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Anterra: There is no scientific hurdle to innovation for animal health start-ups

October 24, 2020

Anterra Capital has built a team of venture partners with extensive animal health backgrounds. At the recent Animal Health Investment USA conference, IHS Markit Animal Health editor Joseph Harvey heard the Anterra team debate the advantages and drawbacks of being a start-up in the veterinary medicines space.

Anterra Capital believes innovation is increasingly shifting to animal health’s start-up scene, as the barriers to success come tumbling down.

Phil Austin – one of Anterra’s founding partners – said animal health is one of the most active areas of investment for the firm at the moment. A key area of interest for the company is biotechnology, due to the convergence of several themes.

Mr Austin noted biotechnology tools are becoming faster and more precise, as well as more readily available to animal health innovators. This has enabled a wide range of new companies to improve genetics, optimize nutrition, better manage diseases and more accurately diagnose health issues.

He also pointed out the success of the isooxazoline class of antiparasitics – now worth around $1.5 billion in annual sales – shows “there is proven demand for biotech innovation in animal health”. Zoetis’ pet dermatology portfolio is another indicator of this, as it edges towards $1bn in yearly revenues.

However, Mr Austin stated: “There is no reason these molecules have to come from a major. There is nothing intrinsic in these chemistries that means a small company can’t innovate in these spaces. When we look at these innovations and the scale they can reach, what is exciting is there is no hurdle to a start-up – except for ambition and capital – to going after these types of products.

“The biotech toolset is exploding. If you go back 40 years, pretty much everything was a small molecule solution. Clearly that toolset has grown. Now, when you look at a problem and the best solution for it, you’re no longer constrained.”

He highlighted monoclonal antibodies, engineered viruses, mRNA, CRISPR/Cas9 and host cell engineering as just some of the next-generation technologies being fostered by animal health start-ups.

As well as a wide proliferation of new technologies fuelling innovation, the cost of conducting novel R&D at scale is collapsing. The general cost of experimentation is falling, making genomics, automation and computational technologies more accessible.

“Lab-less science is coming of age,” Mr Austin remarked. “You no longer need to own a lab, fill it with equipment and fill it with people in order to do your first experiments. You can outsource your experimentation and eliminate that initial hurdle to innovation.”

He suggested biotechs can “out-innovate the incumbents” and go head-to-head when developing drugs in certain molecular classes.

Anterra is sourcing innovation from the more mature human health market to create start-ups in the animal health space. The investment firm has been sourcing experts from the animal health industry to become part of its venture team and lead some of its portfolio investments.

Boston, Massachusetts-based pet therapeutics Invetx is an example of this.

Jürgen Horn – Anterra venture partner – has been hired as the chief executive of the start-up. This appointment drew from Dr Horn’s extensive experience at animal health majors, as well as his time at Nexvet Biopharma.

Dr Horn said it is the goal of many young businesses in animal health to hit the sweet spot between innovation, an unmet need, technology that is ripe enough to deploy and affordability.

Instead of bringing technology in-house via a license deal, Invetx has taken a different approach to innovation by partnering with companies that have already had proven success in human health with their portfolios.

Dr Horn said this strategy – paired with the experience of its management team and advisors – has helped Invetx put together a platform for innovation that is “bigger than we could build in-house”.

Haven and Seidler on innovation

Another Anterra venture partner with a considerable background in the animal health industry is Michelle Haven, who was with Zoetis for nearly 20 years.

Dr Haven pointed out much of the innovation in animal health 25 years ago focused on antiparasitics, such as that involving ivermectin and fipronil, was leveraged from parent pharma companies. However, more recently, new blockbusters have helped create new market segments in animal health.

“Innovation is very much about strategic choices,” she remarked. “In hindsight, things always look obvious but it’s not at the time. You’re taking a big risk. I think what Zoetis did was really unprecedented when it comes to allergy. At the time, coming up with a small molecule for allergy was a risk. Most of the focus groups told us there was a cheap drug out there that was meeting all the needs. People didn’t know they needed an alternative. That’s a huge risk.

“With these larger public companies, now the pressures have changed but there are still pressures. These companies have to balance their portfolios, balance the risk and diversify.

“Animal health is very distinct from human health, we have a lot of opportunity when it comes to product extension and the long lifecycle of products. When companies are working out where to spend their research dollars, there’s a good chunk that needs to go into that bucket because that’s a sure return on your investment, although it might not be the high reward that goes along with the high-risk investments, it’s still part of that balanced portfolio.”

Dr Haven said there is only so much investment the big companies can put into high-risk innovation – leaving opportunities for start-ups to invest and do early groundwork.

However, Dr Horn noted many start-ups in animal health only focus on one drug class. This means they only have a single shot at success – a disadvantage not experienced by the industry’s major companies and their extensive pipelines.

Anterra’s most recently recruited venture partner Randolph Seidler – the former head of global R&D at Boehringer Ingelheim Animal Health – further explored the evolving relationship between the major players and their human health owners.

Dr Seidler noted: “We have an interesting dynamic in the industry right now. Out of the four majors, two still have their ties to their human pharma businesses and two have chosen to go independently. One thing I think is clear is the overlap of therapeutic areas between animal health and human pharma is decreasing. Human pharma companies are increasingly focusing on thing like personalised medicine and oncology.

“I think the traditional sourcing and repurposing of compounds form human pharma is decreasing and that puts pressure on the animal health companies that still have a human pharma parent or source innovation from external partners.

“I still see the benefit of having a human pharma business attached, as you have a lot of expertise and a lot of technology expertise that few animal health companies can afford to have in-house.”

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From: IHS Markit Animal Health, by Joseph Harvey