Merck CEO Kenneth Frazier
Last year, the Wall Street rumor mill was abuzz with speculation that Merck ($MRK) CEO Kenneth Frazier was considering selling off the company's animal health business. But Frazier repeatedly sung the praises of the unit, as it churned out reliable sales growth and solid profit margins, and it scored a big success with the debut of Bravecto, its chewable flea-and-tick fighter. Now Merck is signaling its dedication to animal health again, announcing Nov. 12 that it will acquire Harrisvaccines, a private Iowa company that made news in October when the USDA appointed it to manufacture avian influenza vaccines for an emergency stockpile.
Merck, which did not disclose what it paid for the acquisition, said in a press release that it was attracted to Harrisvaccines' product portfolio, as well as its technology platform. The company developed "RNA Particle" technology, which involves collecting pathogens from farms, sequencing genes from those bugs and then inserting them into bits of RNA to produce herd-specific vaccines.
"Combining Harrisvaccines' R&D and portfolio of products with our strong capabilities and global reach will enable us to address even more devastating diseases that are impacting production animals and reinforce our commitment to the science of healthier animals," said Rick DeLuca, president of Merck Animal Health, in the release.
The deal is the latest in a wave of consolidation in animal health, much of which has been centered around a growing interest in improving disease prevention. Merck's acquisition comes just days after rival Zoetis ($ZTS) paid $765 million to buy Pharmaq, a leading maker of vaccines for the aquaculture industry.
Harrisvaccines will add to Merck's fast-growing portfolio of popular disease-prevention products. The unit charted third-quarter sales of $825 million--up 7% year over year minus the impact of currency fluctuations--driven largely by Bravecto, as well as strong sales of Porcilis Hyo, a vaccine that protects pigs from lesions caused by the lung infection Mycoplasma hyopneumoniae.
The Harrisvaccines purchase should put to rest any questions about Frazier's dedication to animal health, which he often cites as a key growth driver for Merck. In July, during the company's second-quarter earnings call, Frazier balked at an analyst's assertion that he should revisit the idea of separating out the animal-health unit in a bid to "liberate value" that could benefit the company as a whole.
"It continues to grow well. It continues to have a very good pipeline," Frazier said of Merck Animal Health. "We continue to see this business as a key growth driver with healthy margins and a strong market outlook over the long-term."