Zoetis Inc. (NYSE:ZTS) today announced an agreement to purchase PHARMAQ, the global leader in vaccines and innovation for health products in aquaculture, for a price of $765 million on a debt-free basis. Acquiring PHARMAQ strengthens Zoetis’ core livestock business, giving the company a market-leading presence in the fastest growing segment of the animal health industry. Zoetis is purchasing PHARMAQ from a company owned by Permira IV, a fund managed by the global investment firm Permira, which has been the majority owner of the company since 2013.
PHARMAQ is the market leader in sales of vaccines for farmed fish, a market segment growing 10% annually. The company generated revenues of approximately $80 million in 2014 and has a presence in the major aquaculture markets in the world. PHARMAQ revenue grew at a compound annual growth rate of 17% from 2005 to 2014. Privately-held PHARMAQ has approximately 200 employees, is based in Oslo, Norway, and has subsidiaries in Chile, the United Kingdom, Vietnam, Spain, Turkey, Panama, and Hong Kong.
“This acquisition is a great strategic fit that brings to Zoetis an animal health leader with similar competitive advantages – an industry-leading portfolio, strong customer relationships, and world-class innovation and manufacturing,” said Zoetis Chief Executive Officer Juan Ramón Alaix. “We are gaining a new platform for growth and value creation that we can expand. PHARMAQ strengthens our core livestock business by providing market leadership in aquatic health and a strong late-stage pipeline in the world’s largest category of protein and fastest growing animal health market.”
“We see a tremendous opportunity to grow our business as part of Zoetis,” said Morten Nordstad, Chief Executive Officer at PHARMAQ. “Zoetis has proven expertise in supporting livestock producers with high-quality products and technical services that help improve animal health, productivity and profitability. By combining our experience and R&D capabilities, we believe we can optimize our industry-leading ability to develop vaccines and medicines for farmed fish. With Zoetis’ global footprint, we can deliver greater value to more customers around the world and accelerate our geographic expansion plans. This acquisition is a testimony to our success and to the highly skilled, innovative and hard-working employees of PHARMAQ.”
PHARMAQ’s well-respected R&D organization addresses many of the most pressing health needs of the aquaculture industry. Its late-stage development pipeline includes important new vaccines and next-generation parasiticides expected to enter the Norwegian, Chilean and UK markets in the near term.
Aquatic Health – The Fastest Growing Animal Health Segment
The market for aquatic health products serving aquaculture was valued at approximately $400 million in 20141 and has been growing 7 to 8% annually.1 This growth rate is faster than the overall livestock segment, which is growing at 6% CAGR, and the companion animal segment, which is growing at 5% CAGR.2
Fish remains the most consumed animal source of protein worldwide. Farmed fish accounts for about 50% of total fish consumption up from 15% in 1990.3 Moreover, current medicalization rates for fish rank at the lowest level of any livestock category. Healthcare spending is expected to increase as productivity of fish farming becomes more efficient to address the rising global demand for protein.
Addressing Growing Demand for Customized Aquatic Health Solutions
With this acquisition, Zoetis adds vaccine brands such as AlphaJect® (an injectable vaccine) to its diverse portfolio of more than 300 product lines. It also adds parasiticides such as AlphaMax® to protect farmed salmon from sea lice. PHARMAQ diagnostic products complement the Zoetis diagnostics business and support customers with early detection of infection and rapid response through more customized solutions. PHARMAQ also provides dip/immersion vaccines, therapeutics, and technical support services tailored to the needs of farmed fish operations.
“We are excited to welcome the team from PHARMAQ, who share our passion for supporting customers and keeping livestock healthy and productive,” said Alejandro Bernal, Executive Vice President, Strategy, Commercial and Business Development for Zoetis. “To ensure its continued success, the PHARMAQ business will run largely as a stand-alone operation within Zoetis and maintain its focus on critical customer needs and R&D milestones.”
Zoetis expects to complete the acquisition on or about Nov. 10, 2015, and it intends to draw on its revolving credit facility to finance the transaction. Inclusive of financing costs, Zoetis expects the transaction to be neutral to adjusted earnings in 2016 and become accretive to adjusted earnings thereafter.
Zoetis will discuss the transaction on its regularly scheduled third quarter financial investor conference call tomorrow, Nov. 3, at 8:30 a.m. (EST). Investors and the public may access the live webcast by visiting the Zoetis website at http://www.zoetis.com/events-and-presentations. A replay of the webcast will be archived and made available on Nov. 3, 2015.
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