The animal health market is becoming increasingly dynamic, paralleling the pace of change in the agricultural technology market. The constant in both markets, of course, is change.
While the animal health market has never had the same level of hype as other sectors of the agriculture, it is no longer a market easily overlooked (especially when you include the companion animal element). Or, as said in one colorful description, the animal health market is no longer “the awkward uncle” of agriculture.
So what’s behind the change? Pressure from within, pressure from the external environment – including investors – and pressure from consumers. Let’s explore a handful of forces we see that are creating the pressure.
1. Growth, Consolidation & Competition
First consider the expanding pie: experts say the $38.5B animal health market is expanding by as much as 5.7 percent CAGR through at least 2023. Consolidation is a core strategy to achieve successful growth – take the acquisition of Merial by Boehringer Ingelheim, or Zoetis’ acquisition of Abaxis and Platinum Performance.
The most recent example currently making headlines relates to pharmaceutical and chemical giant Bayer splitting from its animal health division, which will be sold to Elanco, creating the second-largest animal health company. While the sale of the business unit still needs to be examined from an antitrust perspective, the deal is expected to close by mid-2020. Elanco is reportedly offering $7.6 billion – an implied multiple of 18.8x adjusted core earnings – for the acquisition.
With the recent consolidations, the animal health market today is dominated by four global industry giants: Zoetis, Boehringer Ingelheim, Merck and Elanco. The next tier in the animal health industry – including Ceva Sante Animale, Virbac SA, Vetoquinol SA, IDEXX Laboratories Inc., Covetrus and Dechra – faces the same market dynamics as the Big Four. Actually, this mid-tier may even be feeling more stress from specialty producers homing in on nutrition, feed and health products, as well as startups bringing innovation – like the development of new products for animal monitoring and wellness (think probiotics).
2. Increased Investment
Another force comes from new money. We are seeing an increasing attractiveness of the market to external investors, including an influx of capital from investors expanding beyond human health life sciences, pushing digital innovations, as well as genetic and biotechnology advances, into animal health. (For example, see the recent AgFunder News report on 95 startups innovating in livestock farming – with a known investment of $500M).
3. Evolving Consumer Behaviors
Overlay the force of evolving consumer behaviors, including in the important millennial marketplace. Biggest among these is the continuing demand for animal protein in global diets, which, in part, has spurred the development of alternate proteins and sources.
Lire la suite: www.forbes.com
