- Elanco is setting up a commercial team specifically dedicated to veterinary specialty products as it anticipates business there to tick up following two recently announced strategic deals.
- On Friday, the animal health company said it will be acquiring Aratana Therapeutics, a maker of medicines for dogs and cats, in a stock-for-stock transaction valued at up to $245 million. Per deal terms, Aratana investors would receive 0.1481 Elanco shares and one contingent value right (CVR) worth 25 cents for each share of the target company they hold. The CVR hinges on sales of Entyce, an appetite stimulant for dogs, achieving certain sales by the end of 2021.
- Separately, Elanco said it has entered into an agreement with VetDC focused on developing and commercializing Tanovea-CA1, the latter company's treatment for lymphoma in dogs. Terms of that agreement were not disclosed.
Unlike other big pharma spinoffs, Elanco hasn't elicited much of an investor response since becoming a standalone firm. The company's per share price, for instance, is essentially unchanged from when it officially split with Eli Lilly last September.
A deeper dive into companion animal therapies, however, appears to be raising at least a few eyebrows. Elanco shares were up 3.5% Friday — though they trickled back down Monday morning.
Elanco is specifically going after specialty veterinary clinics. Executives estimated on a call with investors that there are 1,000 such clinics in the U.S., and predicted the deals with Aratana and VetDC will help tap into that piece of the market.
"Veterinary specialty is among the fastest-growing segments in veterinary medicine, and where many age-related diseases are treated," Elanco CEO Jeff Simmons said on the April 26 call.
"By transitioning the Aratana specialty sales force with broadened Elanco portfolio, relevant for the needs in the space, we see an opportunity to expand our companion animal therapeutics business and better serve this emerging niche specialty market."
By Elanco's estimates, Aratana sports a roughly 35-person commercial team comprised of sales representatives and technical consultants who help sell the company's three marketed products: Entyce (capromorelin), for appetite stimulation in dogs; Nocita (bupivacaine), for pain relief in cats and dogs following certain surgical operations, and Galliprant (grapiprant), for osteoarthritis in dogs.
Elanco executives noted that Aratana's promotional efforts for Entyce have mostly targeted specialty clinics. Moving forward, the company intends to expand those efforts to primary care practices. Last year, Entyce sales were $4.6 million — up from $1.3 million the year prior but still well below the sales recorded from Nocita or Galliprant.
Investment bank Stifel has argued that, despite "solid adoption" of Entyce across more than 50% of North American veterinary clinics, the drug's annual run rate is still struggling. "The key for the company will be significantly increasing Entyce's duration over the next handful of quarters," Stifel analysts wrote in a recent note.
Aratana reported $35.4 million in net sales for 2018. Stifel models that growing to $166 million in 2024.
As for VetDC, Elanco expects the collaboration will help it break into the "emerging" field of cancer drugs for companion animals.
"Oncology, like most of animal health, is a cash pay market. And so this is a early opportunity to stick our toe into the water with respect to oncology," Todd Young, Elanco's chief financial officer, said on the April 26 call.