The last few years have been defining for the animal health industry. A burst of deals has served to highlight it as a dynamic sector of strength, moving animal health beyond a modest branch of big pharma companies. In 2013, Pfizer spun off Zoetis into the largest animal health company in the world, further boosted by its acquisition of a pet care portfolio from Abbott this year. In 2014, Eli Lilly acquired Novartis’ animal products business for $5.4 billion, bringing Lilly’s Elanco unit into second place in the revenue rankings behind Zoetis, while divesting some products to Virbac along the way.
The recent boom in mergers and acquisitions comes as acquirers seek to take on technologies and capabilities that expand their market offerings geographically and strengthen their business in specific animal types. However, deal size is often constrained by anti-trust regulations. This is encouraging a hunger for smaller deals, academia-industry partnerships, and new entrants to the animal health market.
The animal healthcare market was valued at over $32 billion last year and analysts expect it to expand at a compound annual growth rate of over 5%. Constituting a variety of segments including pharmaceuticals, vaccines, diagnostics and feed additives, the breadth of the industry is amplified by the fact that different companion animal and livestock species often require unique products. This has driven the industry to a more expansive portfolio of lower revenue products, compared to human health’s main income generators, blockbuster drugs.
There are various factors driving market expansion, including adaptation of human pharma to animals, technological development, growth in emerging markets, a pushback against antibiotics in food animals, and the humanization of pets propelling sales in natural treatments and foods in line with trends in the human health market.
Human pharmaceuticals often form a starting platform for animal medicines, particularly in treatments for pain, infectious disease, and cancer. Several companies with human treatments have recently expanded by applying their knowledge to create animal health products. For example, US-based Oculus Innovative Sciences launched wound and skin care products for pets this year, based on their strength in human dermatological treatments. Phosphagenics, an Australian company that markets a topical drug delivery system, also applies its technology in animal supplements. Australia-founded Nexvet applies their ‘PETization’ platform to translate human and rodent monoclonal antibodies into companion animal species-specific treatments for pain and inflammation.
Due to the Australasia region’s strength in dairy and meat exports, there are robust investments here in animal health. Australia has multiple Cooperative Research Centres for livestock; these centres have developed a myriad of new technologies including vaccines against bovine respiratory disease and porcine pleuropneumonia. Animal health makes up approximately 20% of agritech exports from New Zealand, which has been chosen to host the 2017 International Animal Health Surveillance Conference. There are eight universities with veterinary science schools in Australasia, multiple other universities with animal health groups, plus several relevant R&D organisations such as CSIRO and AgResearch.
In this roaring market for animal health innovations, unique opportunities exist for companies to capture growth. One of the most effective ways for businesses to do so is to look outside their walls for complementary capabilities, developing technologies, and products either already in animal health or with potential to make the switch from humans. The Australasia region represents strong potential due to its emphasis on animal science.
By Emma Armitage, Business Analyst, BioPacific Partners