Merck shelling out $3.7B on digital solutions for animal health
- Merck & Co. is putting up €2.1 billion ($2.37 billion) and assuming €1.15 billion in debt to acquire Antelliq, a privately held company specializing in digital devices for animal identification, monitoring and tracking.
- Within Antelliq are three main businesses: Allflex, focused on livestock; Sure Petcare, focused on pets; and Biomark, focused on fish and aquaculture. In the 12 months leading up to Sept. 30, Antelliq recorded sales of €360 million, according to a Dec. 14 statement from Merck.
- "The increasing use of digital technology in animal agriculture is driven by the growing demand for protein, food traceability and food safety. Identification and monitoring technologies will help optimize disease prediction and treatment and this acquisition will provide Merck Animal Health with a large, established customer base in both areas," Merck said in the statement.
Animal health, which accounts for about 10% of Merck's sales, helped drive revenue growth for the big pharma over the first nine months of 2018. Sales from the unit totaled $3.18 billion during that period, up 10% year over year.
That's not to say there aren't challenges.
In the third quarter, for instance, sales growth in Merck Animal Health was a much more modest 2% due to timing of purchases and a shorter flea and tick season. There's also stiff competition from New Jersey-based Zoetis and Eli Lilly's recent spin out Elanco — which raised $1.5 billion from an initial public offering in September.
Still, Merck leadership appears confident in their management of the company's animal health division and the margins it's fetching.
CEO Kenneth Frazier noted in an October earnings call that Merck shares "the market's excitement around animal health's value as a sector and our business in particular. In fact, we believe that we've run this business very well inside the company, compared to its competitors."
"[W]e have to actively review our portfolio, looking at multiple factors, including market development, to decide whether or not a particular asset, not just Animal Health, should remain in our portfolio. And we'll continue to do that on an ongoing basis," Frazier added.
Recent M&A activity suggests Merck Animal Health is far from finished expanding. It bought privately held Harrisvaccines, which makes vaccines for food production and companion animals, for an undisclosed sum in 2015. And in the following two years, it snagged Uruguay-based Prondil S.A. and Brazilian company Vallée to beef up its manufacturing capabilities and portfolio of parasiticides, anti-infectives and vaccines.
With Antelliq, Merck adds another animal health deal to its tally. The buyer touted in its Dec. 14 statement how digital solutions and devices are the "fastest growing part of the animal health industry."
Investors may be less enthused, however. Merck shares were down about 1.5% in late-morning trading.
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