Tuesday, July 15, 2014

Merck Wants Zilmax Back on Market, But Packers Don't

A sweeping effort by Merck  & Co. to revive a livestock drug it pulled from the U.S. market last year is stalling amid resistance from the nation's largest beef processors.
Merck for months has been preparing to conduct a large-scale study this summer to demonstrate the safety of its Zilmax product. The feed additive was widely used to promote weight gain in U.S. cattle before Merck suspended sales in August 2013 because of concerns in the beef industry that the drug made it difficult for some animals to walk.
The pharmaceutical company has said it wants to test Zilmax on about 250,000 cattle, in what Merck says would be the most-extensive randomized, controlled study of any drug fed to cattle. Though the cattle involved would represent less than 1% of the annual U.S. cattle slaughter, they would be valued at about $500 million at current prices for slaughter-ready cattle and produce roughly 200 million pounds of beef.
But Merck has delayed plans to begin its field evaluation because of continued unease among Cargill Inc., JBS SA and other meatpackers about animal welfare, as well as some packers' reluctance to try to market the beef that would be produced during the research, according to people familiar with the matter.
Merck confirmed the study has encountered setbacks. "This has become more time-intensive than we anticipated," said David Yates, a Merck manager who helped design the planned study. He declined to discuss details of negotiations with meatpackers, but said: "We continue to work on the process to make sure we have alignment with all parties."
The research requires the support of feedlot operators, which fatten cattle for slaughter, and the meatpackers that buy and process them into steaks and ground beef. The three-largest U.S. beef processors— Tyson Foods Inc., Brazil-based JBS and Cargill—account for about 60% of total production, according to industry estimates. JBS also operates one of the world's largest feedlot operations in the U.S.
I don't think you are going to get much producer buy-in on the product when the packers are resistant. I think Merck has a loser on their hands here.

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