In a nod to those concerned about animal welfare, Iams also said it will expand in-home testing and use only dogs and cats that live in homes, its own facility or animal shelters.

Iams officials called the move part of an evolution that will increase costs but help its research efforts.

"We've been evolving in this direction because of some of those advantages we can gain from in-house studies," said Dr. Dan Carey, a veterinarian and director of technical communications at the research center.

Others are sure to see the move as a bow to animal-rights groups such as People for the Ethical Treatment of Animals, which has criticized Iams harshly.

P&G bought Iams in 1999 but has been dealing with animal-rights activists for years. In the last two decades, the company has spent more than $187 million to find alternatives to animal testing in businesses ranging from pet food to cosmetics. But it still attracts the criticism.

Norfolk, Va.-based PETA has proposed a resolution to be voted on by shareholders at P&G's annual meeting next week. It calls on Iams to end contracts with outside laboratories but also to end all testing on animals in company laboratories. P&G recommended that shareholders vote against the proposal.

Two years ago, PETA sent an undercover researcher into a contract lab in Missouri and said it discovered cruel treatment, which caused Iams to sever the contract in the spring of 2003. The company also pulled out of 19 other contract laboratories at about the same time. It still has contracts with eight such labs.

Ed Sayres, president of the American Society for the Prevention of Cruelty to Animals, said Iams deserves credit.

"They're definitely leading the way," Sayres said. "In Iams' case, there wasn't enough oversight (in the labs), but it's always the response that matters. Instead of just looking at the incident, they looked at the whole way animals are kept for animal research."

Iams noted that it established its animal-research policy three years ago. As part of that program, it agreed to fund an "animal welfare specialist" for each of its contract labs. In the Missouri lab, unknown to Iams, that person was the PETA investigator.

Iams officials charged that PETA was more interested in dramatic violations than in improving the animals' living conditions.

"I think Iams has to prove itself to us," said Mary Beth Sweetland, senior vice president of research and investigations at PETA. "Yes, this is part of what PETA wants. But that said, Iams has lied to us in the past. The questions is, is Iams going to commit to ending testing on all animals? The expansion of that Dayton facility means more testing."

In its complex off Interstate 70 in Lewisburg, Iams keeps about 350 dogs and cats. The cats are kept in inside cages, about 15-20 to a room, with some time out of the cage each day. The dogs are kept in inside/outside combinations that can open onto a gravel play area.

The animals are tested for their reaction to the dog and cat foods that Iams makes.

Construction already is under way on several new buildings that will be ready in November, and Phase II of the project will be complete by late 2005, Carey said. That will bring the total capacity to more than 800 dogs and cats, Carey said.

Buildings in the second phase will be without cages, another new part of the Iams program, he said.

Slightly more than half of animals live in homes now, with the rest in contract laboratories, universities or in the Iams unit.

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E-mail cpeale@enquirer.com