After years of second-class status in corporate board rooms, animal health companies are rising in stature. With more human drugs going off patent and revenues of big pharmaceutical companies dwindling as a result, more attention is being focused on companies that supply animal medicines.
Even though animal drug sales are dwarfed by human drug counterparts, large pharmaceutical companies are finding that animal drugs may offer more reliable growth and less competition. Animal health companies provide big-pharma a way “to diversify and defend against generic drug rivals,” according to a Reuters report.
However, as mega-mergers unfold in the human drug arena, animal health holdings of companies may have to be pared to pave the way for regulatory approval. Such is the case in Merck’s divestiture of its stake in Merial announced today. (See Porkmag.com)
There are several reasons for the increased interest in animal health companies. Ron Brakke, of Brakke Consulting, a leading consulting and research firm for the animal health industry, admits there has been a "dramatic reduction" in the number of animal health companies over the past 20 years. The trend seems to have picked up in the last year or so for a couple of reasons, he says:
• Many of the big pharmaceutical companies have experienced a slowdown in their human health businesses. Part and parcel of this is the loss of some products to the generic market. So, these companies are investing in animal health companies, because that industry has experienced a larger sales growth in the last year or so than the human drug side.
• The cost of developing and registering new products and getting those products approved by the Food and Drug Administration, the Environmental Protection Agency or the U.S. Department of Agriculture has been getting more costly. So, the companies are finding that it takes a larger critical mass in their animal health businesses to have an effective Research and Development program.
Also facing possible divestiture of animal health assets is the pending Pfizer-Wyeth merger. Both companies have major animal health holdings, some of which may need to be divested to receive regulatory approval for that mega-merger.