As my colleague Bob Jones shared recently, we attended the Kiasaco Animal Health conference recently in London. It was very well attended and kudos to organizing in conjunction with an executive meeting for Health For Animals, which as a result meant a lot of the company CEO’s were in attendance.

The program was very good, but there was some concern over the consolidation of these sort of events, and also the availability of general market information. Dominant companies may show predatory behavior in pricing, or simply cancelling out anyone they perceive as competition. For example, you can no longer subscribe to the old ‘Animal Pharm’ newsletter, if they deem you as competition. One of the only real global market surveys, CEESA, is only available to subscribers that have sales.

While this may have made some sense in the past when we were a ‘cottage industry’, today we have a >$40B industry with large, publicly traded companies. And we are attracting serious interest from private equity and other sources of funding which is critical for investing in innovation.

My view is that we need to make industry events and market information more available so that we continue to support the growing interest and investment in animal health. What is your company’s position?

Paul Casady

Last week, Paul Casady and I attended the Animal Health, Nutrition & Technology Innovation Europe conference held in London.  We conducted two sold-out round table sessions on the topic, “From Startup to Grownup, Go To Market Strategies for Companies in the Animal Health Industry – and why It’s All About People”.  The Kisaco Research team produced the well-attended event, showcased 19 startup companies, and brought in some energetic speakers.

One of those speakers was Sven Smit, Chair of the McKinsey Global Institute (MGI), and he made everyone listening start to think about what’s next for the global economy.  He thinks the world is not just going through another business cycle, but is on the cusp of a new era, which is driven by the global pandemic, energy scarcity, rapid inflation and geopolitical tensions.  The data presented was taken from a new paper from the MGI and he highlighted three past eras: the Postwar Boom (1944–71), the Era of Contention (1971–89), and the Era of Markets (1989–2019).

The most remarkable part of his presentation was on energy systems and how utterly unprepared we are as a global economy to achieve net-zero and how utterly dependent the global economy, including animal, feed and food production, is on fossil fuels.  Mr. Smit wouldn’t speculate on a name for the new era and I won’t either, although if I did, it would have something to do with energy supply.

Bob Jones

Earnings season 2022 is behind us and believe it or not, earnings announcements for 1Q23 are right around the corner. The animal health industry’s growth was largely driven by the companion animal market as evidenced by the announcements by the largest companies where Zoetis, Merck, IDEXX, Virbac, and Dechra  showed above industry average growth. The livestock segment however, tempered the overall growth of the bigger companies, with the exception of Huvepharma and Phibro.

The livestock industry is looking at a cyclical slowdown and an important question is how long it will last. Will this cycle have an impact on innovation in the livestock segment? There is no doubt an ongoing need for products and services to be provided to livestock and poultry  producers to continue to drive increased efficiency and yields for the proteins that feed the world. We know the livestock industry will pay for innovation, but we are worried about the investment in innovation for livestock.

In recent years, both Merck and Zoetis have made significant investments into technology to drive efficiency. But we hope there is still investment in preventative and therapeutic products for livestock. We would like to see the livestock industry to remain a “star” and not become a “cash cow”.

Randy Freides

A couple of weeks ago, we reported in the newsletter about Arkansas’ efforts to legalize the use of Veterinary Technician Specialists (VTS) – a certification of advanced training – to handle some tasks that only licensed veterinarians can currently perform. Examples would include prescribing some drugs and performing minor procedures such as suturing.  The objective of the bill is to expand access to veterinary care in the state, which currently struggles with a shortage of veterinarians.

It’s a solution that follows the human model of using Physician’s Assistants and Nurse Practitioners to manage some of the routine care needs of patients. While in theory it would seem to offer a way for veterinary practices to be more efficient and see more patients, I wonder about the degree to which the veterinary profession would fully utilize this potential new resource.

Recently, we surveyed veterinarians as part of our annual industry overview, and asked what one improvement they could make that would most impact their practice productivity. The #1 response was to improve their staff utilization and training.  If veterinarians know that they aren’t getting the most out of the staff they have now, would anything change with the addition of VTS-certified staff who can perform higher-level tasks?  It may require more than just legally permitting technicians with advanced certification to take some of the load off of over-worked veterinarians; the profession may also need to shift the mindset of DVMs so they more consistently prioritize training for staff, and then empower the staff members take on new responsibilities within the practice.

Lynn Fondon

We are getting close to the end of earnings release season and with only a couple of the top companies left to report, it’s looking like the global animal health industry grew just a bit over 5% in 2022 versus 2021, correcting for exchange rates.  This seems like tepid growth compared to the growth in 2021, which we estimated was 12%, but in reality, we are back to normal growth rates now.

This topic and more were covered in our annual Industry Overview, which was presented this week and the Western Veterinary Conference held in Las Vegas.  Thanks to all those that attended the Overview during WVC and previously at the VMX.  Both conferences were very well attended, and the trade show floor seemed very busy – all seemed better than normal.

I would also like to thank all our panelists who offered their ideas on “Managing AH Companies in Times of Uncertainty” – at WVC, Nicki Baty, from Hill’s Pet Nutrition, George Fennell, from IDEXX, and at VMX, Scott Bormann, from Merck AH, Kurt Green, from Vetsource, and Kevin Pohlman, from Patterson.  If you attended Overview, I am sure you picked up some great insight, from managing people, supporting customers and strengthening supply chains thanks to these remarkable leaders.

Bob Jones

The item in this week’s newsletter from Arkansas discussing Certified Veterinary Technician Specialists (VTS) merits attention.  A bill has been introduced in the Arkansas legislature to give certified VTS’s the authority to prescribe certain drugs and to perform minor surgical procedures, similar to the scope of authority granted to nurse practitioners in human medicine.  It would require that the certified VTS would work for and under the supervision of a licensed veterinarian, and the supervising veterinarian would be required to personally see the treated animal within 15 days after the VTS has administered care.

The effort to educate veterinary technicians to a higher level and to allow them to become certified in areas of specialties has been ongoing for at least 20 years.  However, a successful legislative effort to empower technicians to expand their scope of practice and responsibility could substantially change the dynamic between veterinarians and certified VTS’s.

The shortage of veterinarians in rural areas has left Arkansas with the lowest ratio of veterinarians per capita at 14 veterinarians per 100,000 population.  Passage of this bill could result in critical relief to farmers and their animals as well as expand the availability of care for pets in places where veterinary care remains difficult to deliver.  Of course, it is to be expected that some veterinarians might see this effort as competition for the traditional veterinary practice.  And, as quoted in a recent article published in the Northwest Arkansas Democrat Gazette, Dr. Everett Rogers, president of the Arkansas VMA, said that there are currently no certified VTS’s in the state of Arkansas.  Any impact on accessibility of care would appear to be on a fairly long timeline.  We’ll keep you posted on this topic as there is more news to report.

Jim Kroman

The FTC recently proposed banning non-compete clauses in employment agreements to increase competition and provide career fluidity. The rule would end the practice, retract existing non-competes, and prohibit indicating that anyone is or may be subject to one. Stay clauses for a business sale are exempted. The federal rule would supersede all local rules.

Is this an issue in our industry?  CNBC reports that about 30M Americans are bound by non-competes, including 15% without a college degree and 14% earning less than $40k/yr.

Along with increased autonomy, proponents cite that executives have greater flexibility in circumventing non-competes. Employers will undoubtedly point to resultant cost increases.  Some estimate that salaries will rise by $300B. The Bureau of Economic Analysis recorded nearly $10T in 2020 salaries, making this a 3% impact. CNBC suggests that if confirmed, the ruling will be trimmed.

The legal profession has historically crafted employment terms to protect the hiring company.  The American Veterinary Law Association suggests that veterinarians’ best approach is to stipulate non-solicitation. Dr. Lance M. Roasa, a director at AVMLA, points to geographic and chronological constraints as the most reasonable, practical, and enforceable. Still, for the entire industry from those in the clinic to those serving and supplying them, the current tapestry of local rules draws intensive attention to this issue.  Given the corporatization and shortage of veterinarians and the relatively small animal health industry, this FTC proposal will impact our industry.

Jeff Santosuoss

In December, I attended the United Against Rabies(UAR) forum in Paris. Take look at their website. This group, which is supported by the FAO, WHO, and WOAH, uses a One Health approach in bringing together governments, vaccine manufacturers, researchers, NGOs and development partners around the goal of eliminating all human deaths from dog-mediated rabies by 2030. Up to 99% of human rabies infections are caused by a bite form a rabid dog.

Especially in developing countries around the world, domestic and feral dogs comingle with human population creating the opportunity for potential exposure. This group focuses on helping to develop global, regional, and local strategies to help countries conduct effective national campaigns to vaccinate as many dogs as possible, thereby reducing or eliminating the chance of disease spread.

This people are very committed and do some great work. I personally through the years have been to the Favelas in Brazil, the ‘squatter towns’ in the Philippines, and the Dharavi Slum in Mumbai. In each case you see the challenge for One Health commitment in the most difficult of conditions and I applaud the UAR effort.

The Animal Health Industry needs to be very active and committed to Veterinary Public Health. There are many ways to make an impact, talk to your company to see what is possible!

Paul Casady

Last week John Volk wrote about the unbelievable turnout at VMX with over 27,000 in-person attendees.  I certainly felt the optimism in the air at VMX but also sensed a cautiousness – can the animal health industry remain resilient in the face of economic uncertainty.

At the beginning of 2023, inflation was running at levels not seen in over 40 years.  The Fed is trying to cool the economy by increasing interest rates from near 0% at the beginning of 2022 to 4.5% today.  Talk of a recession is everywhere.

We are now starting to see the pain that rising interest rates, slowing demand and a recession will cause.  Amazon, Microsoft, Facebook, Google, Salesforce, Twitter and Goldman Sachs have all announced thousands of layoffs in the past two months.  Maybe these companies staffed-up too quickly during the pandemic and are now right-sizing, but this may be an omen of things to come.

But many vet clinics are as busy as ever and always appear to be in search of qualified candidates to fill openings for veterinarians and vet technicians.  We will review hiring issues, what veterinarians intend to in times of inflation and more at our annual Industry Overview at WVC on February 20th (sign up here).  We are hoping for another big, optimistic turnout at WVC – maybe that will be a good sign for 2023.

Randy Freides

Wow!  NAVC’s VMX veterinary conference in Orlando smashed all records this week with a reported 27,000 attendees.  That’s more than 10,000 more than last year’s registration.  The show was jam-packed with a record number of CE sessions, entertainment, and a huge exhibit hall.  Many of the exhibitors thought outside the box with novelties such as a roller-skating rink and free (real) tattoos.  (I admit that I took advantage of neither, thinking ahead to the possible reaction of returning home with a broken bone or body art.)  Kudos to Gene O’Neill and his team for a spectacular event.

The annual Brakke Industry Overview at VMX was standing room only as well.  Thanks to panelists Scott Bormann, Kurt Green and Kevin Polhman for their cogent remarks.  We had to turn several people away, so we hope you can join us for the Overview at WVC in Las Vegas.  This one you don’t want to miss.

John Volk