Bomac [Animal Health Sector]

Nov 6, 2009

Bomac benefits from global shakedown

by Graeme Kennedy

The country’s biggest animal health company, Bomac, is poised for huge international growth in the fallout from a wave of mergers by the sector’s top multinational firms.

Many leading human pharmaceutical businesses, such as Pfizer and Merck, have animal health divisions that are being merged or acquired by other companies and are aggressively seeking new products.

Bomac founder, owner and director Don McLaren said the multinationals were gaining growth by merging rather than developing products of their own and were searching the world for innovative animal applications.

“We have registered 50 new products in the past three years and have another 60 under development,” Mr McLaren said. ‘They are chasing us now but we are waiting to see which way it all goes after the mergers and how to take our products into the big markets
— the veterinary business is worth about $200 million in New Zealand but $9 billion in the US.

“We are sitting on a gold mine ready to blast into space when we find the right way to go with our relatively new products — they are ready to launch on the world market once the mergers have been worked out.

“We will find who can best drive our innovations but a problem is that the orders the multi-nationals have indicated we could get are so big we would have to build 10 new factories to cope.”

Bomac topped the animal health sector of The National Business Review’s monthly Exciting Companies series with a 66.9 rating in surveys conducted by strategic business consultancy New River. It was followed by Annandale Feeds, Merial Ancare, Bell-Booth and FIL New Zealand (see table).

Mr McLaren began the company as a one-man business after working during his 1957 OF for a large UK pharmaceutical firm which sent him home to set up its animal health division in New Zealand.

“I had to do the whole country myself so I left and the next year formed Northern Veterinary Supplies in Auckland, wholesaling and distributing products to vets,” he said. “I was joined by a partner, Jim Bowen and we went into agencies with exclusive distributorships for major overseas companies which were using us as a pathway to becoming established here.

“The driver was differentiation through innovation and the company has grown to 400 staff including 100 vets, scientists and researchers worldwide with manufacturing plants in Australia and the US as well as South Auckland.”

A 2008 Business Hall of Famer, Mr McLaren said Bomac’s total domestic and worldwide sales were around $100 million compared with the New Zealand company average of $2 million to $4 million.

“Our exports this year will be our best-ever with 35% growth although we are being hit by the high dollar. The big companies look for the $200 million blockbusters to justify their efforts while we take a portfolio approach with $5 million to $10 million products — incremental growth is not enough for them.

“They like to deal with the macro-customers but we will sell to w small Asian farmer with 50 chickens and a pig — we can supply the small guys but would like to move into the really big markets.”

GETTING BETTER

Conditions in the animal health industry differ widely depending on the market sector companies are operating in but only 10% are reporting buoyant trading.

The exciting companies survey conducted by New River found 40% of respondents are finding business difficult, 5% very difficult and 45% neutral — a sharp reversal from the 60% who rated conditions buoyant in 2005.

Spending has been kept to the essentials and dropped in the dairy industry following producers’ payout falls over the past year although one respondent said his phone began ringing an hour after Fonterra’s recent increases.

New River said companies operating in areas affected by drought in the past few seasons had been affected as farmers’ returns came under pressure.

Sheep and beef markets had not been as severely hit, it said, as returns had been improving although the high dollar was hurting exporters.

“Animal health companies exporting product, however, are reporting buoyancy and continuing to see growth and high demand,” New River said. “Other more stable sectors are domestic pets and horses.”

Business conditions

Respondents’ rating of current business conditions in the ANIMAL HEALTH Sector

Very buoyant =0%
Buoyant =10%
Neutral =45%
Difficult =40%
Very difficult =5%

Top Nine ANIMAL HEALTH

Rank / Company/ Excitement rating

1 Bomac 66.9
2 Annandale Foods 63.0
3 Meriel Ancare 58.8
4 Bell-Booth 56.0
5 FIL New Zealand 50.0
6 Homeopathic Home Support 49.9
7 Norbrook 47.5
8 Pfizer 44.0
9 Stockguard Laboratories