In the five years to 2016, IBISWorld projects revenue for equine pharmaceutical manufacturers will increase at an average annualised rate of 3 per cent to $US399.7 million.
Rising downstream demand will be the main driver of growth, it says.
It says a rise in disposable income and participation in equestrian sports will play key roles in stimulating demand.
IBISWorld says its growth prediction would reverse the trend seen in the five years to 2011, during which it estimates that revenue for the equine pharmaceuticals industry decreased at an average annualized rate of 3.3 per cent to $US345.3 million.
Operators, it said, have suffered from a decline in horse and other equine production.
A fall in disposable income has constrained horse sales in the consumer market - the industry's largest market.
This constraint has hampered demand for equine pharmaceuticals, which include vaccinations, antibiotics and parasite control.
Furthermore, attendance at horse races has fallen drastically, and some horse tracks have closed altogether.
"This factor has minimised the demand for some of the industry's high-margin products, including joint injections.
"Luckily for industry operators, an increase in horse and other equine production is expected in 2011, contributing to revenue growth of 2.8 per cent during the year," it said.
In the five years to 2011, IBISWorld estimates that the number of firms operating in this industry has declined.
Like many pharmaceutical industries, the equine pharmaceuticals sector has experienced some consolidation in the past five years. Its largest players are large pharmaceutical manufacturers that also produce non-veterinary products, including Bayer AG, Merck and Co. Inc., Pfizer Inc. and Sanofi-Aventis U.S. LLC.
"Many of these companies have sought merger and acquisition opportunities to access intellectual property or increase market share," it said.
For example, in 2009, Pfizer acquired Wyeth, and Merck & Co. acquired Schering-Plough.
IBISWorld analyst Caitlin Moldvay said of the predicted 3 per cent annual growth over the next five years: "A rise in disposable income and participation in equestrian sports will likely boost demand for equine pharmaceuticals."
Rising disposable incomes will increase the likelihood of greater attendance and participation in horse racing during the next five years.
While the prices of some pharmaceuticals are expected to decline, profit margins are not expected to fall drastically due to continued consolidation among industry operators.