Bayer AG continues to boost animal health unit

Bayer AG has not given up on deals to boost its veterinary unit despite its absence so far in the shake-up of the animal health industry, according to sources.

Bayer, Germany's largest drugmaker, would not consider selling the unit until it has exhausted its remaining acquisition options in the US$19-billion market, sources said.

A number of options are likely to emerge from a pact between Merck & Co and Sanofi-Aventis to combine their animal health operations, which is expected to trigger divestments to address antitrust concerns.

Bayer is not the only potential buyer; others such as Eli Lilly with its US$1.2 billion veterinary business are also likely to look closely at Merck/Sanofi divestments. Bayer's veterinary drugs unit had EUR977 million (US$1.3 billion) in revenue last year, selling treatments against fleas, worms and infections for livestock and pets.

Bayer said it was analysing its options for the animal health unit, having recently failed to strike a takeover deal. The company last year tried to bolster the unit but failed to snatch up animal health businesses that were offered as part of Wyeth's merger with Pfizer and the tie-up between Merck & Co and Schering-Plough.

Instead, Pfizer last September picked Bayer's national rival Boehringer Ingelheim when it sold about half of Wyeth's US animal health business to win antitrust approval for the Wyeth deal.

Merck & Co, in turn, agreed this month to reforge ties in animal health with Sanofi-Aventis, combining the French drugmaker's Merial unit and Merck's Intervet/Schering Plough to take the top spot in the veterinary market.

The joint venture will surpass Pfizer Animal Health, if it wins cartel clearance from regulators across the globe. In its current shape, it would have an estimated 29% market share compared with Pfizer's 20%. Bayer would be the industry's distant number three.

One financial industry source said Bayer might train its sights in the longer term on Novartis' animal health business, which had US$1.1 billion in sales last year, if it were put up for sale.