» 1999

Animal Health News & Notes for December 21, 1999 - Special Edition 12/21/1999

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SPECIAL EDITION
Brakke Consulting’s
Animal Health News & Notes for December 21, 1999

(note:  the regular edition of the Brakke Consulting Animal Health News & Notes will be published on December 23.)

Company News Releases
 Monsanto Co. and Pharmacia & Upjohn signed a merger agreement Sunday, creating the world's 11th largest drug.  The combined company, as yet unnamed, will have sales this year of $17 billion and 60,000 employees. The new company's pharmaceutical business will be headquartered in Peapack, N.J., where Pharmacia is based, and the agricultural-chemical business will be headquartered in Monsanto's hometown of St. Louis.  Tentative plans are to sell 19% of the agriculture business in an initial public stock offering next year. The agricultural business will become a separate legal entity, with a stand-alone board of directors and its own publicly-traded stock upon completion of the intended IPO.
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Brakke Consulting Viewpoint

The announced merger of Pharmacia & Upjohn and Monsanto is such a big news story in animal health, we decided to send a special edition of our newsletter instead of waiting until Thursday to discuss it.  If in the merger the Pharmacia & Upjohn Animal Health and Monsanto Dairy Business are combined into a single subsidiary, total sales will be in the range of $660 million for 1999.  This would move the new company into the number six position worldwide in the animal health industry excluding nutritional feed additives, just behind Fort Dodge.  The company would be number eight if companies in nutritional feed additives are included.  In either case, the new combined entity would clearly be a top 10 animal health company with significant strength in the dairy sector.

Geographically, this will add significant sales volume to the North American portion of Pharmacia & Upjohn’s animal health business. The main integration of the businesses will occur in North America.  Monsanto Dairy Business has marketed BST through Elanco outside the US.  This merger will bring into discussion the Monsanto/Elanco BST distribution agreement that is currently in place. 

There have been indications that world sales of BST could be as high as $300 million, although we have used a more conservative $250 million in our estimate of the combined company’s 1999 sales.  The real question at this point relates to where animal health will report in the merged company.  Will it be in the agricultural unit, or in the pharmaceuticals unit?  Executives have already indicated that they will sell a 19% stake in the agricultural unit in an IPO, and the unit will operate as an independent entity.  Where animal health ultimately ends up will demosntrate corporate’s focus on and commitment to animal health in the long run. 

This is another merger of pharmaceutical companies that will have an impact on the animal health divisions.  In this case, the animal health divisions of both companies are healthy businesses that should be complementary when consolidated into one unit.
[Ron Brakke]
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