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Merck & Co.’s Animal Health Segment

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Animal Health segment

The Animal Health segment of Merck & Co. (MRK) operates in more than 140 countries. The company reported global sales of ~$884 million for 4Q16, a 6% increase in revenues compared to 4Q15. For fiscal 2016, the company’s Animal Health segment reported revenues of ~$3.5 billion, which represents 4% growth compared to ~$3.3 billion for 2015.

The above chart shows annual revenues of the Animal Health segment. In terms of the percentage of total revenues, the contribution of the Animal Health segment is nearly constant at ~8.2% of the total revenues in 4Q16, compared to 4Q15.

The sales in the US markets rose 11% during 4Q16 to $263 million, while the sales outside the US markets rose 4% to $620 million.

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Revenue drivers from the Animal Health segment

The revenues of Merck & Co.’s Animal Health segment have improved due to increased sales in the Companion Animal Products segment. These products are used by small-animal veterinarians and pet owners.

Bravecto, one of the key products in this segment, is a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks. It has shown strong growth over the previous year. Other products include Activyl, eye and ear products, Nobivac, Panacur, Scalibor, and Vetsulin, which is a veterinary insulin.

Other products that drive the performance of the Animal Health segment include aquaculture products and swine products. The aquaculture products maximize fish survival, growth, and production efficiency for major farmed fishes such as salmon, tilapia, trout, and other marine species. A few of the aquaculture products include Aquaflor, Norvax Minova 6, Slice, and Aquavac.

The Swine Products segment helps pork producers improve the health of pigs for safe and better-quality pork. A few of these include Circumvent PCV, Porcilis PRRS, Regumate, Respig, and Zuprevo.

Bravetco competes with Nexgard, a product from Merial, a Sanofi (SNY) company. Zoetis (ZTS), a part of Pfizer (PFE) group, is the largest animal health company, with around 20% market share.

Elanco, an Eli Lilly & Co. (LLY) subsidiary, competes closely with Merck & Co. for its companion animal products as well as food animal products such as the Swine and Aquaculture segments.

Investors can consider the Health Care Select Sector SPDR ETF (XLV), which holds 6.3% of its total assets in MRK.

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