Consolidation in the animal-health industry continues with the news that Sanofi-Aventis has bought out  Merck & Co's stake in Merial.

The move clears the way for the proposed merger of Merck with Schering-Plough. Either Merck or Schering Plough had to divest itself of its animal-health holdings for the merger to happen.

"These agreements should enable us to proceed expeditiously with the closing of our merger with Schering-Plough in the fourth quarter as planned," says Richard Clark, head of Merck is quoted as saying in the Financial Times.

These are the latest developments in a consolidation trend affecting animal-health companies.  

Ron Brakke, of Brakke Consulting, a leading consulting and research firm for the animal-health industry, acknowledges there has been a "dramatic reduction" in the number of animal-health companies over the past 20 years. And, the trend seems to have picked up in the last year or so for a couple of reasons, he says.  

  • Many of the big pharmeutical 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 the animal-health business has experienced a larger sales growth in the last year or so than the human-health 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.

Generally speaking, the effect of these mergers on the livestock producer is neutral, Brakke says. "In a lot of cases, the dairy producer may not see a difference," he says.

click here to read "Sanofi buys full control of Merial from Merck" in The Financial Times.

Source: The Financial Times