Top Stories of 2019
From acquisitions to osteoarthritis, here were the top animal health industry stories of 2019.
Elanco to Acquire Bayer’s Animal Health Business
In late August, Elanco Animal Health announced it had entered into an agreement with Bayer AG to acquire its animal health business. The transaction is valued at $7.6 billion, and would create the second-largest animal health company in the industry. The transaction, subject to regulatory approval and other customary closing conditions, is expected to close by the middle of 2020.
“In our first four quarters as an independent company, we have validated the significant value creation potential from a dedicated focus on animal health and a targeted strategy,” said Jeffrey N. Simmons, president and chief executive officer of Elanco. “Joining Elanco and Bayer Animal Health strengthens and accelerates our IPP strategy, transforms our portfolio with the addition of well-known pet brands, brings an increased presence in key emerging markets, expands innovation, and accelerates our margin expansion journey. The move combines our long-standing focus on the veterinarian while meeting pet owners’ changing expectations of pet care and access to products.”
Elanco said the deal would double its Companion Animal business, elevating Companion Animal to nearly half of the overall business. The company said the combination creates access to new segments of the parasiticides market with topical treatments and collars and propels Elanco into expanding pet e-commerce and retail spaces. In the Food Animal business, the acquisition will add a number of anchor cattle brands, create a bio-protection portfolio and expand Elanco’s aqua presence into warm water fish. “The enhanced global presence will allow Elanco to better serve veterinarians, farmers and pet owners,” the company said in a release.
Covetrus Celebrates Launch
In February, Covetrus celebrated the combination of two unique and complementary businesses – Henry Schein Animal Health and Vets First Choice – as a newly formed company.
“Covetrus will leverage decades-long experience, insights, technology and global scale to empower veterinarians to enhance clinical and practice health,” the company said in a release.
“This means providing veterinary practices with a more comprehensive set of integrated services and technology solutions, tools to strengthen client relationships and grow their practice while driving improved workflow and cost-effectiveness through efficient delivery of next-generation solutions.”
Industry Tackles OA
According to Banfield Pet Hospital’s third annual Veterinary Emerging Topics (VET)® Report, done in partnership with the North American Veterinary Community (NAVC), age is not always the main culprit when it comes to changes in pets’ behavior and activity levels.
What is? Well, that’s where the industry has to look at a harsh reality. The U.S. is facing an epidemic of overweight and obese pets. Approximately 1 in 3 pets seen at Banfield Pet Hospital are overweight or obese, the company says. And, the prevalence is trending upward.
“What does this mean for our pets?” the veterinary hospital group asks. “We have a growing population of pets at risk of developing osteoarthritis (OA). And vice versa – osteoarthritic pets are at risk of weight gain, contributing to the epidemic.”
According to Banfield, excess weight and OA are conditions that serve as risk factors for each other. “In most pets, it would be difficult to discern which came first,” the report said. “Joint trauma can progress into OA that can lead to reduced mobility, which can cause weight gain. In some pets, there may be no known initiating joint trauma, but the excess weight contributes to the onset of OA.”
Banfield found 51% of dogs and 41% of cats newly diagnosed with OA were considered overweight or obese in 2017. For both osteoarthritic and overweight conditions, detection at early onset is ideal, as proper management can stop or slow progression (in the case of OA) and lead to reversion (in the case of overweight) to a healthier condition, according to the report.
Pet Spending Continues to Reach New Heights
Pet care spending reached new heights in 2018 and is expected to rise even higher in the coming years, according to the American Pet Products Association.
Pet spending hit a record-breaking high of $72.56 billion compared to $69.51 billion in 2017, an increase of over 4%. APPA’s annual industry figures cover pet spending in the market categories of food, supplies/over-the-counter (OTC) medications, veterinary care, live animal purchases, and other services.
“Millennials continue to be the largest pet-owning demographic and this shows in the data,” said Bob Vetere, president and CEO of the APPA. “We know this generation is willing to pay more for quality products and services to improve the health and well-being of their pets. Today more than ever, pet owners view their pets as irreplaceable members of their families and lives, and it’s thanks to this that we continue to see such incredible growth within the pet care community.”
Spending on pet food continues to make up the majority of dollars spent in the industry, with premium dog food accounting for the most frequent type of food purchased, followed by generic and natural food. Rather than a higher volume of food being sold, the ongoing growth in this category likely stems from rising prices and sales of higher-priced foods made with quality ingredients. An interest in natural, locally-sourced treats and chews has never been higher across U.S. pet owners.
Pet Retailers Adapting
Today’s Veterinary Business reported that online sellers would capture an estimated 20% of the U.S. pet products market in 2019, but brick-and-mortar businesses were responding to e-commerce’s growing challenge by emphasizing and expanding pet services, according to a study published by Packaged Facts. According to Today’s Veterinary Business, the market research firm pointed to PetSmart and Petco as examples of pet specialty retailers that have adapted to the internet age. The companies draw customers to in-store veterinary clinics – PetSmart hosts hundreds of Banfield clinics – encourage them to spend on training and grooming services, and make it easy for them to go home with food and other supplies. PetSmart also has gotten into boarding through PetsHotel. Meanwhile, Walmart has entered the veterinary space with in-store providers PetIQ and Essentials PetCare.
Consumers Turning to CBD
Packaged Facts reported that U.S. retail sales of pet supplements, in general, rose by 5% in 2018, to $636 million, of which the veterinary channel captured 48%, or about $305 million. The pet specialty channel took in 30%. Packaged Facts attributed the surge in sales to an improved economy, greater spending across the pet industry and heightened consumer acceptance of CBD supplements, which are often advertised as a way to support an animal’s general health, alleviate pain or reduce anxiety. Petfood Industry reported that as of July 2019, 209 hemp and hemp-derivative pet supplement products were available on the U.S. market, according to an NASC report submitted to the FDA.
Leadership Changes in the Industry
Major animal health companies Zoetis, Idexx, and Covetrus all announced leadership changes in October.
Veterinary software company Covetrus announced that Benjamin Shaw has stepped down as the company’s president and CEO and will be a strategic advisor to the board. Benjamin Wolin, who currently serves as the company’s board chair, will take the role of acting CEO and president.
Diagnostic manufacturer Idexx, meanwhile, announced that its own chair and CEO, Jonathan Ayers, is stepping down permanently after a June bicycling accident injured his spinal cord and paralyzed most of his body. Ayers said in a statement that he would continue working with Idexx as a director and senior adviser to the board. The company’s board of directors appointed executive vice president Jay Mazelsky as president and CEO of the company effective immediately. Mazelsky had been serving as interim president and CEO in Ayers’ absence, the Portland, Maine, Press Herald reports.
Zoetis announced that Kristin Peck will succeed Juan Ramón Alaix as CEO, effective Jan. 1, 2020, and join the Board of Directors effective immediately. Alaix, who has been CEO of Zoetis since its formation in 2012, has decided to retire as CEO effective Dec. 31, 2019. He will act as an advisor on the leadership transition through Dec. 31, 2020.