For years, the veterinary medicines sector struggled to maintain a quality pipeline of product innovation and attract investment lifeblood. However, the last couple of years have seen a dramatic sea change. Animal Pharm editor Joseph Harvey spoke to industry expert Dr Linda Rhodes about the innovation climate in 2016 and prospects for future novel products.
Animal health innovation "has got better but is still slim" over the last few years, according to someone who has had a large hand in some of the industry's most recent game-changing products.
Dr Linda Rhodes was previously a co-founder of two notable US animal health firms – contract research organization and consultancy business AlcheraBio, as well as companion animal biotechnology pioneer Aratana Therapeutics.
Dr Rhodes said the US FDA has approved eight new chemical entities in the pet therapeutic space (excluding drugs for fleas and ticks, and treatments that had been used in human health) since 2011, including three in 2016 (capromorelin, grapiprant and deoxycorticosterone). She said this is "significantly more than the previous 10 years".
When co-founding AlcheraBio in 2001, the thrust of innovation in veterinary medicine focused on combination of flea and tick products, as well as formulation improvements.
"There was not a lot of difference in therapeutic areas," she said. "There were parasiticides, antibiotics and pain drugs and not many really new things happening. Since then, there have been some big breakthroughs in allergies, appetite and pain. There are new molecules for flea and tick treatment, and there are monoclonal antibodies to treat cancer, pain and allergy."
Knocking on the doors of biotechs As one of the co-founders of AlcheraBio 15 years ago, Dr Rhodes tried selling the concept of animal health to biotechnology businesses rooted in the human health sector. She was met by a wall of indifference.
"There were a lot of good drugs and cutting edge science at the biotech companies," Dr Rhodes explained. "We went knocking on the doors of the companies that had molecules that clearly had animal applications and told them they could apply their drugs to dogs and cats – we showed them the business opportunity.
"Most companies weren't interested at all. They thought we were out of our minds."
Dr Rhodes said there were four main barriers to the acceptance of animal health as a viable revenue-earning possibility for human biotechs.
Firstly, she said many companies simply did not understand the potential market for drugs in the animal health space, as well as the regulating system governing veterinary medicines. Secondly, biotechs were dubious of the risks posed by taking their human drug candidates through safety and clinical studies in animals – as working on veterinary applications was a distraction to their core work but more importantly, because they were fearful that any adverse effects seen in animal studies might negatively impact their human drug development.
The third drawback in AlcheraBio's eyes was a lack of knowledge in the biotech industry of the pricing model in animal health.
The final hurdle in the way of the human-to-animal crossover was a stigma on the side of the biotechs when working in veterinary medicine.
"Companies told us that if they took their drug to the vet space then they were deemed a failure for human health applications," Dr Rhodes said. "They were afraid to be seen as scraping the bottom of the barrel."
Despite this resistance, AlcheaBio was able to broker its firs deal. In 2004, it helped Massachusetts firm TransForm Pharmaceuticals exclusively license its proprietary formulation of an anesthetic for veterinary use to Fort Dodge Animal Health. This was a precursor to similar transactions that would fuel the discovery of new chemical entities for the animal health sector some 10 years later.
However, this deal was an island in a sea of refusals.
"The whole idea just didn't work," said Dr Rhodes, who also noted a harsh scarcity of venture capital firms interested in animal health at the time – there was little capital available with Bay City Capital one of the only sources of funding for the industry. So AlcheraBio began morphing from a consultancy and business development entity into a contract research organization running large-scale clinical trials for animal health companies.
Enter Aratana Then several years down the line, Aratana Therapeutics entered the picture with a strategy very similar to AlcheraBio's plan from the previous decade. Dr Rhodes began her career at Aratana as founding chief executive.
She said: "The time was right. Investors were interested in animal health and the biotech industry was doing poorly in terms of return on investment at the time. Aratana shifted everything. Suddenly, animal health became a legitimate opportunity and the boards of directors at biotech companies began to look at what Aratana did with RaQualia – a licensing deal for two new chemical entities to be developed for dog and cat applications – as a potential source of additional revenue to fuel their expensive human drug development programs.
"Aratana opened the floodgates – people saw the value that was there. There was a great deal of initial skepticism but Aratana delivered on its promise to investors. As far as I know, no company has ever got three US approvals in one year for new chemical entities in pet therapeutics before Aratana. There were sceptics but you have to remember Aratana was the first real start-up in animal health with new drugs from human biotech and a large enough budget to develop them. There just wasn't many people who had tried this before and I understand the skepticism."
"Some of the big companies have R&D teams with more than 150 people. That's what people thought it took to bring new chemical entities to market through the FDA, but you don't, you need an 'A' team who know what they're doing and is willing to take risks. That's what we did at Aratana."
Dr Rhodes said a balanced and knowledgeable management team is vital to the success of any young firm. Although she warned that putting together a team of star people is no easy task.
"There is a dearth of talented animal health people willing to leave Big Pharma to join start-up companies," she said. "It was hard to put the Aratana team together but now people will hopefully see the risk of leaving a job at Big Pharma paid off."
Dr Rhodes said she felt it is easier to innovate at smaller companies – she believes there will be more start-ups arriving in the animal health space who want to emulate the success from firms such as Aratana.
However, it is not just the smaller firms contributing to animal health's new wave of innovation. In 2015, industry leader Zoetis bagged a conditional license for its canine atopic dermatitis immunotherapeutic – its first license from the USDA for a monoclonal antibody.
Dr Rhodes commented: "Hopefully, companies will say to themselves 'If Zoetis did it and Aratana did it, why can't we do it?'
"But bringing innovation to animal health is like turning the Titanic. Some of these innovations are high-risk and there definitely is a fear of failure at some companies, so most make the easy choice and say no to innovation. There is much less risk in life cycle management of existing products. That's one of the barriers to innovation we're facing."
Where next for innovation? Dr Rhodes said the recent stand-out new products in animal health have been three exciting new chemical entities: Zoetis' Apoquel canine dermatological treatment and Aratana's Entyce appetite stimulant for dogs and Galliprant for osteoarthritis pain and inflammation for dogs. She said all three of these products introduced new mechanisms of action to animal health and treated severe unmet or underserved problems amongst dogs.
But what of future innovation?
"There are exciting new chemical entities being developed for human uses, and a long list of therapeutic areas for cats and dogs that are underserved compared to human medicine," she said.
"Such areas as anemia, diabetes, and of course, cancer where extensive research is ongoing for humans, will be fertile territories for new products for pet therapeutics. Biotech companies should have more confidence in licensing their molecules to animal health, given the clear proof that this can create value for them, both from the licensing revenue, but also for validation of the clinical value of their compounds, not in animal models, but in clinical veterinary medicine."
Dr Rhodes said a key area that is calling out for innovation from animal health companies is non-surgical contraception.
"Suprelorin, the innovative 6-12-month contraceptive implant developed by Peptech Animal Health, and acquired by Virbac, is reportedly selling very well in the EU, Australia and New Zealand.
"Non-surgical contraception could be the next really big thing," she stated. "It's similar to the flea and tick market – almost every dog and cat is a candidate for treatment. If a gene therapy can be used to deliver a contraceptive lasting a lifetime, then that could be a gamechanger. It would revolutionize the animal health industry in the way ivermectin or fipronil changed pet ownership and made companion animals part of the family."
In addition, she commented on what a valuable tool a long acting non-surgical contraceptive would be for world-wide population control of dogs and cats.
According to the Alliance for Contraception in Cats and Dogs, 78% and 88% of dogs and cats are neutered in the US respectively – the annual cost of performing surgical sterilization procedures in the country is $2.9 billion.
Bruce Jackson of Lake Street assumes coverage of Aratana Therapeutics Inc (NASDAQ: PETX) with a Buy rating and $15 target price, saying twelve additional new products in the pipeline suggest the revenue growth can continue for the next several years. The analyst expects more than $200 million in peak sales potential from Galliprant, Nocita and Entyce.
Jackson said Galliprant, for the control of pain and inflammation associated with osteoarthritis in dogs, offers a market opportunity in excess of $100 million . Nocita, a liposomal bupivacaine product for post-op pain management, could achieve peak sales well over $75 million."Entyce, which we view as an underappreciated asset positioned to emerge as a breakthrough first-in-class therapy for appetite stimulation, could surprise with peak sales potential in excess of $100 million ," Jackson wrote in a note.
Jackson projects Aratana's current target market of $2 billion to increase to more than $5 billion over the next ten years. The analyst expects Aratana to achieve fully-taxed, adjusted EPS of $1.92 , excluding milestone payments from Elanco, in 2021.
Catalysts For The Drugs
Meanwhile, the upcoming catalysts include the start of pivotal field effectiveness trials for cat formulations of Nocita and Entyce in late 2016, followed by conditional licensure for AT-014 in late 2016 or early 2017. Further, the EMA approval of Galliprant is anticipated in early-2017. At time of writing, shares of Aratana rose 3.18 percent to $9.09 . The price target of $15 represents a potential upside of 70 percent from Friday's close.
Interesting how this stock keeps getting caught up in the #Hillarystopgains in bio even though this is a pet care and highly unlikely to have any attention paid to them. Provides repetitive opportunities to buy in for anyone interested as it keeps recovering based upon perceived revenue potential. The short term chart is technically bullish though approaching the top of channel. The weekly chart shows how far below highs it is an volume at particular price levels that may be looking to get just recover their cost basis.
Continue to hold PETX with a $10 oct covered call written against it. THis always trades with bios but in reality the pricing issue is minimal with pet care. Not likely to add unless it drops to 50day at $8.50.
Aratana Therapeutics Announces Launch of NOCITA® (bupivacaine liposome injectable suspension)
LEAWOOD, Kan., Oct. 5, 2016 /PRNewswire/ -- Aratana Therapeutics, Inc. (NASDAQ: PETX), a pet therapeutics company focused on the licensing, development and commercialization of innovative biopharmaceutical products for companion animals, announced the Company has made NOCITA® (bupivacaine liposome injectable suspension) commercially available to veterinarians in the United States. The U.S. Food and Drug Administration's Center for Veterinary Medicine (CVM) approved Nocita as a local post-operative analgesia for cranial cruciate ligament surgery in dogs on August 12, 2016.
"We are eager to get Nocita into the hands of veterinary surgeons and anticipate the first orders shipping in October," explains Brent Standridge, Chief Operating Officer of Aratana Therapeutics. "We believe Nocita is an innovative tool since it controls canine cranial cruciate ligament surgery post-operative pain for up to 72 hours with one dose."
Nocita is a long-acting, local anesthetic that lasts up to 72 hours post-surgery by releasing bupivacaine over time from multi-vesicular liposomes deposited in the tissue. The therapeutic is administered as a single dose by tissue infiltration during closure of cranial cruciate ligament surgery in dogs.
Under: Been on the sidelines for a bit holding (building) cash. Now that "BIGLEY" has rolled out the tax plan its time to jump in.
Dec 21, 2017 19:06:02 GMT -6
martyc: Looks like you are buying Msft again!
Dec 15, 2017 11:23:29 GMT -6
martyc: The news that Trump called Rupert to congratulate him sure seems to indicate that this is heading to approval
Dec 15, 2017 11:22:23 GMT -6
Under: DIS finally getting some traction.?
Dec 14, 2017 17:08:45 GMT -6
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Dec 14, 2017 11:05:16 GMT -6
Under: Great posts on $DIS
Dec 13, 2017 17:50:49 GMT -6
Under: $ROKU Citron on a war path.
Nov 28, 2017 15:11:20 GMT -6
Under: $HAS takeover bid for $MAT?
Nov 10, 2017 16:16:07 GMT -6
martyc: Not looking like the market will provide any discounted opp for SGMO. Call was just too professional and all signs indicate they are on a great path for commercialization. Happy with core but wish I had some trading shs
Nov 10, 2017 9:04:05 GMT -6
martyc: For anyone looking to find an entry point into SGMO, I'm almost hoping is sells off in next few days so I can add more. They are really clicking but the fact they haven't signed new deals might cause some to exit. Watching as I have room for trading shs
Nov 9, 2017 18:28:09 GMT -6
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Nov 9, 2017 18:26:08 GMT -6
Under: whats up with your Bears this year Marty?
Nov 9, 2017 17:35:25 GMT -6
martyc: Hope you were long ROKU. I wanted to see Q first so missed out
Nov 9, 2017 7:08:53 GMT -6