By MATEUSZ PERKOWSKI
A controversial milk production-boosting drug has helped the Eli Lilly pharmaceutical company fuel a significant expansion of its animal health division.
In the year since the company bought Posilac, its animal health division revenues have risen about 26 percent, to $670 million, according to financial reports filed with the U.S. Securities and Exchange Commission.
Eli Lilly said the division's revenues grew "primarily due to the inclusion of sales from the Posilac acquisition," according to firm's most recent quarterly filing.
The brand -- generically referred to as rBST, or recombinant bovine somatotropin -- was sold to Eli Lilly by the Monsanto company for about $404 million in October 2008.
The transaction included the sale of Monsanto's rBST-manufacturing facility in Augusta, Ga.
"It's been a great addition for us," said Joan Todd, spokeswoman for Elanco, Eli Lilly's animal health division.
The firm doesn't break out sales figures for individual veterinary drugs for competitive reasons, she said.
Dennis Erpelding, manager of corporate affairs for Eli Lilly, said the company sees a lot of growth potential for Posilac in light of rising demand for dairy products in countries like China, Mexico and Brazil.
"We feel technology like this will undoubtedly be critical on a global basis," Erpelding said. "We see huge opportunity as we look to the dairy sector globally."
Before the transaction, several opponents of the synthetic cattle hormone characterized Monsanto's decision to sell off Posilac as a capitulation prompted by consumer pressure and dropping sales.
Judging from the growth of its animal health division, Eli Lilly paid a reasonable sum for Posilac, but not a "fire sale price," said Damien Conover, an analyst at the Morningstar research firm who tracks the company.
As a veterinary product, Posilac fits better within the product portfolio of the pharmaceutical company than within Monsanto, which is primarily geared toward crop products, he said.
"I think it makes sense to be under Lilly's umbrella," he said.
Pharmaceutical manufacturers are keen to invest in animal products because they're seen as a reliable source of income, particularly as patent protections for human drugs expire, he said.
"Lately it's been increasingly important for companies to have these groups that mitigate patent losses within the branded drugs segment," Conover said.
Critics of rBST remain skeptical of Posilac's sales potential.
The drug is lumped in with other Elanco products, so it's unknown how much Posilac the company is actually selling, said Rick North, project director for Oregon Physicians for Social Responsibility, an anti-rBST advocate.
"You have this total lack of transparency," he said, noting that Eli Lilly may be trying to hide declining use of the product.
Many large dairy manufacturers have completely or partially switched to rBST-free milk, which would indicate the demand for Posilac has also dropped, said Bill Freese, science policy analyst for the Center for Food Safety, another rBST opponent.
"If there's this continuing phase-out, the prospects are bleak," Freese said.
Erpelding said he is optimistic about domestic Posilac sales.
According to a survey commissioned by Eli Lilly, only about 8 percent of consumers buy organic and rBST-free exclusively, he said.
Consumers who prefer organic and rBST-free milk should have a right to buy it, but that shouldn't prevent the majority of people from having access to conventional dairy products, Erpelding said.
"Let's really align the choice with what the true demand is," he said.