Randall Marcuson addressed the potential impact in the company's first quarter conference call, describing it as "the real unknown" of the company's 2006 performance.
The danger of a bird flu outbreak "will continue to have a significant confounding effect on any forecast, and while both North and South America, which represent 78 percent of our revenues in 2005, are (bird flu) free, if it's detected in the U.S. or Brazil it would clearly be a strong negative," Marcuson said.
Analysts who cover the meat processing industry say the slowing sales of Tyson and Pilgrim's Pride will hurt vendors such as Embrex, but it's not clear by how much.
"I don't think they're just going to stop doing business" with Embrex, says Timothy Ramey, an analyst who covers Tyson Foods for D.A. Davidson & Co.
Marcuson says Embrex also would be a "very logical company to deal with" if another company devised an avian flu vaccine, because Embrex's technology could be used to administer it. No vaccine has been discovered yet.
The uncertainty surrounding an avian influenza outbreak comes even as Embrex awaits U.S. Food and Drug Administration approval of a $14.7 million manufacturing facility in Scotland County, located in the southeastern part of the state.
Embrex sought FDA approval for the plant in December and expects a decision in the first half of 2006. If approved, Embrex plans to manufacture a vaccine called Inovocox, which fights the digestive infection coccidiosis.
Founded in 1985, Embrex claims to have been the first biotechnology company founded in the state. The company's employment numbers have hovered at about 310. It added staff during the past year in Latin America, in particular at its Brazilian operations.
Durham company coping with bird flu
Development of a vaccine may help Embrex in the long run
Triangle Business Journal - April 14, 2006
by Leo John
DURHAM - The outbreak of bird flu in Europe has resulted in slumping sales for two Embrex customers that contributed 28 percent of the vaccine company's 2005 revenue - and the threat of the disease migrating to North America is looming over Embrex's 2006 outlook.
Pilgrim's Pride Inc., which last year provided 11 percent of Embrex's $53 million in revenue, on March 1 withdrew its previously reported financial guidance for the 2006 second quarter and also for the full year because the bird flu scare has hurt chicken consumption in Europe.
"The results for the second quarter and full year are expected to be less than previously forecasted primarily because of depressed prices for U.S. chicken leg quarters due to continued weakness of international demand," Pilgrim's Pride said in a statement.
Tyson Foods, which generated 17 percent of Embrex's 2005 revenue, has said that some of its chicken inventory is being used as pet food as overseas demand has fallen.
Both meat processors use Embrex's technology to inoculate eggs to produce healthier chicken.
Sporadic reports of avian influenza have dominated recent headlines, prompting consumers to curtail chicken purchases.
Chicken sales have fallen 70 percent in Italy, 30 percent in France and 80 percent in Turkey after cases of avian flu were discovered in those countries, according to news reports.
Embrex's revenue from Tyson and Pilgrim's Pride is primarily linked to U.S. operations, and U.S. health officials have said it is only a matter of time before a domestic case of bird flu is discovered.
Embrex Chief Executive Officer Randall Marcuson addressed the potential impact in the company's first quarter conference call, describing it as "the real unknown" of the company's 2006 performance.
The danger of a bird flu outbreak "will continue to have a significant confounding effect on any forecast, and while both North and South America, which represent 78 percent of our revenues in 2005, are (bird flu) free, if it's detected in the U.S. or Brazil it would clearly be a strong negative," Marcuson said.
Analysts who cover the meat processing industry say the slowing sales of Tyson and Pilgrim's Pride will hurt vendors such as Embrex, but it's not clear by how much.
"I don't think they're just going to stop doing business" with Embrex, says Timothy Ramey, an analyst who covers Tyson Foods for D.A. Davidson & Co.
Marcuson says Embrex also would be a "very logical company to deal with" if another company devised an avian flu vaccine, because Embrex's technology could be used to administer it. No vaccine has been discovered yet.
The uncertainty surrounding an avian influenza outbreak comes even as Embrex awaits U.S. Food and Drug Administration approval of a $14.7 million manufacturing facility in Scotland County, located in the southeastern part of the state.
Embrex sought FDA approval for the plant in December and expects a decision in the first half of 2006. If approved, Embrex plans to manufacture a vaccine called Inovocox, which fights the digestive infection coccidiosis.
Founded in 1985, Embrex claims to have been the first biotechnology company founded in the state. The company's employment numbers have hovered at about 310. It added staff during the past year in Latin America, in particular at its Brazilian operations.