We should not give up on developing a MLV vaccine for ASF.

In recent meetings with R&D leaders of domestic and international animal health companies in China, the topic of a modified live virus (MLV) vaccine for African Swine Fever (ASF) was often discussed. Most of these company leaders do not believe that an MLV vaccine will be approved by the Chinese regulatory agency anytime soon. The major concern is the safety of MLV vaccines.

The danger of an ASF MLV vaccine has been clearly demonstrated by the unauthorized introduction of various attenuated ASF viral strains as experimental vaccines in China in the last few years. These “less-virulent” MLV strains caused more damage than the wildtype ASFV because the disease became clinical when pigs grew older and were stressed.

However, we should not give up the hope that a safe and efficacious MLV vaccine for ASF is possible. Afterall, the safe and efficacious C-strain Classical Swine Fever (CSF) vaccine is an MLV vaccine and it has been successfully used to control CSF in many countries in the last few decades. Because MLV vaccines are often administered once and are more efficacious (quicker onset of immunity and longer protection) than subunit vaccines, they are usually a more cost-effective tool for infectious disease prevention and control compared to other types of vaccines. If an MLV ASF vaccine has a similar level of safety and efficacy profile as the C-strain CSF vaccine for CSF, it should be approved for use in ASF control and prevention.

Jishu Shi

In this space last week, Bob Jones published a thought-provoking Viewpoint on the topic of FDA Animal Drug User Fees. He asked if readers felt that the User Fee amounts are reasonable. Not surprisingly, 57% said the fees are too high.

I recently read “Flying Blind: The 737 MAX Tragedy and the Fall of Boeing” by Peter Robison. Robison outlined the issues regarding the 737 MAX and the accidents that resulted. A recurring theme is the policy of the Federal Aviation Administration (FAA) to “outsource” oversight of airplane development to the manufacturers themselves. Boeing made decisions about the development of this plane and the training for its pilots that would have been visible to a competent and independent regulator; unfortunately, the FAA lacked the understanding to challenge these decisions and 346 people died in 2 crashes, resulting in the grounding of the airplane and one of the costliest corporate scandals ever.

So…what does this have to do with Animal Health? The industry agreed to support CVM’s efforts through the User Fee system maintaining expertise and providing for certainty in the review process. Yes, it can take a lot of money to register a new compound or a new generic drug; however, the regulatory system continues to help our industry maintain a position in our society that we can be proud of. And that has a value that is certainly real.

Jim Kroman

Do high FDA Animal Drug Users Fees slow innovation in animal drugs?

Each year the FDA ADUFA/AGDUFA fees change due to inflation, workload, and prior year excesses or shortfalls in collections.  Starting in October, New Animal Drug Applications will require a $659,364 check and a supplemental application will need a $329,682 check, 13.5% more than last year.  A generic drug ANADA will need a $494,983 check in 2023, down from $548,628 in 2022 due primarily to excess collections in 2021.  That’s a lot of money and it must impact innovation.

Some interesting information on innovation comes from the workload calculation.  The average number of NADAs submitted over the last 5 years (ending May 2022) is 12.8, which is down 22% compared to the 5 years ending September 2018, which had an average of 16.4 applications.  The FDA expects 5.25 NADAs in 2023.  Comparing these same 5-year periods to each other, supplemental applications are down 22% also, investigational study submissions are down 7%, manufacturing supplements are up 4% and investigational protocol submissions are up 1%.  This all leads to an overall 4.5% reduction in workload, which doesn’t reflect well on innovation.

However, the workload for Generic Animal Drugs is booming – it’s up 77%. Over these same two 5-year periods, ANADAs are up 12.5% (27 vs 24), generic investigational study submissions are up 125%, generic investigational protocol submissions are 77% and manufacturing supplements are up 30%.  The FDA estimates that in 2023, there will be 11.6 full fee ANADAs filed, double the NADAs filed.

So, less risky, cheaper generic drug development has replaced more risky, expensive new drug development.  There are provisions for fees to be waived or reduced if the product is deemed to be innovative and that the fee would be a significant barrier to bringing the product to market.  The number of NADAs that were filed with the FDA and had the fees waived is not published by the FDA – we assume it is insignificant.

This is the last year of ADUFA IV and negotiations are underway now for ADUFA V, which would begin in FY2024.  Let’s hope its structured to drive more innovation.

Bob Jones

In recent weeks I have been visiting corporate offices and cannot help but notice how empty some of them are. As we recover from the pandemic and are now in the endemic part of the story, will there ever be a return to the days when people went to offices to work and did not operate in the virtual Zoom world. While many people I asked desired a return to that environment, they were also quick to point out the joys of flexible work arrangements – especially those with long commutes. And no doubt the cost of gasoline is now replacing Covid as a reason not to drive to the office every day. In the end, will companies and employees come to an appropriate compromise that encourages good work performance- while meeting the new expectations for the remote work opportunity?

Another observation is that the last couple of years has made many of you think differently what a ‘successful’ career would look like. Work/life balance was really brought back into perspective and many people have reengineered what they are defining as success. How about you? It’s perfectly natural to stop and see if you are headed where you want to be after what we’ve been through. If you haven’t done this in a while, it’s always good to stop and really look hard at your career/life balance and make sure you are headed where you want to go. And you may be surprised by the outcome!

Paul Casady

We have had a few consulting projects lately where we reviewed how the top global animal health companies have grown.  So when I saw an article from McKinsey entitled, “Choosing to grow: The leader’s blueprint”, I was curious to see what the world’s largest consulting company had to say.

The authors use data from their research to describe how growth leaders, those that purposely choose to grow, are different than those that just pay lip service to growth.  Their blueprint has three parts: (1) Set an aspirational mindset and culture, (2) Activate pathways, and (3) Execute with excellence.  Even the authors thought these are timeless and holistic.

The Activate Pathways part has three parts, which made me think of the fast-growing animal health companies.  They are (1) Expand the core, (2) Innovate into adjacencies and (3) Ignite breakout businesses.  Successful examples of these in animal health can be seen, like Zoetis growing its core parasiticide and dermatology businesses and moving into diagnostics.  Or Merck AH’s innovative step into the animal digital technology world.

The authors conclude, “Making the conscious choice to grow creates powerful momentum that orients the entire business toward that goal.  The clarity of purpose and vision that comes from choice is what helps leaders and their teams believe in the seemingly impossible and make it happen.”

Bob Jones

The financial markets have taken a beating thus far in 2022.  The Dow Jones Industrial Average has declined -14%, while the S&P 500 Index is down -18% YTD.  Perhaps indicative of the animal health segment, PAWZ, the Petcare ETF that tracks the animal health industry, is down -30% YTD.  Ouch.

The Fed recently raised its benchmark interest rate by 75 basis points with more hikes likely to come, so the days of “free money” or inexpensive borrowing are over.  This can potentially have long term impacts on innovation in the animal health industry.  The industry depends not only on the big companies (Zoetis, Elanco, Merck and BI) who have well-funded R&D organizations, but also on hundreds, if not thousands of small start-up companies for innovation, where access to cash is critical.

Investment capital and borrowing is needed by start-ups and early-stage companies to fund operations and growth.  It remains to be seen how venture capital along with increased borrowing rates will impact the funding of innovation.  Moreover,  increased interest payments combined with reduced margins due to inflation may impact nascent companies in tenuous cash flow situations.

Innovation is critical to address the many unmet animal health needs both in terms of products and technologies.  If your company needs help making decisions about innovation and funding, we can help.

Randy Freides

This week’s news includes an announcement of a partnership between Kimpton Hotels and Wag! to offer dog walking services at Kimpton’s US hotels. Last week Mars Petcare and Hilton Hotels announced that guests at many of Hilton’s hotels will be able to access virtual support for questions about traveling with pets. Traveling with pets has become commonplace: a recent survey conducted for Hilton found that 55% of pet owners with summer travel plans intend to travel with their pet. Another survey sponsored by Wag! found that 70% of pet owners say they almost always seek out pet-friendly hotels, and 94% would trade away at least one common amenity in exchange for more pet-friendly policies. According to Hilton, 85% of their hotels are pet-friendly, so they seem poised to capitalize on this trend.

I’ve never personally vacationed with my dog (or cat), but I know many who have.  A good number of those chose to go the Vrbo/Airbnb route because those offerings tended to be more pet-friendly. Hotels seem to be determined to win some of that business back; time will tell if the new pet-centric offerings swing the momentum back their way.

Have a great Independence Day holiday, and be safe!

Lynn Fondon

This week’s newsletter is chock full of items about new technologies, new products, new investments, new initiatives, and new collaborations – strong evidence that these are exciting times in animal health.

But not everything in our industry is bullish.  The University of Minnesota recently published market research that showed the strength of the plant-based movement.  31% of consumers said they would eat more plant-based protein over the next 5 years, and 36% said they were concerned about the environmental impact of animal production.  Although 80% said they preferred beef, pork and poultry as their protein sources, 20% did not.  To me, these data are surprising, and sobering for animal agriculture. And they don’t even address the growth in milk substitutes!  While I support people’s right to choose plant-based diets, we have to keep in mind that they reduce demand for meat, and thus animal health products.  It motivates me to grill some steaks this weekend.  You know, to help the industry.

John Volk, Senior Consultant

The first commercially available African Swine Fever (ASF) vaccine in the world is currently being field tested for safety and efficacy in Vietnam. While this is an important milestone in ASF control and prevention, we should be aware that this is a modified live virus (MLV) vaccine and a DIVA (differentiate infected from vaccinated animals) diagnostic assay that can distinguish vaccinated pigs from those infected with wildtype ASF viruses has yet to be developed.

To effectively control and eradicate ASF, researchers should continue to develop subunit (proteins and peptides) and nucleotide (DNA and RNA) vaccines that are inherently safer and DIVA compatible. DIVA assays are extremely useful for the control of a newly emerging infectious disease or a foreign animal disease as they can enable the “vaccinate-to-live” strategy by which vaccinated animals can be raised and processed for food production and consumption and/or sold into international trade.

In addition to making safe and efficacious ASF vaccines affordable and available worldwide, we should also prioritize R&D efforts to increase our understanding of ASFV virus survival in the environment and evaluate low-cost and environmental-friendly virucidal disinfectants under field conditions.  It has taken a long time to get this far with an MLV vaccine for ASF and let’s hope DIVA vaccines will be field tested soon.

Jishu Shi

This week’s newsletter contains several announcements that are straightforward alone but indicate some significant shifts when taken together.  Mars Petcare (owner of VCA and Banfield) announced a significant study that would generate physiological metadata from 20,000 pets. This data could provide strong synergy to the Mars investments in genetics made in recent years. Another Mars subsidiary, Antech, has announced an expanded relationship with cancer test maker PetDx to make the OncoK9 test available to all Antech customers, broadening the reach of this testing technology. Finally, PetSmart has announced a program that will enable independent veterinarians to open a franchised practice in PetSmart locations. Until now, the Mars subsidiary Banfield operates most vet clinics in PetSmart retail locations.

We’ve all watched our industry embrace investments in genetics in a very long-term process with very few obvious near-term benefits. It’s too soon to tell, but the Mars Petcare Biobank could mark the beginning of the next phase where genetics begins to be more closely integrated into normal veterinary practice. In addition, PetSmart’s announcement that they will be opening a program to encourage and develop more independent ownership of in-store clinics provides yet another pathway for veterinarians to find a blend of “old style” clinic ownership with the benefits of the corporate business model that has swept the industry in recent years.

We, like you, will eagerly monitor the changes in landscape as they occur, and we’ll try to help us all make sense of the opportunities.

Jim Kroman