Fido pharma: The explosion in pet medicine

Veterinarian James Rhodes (right) and an assistant vaccinate a dog at the University of Pennsylvania pet hospital in West Philadelphia.
Veterinarian James Rhodes (right) and an assistant vaccinate a dog at the University of Pennsylvania pet hospital in West Philadelphia.

From bovine hormones to flea-and-tick spray, veterinary products are very big business.

Posted: July 19, 2009

He's fat, neurotic, and unwittingly proffers his body as a romantic hideaway for vermin.

And you love him so much that you spend hundreds or thousands of dollars yearly paying for pills, vaccines, and other products to keep him healthy.

If this describes your relationship with your dog, you and your wallet know exactly why analysts expect companies bidding for the animal-health businesses of Pfizer Inc. and Merck & Co. Inc. to act like a pack of retrievers in hot pursuit of a drool-covered tennis ball: The market for these medicines is bounding.

Pfizer is merging with Wyeth, and Merck with Schering-Plough. All four companies have large animal-health businesses that they may sell all or part of to avoid antitrust challenges to their mergers.

Novartis AG, Eli Lilly & Co., Bayer AG and Boehringer Ingelheim are considered likely bidders for these operations, analysts said. The companies are not commenting.

The strong growth in sales of animal drugs reflects animals' increasingly intimate roles in people's lives, said Michael Schaffer author of One Nation Under Dog: Adventures in the New World of Prozac-Popping Puppies, Dog-Park Politics and Organic Pet Food.

"The way we treat pets parallels and shadows the way we treat humans," said Schaffer, a former Inquirer reporter. "For instance, with pharmaceuticals, someone might say, 'My grandmother has a cataract medication. Can you do the same for my dog?' Saying yes to that is a path to great profits because often, a company just has to tweak a drug it already has."

One example: Eli Lilly's Reconcile, a pill to treat the barking and destructive behavior some pets engage in when separated from their owners, is a canine version of the Indianapolis company's antidepressant Prozac.

Not all animal drugs descend from human ones. The vast majority - about 60 percent - of animal-health sales come not from pills for cats and dogs but from vaccines, antibiotics, and other products for the livestock, poultry, and fish that we eat.

But even some of those products have taken on human overtones. The hormones and other chemicals that enlarge livestock and poultry, for example, are known as "performance-enhancers." Can it be long before a chicken is riding in the Tour de France?

Worldwide sales of veterinary health products are expected to hit $43.6 billion in 2014, up from $28.5 billion in 2006, according to market-research firm Kalorama Information Inc.

Both Merck and Pfizer said they were "exploring options" for their animal-health businesses.

Through a joint venture with Sanofi-Aventis, Merck co-owns Merial, whose Frontline flea and tick products account for about half of its roughly $2.5 billion in sales.

Merck and Schering-Plough could sell Merial, or Intervet, Schering-Plough's animal business with nearly $2.97 billion in yearly sales. Its products treat everything from ear infections in dogs to sea lice in salmon.

Pfizer generated $2.8 billion in veterinary sales last year. Wyeth's Fort Dodge Animal Health Division brought in about $1 billion in revenue in 2008. It is the largest seller of animal vaccines in North America, Kalorama said.

Pfizer would not discuss antitrust questions, but Rick Goulart, a spokesman for the company's animal-health business, said it has benefitted from two trends: the need for a safe food supply, which has driven sales of cattle vaccines and other products, and the desire of pet owners to treat cats and dogs more like members of the family.

In the last two years, the FDA has approved four Pfizer animal drugs: Slentrol, for obesity in dogs; Convenia, an injectable antibiotic for dogs and cats; Palladia, a cancer treatment for dogs; and Cerenia, for motion sickness in dogs.

One reason pharmaceutical companies find veterinary drugs appealing is because of the perception that it is easier to get them approved than human drugs.

"Animal health is a much steadier business than the human-pharmaceuticals business these days," David Moskowitz, an analyst with Caris & Co., told Bloomberg. "Animal products tend to have very nice margins, there's much lower threat of generic competition, and there's a lot of brand loyalty."


Medicating Fido and Fifi

Value of worldwide pet prescriptions for 2008, in billions of dollars.

         Pharmaceuticals      Vaccines            Total

Dogs            $3.4               $1.2            $4.6

Cats              2.8                0.8              3.6

Total              6.2                2.0              8.2

SOURCE: Kalorama Information Inc.


Contact staff writer Miriam Hill at 215-854-5520 or hillmb@phillynews.com.

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