Since the March 2009 acquisition of Schering-Plough by Merck and Co. Inc. there has been considerable speculation in the animal health industry regarding rationalization and divestiture. Merck is a 50% partner together with Sanofi-Aventis of France in Merial.

The company generated sales of $684 million for Quarter 1, 2009. Revenue from parasiticides for companion animals and food species represented more than 70% of this total. Sales of Merial animal health products worldwide for food animal species including poultry during the quarter amounted to $70 million.

It is generally accepted that Sanofi would be the first in line to acquire the Merck shareholding in their joint venture. The Schering-Plough animal health subsidiary arising from the recent acquisition dominates the U.S. market for oocyst-based anticoccidial vaccines but will encounter intensified competition from companies including Merial in the current year. Schering-Plough lacks breadth in either poultry biologicals or pharmaceuticals and would be a natural spin-off. Merging this subsidiary with the existing Merial JV would not seem to offer any strategic advantages or synergy unless as an interim measure to package Merial/Schering-Plough/Intervet. Bayer AG and Boehringer Ingelheim GmbH have been mooted as potential purchasers of a consolidated enterprise.

Editorial Comment: While the disposition of Merck assets in animal health should not materially affect the poultry industry in the short term, concentration of production, distribution and service among fewer companies would appear to be inevitable. On the one hand this will decrease competition and lead to escalation in prices in an extremely competitive and low-profit margin segment of the pharmaceutical-biologics market. Consolidation will, however, justify expenditure on research and development to produce a new generation of antiparasiticals, biologics and pharmaceuticals required to replace existing products.