Thursday, August 20, 2009

Highly-Concentrated EU Vet Med Markets: Multi-Species Rabies Vaccines, Among Others


This is part two of a series of posts, on what to write about, when you get ready to write the European Competition Commission.

You only have seven days left to respond -- now that Sanofi-Aventis is acquiring the second half of Merck's Merial animal health venture, and is also being granted the right to buy all of Intervet, post the Schering-Merck merger. [Here is the earlier part one.]

Back in the Fall of 2007, as a part of Schering-Plough's original acquisition of Organon (and Intervet), the ECC required divestitures of a slew of animal health product lines. While it is exceedingly difficult to track which concerns bought which product lines, post 2007 (out of the Organon/Intervet acquisition required divestitures), what is clear is that if Merial and Intervet are combined, even in a 50-50 joint venture between Sanofi-Aventis and "New Merck" -- there will be significant, and increased, concentration in many animal health markets in Europe.

[Recall again that Sanofi-Aventis is buying Merial, from Merck, and then receiving a "call" option -- to buy all of Intervet, post the Schering-Plough/Merck merger.] With me so far? Good.

We know both Merial and Intervet have substantial market positions in the multi-species rabies vaccines markets in the United Kingdom, Greece and Finland. We also know that Merial and Intervet have substantial market positions in the clostridia vaccines for ruminants markets the United Kingdom, Italy and Greece.

More specifically, by using the parties' own 2007 ECC filing data, we may infer that the following is highly-likely still true, at least to the nearest 5 to 10 percentage points of market share: These figures were derived by assuming Schering-Plough divested these lines, on Pages 37, 42 and 46 of this ECC October 2007 Filing -- and then totaling Merial and Intervet's combined positions, as being the likely final outcome of the 2009-2010 proposed transactions:

. . . .Schering-Plough sells its monovalent rabies vaccine under the brands Rabdomun and Quantum. Intervet’s product is marketed under the brand Nobivac. . . . At the EEA level, there are four significant competitors. The market leader is by far Merial, with a market share of [40-50]%. The other significant competitors are Intervet ([20-30]%), Virbac ([10-20]%) and Pfizer ([5-10]%). . . .

Based on data provided by the parties, the affected markets where Merial and Intervet would have a combined market share of at least 25% in the EEA at the national level are Finland, Greece and the United Kingdom:
CompetitorsUnited KingdomGreeceFinland
Intervet[50-60]%[40-50]%[30-40]%
Merial/Sanofi[30-40]%[40-50]%[30-40]%
M/I COMBO[95-100]%[90-100]%[60-70]%

Folks -- that's nearly what we call a monopoly, in two big markets -- and highly concentrated in the third large market, to boot.

It would seem that the European Competition Commission ought to take the view that the proposed concentration raises serious doubts as to its compatibility with the common market as regards the markets for monovalent multispecies rabies vaccines in Finland, Greece and the United Kingdom. . . .

Ruminant Vaccines

At the EEA level, Schering-Plough [even with several intervening divestitures, post 2007] and Intervet are the clear market leaders on the market for multivalent clostridia vaccines for ruminants (the term "ruminant" includes farm animals -- cattle, sheep and goat, but not pigs). The other important competitors that market clostridia vaccines for ruminants in the EEA are Hipra and Merial (each with a 8-antigen vaccines for sheep, cattle and goats) and CEVA (with a 3-antigen vaccine for cattle and sheep and a 6-antigen vaccine for sheep and goats). . . .

The table below sets out the market share of the parties and of their competitors on the broader market for multivalent clostridia vaccines for ruminants, including multivalent clostridials/pasteurella vaccines in these countries in 2006 (no other participant -- except whomever Schering-Plough divested to, in 2007 -- had more than 20 percent share in any of these markets, as of 2006):
CompetitorsUnited KingdomGreeceItaly
Intervet[80-90]%[50-60]%[20-30]%
Merial/Sanofi[0-5]%[0-5]%[40-50]%
M/I COMBO[85-90]%[55-60]%[65-70]%

These concentrations raise serious concerns.

. . . .[Even after divesting ECC mandated lines in 2007] Schering-Plough retained the right to manufacture the ten-strain clostridial vaccine, but agreed to re-register and rebrand it, as the trademark Covexin was transferred to the purchaser. . . .

So, this is yet a[nother] public service mailer -- print, or cut and paste the above, and mail in the next ten days -- if you are at all concerned about preserving European price- and product-offering competition in animal health businesses. Mail it (Old School-style) to this address:

European Commission
Directorate-General for Competition
Merger Registry
J-70
1049 Bruxelles/Brussel
BELGIQUE/BELGI√čEN


"Whiskey for my men; beer for my horses. . . ."

2 comments:

Anonymous said...

Condor:

Good work. Full disclosure - I worked for Intervet up to a year ago once I saw what SP was like. In general, the animal health business has three main drivers: vaccines, antiparasitics, and antibiotics. You have done a nice job on the vaccine side of the business. However, this part of the business tends to be lower profit. On the antibiotic side, I don't see a problem combining Merial with Intervet/SP (business is driven by Pfizer). However, you should consider the antiparasitic business. Merial has Fipronil (Frontline - used in dogs and cats..which is the real money maker and goes of patent sometime soon) and Ivermectin (Heartgard for dogs and cats; Ivomec for livestock). Intervet/SP has Fenbendazole (Panacur, Safeguard for dogs, cats, horses, and livestock). I see another possible monopoly in a major business driver.

Condor said...

Ding! See above -- new post!