Drugmaker Pfizer Inc. is aiming to boost sales of veterinary medicines in China _ and its global dominance in the animal health business _ via a joint venture with a Chinese startup company.
Pfizer said Thursday that it has reached a deal to jointly develop, manufacture and sell vaccines for animals with Jilin Guoyuan Animal Health Company Ltd.
The joint venture, called Jilin Pfizer Guoyuan Animal Health Co., plans to start marketing its first product _ a vaccine against a reproductive and respiratory condition pigs get _ next year.
Executives from Pfizer and the Chinese company are reviewing options and planning future strategy. That could include developing additional vaccines for pigs, poultry, cattle and perhaps pets, as well as new animal medicines. All will target diseases common in China.
Pfizer's animal health business also will try to increase sales of its existing products by expanding its sales force in China, where 90 percent of veterinary medicines currently sold are produced by domestic companies.
"China is the second-largest animal health market in the world," Juan Ramon Alaix, president of Pfizer Animal Health, told The Associated Press in an interview. "We saw the opportunity to partner with a local company to produce top-quality vaccines," priced affordably.
Terms of the deal were not disclosed. Pfizer said it expects that within three months Chinese authorities will approve the joint venture and the opening of the high-tech factory Jilin Guoyuan just built in the city of Jilin, in northeastern China.
The deal "is in keeping with (Pfizer's) increased global operations and especially in China," said analyst Steve Brozak, president of WBB Securities LLC. "Pfizer's been on this path before."
Brozak predicted the joint venture could produce $1 billion in annual sales, with the time frame depending on how fast it ramps up, because of the focus on agribusiness.
Global sales of veterinary medicines and vaccines total about $20 billion, including about $3.4 billion in annual sales in China. Veterinary medicine sales are slightly more than $6 billion in the U.S., the largest market in the world.
New York-based Pfizer began looking for an animal health partner in China about a year ago, under pressure because two other major global players _ Merck & Co. of Whitehouse Station, N.J. and Paris-based Sanofi SA _ were trying to combine their animal health divisions into a joint venture.
That combination would have leapfrogged far ahead of Pfizer's lead position, at about $3.6 billion in animal health sales last year. Merck had nearly $3 billion in 2010 animal health sales, followed closely by Sanofi with about $2.65 billion. Antitrust concerns from regulators eventually scotched that partnership.
Now Pfizer, under new CEO Ian Read since January, is in the midst of a top-to-bottom strategic review, and the company said in July that it could end up selling the animal health business. Pfizer spokesman Rick Chambers said Thursday that the Chinese joint venture has no effect on whether the animal health business will eventually be sold.
Like other pharmaceutical companies, Pfizer has been devoting considerable resources to expanding its human drug business in emerging markets such as China, where sales are expected to grow much faster than in the U.S. and other developed countries. Pfizer already has three factories making medicines in China plus a staff of about 350 people in sales, marketing and support.
Pfizer reported that its prescription drug sales jumped 7 percent in emerging markets in the second quarter, but declined significantly everywhere else. The animal health business was probably the only other bright spot. Sales were up 18 percent at $1.06 billion, helped by new products acquired when it bought King Pharmaceuticals earlier this year and by bigger livestock herds worldwide.
Animal health also is an attractive business because companies rarely face limits on prices from insurers and government health programs, and because there's less competition from generic medicines or vaccines than with products for people. Pfizer's U.S. products include the dog kennel cough vaccine Vanguard and ProHeart 6, for preventing heartworm in dogs.
With the latest joint venture, Pfizer is betting it can increase sales of animal medicines in China, and possibly in other emerging markets in the future.
One reason for Pfizer's optimism is that people are eating more meat in China, particularly pork, and hog-raising has recently gone from mostly backyards with two or three hogs to big industrial operations. Putting pigs in close quarters means greater need for vaccines and medicines to keep them healthy.
Pfizer has made a number of moves to expand its animal health business recently. It gained numerous products with its 2009 purchase of Wyeth and its 2010 purchase of Synbiotics Corp. of Kansas City. Synbiotics makes diagnostic tests for pets and livestock, another growth area.