The animal health business within the global health market is changing with pharmaceutical giants considering selling their veterinary arm due to lower sales and more regulatory restrictions. When a friend of mine swapped his veterinary job for one in human healthcare, I told him he was simply following the latest fashion. The top directors of several big pharmaceutical corporations have been recently suggesting, again, that they might concentrate on the human side and end their interest in animal health products.

Nobody should be surprised if the pharma giants say this; they see a global marketplace in which products to safeguard the health of animals account for only about 2% of total sales. In round terms, the world market in 2010 was worth about US$860 billion. Less than US$19 billion of this related to veterinary medicine.

Livestock farming is a comparatively small customer within that animal category. The largest single segment of veterinary sales last year was for pets. Second place went to cattle. Pig and poultry products were about equal to each other for expenditure, and together accounted for approximately 25% of all veterinary sales.

The sales performance of the global health market (human plus veterinary) and of individual players is tracked by an agency called IMS, which reckons that the total value will pass the US$1 trillion mark by 2014. About one-third of that will be in North America and another one-quarter in Europe. Other forecasters think we are looking at an animal health business totalling close to US$20 billion inside three years and growing at about 5% per year for the next five years, but mainly due to a projected further increase in the number of pets.

A problem identified by numerous commentators is that the costs of the animal health suppliers have been driven sharply higher by regulatory restrictions. There is at least as much regulation on the human side, as you would imagine, but its cost effect is balanced against a much larger turnover. Industry spokespeople have called for the regulators to be more sensitive to the fact that health products for animals are needed to support the extra food production that must happen in order to feed for the world’s expected population growth.

At the same time, one of the pharmaceutical corporations has told analysts that it actually wants to be bigger in veterinary products because it sees increasing difficulties on the human side with generic products competing with its market-leading prescription drugs. Some news reports have also indicated that the animal health business has attracted the attention of equity investors.

Perhaps they will join the ranks of the potential buyers if one or more pharma giant does decide to sell its veterinary arm. At least as likely, however, is that the units put up for sale will be acquired by existing competitors who want to grow their own profile. Their bosses chase scale above all else in health product sales, so expect to see a few takeovers or mergers being announced – provided they can win the backing of the anti-trust competition authorities.