Animal Pharm Reports
Licensing and Partnership Opportunities in Animal Health R&D
Published April 2003
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CHAPTER 1 - INTRODUCTION
Real growth in the value of the world market for animal health products averaged less than 2% a year through much of the 1990s and has dipped below 1% in recent years. The BSE crisis, slack demand for major livestock products, poor conditions in leading animal health markets, increasingly onerous regulatory demands and health/environmental concerns have all taken their toll on the industry.
Factoring the current economic slowdown into forecasts leaves little hope of a return to higher rates of market growth in the near future. With that in mind, parent companies will continue to look closely at the performance of their animal health subsidiaries, and more businesses will be offloaded in the next few years.
Faced with such a challenging environment it is easy to adopt a short-term approach, restructuring businesses in order to paper over the cracks. But history tells us that, as in any other industrial sector, innovation is the key to the success of most companies that out-perform their market on a consistent basis. While it may be difficult to look beyond existing market conditions, managers who maintain their commitment to efficient, well-targeted research and development programmes are most likely to achieve success in the long term. This is the challenge facing executives at the helm of animal health businesses. The strategies adopted by individual managers now will have a major impact on the performance of their respective companies through the next decade and beyond.
1.1 Animal health company research activity
Industry-wide R&D spending figures are hard to come by, but data published by the US trade association, the Animal Health Institute (AHI), gives a reasonable indication of how spending in the sector has progressed in recent years and how investment trends match up against market growth.
The AHI conducts an annual audit of member company sales and research spending. Sales figures are combined to arrive at an estimate of total US market value. R&D spending by non-members is not included, however, and non-member sales projections have been stripped out of the figures in table 1.1 to enable an explicit comparison between AHI member sales and the amount invested in R&D by those companies.
The figures show that while AHI member sales increased by 44% between 1994 and 2001, their spending on research and development actually decreased slightly over the same period. Expressed as a percentage of sales, AHI member company spending on R&D declined from just over 17% in 1994 to less than 12% in 2001.
Table 1.1: US industry sales and R&D spending, 1994-2001
1AHI member sales only. Year $ million R&D spending as % of sales Sales 1 R&D spending 1994 2,462 421 17.1 1995 2,559 381 14.9 1996 2,605 387 14.9 1997 2,864 388 13.5 1998 3,419 464 13.6 1999 3,360 410 12.2 2000 3,254 418 12.8 2001 3,545 415 11.7
Source: US AHI
Few individual animal health companies release details of R&D spending. Pfizer, which is the biggest player to reveal a recent figure, is currently ploughing back close to 20% of its sales into research and development. That figure is more akin to human pharmaceutical spending levels, however, and is way above the animal health industry average.
Most leading companies in the sector currently invest the equivalent of between 9% and 12% of sales in R&D. Bayer (9.9%), Boehringer Ingelheim (11.1%) and Novartis (9.7%) all spent at rates in that range during 2001. A number of companies ranked among the 20 biggest animal health businesses are more generic in nature, however, and invest at lower levels. Ceva, for example, spends less than 7% of revenues on R&D, while the figure for Alpharma is believed to be 5-6%. Even assuming a clearly over-generous 10% research/sales ratio for the industry as a whole, only 12 companies in the sector would have an annual R&D budget of more than $50 million, while just four would have as much as $100 million a year at their disposal.
Even those figures do not tell the whole story. A significant proportion of R&D spending is essentially "defensive" by nature (i.e. is invested to maintain existing product approvals rather than to discover and develop new products). Responses to the AHI's annual survey indicate that spending on defensive research accounts for around 15% of total R&D investment, with figures varying between 12% and 18% in the period since 1994. Defensive spending is significantly higher in Europe, however, where the industry has been forced to invest heavily in order to comply with rising regulatory demands imposed on established products during the past two decades.
Clearly, resources available to the industry for investment in R&D are scarce. It is equally clear that, with regulatory demands on the increase, and with the cost of conducting research rising rapidly, those resources are being spread more thinly. Choosing which R&D projects to pursue, and which partners to work with, is increasingly important as a result.
1.2 Commercial research and development partners
Veterinary and agrochemical applications of emerging products and technologies featured high on the list of development targets for many biotech start-ups in the 1980s, but a series of expensive failures and the negative publicity that has dogged new technologies in both sectors taught investors that these applications did not necessarily represent a quick and easy way to market.
There have been a few notable veterinary biotech success stories – mostly with biological products. Equally, there have been a number of very expensive failures. Heading that list is bovine somatotropin (BST), which was once a target for several major biotech/animal health company tie-ups, but which taught the industry a salutary lesson. Even Monsanto, which obtained a US approval for its BST product in 1994 and has generated significant revenues with the product since then, remains heavily out of pocket on BST overall.
Biotech specialists with in-house development programmes that include animal health as well as human health applications are now decidedly thin on the ground. Most research or development-stage companies are focused solely on human health applications of products and platform technologies, and the prevailing view appears to be that targeting other applications will dilute precious resources.
For biotechs with proven products on the market, or for those with promising candidates in the later stages of clinical development, this is an entirely understandable attitude. Most research-based companies are less well placed, however, and as the stock market slump continues to affect their finances they would do well to take a more positive attitude to "add-on" applications of their core technologies.
Since most of the companies profiled in this report already have tie-ups with major animal health companies it follows that they display an enlightened attitude to broader applications of their core products and technologies. As venture capital funding becomes increasingly scarce, it is fair to expect that companies with similar or related technologies will follow their lead, latching on gratefully to opportunities that promise to boost ailing balance sheets.
The market downturn has already begun to pinch, driving up both financial failures and rates of merger and acquisition activity in the biotech sector. More than one of the US companies mentioned in this study has either been de-listed from the main Nasdaq Stock Exchange or faces imminent de-listing – usually because of the level to which share prices have plummeted and the consequent reduction in the value of shareholders' equity. Minimum requirements for Nasdaq listing were suspended for over a year in the wake of the September 11th terrorist attacks, but are now back in place and many fledgling US biotechs risk losing their exchange listings in the course of 2003.
Some companies have been transferred from the Nasdaq National Market to the SmallCap Market, and may eventually recover their headline market listings. However, the loss of main market status affects both the visibility and investor pulling power of a company. De-listing can also affect loan agreements and financial backing from major investors, which may be dependent on the ability of companies to maintain their status as publicly listed entities.
De-listing worries aside, cash-hungry biotechs are struggling to attract venture capital funding. US venture capital and private equity funds raised more than $200 billion in fund commitments during 1999 and 2000, but up to half of that money has yet to be invested. Fund managers remained cautious through the second half of 2002 and the early months of 2003 as the threat of war in the Gulf continued to cast a shadow over the global economic outlook.
Financing terms have also become tighter, and the conditions attached to some investment offers may be unpalatable to executives who, less than two years ago, had few problems attracting investors. Partly as a result of these trends, many research-based companies that had chosen to focus on internal development programmes are turning increasingly to early-stage collaborative partnerships. The potential returns from tie-ups with animal health partners may be much less lucrative than tie-ups with human pharmaceutical majors, but, as the saying goes, beggars can't be choosers, and closing a veterinary development deal can have a significant impact on the balance sheet of a small biotechnology company. So while conditions in their own market remain poor, animal health companies willing to continue investing in collaborative R&D projects are in a much stronger negotiating position now than they have been for the best part of two decades.
1.3 Research directions
Bruce Jones, who is one of the animal health industry's most experienced analysts, believes that very few pharmaceutical parent companies retain a serious long-term commitment to their animal health subsidiaries. And while veterinary businesses will continue to mine human pharmaceutical portfolios for new, more sophisticated companion animal products, he forecasts a period of limited growth in the livestock sector as generics capture an increasing share of the market and as levels of research investment decline in the face of a worsening risk/reward ratio.
What the industry needs, Mr Jones believes, is another "trigger" technology breakthrough that will kick-start a new phase of growth in the livestock production cycle. And he believes that genetic manipulation and cloning are the technologies most likely to fulfil that need. Pharmaceutical majors are among the biggest investors in genomics, but the sector has yet to provide a real commercial breakthrough in human medicine. If it does, says Mr Jones, then genomics technology platforms will once again provide major synergies for companies operating in both the human and veterinary medicine sectors.
Increasing political and regulatory pressure on products for use in food animals have already had a significant impact on R&D investment in the sector. Major animal health companies continue to invest in the development of new livestock products, but an increasing proportion of their research budgets is being directed towards companion animal projects.
The following section addresses a number of major fields in which tie-ups between animal health companies and commercial research partners have been established. They range from high-risk, long-term programmes such as genomics to relatively low-risk, medium-term projects in areas such as the application of drug formulation and delivery technologies to existing products.
1.3.1 Drug discovery
Screening programmes, designed to test large numbers of compounds and identify those producing desirable biochemical or cellular effects, mark the traditional starting point in the drug discovery process. Most pharmaceutical majors possess substantial in-house screening resources, including their own extensive compound libraries, and parent company screening programmes have yielded major benefits for animal health subsidiaries over the years.
The number of animal health businesses with the financial resources to support their own drug discovery programmes is relatively small, but most of the sector's leading players possess divisional-level screening capabilities in key product areas. In order to make the most of scarce R&D resources, they also licence access to compound libraries and both the hardware and software required to screen those libraries efficiently.
Major technological advances have been made over the past 20 years in terms of both the generation of candidate compound libraries and the ability to screen them. Combinatorial chemistry techniques fuelled exponential growth in the size of compound libraries, while high-throughput screening technology enabled libraries to be screened much more rapidly. Both fields continue to advance at a rapid pace and must be monitored closely by companies seeking potential partners.
Inevitably, as technologies that enabled more rapid screening emerged, the primary focus of many companies was to screen as many compounds as possible. With the passage of time, however, it has become clear that the massive increase in screening capacity has not yielded a significant increase in the number of positive leads that are developed to commercialisation.
Perhaps it is too early to judge what is still essentially an emerging field of technology, since the time required to transform a positive screening result into a commercial product is typically 12-15 years. Nevertheless, goals have begun to shift more recently, from screening large numbers of compounds as rapidly as possible to the quality of compounds being tested and the ability of screening systems to throw up potential leads.
Developments in the drug discovery software sector have been particularly rapid in recent years, in terms of both products and services being offered by specialists in the field and the structure of the industry itself. Many new players have emerged inside the past 2-3 years, while merger and acquisition activity has seen others change hands. The latter trend is illustrated graphically by events at the US company, Pharmacopeia, which hoovered up no less than five businesses in the sector between 1998 and 2001, merging them into a wholly-owned subsidiary, Accelrys, which now generates more than three-quarters of Pharmacopeia's total revenues.
In November 2002, Accelrys announced the signing of a three-year software licensing deal with Intervet under which its molecular modelling, simulation and combinatorial chemistry applications will be used by the Dutch company at its new research centre in Schwabenheim, near Frankfurt, Germany. Commenting on the agreement, Intervet's Christian Miculka, said that the company aimed to make its drug discovery unit the most productive in the entire animal health sector inside four years.
Intervet also licenses R&D software technology from the German bioinformatics specialist, Lion Bioscience, and the two companies are collaborating on a project that aims to generate novel anti-infective drug leads for the treatment of respiratory and enteric diseases in livestock and poultry. Lion is working on sequencing the Mannheimia haemolytica genome and will identify potential targets for Intervet researchers.
Like Pharmacopeia, Lion Bioscience established its own drug discovery business, which traded until recently as iD3. The company has now decided to focus resources on the development of bioinformatics products and services and closed down its in-house discovery operations at the end of 2002. While the establishment of in-house drug discovery programmes has obvious attractions, transforming screening hits into drug leads and moving them through the early stages of clinical development is a lengthy and expensive process. In the current investment climate, many of the companies that are attempting to make the transition from providers of drug discovery technology to drug discovery/development specialists will struggle to fund in-house development efforts. More companies with existing interests in both areas are likely to close down or sell off in-house drug discovery/development businesses as they tighten their financial belts.
1.3.2 Genomics and gene therapy
Genome mapping – of humans, animals and pathogens – has opened the way for major advances in both the understanding of disease mechanisms and the potential to prevent or treat diseases. Recombinant proteins and vaccines have already been developed and commercialised, and there are an increasing number of gene-deleted veterinary vaccines on the market.
Other avenues of research are being pursued, including the development of cloned and transgenic animals, sequencing of pathogenic organisms and the development of DNA-based vaccines and immunotherapeutics for the treatment of a broad range of diseases. Genome mapping projects are broadening scientific knowledge about the physiology of individual species, the mechanics of individual diseases and the biological mechanisms used by host systems to fight infection.
Animal genome mapping efforts have identified genes responsible for growth, disease susceptibility, production and reproduction. These could eventually deliver livestock herds and flocks with improved production/productivity traits or with reduced susceptibility to key diseases. Cloning of transgenic animals could facilitate the rapid expansion of enhanced populations.
The UK company, PPL Therapeutics, which was responsible for cloning Dolly the sheep, has been a major player at the forefront of transgenic animal and cloning technology. Dolly was euthanased recently, having contracted a fatal lung disease, and some data indicate that cloned animals in general may have reduced life-spans. Much work remains to be done before transgenic or cloned animals play a significant role in livestock production, and opposition to developments in this sphere remains widespread. This makes investment in the field a very high-risk strategy, and outside of the public sector most research programmes are being undertaken by a few specialist, privately-funded companies.
While Merial is a major player in the poultry genetics sector, most traditional leaders in the animal health industry are expected to focus on the therapeutic potential of genomics rather than advances in animal genetics. Several companies are already involved in tie-ups with commercial biotech partners in this area. Products targeted by these collaborations vary, but include DNA vaccines or other novel vaccine types, therapeutic proteins, and vector systems for the delivery of gene therapies to specific target sites. Individual projects are discussed elsewhere in this section.
There have been some widely-publicised setbacks in trials with gene therapy products in the past 2-3 years, including the death of a patient in a trial conducted by researchers at Pennsylvania University and the more recent discovery that two patients in a French trial had contracted leukaemia. Neither of these cases undermines the basic potential of gene therapy, however, and with approximately 600 trials involving gene therapy products currently in progress the field will remain a major focus of activity. It could eventually begin to deliver a range of new veterinary therapeutics, especially for use in companion animals. The first of these – a canine cancer gene therapy in development at Heska – could be little more than a year from the market (see 1.3.10).
1.3.3 Antimicrobials
The use of antimicrobials in animals is subject to increasing scrutiny as concerns surrounding microbial resistance to human drugs increases. Combined sales of antimicrobials for therapeutic and in-feed use in animals are in excess of $2 billion a year, but approvals for several in-feed products have been withdrawn by regulators in the European Union, where all remaining antimicrobial feed additives are due to be phased out by 2006.
Therapeutic use of some key antibiotic classes in veterinary medicine is also under the spotlight, with fluoroquinolones the main focus of attention in this respect. Regulators in the US have proposed the withdrawal of approvals for fluoroquinolones in poultry, while obtaining authorisation for new quinolones in food-producing species will become increasingly difficult.
The efficacy of existing drug classes in both human and animal medicine saw many companies reduce levels of R&D investment in the development of new antimicrobials during the 1980s and early 1990s. New products brought to market during that period were all from existing classes. As such they were vulnerable to organisms that had built up resistance to related molecules.
Pharmacia's Zyvox (linezolid), launched for use in human medicine in 2000, was the first antibiotic featuring a novel mechanism of action to reach the market for more than 30 years. Linezolid is the first member of the new oxazolidinone antibiotic class, which block bacterial growth by disrupting the initiation of bacterial protein synthesis. This is a mode of attack never previously experienced by target pathogens and yet resistance in patients receiving the drug for prolonged periods (up to 40 days) had been reported by 2001.
The speed with which linezolid resistance emerged underlined both the need for other new antimicrobial products and for the introduction of measures designed to preserve the efficacy of existing therapies. It did little to instil confidence in prospects for veterinary antibiotic research, however, and few companies are likely to commit significant resources to the field until the debate over agricultural use is resolved. The rewards for successful innovation in the field of human antimicrobial research remain high, but until the role of veterinary antimicrobial use in the development of resistance is properly understood, how many companies will be willing to jeopardise those rewards by developing related products for use in animal medicine?
Against this background, prospects for the near-term development of new antimicrobials for use in food-animal species appear bleak. The market for companion animal antibiotics is more likely to witness novel product launches, however, and alternative approaches to the treatment and control of microbial infections may see the veterinary antimicrobials market begin to develop in new directions. Immunological approaches represent one such direction, while genomic research may eventually offer alternative control mechanisms once the complex structures and mechanisms of target pathogens have been unravelled.
A handful of animal health companies continue to pursue the discovery and development of new antimicrobial classes for use in veterinary medicine. Among them is Pfizer, which has funded research by Essential Therapeutics to identify and screen genes essential to the viability of pathogenic bacteria with the aim of discovering products for the treatment of bacterial infections in animals. Pfizer is now pursuing product leads discovered as a result of the alliance.
Essential Therapeutics is also working on methods of combating resistance to existing antimicrobials through the application of efflux pump inhibitors, which disrupt resistance mechanisms in target bacteria and may also increase the susceptibility of some bacteria to certain antibiotics, extending their potential applications and reducing required therapeutic dose levels. Schering-Plough Animal Health (SPAH) has been involved in a collaboration with Essential Therapeutics since 2000, under which the two companies hope to apply Essential's efflux pump inhibitor technology to existing SPAH products.
One particularly interesting alternative approach to the treatment and control of bacterial infections is phage therapy. Bacteriophages are naturally occurring viruses that target bacteria, binding to receptors on the surface of host bacteria, which are destroyed following rapid, large-scale phage replication. Individual phages target specific types of bacteria, and identifying and isolating phages active against individual bacteria was a daunting challenge for pioneering researchers in the early part of the 20th Century. Purification and achieving prolonged activity with early phage therapies were also difficult, and bacteriophages were consigned by many Western researchers to medical history following the discovery and commercial development of the first antibiotics. Phage therapy was pursued in the former Soviet Union, however, and treatments for a broad range of infections were perfected. Many are still used widely today.
Western interest in bacteriophages has been rekindled by growing concerns surrounding the development of resistance to antibiotics. Genetic engineering techniques are now being applied in an effort to develop bacteriophages as alternatives to antibiotic therapies. A number of biotech start-ups incorporated in the 1990s are working in the field. Most are targeting products capable of treating infection with multiply-resistant bacteria such as vancomycin-resistant Enterococci (VRE), methicillin-resistant Staphylococcus aureus (MRSA) and Pseudomonas aeruginosa. Resistant bacterial strains found in livestock are also being targeted and several companies are pursuing the development of products for use in both human and animal health.
The Canadian company, Biophage Pharma Inc (BPI), is developing veterinary-use phage therapies against a range of target pathogens, including E. coli, Salmonella, Campylobacter and Pasteurella. Products against E. coli and Salmonella infections have been tested experimentally in pigs and poultry, and BPI has drawn up protocols for clinical trials with Coli-Pro, a product for the treatment of E. coli in pigs. The company believes that Coli-Pro could be approved by Canadian regulators before the end of 2003.
The US company, Intralytix, is pursuing a broad range of potential applications for bacteriophages, including food processing, environmental clean-up and both veterinary and human therapeutics. It has received an experimental use permit for a product targeting Listeria monocytogenes in food processing plants and is working with unidentified partners on agricultural applications of bacteriophages.
In general, start-ups involved in phage therapy research have found it difficult to obtain funding – either from the venture capital community or from pharmaceutical partners. As the first products of research in this sector approach the market, however, both camps may begin to show more interest.
1.3.4 Antiparasitics
The treatment and control of parasites affecting both livestock and companion animals was transformed during the last two decades of the 20th Century – first by the commercialisation of avermectin- and milbemycin-based endectocides, and more recently by the development of a new generation of highly effective insecticides for use on companion animals. Products in both of these market segments now generate annual revenues of several hundred million dollars and the avermectins market has become a key target for generic manufacturers following the expiry of basic patents covering ivermectin and abamectin.
Ironically, the success of these new drug classes, in terms of both their ability to control major parasite species and as major revenue sources for their respective developers, has contributed to recent declines in the amount of research being conducted into novel antiparasitic drug classes. At the same time, the successful development of effective vaccines against many key parasites has proved more complex and expensive than originally hoped. Parasite resistance to new chemical classes such as the avermectins is already being reported on a relatively broad scale, however, and the need for next-generation antiparasitics – be they chemical or biological in nature – remains.
A handful of the leading animal health companies continue to operate significant in-house development programmes in the sector, but there is little sign that these will deliver major new commercial products in the foreseeable future. Furthermore, where ectoparasiticides are concerned, access to in-house agrochemical insecticide research has been lost to some animal health businesses as a result of parent company restructuring. As a result, access to work being conducted by public sector organisations and commercial research specialists will play a vital role in securing the development of novel antiparasitics likely to reach the market in the next decade and beyond.
Research aimed primarily at the discovery and development of agrochemical insecticides will undoubtedly provide additional new candidates for use in companion animals and, to a lesser extent, livestock. The crop protection industry could also be a source of novel endoparasiticides, resulting from work aimed at the development of nematode controls.
One research specialist involved in the latter sector is the Missouri-based start-up, Divergence Inc, which is focused on the study of nematode genomics and the discovery and development of gene-based nematode control products. Treatments for use in crop protection are the company's primary focus, but Divergence aims to lever additional value from its work by licensing products and technologies for use in animal health. It lists canine heartworm, roundworm infestations in ruminants and trichinella infections in pigs as possible targets.
Divergence and companies pursuing similar research targets could eventually develop vaccines against nematodes that may pave the way for immunological products against some key animal parasites. Many commercial research specialists have abandoned programmes aimed specifically at the development of parasite vaccines for use in the veterinary sector; collaborations with public sector research organisations are now the main channel through which animal health companies involved in the field access promising products and technologies.
Australia is a focus for parasite research and a number of public sector organisations there continue to work on long-term programmes aimed at the development of vaccines against key parasite targets. Novartis is involved in a major collaboration with researchers at the Victorian Institute of Animal Science (VIAS) and the UK institutes Babraham and Moredun, aimed at the development of anthelmintic vaccines, for example.
As so often, public sector research has provided a platform for the development of commercial organisations focused on immunological approaches to parasite control. Vaccine Solutions, a joint venture between the Australian company, CSL, and the Queensland Institute of Medical Research, lists development-stage vaccines against cattle tick fever and liver fluke in its portfolio, while in Ireland researchers from University College Dublin and Dublin City University teamed up in 2002 to found Ildana Biotech – a start-up focused on the development of a liver fluke vaccine that yielded promising results in trials undertaken by the two institutions recently.
Efforts to develop vaccines against major companion animal parasites, including heartworm and fleas, have been under way for many years, but have yet to yield successful results. A few animal health companies have retained interests in the field, however, and a handful of commercial research-based organisations continue to work on heartworm or flea vaccine development projects.
Vaccines against a few parasites – notably the lungworm, Dictyocaulus viviparus, have been developed successfully using conventional approaches, while a genetically engineered vaccine against the cattle tick, Boophilus microplus, was brought to market by Biotech Australia in the mid-1990s as a result of work with the Commonwealth Scientific and Industrial Research Organisation (CSIRO).
Effective vaccines against key parasites such as fleas, helminths, heartworm and fluke remain illusive, however, and while new technologies offer potentially promising new approaches the complex nature of target parasites and parasite antigens has defeated many commercial projects. Optimistic forecasts made in the mid-1990s about the likely timeline for the introduction of commercial products have proved wide of the mark and it has become clear that researchers are in for a long haul.
Bayer, Intervet, Merial, Novartis and Schering-Plough are all thought to have retained some interest in the development of parasite vaccines. Bayer, Novartis and the Japanese company, Eisai, all entered agreements with Heska (US) in the 1990s relating variously to the development of vaccines against canine and feline heartworm and fleas. Bayer and Eisai have withdrawn from their respective collaborations, however, and while Heska's agreement with Novartis runs to 2005 the companies are believed to have ceased active development work on former candidate vaccines. The Australian biotech company, Novogen, also shelved its involvement in work on the development of a tick toxin vaccine developed by researchers at the University of Technology in Sydney, following disappointing results from trials undertaken in the late 1990s.
Novartis has also withdrawn from a tie-up with the UK company, Evolutec, covering the use of molecules derived from tick saliva in the development of tick vaccines. Evolutec continues to pursue work on this project, however, and trials with a candidate vaccine are being conducted in Africa. Work is also underway to determine whether the vaccine can protect against the transmission of tick-borne viruses.
1.3.5 Growth promoters/performance enhancers
Traditional methods of livestock performance enhancement have focused on the administration of hormones or sub-therapeutic doses of antimicrobials. Several products in both categories have been withdrawn in the EU, however, and commercial prospects for remaining products are limited (see 1.3.3 above).
Somatotropins emerged as a potentially lucrative new class of livestock performance enhancers in the 1980s, but became embroiled in a political debate that all but destroyed their commercial prospects. A moratorium on the use of these products is still in place across the EU, and Monsanto is the only company to have generated substantial revenues from a somatotropin-based product. Its Posilac bovine somatotropin has been sold in the US since the mid-1990s, but generates limited revenues in other markets.
Somatotropins for use in other species have received a slightly less negative press, and products for use in pigs and horses have been commercialised in Australia and a number of other markets. Alpharma's decision to acquire the Australian porcine somatotropin specialist Southern Cross Biotech looks increasingly like a costly mistake and significant investment by other leading animal health companies in the sector is unlikely.
With clouds hanging over the future of anabolic and antibiotic growth promoters and widespread take-up of somatotropins seemingly ruled out, the search is on for alternative methods of livestock performance enhancement. Some of these, such as probiotics, have been around for a number of years, but other novel approaches are also being pursued. This is one of the few research areas in which investors include animal nutrition specialists as well as mainstream animal health companies.
Among the most interesting approaches being pursued is the production of transgenic feed crops containing proteins or enzymes that enhance the performance of food animal species in a similar manner to subtherapeutic antibiotic treatment. Several specialist "biopharming" companies were established during the 1990s. Their aims include the development of plant-derived therapeutics and vaccines or the provision of industrial-scale amounts of target proteins for use by commercial partners in the development of human or animal health products.
ProdiGene, which has been working on the development of "edible" vaccines for use in animals since its inception in 1996, is also running a food animal performance enhancement programme in collaboration with an unnamed animal health partner. The Texas-based company believes that opportunities arising from applications of its technology to animal feed and production may eventually outweigh those in the field of veterinary vaccines.
Ventria Bioscience, a California-based biotech company founded on a proprietary protein expression system (ExpressTech) applied to transgenic rice, wheat and barley crops, is also pursuing applications in animal feed and production. In 2002, researchers from the company published the results of trials with two recombinant proteins, lactoferrin and lysozyme, fed to broilers.
Three groups of broilers were fed, respectively, antibiotic-free diets, rations containing subtherapeutic antibiotic doses, and a regime including recombinant lactoferrin and lysozyme. The researchers said birds fed on a diet containing lactoferrin and lysozyme showed improved gut health, lower feed intake and productivity improvements averaging 6.25% more than untreated controls, and that performance was equivalent to birds receiving rations containing an antibiotic growth promoter.
Ventria said that in the light of successful results achieved in poultry the technology would be trialled in other food animal species, including pigs, turkeys, beef cattle and dairy cows. The company aims to scale-up manufacturing of the proteins and launch commercial products in collaboration with an unnamed partner within two years.
Biological approaches to performance enhancement are also being developed. Through its VectoGen subsidiary, the Australian company, Imugene, has acquired exclusive global rights to productivity enhancers developed by researchers at the Commonwealth Scientific and Industrial Research Organisation (CSIRO). The products, which have been trialled in poultry and pigs, comprise cytokines delivered using an adenoviral vector system. By boosting the natural immune system and increasing protection against disease, these have been shown to improve growth and weight gain in treated animals.
In trials, a cytokine-based productivity enhancer delivered using the adenoviral vector system increased weight gain in treated poultry by 10%. VectoGen is also working with three cytokines that have potential for use as performance enhancers in pigs, where trials have shown improvements of up to 8%. Imugene signed two evaluation and sublicense agreements with Merial concerning its cytokine-based poultry productivity enhancers in September 2002.
1.3.6 Vaccines
Recent advances in biotechnology and genetics have opened up a number of possibilities for the development of new and improved vaccines, including products containing live genetically-modified organisms, sub-units of pathogenic organisms, DNA-based vaccines and synthetic vaccines. A number of vectored vaccines, gene-deleted ("marker") vaccines and sub-unit vaccines have already been commercialised for use in veterinary medicine. Other products using these techniques are in development, while DNA and synthetic vaccines are also being researched.
All of the major players in the veterinary vaccines market are involved in research alliances targeting novel products and the development of technologies that will improve both new and existing products. These include vaccine delivery systems and adjuvant technologies, which are especially relevant where DNA vaccines are concerned (see 1.3.7). Several agreements are noted in profiles of immunology research specialists such as Avant Immunotherapeutics and Imugene.
Avant is working on the development of several human-use vaccines based on patented gene modification technology acquired through its 2000 purchase of Megan Health. Exclusive rights to animal health and food safety applications of the technology have been licensed to Pfizer in a deal worth more than $5 million in equity and up-front payments alone.
The Australian company, Imugene, has established collaborations with two other veterinary vaccine specialists, Merial and Intervet, based on an adenoviral vector technology platform licensed from the CSIRO by its VectoGen subsidiary. The deal with Merial includes options to use the vector as a delivery vehicle for swine vaccines, while Intervet is evaluating a vaccine against Actinobacillus pleuropneumoniae in development at VectoGen. The Dutch company has global rights to distribution and marketing of the product as a result of the tie-up.
Immunological approaches are expected to play a much broader role in the treatment and control of disease as a result of new and emerging technologies in the field. Potential developments are discussed under appropriate headings in this review.
1.3.7 Adjuvant technology
Adjuvants are used to potentiate attenuated vaccines by acting as a slow-release deposit for antigens at the injection site or by stimulating an enhanced immune response. Sub-unit and recombinant sub-unit vaccines are also heavily reliant on adjuvant systems in order to deliver required levels of efficacy.
Aluminium salts and mineral oil emulsions have traditionally been used to potentiate attenuated vaccines. They often cause modest reactions at the injection site, however, and may result in persistent tissue lesions. Veterinary vaccine manufacturers have come under increasing pressure to improve adjuvant technology, both from food processors and retailers concerned about injection site lesions or potential residues from chemical adjuvants, and from the veterinary profession and companion animal owners concerned about possible links between multiple vaccinations and health problems – especially in cats.
Advances in the understanding of the immune system and the processes involved in eliciting an immune response have driven the development of novel adjuvant systems and adjuvant technology over the past decade. Several leading veterinary vaccine manufacturers have commercialised new proprietary adjuvant systems, which have been applied to a range of existing attenuated vaccines in their portfolios. A number of specialist biopharmaceutical companies are also actively pursuing the development of adjuvant technology platforms, many of which have potential applications in the animal health sector.
The US company, Galenica Pharmaceuticals, has developed and patented a series of adjuvant families for application to novel vaccines against cancer and a range of infectious diseases. Galenica is running a number of in-house vaccine development programmes, but has also licensed out rights to its adjuvant products. Agreements in this respect include a deal struck with Pfizer in 2001 under which Pfizer was granted exclusive global rights to the application of Galenica's GPI-0100 adjuvant series in companion animal and livestock vaccines.
The GPI-0100 platform is based on semi-synthetic compounds derived by modifying natural saponins. A product with similar roots is the QA-21 (Stimulon) adjuvant developed and patented by Aquila Biopharmaceuticals. Based on saponins purified from the bark of the Quillaja saponaria tree, QA-21 was applied to a recombinant sub-unit vaccine against feline leukaemia (FeLV), developed by Aquila and commercialised by Virbac as Leucogen.
Aquila was acquired in November 2000 by the New York-based immunotherapeutics research specialist, Antigenics Corp, whose target was Aquila's QS-21 adjuvant technology platform. Royalties from sales of the Leucogen FeLV vaccine and payments from pharmaceutical partners that have licensed the QS-21 adjuvant platform account for the bulk of Antigenics' revenues.
Most other leading veterinary vaccine manufacturers have pursued access to novel adjuvant technology, and Novartis – which engineered an entry to the biologicals sector through a series of recent acquisitions – was quick to join the hunt for immune stimulant products. The Swiss company replaced Heska as a partner for Corixa's leishmaniasis vaccine technology licensing agreement in 2001. The deal includes the use of LeIF as a vaccine adjuvant and stand-alone vaccine against canine leishmaniasis.
Kieran Murphy, who headed up the Novartis veterinary vaccines business at the time of its deal with Corixa, is now director of business development at the privately-held UK company, Adprotech, which has licensed its Immudaptin adjuvant technology to a number of human pharmaceutical partners. Adprotech does not list animal health companies among its current collaborators, but has been approached by more than one veterinary vaccine specialist in the recent past.
1.3.8 Food safety products
Viral or bacterial contamination of animals and food products can cause outbreaks of food poisoning in consumer populations. The actual incidence of food poisoning is difficult to gauge because many less serious episodes go unreported, but US health authorities estimate that in that country alone there are 76 million cases of food-borne disease per year, leading to 300,000 hospitalisations and 5,000 deaths annually.
Heightened awareness of food-borne infections and efforts by public health authorities to reduce the incidence of such disease has prompted an increase in efforts to develop food safety products. Several companies brought food safety vaccines to market in the 1990s, while other approaches to the control of food-borne infections are also being pursued.
Megan Health (US) was among those to develop and commercialise food safety vaccines for use in animals. The company was acquired by Avant Immunotherapeutics in December 2000, however, and sales of Megan's Salmonella vaccine, MeganVac 1, are now booked by Avant. Megan had a number of other food safety vaccines in development at the time of its acquisition, but Avant has no interest in pursuing these projects in-house. Rights to veterinary and food safety applications of Megan's vaccine technology have been licensed by Avant to Pfizer, and Avant has licensed North American distribution and marketing rights for MeganVac 1 to Lohmann Animal Health.
Other new technologies and applications offer potential improvements in food safety through the establishment of more complete traceability systems for livestock and food products. The German biotech company, November AG, has developed biological labelling technology that promises to bridge existing gaps in traceability and quality assurance schemes, enabling the rapid identification of animals or meat/dairy products throughout the food chain.
November's technology is based on the subcutaneous injection of animals with synthetic peptides that induce a specific antibody response. Antibodies can subsequently be detected using routine ELISA testing. The technique offers additional possibilities, including encoding and subsequent verification of quality data relating to methods of production, quality standards or branded product ranges. It could also be used to differentiate between vaccinated and non-vaccinated animals. November has established alliances with the German food safety inspectorate and the vaccine manufacturer, Riemser Arzneimittel AG, in respect of this biological labelling technology.
1.3.9 Control of reproduction
Hormone-based products for the control of animal reproduction and associated behavioural problems generate substantial revenues in both the livestock and companion animal sectors, but their role has traditionally been confined to the treatment of reproductive-related health problems or the control of ovulation. Surgical sterilisation (castration) of male stock is practised widely in food animal species, while castration and spaying also represent the most common means of contraception in small animal populations. It has been estimated that around three-quarters of all cats and half of all dogs in developed markets are sterilised permanently through surgical intervention.
New technologies, including delivery and formulation expertise and immunology, promise improvements on existing products used to control animal reproduction, and to offer alternative – and in some cases reversible – methods of contraception. Interest in non-surgical contraception products for use in dogs and cats is especially widespread, and several research specialists are working in this field. Developments are being monitored closely by a number of leading animal health companies and six of the 20 leading players in the industry were represented at a symposium on non-surgical contraception for pets held in the US during the first half of 2002.
Several different lines of research are being pursued, and products currently in the pipeline promise variously to offer either reversible or permanent sterilisation and treatments applicable to males, females or both sexes. Analysts believe that there will be room for a variety of approaches in the marketplace, due to the various needs of individual owners, specialist breeders and organisations charged with feral population control. Attractive prices should also be available for the first products to reach the market, since established surgical sterilisation techniques are not cheap. The market for these products could be worth in excess of $100 million a year in the US alone.
Peptech is closest to market, having filed for approval of its deslorelin-based reversible canine contraceptive implant with authorities in Australia and New Zealand during 2002. Dossiers have been submitted in respect of a six-month formulation that will be commercialised under the Suprelorin trade name, but the company is already working on a product with 12 months' duration of activity. It is also trialling Suprelorin as a therapeutic for the treatment of benign prostatic hyperplasia and incontinence in spayed bitches, and potential applications in wildlife species are under review. Peptech is expected to announce a tie-up for Suprelorin with a major animal health partner in the first half of 2003.
Another company looking for partners is the Canadian biotech specialist, Immunovaccine Technologies, which has filed for US approval of its SpayVac liposome-based contraceptive vaccine in deer. SpayVac products are also being trialled in a number of other wildlife species, but studies underway in cats and horses will be monitored most closely by potential animal health partners, since this is where more significant revenue potential lies.
Elsewhere, the privately-held US company, MetaMorphix, is conducting trials with a recombinant GnRH vaccine in cats, while several other US companies are developing either reversible or permanent castration products. Gonex is working with an injectable product for permanent sterilisation that has been trialled in adult male dogs, while Thorn BioScience is believed to be pursuing reversible implant technology. Thorn has already developed an equine fertility implant that is essentially similar to Peptech's Ovuplant product.
1.3.10 Cancer treatments
In human medicine, the treatment of cancer lags far behind therapy for the developed world's second major killer, cardiovascular disease. As a result, the field is a major focus of research in both the academic and commercial sectors. Recent advances in molecular biology, immunology and related fields have enabled a much better understanding of the mechanisms involved in tumour formation.
It is hoped that these advances will eventually provide the basis for the development of improved methods for the prevention, diagnosis and treatment of cancers. In the shorter term, efforts are being made to develop new therapies and more efficient methods of delivering anti-cancer drugs that will both improve survival rates and reduce the side effects that accompany current treatments.
Striking similarities exist between cancers in humans and those observed in cats and dogs. They also exhibit similar responses to many traditional cancer treatments. This has led to two trends: first, the widespread use of companion animal (usually canine) models in studies of development-stage therapies for human cancer treatment; and second, demand for access to human cancer drugs by an increasing number of companion animal owners.
The links between research in the human and veterinary fields are so close that many specialist researchers are appointed jointly to posts in both the medical and veterinary schools at universities in the US. The US is also the country in which demand for increasingly complex companion animal treatments is at its most advanced. Effective companion animal cancer treatments, while expensive, would generate significant sales in the US and a number of other developed markets.
This fact has not escaped the animal health industry and several of the leading companies in the sector are already involved, either in funding academic research that may eventually give them preferential access to potential new treatments or in more substantive alliances with academic or commercial organisations that have developed promising products or technologies.
Gene therapies and gene-based therapeutic vaccines are among the most common approaches being pursued in cancer research. Several animal health companies have tapped into this work, purchasing rights to veterinary equivalents of human product candidates or, in some cases, products in development exclusively for use in companion animals.
Closest to market is Heska Corp, which has licensed gene delivery and DNA manufacturing technology from the California-based biotech company, Valentis. Heska has predicted that it could have a canine cancer therapy on the market before the end of 2003 as a result of the collaboration. The product, which contains two immune stimulants – Staphylococcus aureus enterotoxin A superantigen (SEA) and canine interleukin-2 (IL-2) – has been trialled with encouraging results in canine soft tissue sarcomas, and further studies are under way in dogs with oral malignant melanomas.
Intervet has also taken a stake in the cancer gene therapy market, purchasing rights to a therapeutic cancer vaccine in development at the UK company, Oxford BioMedica (OBM), in a deal announced at the beginning of 2003. OBM's TroVax product, which comprises the tumour-associated antigen, 5T4, is delivered using a modified pox virus vector. It is designed to stimulate the host immune system to recognise cancer cells and mount a powerful anti-cancer response. TroVax-VET contains the canine and feline analogues of a gene encoding the 5T4 tumour-associated antigen.
1.3.11 Botanical pharmaceuticals
A substantial proportion of the synthetic or semi-synthetic chemotherapeutic drugs that dominate modern pharmaceutical treatments are derived originally from active substances isolated in plants. Computer-generated drug discovery and other techniques developed towards the end of the 20th Century signalled a move away from reliance on the natural world as a source of new active ingredients. Plant-derived products continue to have a significant impact, however, and if further proof of the commercial potential inherent in botanicals were needed, then the taxane cancer therapeutics provided it.
The active substances on which the taxane drugs are based were isolated from the Pacific yew tree, Taxus brevifolio, during the 1960s. Their subsequent development as cancer treatments with a unique anti-tumour mechanism is without doubt the biggest success story for plant-derived drugs in the past 50 years. Paclitaxel, commercialised by Bristol Myers Squibb as Taxol, generated peak global sales of almost $1.6 billion in 2000.
Success on that scale has inevitably fuelled interest in the discovery and development of so-called botanical pharmaceuticals and a number of companies are focused entirely on activity in this field. Most employ cutting-edge technology for the identification and isolation of compounds with potential therapeutic applications, but many have also established links with companies or organisations in countries where traditional plant-based medicines have retained a significant role in disease treatment. These agreements have yielded both knowledge and, more directly, concrete product leads.
The UK company, Phytopharm, established a joint venture with Phytochemindo of Indonesia in the second half of the 1990s. This venture was directly responsible for the emergence of Phytopharm's non-steroidal anti-inflammatory candidate, P54. This is one of two botanical compounds in the company's portfolio that are being developed for veterinary use as well as human therapeutic applications. The veterinary-use candidate, P54v, yielded promising results in a double-blind placebo-controlled trial and the company is pursuing further development of the product. Phytopharm has also conducted extensive trials on a candidate for the treatment of canine atopic dermatitis (see Phytopharm profile).
Few other botanical drug discovery and development companies appear to be actively pursuing veterinary applications of therapeutic candidates. That is not to say that they do not have potential for use in animals, however, and since a significant proportion of companies involved in the sector are relatively young start-ups, additional funds from veterinary licensing opportunities would probably be welcomed.
1.3.12 Drug delivery and formulation
Oral and injectable methods of drug delivery have traditionally dominated both animal and human health, but alternative methods of delivery have been developed for a variety of reasons. In the livestock sector, new delivery technologies have been driven largely by a desire to reduce the labour-intensive nature of large-scale herd or flock treatments. In companion animal medicine, new technologies have been applied in order to make treatments more user-friendly for both pets and owners as well as veterinary surgeons. Significant innovations commercialised over the past two decades include intra-ruminal bolus products for cattle and spot-on or line-on delivery of products for use in both livestock and companion animals.
Many drugs are effective only when delivered via subcutaneous, intramuscular or intradermal injection and a substantial proportion of drugs administered in both human and animal medicine are still delivered by injectable routes. Injectable delivery brings with it attendant disadvantages, however. In animals, these include injection site reactions, while in humans, needle phobia can be a problem. Operator injury – either through accidental self-injection or injuries caused by discarded needles – is a concern in both sectors.
These problems have driven efforts to develop needle-free injection systems. Commercial devices for needle-less delivery of insulin in human patients have been available for some time, and devices for the delivery of other human drugs have also reached the market.
In December 2001, the privately-held US company, Felton International, received FDA clearance to market a needle-free jet injection system for the delivery of vaccines to pigs. Sold as Pulse 200, the system is based on technology acquired by the company from Russia in 2000. Seaboard Farms, a major integrated pork production and processing group, began using the Pulse system in June 2002.
Felton is working on the development of needle-free injection devices for use in the dairy and beef cattle sectors, and has also announced plans to address the human health market. It has received clearance from the FDA for a proprietary needle-free system with applications in the delivery of human drugs.
Most other companies working on needle-free delivery systems are targeting the human health market, but a number of devices have the potential to be adapted for use in veterinary medicine. Bioject Medical Technologies (US), which has licensed its proprietary system for use by human health partners, entered an exclusive licence and supply agreement with Merial in August 2002, under which the technology will initially be applied to Merial's livestock vaccines. Its eventual use in the delivery of pharmaceutical products is also covered by the terms of the agreement.
Advances in formulation technology have had a major impact on both the human and animal health sectors over the past 20 years, encouraging the use of new and improved drug delivery methods that enhance the commercial prospects of established products (notably those facing competition from generics) and enable the commercialisation of active ingredients that might previously have been impossible to develop as safe and effective treatments.
The latter is an increasingly important factor in drug development, since the solubility of many potential drug candidates identified during the screening process is so low as to render them non-viable as commercial propositions. Candidate compounds with poor solubility might previously have been rejected by researchers keen to avoid problems in the development of a viable drug. New formulation technologies are now offering solutions to these problems by improving the solubility, stability and many other characteristics of "problem" active ingredients.
The use of cyclodextrins to enhance the solubility of active ingredients is an area of particular interest. Cyclodextrins are cyclic carbohydrates derived from starch, which possess exterior hydrophilic surfaces and an interior hydrophobic cavity that provides an environment in which a poorly-soluble active ingredient can be isolated from aqueous solvents, increasing levels of water solubility and stability. These beneficial properties are being exploited increasingly in a variety of industrial sectors, including pharmaceutical development.
The Kansas-based drug delivery specialist, CyDex, is one of several companies that have patented and commercialised technologies based on the application of cyclodextrins to pharmaceuticals in order to enhance levels of solubility. CyDex has licensed its proprietary technologies, which include the Captisol system, to a number of partners, including Pfizer, which in 2002 was granted US FDA approval for two drugs produced in Captisol-Enabled formulations.
Pfizer's human pharmaceutical research arm has had links with CyDex since the early 1990s, but in 2002 Pfizer Animal Health announced that it had licensed the Captisol formulation system for application to development-stage veterinary medicines. Details of the products to which the technology will be applied were not revealed by Pfizer, but they are thought to be in pre-clinical rather than clinical development and, as such, are almost certainly several years from the market.
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