Inside a billion dollar deal: Why Merck acquired Elanco aqua health

MSD Animal Health is confident that this $1.3bn acquisition will enhance its ability to foster health, welfare, and sustainability in the aquaculture industry. 

The company's strategic focus on aquaculture stems from the sector's robust growth.

“With the global middle class expanding and consumers gaining greater purchasing power, we’re seeing a notable rise in seafood consumption, particularly of salmon and shrimp,” explained Jim McIntyre, vice president and head of global development at MSD Animal Health.

He added: “Our aim is to support our customers in achieving their goals more effectively, sustainably, and efficiently. We believe aquaculture holds great promise as one of the most sustainable sources of animal protein, and we are committed to advancing and preserving that sustainability.”

Portfolio enhancement ​

The acquisition adds 90 "transformative" products to MSD’s aquatic portfolio, including Clynav, a new generation DNA-based vaccine that protects Atlantic salmon against pancreas disease (PD) and an anti-parasitic sea lice treatment along with water treatment products for warm water production, he outlined. 

In addition, the company secured new facilities in Canada, Vietnam, and Chile.

“When I consider deals, I always think about their immediate impact and long-term benefits. Typically, deals check one box or the other, but in this case, it covers both. This transaction instantly strengthens our portfolio for customers in both cold water and warm water spaces,” McIntyre told FeedNavigator.

The combined businesses lay a solid foundation for the future, he continued.

“MSD’s aqua division boasts a strong R&D group, especially in vaccine development. With this transaction, we gain access to DNA vaccine technology that we didn't have before. We believe that combining our R&D expertise with this DNA technology will significantly benefit our future endeavors."

Reducing the disease burden ​

Farmed salmon producers constantly face disease challenges, stressed the MSD Animal Health lead.

While Clynav is a product that prevents PD, a critical issue for salmon producers in the northern hemisphere, there are other areas where enhanced vaccines are needed to continue preventing diseases for customers, he reported.

Salmonid Rickettsial Septicaemia (SRS) remains a difficult bacterial disease to manage. “We're actively working on solutions for SRS, which remains one of the most significant challenges in the industry. While there are some vaccines available, more effective solutions are needed.”

MSD Animal Health has been researching oral vaccines as well, which McIntyre says it not an easy fix.

“Currently, most fish vaccines are used in salmon, given their high value. It's cost-effective to vaccinate each small salmon individually due to their worth. However, it becomes more challenging with smaller, lower-value fish like tilapia. It is hard to justify injecting individual tilapia from an economic perspective. So, if we could get oral vaccination into tilapia production, which is more of a volume game, the opportunity there would be vast.”

Another notable solution that MSD Animal Health acquired from Elanco is Imvixa, a treatment for sea lice.

That product is primarily sold in Chile and is well-regarded by customers, he said. Unlike many other sea lice treatments, Imvixa is used in the hatchery rather than at sea, offering a distinct approach to managing this issue, explained McIntyre.

“Sea lice continue to be a significant and costly problem for producers in both the northern and southern hemispheres. It's an area where we are committed to ongoing investment.”

Expansion into shrimp sector ​

The acquisition also gives MSD Animal Health a strong presence in warm water production, particularly in the shrimp sector, across Asia but also in Latin America.

“Our primary markets include Vietnam and China in the warm water space, and we are also looking to grow our presence in Latin America's warm water regions.

“The shrimp industry is exciting because it's a rapidly growing source of animal protein. The customer base is growing, and those producers are actively seeking solutions to enhance their overall productivity and sustainability.

“Through this acquisition, we learned just how much time and investment has gone into developing this business over many years.”

Elanco's expenditure and extensive groundwork in the shrimp segment, building on top of Bayer's efforts in this area, has set a solid foundation for growth, he said.

“If we were starting from scratch, we likely wouldn't have targeted the shrimp space, as it's challenging to penetrate. We believe we can further contribute by introducing more products into this channel to address the need of those customers. And we see a real margin opportunity in this space.”

Monitoring fish health and behavior ​

Surveillance technology is another area where MSD Animal Health sees significant potential. “By effectively monitoring fish, we can quickly address challenges through actionable insights. This includes detecting the presence of sea lice or identifying wounds, which is crucial for animal welfare.”

MSD, he said, aims to integrate this technological perspective into a comprehensive solution that includes vaccines for prevention, treatments for addressing issues, and technology for ongoing monitoring.

The company has already invested in many such technologies. Its dedicated venture team continuously evaluates new and emerging technologies to enhance its offerings in this arena, said McIntyre.

Indeed, a series of technology acquisitions have augmented MSD Animal Health’s aqua business. In March 2019, it acquired Scan Aqua, a fish health and fish welfare company based in Norway, focused on key aqua products. In April that same year, the company announced the completion of its acquisition of Antelliq Corporation, which included BIOMARK, a passive integrated transponder (PIT) tagging and tracking technology for monitoring fish and wildlife. And, in December 2019, MSD acquired Vaki, a leader in aquaculture and wild fish conservation monitoring equipment and real-time video monitoring technology for fish counting and size estimation from freshwater to saltwater rearing, while collecting and analytics for each stage of fish production.