Subscriber Benefit
As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndianapolis-based Eli Lilly and Co. and four of its peers have to submit second bids this week in a scramble to acquire the animal health businesses of two other drugmakers, Merck & Co. Inc. and Schering-Plough Corp.
The final decision on who gets what and at what price is expected by the end of July, Reuters News service said, citing unnamed sources.
Animal health is an attractive business segment for pharmaceutical companies because sales of animal medications have been growing significantly faster than those of human drugs. Lilly’s animal business topped $1 billion last year, but makes up only 5 percent of the company’s total business.
“Animal health is a much steadier business than the human pharmaceuticals business these days,” David Moskowitz, an analyst at Caris & Co., told Bloomberg News. “Animal products tend to have very nice margins, there’s much lower threat of generic competition, and there’s a lot of brand loyalty.”
Lilly could use all those things in the coming years. It will face generic competition against its bestseller, the anti-psychotic Zyprexa, at the end of 2011. In the following three years, four more Lilly products will have their patents expire and face cheaper generic copies.
Most drug companies face a similar scenario.
Merck and Schering-Plough, both based in New Jersey, face a demand from antitrust regulators to divest at least part of their combined animal health units as part of their $41 billion merger. But the companies have yet to decide which of their businesses they will sell.
The other companies beside Lilly who placed bids were France-based Sanofi-Aventis SA, Germany-based Bayer AG, Germany-based Boehringer Ingelheim GmbH and Switzerland-based Novartis AG, according to Reuters.
Merck’s animal business, Merial, is a joint venture with Sanofi, which has said it is interested in boosting its presence in animal health. Merial’s products, which include flea and tick treatment Frontline, generated $2.6 billion in sales last year.
Schering’s animal health business produced about $3 billion in sales last year.
The companies did not comment for the Reuters and Bloomberg stories. However, Lilly CEO John Lechleiter already has made some animal health acquisitions, including the purchase of the dairy biotech hormone Posilac last year from St. Louis-based Monsanto.
“We like animal health,” Lechleiter told a conference of investors last month, Bloomberg reported. “That would also help diversify us.”
Please enable JavaScript to view this content.