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'Animal pharm' catches Wall Street's attention

Reuters | Thursday, Oct 9, 2014

OVERLAND PARK Kan. - Cancer drugs for cats, pain relief for dogs, diarrhoea drugs for hogs and hormones for dairy cattle: The "animal pharm" industry is increasingly drawing the interest of Wall Street investors.

One of the newest companies to market in the emerging sector, California-based Jaguar Animal Health, notified the Securities and Exchange Commission in late August of intent to launch an initial public offering valued up to $70 million for development of gastrointestinal products for pets and livestock.

Jaguar said it launched its first commercial product, a drug to treat diarrhoea in calves, last week.

Analysts say interest in the growing sector is strong despite risks such as drugs that do not perform as expected.

"There is a a lot of enthusiasm for animal health," said Tim Lugo, an analyst at William Blair & Company, which has helped manage two recent animal health IPOs. "Vets in general are starving for new innovative therapies."

The animal health industry globally is pegged at $92 billion to $102 billion, with the subsector of animal medicines and vaccines seen at $22 billion annually, according to a report by Technology Acceleration Partners, a private capital development firm targeting animal health, food and agriculture ventures.

From 2011 to 2016, the animal medicines and vaccines sector is expected to grow by 5.7 per cent per year, the report states.

Investors like the fact that regulatory approval of products for animals can move faster at less cost than with drugs for people. While a drug for humans can take 10 years and more than $1 billion to develop, one for animals can reach market in half that time for about $10 million, industry experts said.

Until 18 months ago, animal drug development companies were largely off the radar screen, either divisions of much larger human-focused pharmaceutical companies, with products and profit streams secondary to the parent operations, or start-ups struggling for cash.

That changed in January 2013 when Pfizer Inc. spun off its animal health business Zoetis, raising $2.2 billion. Shares have climbed more than 40 per cent since then, to around $38.

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