Market drivers

The global animal health market – which includes commercial animal products and companion animals such as pets – is experiencing significant growth driven by the convergence of two mega trends.

The first is the growing demand for protein-rich foods across the world which has increased demand for commercial animal vaccines. To mitigate the risk of disease in livestock, producers rely heavily on vaccines and feed additives. As such, animal health pharmaceuticals now account1 for 61% of the global market followed by biological products (26%) and medical feed additives (13%).

Secondly, we have seen a significant increase in pet ownership and the ‘humanisation’ of companion animals, as people increasingly treat their pets like members of the family and more people use pets to counteract loneliness. Annual spending on pets reached more than €90bn in 20162.

Taken together, these trends mean the animal health market is forecast to grow at a CAGR of 3% until 2020. Commercial animal health products currently account for 59% of the market, with companion animal products making up the remainder3.

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Pet ownership

In the companion animal space, growth is being driven by rising middle-class household incomes, the humanisation of animals, and increasing rates of pet ownership. For instance, it is suggested that as many as two-thirds of pet owners now view their pets as members of the family.

A significant proportion of this spending is in relation to pet health and veterinary services to increase pet lifespans, and to treat diseases such as obesity which has become more prevalent in animals just as it has among humans. Spending on animal health has also been boosted by increasing take-up of pet insurance, especially in the European market, with some countries such as Sweden experiencing very high levels of insurance.

Disease

New variations of animal diseases pose both challenges and opportunities for the market, leading to constant innovation.

For instance, The Animal Health Institute says member companies spend 10–12% of revenues investing in innovation to combat the challenges caused by new disease.

Over the past few decades, innovation through R&D has led to developments that have resulted in dramatic improvements in the prevention and treatment of animal health issues such as flea and tick infestation, Lyme disease, rabies, diabetes, feline leukaemia, and other types of cancers. This has both increased companion animal lifespans and also improved the global food chain.

Regulation

The animal pharma segment is less heavily regulated than the human pharma market and so is attractive to large pharmaceutical companies and other investors. Requirements for animal pharma products are much less stringent so animal health products have a much shorter time to market, meaning there is less pipeline risk for new products when compared to human pharma.

The sector has experienced minimal threat from generic brands because of the high barriers to entry, but this is changing due to the combination of regulatory changes that promote generics and distribution channel shifts.

Emerging economies

Strongly driven by China, the Asia-Pacific region has seen the fastest growth rate in the animal health market.

In particular, China has a mandatory vaccination programme for certain animal diseases and, historically, has supplied these vaccines to farmers at very low prices. This is, however, expected to change as the government wants to drive competition in the market.

The growth in animal vaccinations in China now represents a significant opportunity to current players as the market is expected to consolidate quickly.

1 Vetnosis
2 Euromonitor
3 Vetnosis

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