By Dominique Patton
BEIJING (Reuters) - Germany's Boehringer Ingelheim, the global No. 2 in animal health, is having to rebuild itself in China after a deadly pig disease decimated sales of unrelated mainstay vaccines, bringing write-offs and leaving it facing a three-year slog to recovery.
Fresh from launching a brand new vaccine factory in eastern China this year, the privately held company will focus more on larger customers and invest in diagnostics after sales plunged by about 40%, or the same level as the contraction of the world's largest hog herd, said Stephan Lange, head of animal health for mainland China, Hong Kong and Taiwan.
Boehringer's woes underline the global impact of the epidemic of incurable African swine fever in China, the world's biggest pork consumer. More than a year after the disease was detected in the country for the first time ever, meat prices across the world have soared, as China buys up proteins abroad to plug its domestic shortage.
Though estimates vary, Lange said in an interview with Reuters that official data showing China's herd had shrunk by 41% after incurable African swine fever swept through the country from late in 2018 was a "reasonable" assessment. Sales have bottomed out in the last few months, he said, but full recovery of the herd will take another three years.
"Pigs that aren't there can't be vaccinated," said Lange, whose firm reported sales of 268 million euros ($295.34 million) in animal health overall in China last year.
Companies across the swine supply chain, from feed producers to vaccine manufacturers, have felt the impact of the disease, for which there is no vaccine.
Sector leader, United States-based Zoetis, has said African swine fever will wipe $50 million from its full-year revenues. Its livestock portfolio in China declined 40% in the third quarter, driven by the swine business, but partially offset by growth in poultry and cattle.
British veterinary medicines maker ECO Animal Health Group said on Monday that sales in China, its biggest market, slumped about 60% in the six months ended September due to the disease.
"This is a big crisis that has certainly got the attention of top (Boehringer) management," said Lange. "Big companies like predictability, they like planning, and the one thing that throws us off guard here most is that over the last year, we had to reset expectations multiple times."
Founded in 1885, and credited with inventing mass production of baking powder in the 1890s, Boehringer is one of the world's biggest drugmakers. The leading multinational in China's animal health sector, it has ramped up investment in the country in recent years and began selling one of its most popular swine vaccines from an 85 million euro plant in eastern China in January.
The plant has capacity for 125 million doses but is producing well below what was planned, said Lange. There has also been a "substantial write-off and destruction of goods" that had expired.
With China now a "smaller part" of the firm's 3.96 billion euro animal health business, Boehringer is refocusing towards supplying bigger pig producers, although smaller farms would remain important, he said. Animal health accounts for almost a quarter of the company's sales.
"Some of those are aggressively rebuilding and probably going to be coming out of this crisis bigger and stronger," he said, adding that seven or eight of the world's top 10 pig producers will at some point in the future be Chinese.
The largest are already gaining market share.
Boehringer is also shifting some of its China resources into diagnostics. Onsite portable tests that can process blood or saliva samples in 10 minutes would significantly boost producers' ability to control the spread of disease, said Lange.
The firm is working with German company DNA Biosolutions to develop a rapid test for African swine fever.
Meanwhile Boehringer has joined the global race to develop a vaccine against African swine fever itself - but that could take years.
Chinese efforts to make a vaccine will likely be faster, said Lange, though by the time it reaches the market, China will have learned to live without one.
(Reporting by Dominique Patton; Editing by Kenneth Maxwell)