Pfizer-Wyeth FTC Clearance Yields Significant Intervet (And Merial) Market Data

Mid-last week, when the US FTC cleared Pfizer and Wyeth to merge, it imposed conditions -- especially in the businesses of the two that serve the Animal Health marketplaces.

I just now got around to actually reading the FTC's complaint -- upon which the settlement order was entered -- causing Pfizer and Wyeth to agree to sell various Animal Health businesses to Boehringer Ingelheim Vetmedica, Inc. (hereafter "BIVI", for short). What a trained eye sees there should be cause for concern, for the Merck/Schering-Plough year-end timetable.

In the FTC's analysis memo (an eight page PDF), and its complaint (a nine-page PDF), we learn much more about where Intervet -- currently a Schering-Plough group of businesses, and Merial -- a newly-divested group of Merck businesses, compete, and in some cases, will allegedly dominate -- select Animal Health marketplaces (at least according to the FTC's Enforcement staff-lawyers). These documents, in turn, provide some insight as to what the FTC staffers are likely looking at, when they consider the call option New Merck has granted to New Merial's Sanofi-Aventis parent, to acquire substantially all the Old Schering-Plough Intervet busineses. Take a look -- as I have edited the FTC's document, to reflect the combinaiton of Intervet with Merial. So, this is something like what FTC sees, after the Pfizer-Wyeth closing, the FTC-required divestitures to BIVI, and assuming the exercise of the Intervet call option -- by Merial's Sanofi:

. . . .12. The markets for cattle pasteurella vaccines in the United States are highly concentrated. Currently, Pfizer [or BIVI], Fort Dodge and ISP/Merial are the only significant suppliers in these markets. The proposed acquisition would cut in half reduce the number of competitors in these markets, leaving [Pfizer and/or ISP/Merial] significantly larger than any of its remaining competitors Fort Dodge. . . .

15. Pfizer, Fort Dodge, and Merial are the only three branded players in the U.S. market for cattle macrocyclic lactone parasiticides. The proposed acquisition would significantly increase the concentration in this market, leaving Pfizer with approximately 42 percent of this $118 million market. Suppliers of generic macrocyclic lactone products do not provide a serious competitive constraint due to their poor reputation in this market.

Further, such suppliers sell generic versions of only Merial’s product; there are no generic versions of Pfizer’s or Fort Dodge’s products currently available. The proposed acquisition would increase the HHI in this market by 875 points to 2,381 points. . . .

16. Only [Pfizer or BIVI], Fort Dodge, and Invervet/Schering-Plough ("ISP") offer cattle benzimidazole parasiticides in the United States. ISP accounts for 67 percent of this $16 million market, with Pfizer [or BIVI] and Fort Dodge the only two other market participants. As a result of the proposed acquisition, the HHI in this market would increase by 271 points to a post-acquisition HHI of 5,613 points. . . .

17. Pfizer [or BIVI], Fort Dodge, and Merial/ISP are the only four three significant companies that supply canine combination vaccines in the United States. Total U.S. sales of canine combination vaccines are $126 million. The proposed acquisition would reduce the number of significant suppliers of canine combination vaccines from four to three. . . .

22. Pfizer [or BIVI], Fort Dodge and Merial/ISP are the only four three significant companies that supply feline combination vaccines in the United States. Total U.S. sales of feline combination vaccines are $28 million. The proposed acquisition would reduce the number of significant suppliers of feline combination vaccines from four three to two and produce a firm that is considerably larger than its two remaining competitors. . . .

23. Pfizer [or BIVI], Fort Dodge and Merial/ISP are the only four three companies that supply feline leukemia vaccines in the United States, sales of which total $38 million. The proposed acquisition would reduce the number of suppliers of feline leukemia vaccines from four to three to two. . . .

24. Pfizer [or BIVI], Fort Dodge and Merial/ISP are the only four three companies that offer companion animal rabies vaccines in the United States, sales of which amount to $60 million. The proposed acquisition would reduce the number of suppliers of companion animal rabies vaccines from four to three. . . .

26. The market for equine tapeworm parasiticides containing praziquantel in the United States is highly concentrated. Pfizer has a 33 percent share of this approximately $22 million market; Fort Dodge has a 31 percent market share; and Merial has a 36 percent market share. As a result of the proposed acquisition, Pfizer would have 64 percent of the market for equine tapeworm parasiticides, leaving only Merial as a competitor to Pfizer. The HHI in this market would increase by 2,027 points to a post-acquisition HHI of 5,375 points. . . .

[From the FTC's Analysis, now:]

Canine combination vaccines prevent common canine diseases, such as those caused by canine distemper, adenovirus (types 1 and 2), parainfluenza, parvovirus, coronavirus, and Leptospira. [Pfizer or BIVI], Fort Dodge, Merial/ISP are the four three significant companies that supply canine combination vaccines in the United States. Total U.S. sales of canine combination vaccines are $126 million. The proposed acquisition[s] would reduce the number of significant suppliers of canine combination vaccines from four to three.

While parvovirus, coronavirus, and leptospira vaccines are all available as part of canine combination vaccines, the monovalent forms are administered as booster shots for puppies that have a particularly high risk of exposure to the disease. [Pfizer or BIVI], Fort Dodge, Merial/ISP are the only four three companies that supply canine monovalent parvovirus vaccines in the United States, a $2.1 million market. . . .

The same four three players [Pfizer or BIVI], Fort Dodge, Merial/ISP are also the only four three companies that supply canine monovalent coronavirus vaccines in the United States. The proposed acquisition would further entrench [Pfizer or BIVI] as the dominant supplier with an 81 percent share of the $2.3 million market for canine monovalent coronavirus vaccines. . . .

Canine bordetella vaccines are used primarily to prevent infectious tracheobronchitis, which is the most prevalent upper respiratory infection contracted by dogs in the United States. There are five three suppliers of canine bordetella vaccines in the United States: [Pfizer or BIVI], Fort Dodge and ISP/Merial. Total U.S. sales of canine bordetella vaccines amount to $53.3 million. The proposed acquisition would reduce the number of suppliers of canine bordetella vaccines from five to three, leaving [Intervet/Merial] significantly larger than its three remaining competitors. . . .

I'll have much more, shortly, but other duties call. [Remember, however, as the above graphic indicates, Intervet/Merial faces many of the same market concentration-hurdles in the European Union -- and the ECC is presently looking into them -- in tandem with the US FTC's process.]

What I see here, preliminarily, is that Schering-Plough and Merck still have a lot of FTC regulatory "wood to chop". Back soon.