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CHAPTER 1 - THE WORLD
Source: National industry associations and Animal Pharm Reports.
MARKET PROFILE
Major product sectors: Antiparasitics, biologicals,
anti-infectives
1.1 The world market for animal health products
Excluding nutritional feed additives, the world market for animal health products was worth $13,400 million in 2002. Including vitamins, amino acids and other nutritional supplements added to animal feed, the market was worth $17,505 million. Accurate data on sales of nutritional additives is difficult to obtain at national level, however, and since the sector is more limited in terms of company activity it has been excluded from this report. Unless otherwise stated, figures quoted in the following world overview and individual country profiles refer to a market spanning veterinary pharmaceuticals, biologicals and medicated feed additives. The latter segment includes anticoccidials, anti-infectives approved variously for disease treatment, control and/or performance enhancement, and small amounts of other therapeutic products such as anthelmintics.
1.1.1 Market size and recent development
At $13,400 million, the 2002 value of the world animal health products market was up on year-earlier figures by 2.2%. That apparently modest increase is actually the biggest recorded rise in the dollar value of the market since the mid-1990s. Sales in the sector have been limited since then by a combination of factors, including poor conditions in major livestock markets, economic problems in countries such as Argentina and Brazil, and the impact of drought conditions in parts of the US, Canada and Australia.
Table 1.1: Benzylpenicillin MRLs as set in Codex Alimentarius
Source: Animal Pharm Reports.
Currency factors have also had a fundamental impact on the dollar value of the world market. In 2001 and for several years prior to that, the US dollar strengthened consistently against most other major trading currencies. Consequently, market values in countries outside the US were eroded on conversion to dollars. Exchange rate trends were reversed in 2002, however, when the dollar weakened in value against a number of international currencies, inflating the apparent value of European markets in particular. Currency factors aside, global sales of animal health products are relatively flat, reflecting the mature nature of the market, sluggish demand in a number of the world's biggest country markets, a slowdown in the flow of new products into the sector and increases in the degree of generic penetration in key product segments.
1.1.2 Market structure by region
North America remains the world's biggest regional market for animal health and nutrition products, with sales in the US, Canada and Mexico totalling more than $5.1 billion in 2002 – equivalent to around 38% of the global total. Growth in the region was limited during 2002, however, with sales in the US – responsible for more than 90% of the North American total – slowing significantly as conditions in the country's major livestock sectors continued to deteriorate.
Table 1.2: World animal health product sales by region, 2002
Source: Animal Pharm Reports.
Figure 1.1: World animal health product sales by region, 2002
Source: Animal Pharm Reports.
Sales in most leading west European markets were slightly stronger, with demand for livestock products recovering from a difficult year in 2001 and new companion animal products driving growth in that sector. Sales in France and Germany rose by around 5%, while increases in Spain and the UK were higher at around 8%. Market values in the euro-zone were inflated as the new European currency strengthened significantly against the dollar, and regional growth in dollar terms was around 10%. Western Europe's share of the dollar-based world market rose to 26% as a result.
Growth was also reported across much of central and eastern Europe, but a combination of political problems, economic troubles and climatic extremes affected markets in the Middle East, parts of Africa, Asia and South America. Asia remains the third most significant contributor to global sales, accounting for more than 19% of the global total. Growth rates in most of the region's emerging markets have slowed since the late 1990s, however, and sales in Japan remain depressed. Further south, the Australian market was hit by record drought conditions which triggered sharp reductions in both sheep and cattle numbers and pushed animal health product sales down by around 1% in 2002. Modest growth was recorded in US dollar terms as a result of exchange rate factors.
By contrast, currency factors exerted a strong negative impact on dollar sales values in South America. Dollar-based sales in Brazil, which plummeted by around 18% in 2001 following a sharp reduction in the value of the real, declined by a further 3%, while the collapse of the Argentinean economy had a major impact on revenues reported there by foreign companies.
1.1.3 Market structure by product category
Veterinary pharmaceuticals account for more than two-thirds of all animal health product sales, with therapeutic anti-infectives and antiparasitics similarly dominant within the pharmaceutical product sector.
Antiparasitics, which have been the main driver of pharmaceutical market growth since the mid-1990s, account for more than 40% of pharmaceutical sales, but delivered little growth in 2002. Ectoparasiticide revenues are still rising, but at rates well below those witnessed in the recent past, while competition for shares of the anthelmintic and endectocide markets is depressing the value of those sub-sectors.
The market for therapeutic anti-infectives returned slightly better growth in 2002, but increases were still below the market average. Sales volumes in this sector have been affected by the implementation of 'prudent use' strategies designed to slow the development of microbial resistance.
Growth in the market for other pharmaceutical products was stronger, with sales in this broad segment driven by a combination of higher volumes and new product launches. Major sources of recent growth have included anti-inflammatory drugs, cardiovasculars and behavioural treatments. The number and range of products in this miscellaneous segment continues to grow as companies adapt established human therapies for veterinary use.
Table 1.3: World market structure by major product sector, 2002
| Sector | Sales ($ million) | % total |
| Pharmaceuticals | 9,045 | 67.5 |
| Biologicals | 2,585 | 19.3 |
| Medicinal feed additives | 1,770 | 13.2 |
| Total | 13,400 | 100.0 |
Figure 1.2: World market structure by major product sector, 2002
Source: Animal Pharm Reports
Sales of biological products outpaced the market as a whole, rising by around 7% to almost $2,600 million, and this sector is now responsible for 19% of global animal health product sales. Growth was led by higher sales of food animal vaccines, especially in major west European markets, where local currency increases were inflated on conversion to dollars. Government disease control and prevention programmes were a major factor behind sharply increased sales in some countries. New products were also a factor, with several companies rolling out improved or novel vaccines for use in the livestock sector.
The market for medicated feed additives was flat in 2002, with low prices depressing market values in the US and poor market conditions affecting volume sales in a number of other markets. Little growth is expected in this sector over the next 2-3 years, and values will decline in 2006 when approvals for all remaining antibiotic growth promoters will be withdrawn in the European Union. Curbs or outright bans on the use of antibiotic performance enhancers are expected in a number of other markets, including countries that depend heavily on their export trade to the EU.
1.1.4 Market structure by species
Gauging the structure of the market by individual species is difficult, since many products possess indications for use in several different species. It is clear that the main driver of market growth since the middle of the 1990s has been the companion animal sector, however, with products for use in dogs and cats increasing at levels well in excess of the market average since then.
Small animal pharmaceuticals and biologicals now generate sales of close to $2 billion in the US alone, and contribute well over $1.5 billion to the regional market total in western Europe. At a global level, the small animal market segment is now worth more than $4.3 billion, accounting for just under one-third of all animal health product sales.
Table 1.4: World market structure by species, 2002
| Sector | Sales ($ million) | % of total |
| Cattle | 2,550 | 26.5 |
| Pigs | 2,345 | 17.5 |
| Poultry | 1,610 | 12.0 |
| Small animals | 4,355 | 32.5 |
| Others | 1,540 | 11.5 |
| Total | 13,400 | 100.0 |
In the food animal market segment, products for use in cattle still account for the biggest share of sales, generating annual revenues of approximately $3.5 billion, or more than a quarter of total market value. Sales of products for use in pigs and poultry are worth around $2.3 billion and $1.6 billion, respectively, accounting together for a further 30% of total market value. The remaining 12% is generated by products for use in horses, minor food and companion animal species and aquaculture.
1.1.5 Leading companies in the animal health industry
Merial topped the animal health products sales league in 2002, generating global revenues of $1.5 billion from a range led by avermectin endectocides, the pet flea/tick control blockbuster, fipronil, and an extensive portfolio of veterinary vaccines. Pfizer and Intervet also posted global sales in excess of $1 billion, while six other companies reported animal health revenues of between $500 million and $1 billion.
Pfizer's acquisition of Pharmacia Corp, completed in April 2003, will see Pfizer move above Merial at the top of the sales rankings. There is little overlap between the Pfizer and Pharmacia ranges, and products divested by Pfizer in order to satisfy competition authorities are thought to have generated annual sales of less than $10 million. Both divisions have posted solid growth in the recent past, and continued to grow during the first half of 2003. As a result, Pfizer is expected to report animal health sales of close to $1.6 billion in 2003, rising to around $1.8 billion in 2004 when the former Pharmacia business is included in full-year results for the first time.
Table 1.5: Sales of the leading animal health companies in 2002
| Rank | Company | Local sales (million) | % change | US$ sales (million)1 |
| 1 | Merial | $1,501 | +3.7 | 1,501 |
| 2 | Pfizer | $1,119 | +9.6 | 1,119 |
| 3 | Intervet | Euro 1,081 | -1.4 | 1,020 |
| 4 | Bayer | Euro 8502 | -0.9 | 802 |
| 5 | Elanco | $693 | +1.0 | 693 |
| 6 | Schering Plough | $677 | -2.5 | 677 |
| 7 | Fort Dodge | $653 | -15.9 | 653 |
| 8 | Novartis | SwFr 971 | +0.9 | 622 |
| 9 | Pharmacia | $506 | +7.9 | 506 |
| 10 | Virbac | Euro 368 | +5.1 | 347 |
| 11 | Alpharma | $322 | -3.9 | 322 |
| 12 | Boehringer Ingelheim | Euro 318 | +0.6 | 300 |
| 13 | Phibro Animal Health3 | $255 | +5.0 | 255 |
| 14 | Dainippon4 | Yen 26,815 | +8.8 | 214 |
| 15 | Ceva | Euro 211 | +10.5 | 199 |
Notes: 1US dollar conversions at annual average rates for 2002; 2Excluding sales of environmental health range, which was transferred to Crop Science division in 2002; 3Forecast figure for year to 30 June 2003; 4Year to 31 March 2003.
Figure 1.4: Sales of the leading animal health companies in 2002, $ million
There have been a series of significant acquisitions and mergers over the last ten years, as summarised in Table 1.6. Current market leader Merial was established in 1997 by the merger of Merck & Co's animal health and poultry genetics interests with the French company, Rhône Mérieux. Novartis is also the product of a merger that brought together the businesses of fellow Swiss multinationals Ciba and Sandoz, while Intervet, Schering-Plough and Fort Dodge all owe their current positions in the animal health sales rankings to acquisitions completed since the middle of the 1990s.
Table 1.6: Merger and acquisition activity in the animal health sector, 1994-2003
| Year | Details |
| 1994 | American Home Products (AHP) acquires American Cyanamid |
| 1995 | AHP sells Cyanamid's feed additive business to Roche and purchases Syntex Animal Health from the Swiss company in a related deal |
| Pfizer acquires SmithKline Beecham Animal Health | |
| Corporate-level merger between Pharmacia and Upjohn leads to the creation of Pharmacia & Upjohn Animal Health | |
| Rhône Mérieux acquires Sanofi's animal health activities in the Americas and Asia | |
| 1996 | Corporate level merger between Ciba and Sandoz leads to the creation of Novartis Animal Health |
| 1997 | AHP acquires Solvay Animal Health |
| Grampian Pharmaceutical divests animal health interests in a management buy-out | |
| Merck & Co and Rhône-Poulenc merge their respective interests in animal health and poultry genetics, creating Merial Animal Health | |
| | Schering-Plough acquires Mallinckrodt Veterinary |
| 1998 | Rhône-Poulenc and Hoechst announce decision to merge, creating life-science specialist Aventis. Stake in Merial and the RP animal nutrition business are retained but Hoechst sells its animal health division. |
| | BASF acquires Daeseng (South Korea) lysine business |
| 1999 | Intervet's parent, Akzo-Nobel, agrees to acquire Hoechst Roussel Vet |
| | BASF acquires Takeda's feed additives business |
| | French investment bank Paribas acquires Sanofi Animal Health & Nutrition (now trading as Ceva Animal Health) |
| | Virbac acquires Agri-Nutrition Group (US) |
| | Novartis acquires Vericore (UK) as part of a move into the veterinary vaccines market |
| | Vétoquinol acquires J Webster Laboratories (Canada) from Merial |
| 2000 | Pharmacia & Upjohn and Monsanto merge to create Pharmacia Corp |
| | Alpharma acquires the Roche medicinal feed additives business |
| | BASF agrees the take-over of Takeda's vitamin business |
| | Schering-Plough acquires Takeda Chemical Industries' Japanese animal health business |
| | Novartis adds Cobequid and the animal biologicals business of Biostar to its growing veterinary vaccines portfolio |
| | Pfizer sells its medicinal feed additives business to Philipp Brothers Chemicals (US) |
| | Ceva acquires Anchorpharm Animal Health of South Africa. Sales of €4.4 million in 1999. |
| 2001 | Ceva completes the acquisition of Centralvet-Vetem (Italy) |
| | Schering-Plough acquires Fujisawa's animal health business |
| | Vétoquinol acquires the Chassot Group (Switzerland) from Asklia Holdings |
| 2002 | Boehringer Ingelheim Vetmedica takes a majority stake in an animal health joint venture with Shionogi of Japan |
| | Dainippon Pharmaceutical acquires Tanabe Seiyaku's animal health business |
| | CVC Capital Partners completes the acquisition of Aventis Animal Nutrition |
| | Ceva acquires majority stakes in Interchem (Tunisia) and Laval (Algeria). Total sales €10-11 million in 2001. |
| | Vétoquinol acquires the US companion animal business of IGI |
| | Novartis acquires the US veterinary vaccine businesses of Grand Labs and ImmTech Biologics. |
| | Schering-Plough Animal Health acquires the privately-owned UK company, Aquaculture Vaccines Ltd |
| | Ceva acquires Vetpharma (Sweden). Sales of €3.2 million in 2001. |
| 2003 | Pfizer completes its $60 billion acquisition of Pharmacia Corp |
| | Meiji Seika acquires the animal health business of fellow Japanese company Eisai |
| | Trade regulators approve the planned acquisition of Hoffmann-La Roche's vitamins and fine chemicals division by DSM (scheduled for completion in the third quarter of 2003) |
| | Ceva acquires Rosco (Denmark). Sales of €1 million in 2002 focused on anti-infectives. |
| | Degussa buys out Cargill's 50% holding in the US-based Midwest Lysine joint venture |
| | Paribas Affaires Industrielles sells its majority stake in Ceva Animal Health to Industri Kapital |
In 2002, the five leading players in the sector generated 38% of global market value. Aggregate sales of the top ten companies were equivalent to 59% of market value, while the figure for the 15 biggest companies was 79%. Pfizer's acquisition of Pharmacia will see the aggregate market share held by the top five companies rise from 38% to around 42%. However, despite the ongoing rounds of M&As, the sector, at least in terms of the broader animal health and nutrition industry, has not become more concentrated over the last decade: the top 20 accounted for 76% of the market in 1990 and 73% in 2001, whilst the top three accounted for 215 of sales in both years.
1.1.6 Market growth prospects
Leaving aside currency-related factors, underlying growth of the world market for animal health products has been distinctly limited since a brief period in the second half of the 1990s. Growth then was led by a surge in the value of the pet flea treatment market resulting from the launch of novel, high-value products in the sector. Companion animal parasite control sales have slowed since then, exposing the lack of growth in most other major product and species segments. Further growth is expected in the small animal sector as new products are brought to market in other treatment areas, and as animal owners continue to spend more on the health of their charges.
In the livestock products market, sales volumes in some markets will be driven by increases in herd and flock sizes. Animal numbers in several key markets are either flat or in decline, however, and pressure on farm incomes will limit demand for animal health inputs. Generic penetration of major product segments will also limit increases in market value by pushing average prices down. This trend has been most noticeable in the livestock endectocides market during the past five years, but will affect values in the antibiotic, anthelmintic and anti-inflammatory product segments as major brands lose patent protection later in the decade.
With volumes and values also set to fall in the medicinal feed additives market as a result of product withdrawals beyond 2005, overall prospects for growth of the animal health products market remain limited. New product launches, continued growth in the companion animal sector and the expansion of livestock production in a few markets will be offset by contraction of the food animal sector in other countries, and by increasing competition for market shares, limiting rates of growth at global level.
1.1.7 Country markets
The 15 country markets profiled in this report account together for more than 80% of global animal health product sales. The US is the dominant country market, with sales there valued at around $4.5 billion, or approximately one-third of the global total. No other single market is valued at $1 billion, though five of the countries profiled here generate annual sales of more than half a billion dollars.
Table 1.7: Animal health sales by country, 2002
| Rank | Country | Sales ($ million)1 | % of world market |
| 1 | United States of America | 4,502 | 33.6 |
| 2 |