Merck Animal Health posts small revenue increase, even without Zilmax

Sales at Merck Animal Health have faced some headwinds after the company last year pulled its cattle feed additive Zilmax from the market following allegations from farmers of horrifying hoofless heifers. But the Merck ($MRK) unit managed to grow sales ever so slightly in the second quarter, which was better than the company as a whole. It attributed that success to its new FDA-approved canine drug.

The company's animal health division reported sales of $872 million, up 2%, driven by the strong performance of its chewable flea and tick killer, Bravecto, in the U.S. and Europe after its May approval by the FDA. Merck's animal health unit markets Bravecto as an immediate solution that can last up to three months, and it comes in 5 different doses. The FDA also approved the chewable for treating flea-related dermatitis in dogs and says it is the longest-lasting flea and tick killer currently on the market.

CFO Rob Davis said on an earnings call July 30 that Merck's animal health unit also posted strong results from its poultry business, according to a transcript from Seeking Alpha. For the whole company, total revenue decreased 1% while "foreign exchange did not have a material impact on the revenues this quarter," Davis said.

Investors had some fear of whether the animal health unit would be in good shape after its Zilmax feed additive was pulled from the market last year. The product brought in $159 million in U.S. sales last year but was taken off the market following safety concerns.

Merck intends to test Zilmax in about 250,000 cattle in a randomized, controlled study in an effort to revive the drug. But sources say beef producers like Cargill and JBS S.A. have pushed back against the move. While Merck hoped to have the feed additive on the market by this summer, the study has been delayed.

"Animal health revenues increased $27 million ... excluding exchange or 9% if we also excluded the impact of the Zilmax suspension," Davis said.

In response to a question from an analyst, CEO Ken Frazier said that Merck plans to augment its animal health business with additional business development. "We continue to look at this business as a key growth driver that has industry leadership, healthy margins, and a strong market outlook. So, we will look for opportunities to supplement our diverse portfolio in that business again in ways that create long-term shareholder value," he said.

- here's Merck's Q2 earning's announcement
- see the transcript of the earnings call

Special Report: Top 10 animal health companies of 2013 - Merck Animal Health