Animal Health Becoming Pet Project for Life-Science VCsTimothy HayMay 09, 2013Startups are developing diagnostics, drugs a...
Its that type of steady growth that companies like Fort Collins, Colo.-based VetDC Inc. are banking on."Companion animals ...
analyze milk samples from dairy cows for signs of mastitis, an infectious inflammation of the mammary glands thatspreads q...
Upcoming SlideShare
Loading in …5
×

Animal Health Becoming Pet Project for Life-Science VCs, DowJones VentureWire May 09, 2013

461 views
424 views

Published on

Animal health is a burgeoning market that is becoming more attractive to life-sciences investors, many of whom have seen the human medicine market grow more problematic thanks to increased regulatory scrutiny, the uncertainty
caused by health-care reform, and a generally lackluster environment for health-care investing.

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
461
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Animal Health Becoming Pet Project for Life-Science VCs, DowJones VentureWire May 09, 2013

  1. 1. Animal Health Becoming Pet Project for Life-Science VCsTimothy HayMay 09, 2013Startups are developing diagnostics, drugs and other products for a growing class of patients--the four-legged kind.Animal health is a burgeoning market that is becoming more attractive to life-sciences investors, many of whom haveseen the human medicine market grow more problematic thanks to increased regulatory scrutiny, the uncertaintycaused by health-care reform, and a generally lackluster environment for health-care investing.Jeff J Mitchell/Getty ImagesA dog receives treatment in a hydrotherapy tank at a small animal hospital. Startups developing diagnostics, drugs andother products for four-legged patients are becoming more attractive to venture investors."Animal health is a very solid market," said Jim Schultz, founder of Illinois-based venture firm Open Prairie Ventures, afirm that realized a lucrative exit a few years ago when Sony Corp. acquired portfolio company iCyt MissionTechnology Inc., a maker of disease-research tools for both human and animal health."We are actively looking at companies now," Mr. Schultz said. "In fact, we just looked at a dozen or so animal-healthcompanies in Kansas City. Now were looking at a couple of those more closely."The global market for medical products designed for animals has grown to $100 billion, an April report by Bank ofAmerica Merrill Lynch said. Medical products both for livestock and pets are continuing a steady rise, and both havestrong tailwinds that could keep the sectors attractive for years to come, analysts and investors say.The growing middle class in countries like China and India has led to a major spike in demand for livestock thatprovides protein, like cattle and poultry. Products that keep flocks and herds from getting sick are in growing demand.Meanwhile, keeping pets healthy looks just as promising. Pet ownership is on the rise world-wide, and pets areincreasingly seen as family members--the Bank of America Merrill Lynch study said "pet owners do demonstrate awillingness to cut spending elsewhere in order to maintain the wellbeing of their pets." It noted that pet-relatedspending in the U.S., including on health products, has grown by more than 9% annually since 1959.From Barn to Living RoomCopyright 2013 Dow Jones and Company, Inc. Copying and redistribution prohibited without permission of the publisher.
  2. 2. Its that type of steady growth that companies like Fort Collins, Colo.-based VetDC Inc. are banking on."Companion animals over the years have moved from the barn to the garage to the living room to the bedroom to thebed," said Chief Executive Steven Roy. "Theyre family--thats the bet were making."The angel-funded, development-stage company aims to come out soon with a drug that targets lymphoma cells indogs, then a series of other drugs. Rather than develop medications from scratch, VetDC acquires licenses for humandrugs that have stalled out in development, and then tweaks the formula for use in pets. The companys cancer drugoriginated at Gilead Sciences Inc ., Mr. Roy said.Acquiring human-drug licenses is a not-uncommon business model, one followed by Kansas City, Kansas-based Aratana Therapeutics Inc ., which filed to go public in March.Aratana, which has acquired licenses for human pain-management and appetite-stimulation drugs, has been fundedby Avalon Ventures , Cultivian Ventures, MPM Capital and other investors.The company and its investors declined to comment, citing the customary "quiet period" that surrounds initial publicofferings.The Aratana IPO--as well as Pfizer Inc .s recent spin-out and IPO of its animal health products division--have causeda ripple effect of excitement through the industry, said Kimberly Young, vice president of biosciences development atthe Kansas City Area Development Council.The council manages many operations of the so-called Animal Health Corridor, a stretch of Kansas and Missouri thatis home to more than 100 animal-health companies, many of them well-known brands and others obscure startups.The council also hosts the annual Animal Health Investment Form, where venture capitalists and animal-healthentrepreneurs mingle, and where funding rounds with a total value of more than $87 million have been sealed over thepast four years, Ms. Young said.As the council prepares for its fifth such conference this August, it is fielding applications from venture firms who havenever attended in the past, and from several dozen startups eager for funding to continue their work."Its exciting, whats going on in the corridor," Ms. Young said. "We are seeing significantly increased interest frominvestment funds. The number of startup companies located here has been increasing every year. There are about 28companies looking to relocate to the corridor, and about two-thirds of those are startups."Tom Overbay, a conference organizer and a partner at Expedite Animal Health, which advises early-stage animal-health companies on regulatory and other issues, said, "I dont see this area having a downturn."Even developing generic pet medicines can be lucrative, according to Portland, Maine-based generics maker PutneyInc . The company has a five-year plan to reach $175 million in annual revenue, and could one day file to go public,Chief Executive Jean Hoffman said.Part of the reason for the interest in animal health is the easier regulatory pathway. Investors and company foundersworking on drugs and devices for human health frequently complain about long wait times and a lack of clarity at theFood and Drug Administration, which regulates such products, but the makers of medicines for pets and livestockgenerally give high marks to the FDAs Center for Veterinary Medicine."Point-of-Cow"In its recent survey of the market for animal health products, Bank of America Merrill Lynch pointed out that themarket for products to keep livestock healthy is at least as strong as for comparable products for pets.Two startups offering diagnostics for livestock--Advanced Animal Diagnostics Inc. and Rapid Diagnostek Inc .--haveboth raised funding rounds in the past year. Investors in both companies said they have years of experience backingmedical products for people, and only developed an interest in animal health over time."I had passed on this company in the past. I had no interest in a pure animal-health play," said Jack Ahrens of TGapVentures , discussing portfolio company Rapid Diagnostek.After realizing the company was offering a platform technology--test kits that enable regular people, as opposed to justveterinarians, to screen for viruses, bacteria and other biomarkers that can threaten the health of a herd--the companybegan to look more attractive, Mr. Ahrens said.Rapid Diagnostek, which offers test results in under a minute for conditions like lysteria, heartworm and the flu, lastAugust raised $4.6 million from TGap, Capital Midwest Fund and NEW Capital Fund.More recently, in April, Durham, N.C.-based Advanced Animal Diagnostics closed on a $6 million tranche of Series Bfunding from Intersouth Partners , Novartis Venture Funds and other investors. The company makes test kits thatCopyright 2013 Dow Jones and Company, Inc. Copying and redistribution prohibited without permission of the publisher.
  3. 3. analyze milk samples from dairy cows for signs of mastitis, an infectious inflammation of the mammary glands thatspreads quickly through a herd, threatening production.Simon Wheeler of Novartis Venture Funds said at the time that his firm has little history backing animal-healthcompanies, but that global demand for healthy production animals had caused him to take a serious look at the sector.Jeff Boily, an angel investor, limited partner in a venture fund and the chairman of preclinical pet-medicine companyProteoPex Inc., said animal health has been a "neglected area" that was coming into its own."This market is huge and forecast to grow," he said. "Its time to be bullish."http://www.vet-dc.comhttp://www.aratana.comhttp://www.putneyvet.comhttp://www.advancedanimaldiagnostics.comhttp://www.rapiddiagnostek.comWrite to Timothy Hay at timothy.hay@dowjones.comDocument DJFVW00020130509e959aw90mCopyright 2013 Dow Jones and Company, Inc. Copying and redistribution prohibited without permission of the publisher.

×