Analysts have questioned Merck’s ($MRK) commitment to animal health in recent years, but any lingering speculation that CEO Kenneth Frazier might sell off its veterinary products unit were likely put to rest just before the July 4th holiday, when the company announced it is buying a controlling interest in Brazil-based Vallée for $400 million. Vallée has a portfolio of more than 100 products for livestock and companion animals.
Vallée was initially founded to produce a vaccine to fight foot-and-mouth disease in cattle for Brazil, but it has expanded significantly, adding operations in Paraguay, Mexico, Bolivia and Venezuela, according to a press release from Merck. The region Vallée serves contributes 11% of the value of world food production, Merck estimates, making it a valuable partner in that region. The acquisition “will further strengthen our presence in Latin America and help us respond even more quickly and effectively to the region’s needs,” said Rick DeLuca, president of Merck Animal Health, in the release.
The Vallée purchase is the second major deal Merck has struck in the last year that will boost its portfolio of animal vaccines. Last November, the company bought Iowa-based Harrisvaccines, which uses RNA technology to sequence the genes of pathogens and develop vaccines from them. Harrisvaccines was contracted by the USDA last year to manufacture avian influenza vaccines for an emergency stockpile.
The additions could help fuel Merck’s animal health sales, which were flat year-over-year at $829 million in the most recent quarter. The company’s sales growth in animal health has been driven largely by its companion animal business, which has benefited from the launch of Bravecto, a chewable flea-and-tick fighter for dogs. Merck has also grown its portfolio of vaccines for pets, most recently introducing a new shot to fight a strain of dog flu that emerged in the U.S. last year.
Under the terms of the Vallée deal, Merck will acquire 93% of the company’s shares, subject to regulatory approval. Merck did not provide a timeline for the closing of the transaction.
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