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Article: Maintaining solid levels of R&D will be critical to animal health's rebound
06 May 2020
As part of a free webinar from Kisaco Research, Animal Pharm
editor Joseph Harvey spoke to two of the animal health industry's
leading businesses about how COVID-19 has impacted strategy,
R&D and the overall veterinary sector. The article (dated
04/04/20) below also features a video of the panel discussion in
full.
Two leaders within the animal health sector both believe
companies should be preserving a constant flow of R&D, at a
time when many expenditures might be axed. However, it will be very
difficult for all firms to maintain the same level of pre-COVID-19
spending on developing new products.
Kathy Turner - corporate vice president and chief marketing
officer at IDEXX Laboratories - said: "Continuing to invest in
R&D is going to be critical and, certainly from an IDEXX
perspective, R&D and innovation is at the core of what we do as
a company.
"Everything we invest in is focused on what is medically
necessary to improve veterinary standards of care, whether that's
in our companion animal or production animal businesses. We will
continue to focus R&D on unmet clinical needs.
"Obviously, every company has to pick and choose where they're
going to be spending discretionary money or how they're going to be
investing in certain projects. I think the larger companies will
continue to do that. I would recommend the smaller companies do so
as well."
Ms Turner recommended firms should prioritize essential pipeline
projects that have a viable end-market or products that target
known unmet needs.
Zoetis executive vice president and president of international
operations Rob Kelly echoed Ms Turner's comments. He also pointed
out some companies will be in a better position to maintain R&D
expenditure than others.
Mr Kelly stated: "No company wants to make a short-term decision
on R&D that is going to have a long-term impact on the
business. Obviously, there's going to be an economic impact from
this that going to go on for some time. Some companies are going
into this with a stronger balance sheet position than other
organizations and other companies are more diversified. So, the
impact is going to vary.
"Across the industry, we're going to see some changes in how
companies focus their R&D efforts. There are some companies
where you're going to see little to no change at all. It will
really depend on their financial position.
"I can't imagine every company is going to be in a position to
maintain R&D expenditure levels of the last few years."
He also pointed out many regulatory authorities have shifted
their focus to respond to the challenge of COVID-19, which may slow
down the amount of product approvals for an interim period. Zoetis
is currently working with agencies around the world to prioritize
products of critical need that are in the regulatory pathway.
A recession-resilient industry
Mr Kelly suggested the opportunities for growth in animal health
are not going to change in light of the coronavirus pandemic. The
same unmet needs are still present and will remain relevant in the
years to come.
However, he suggested animal health businesses will be investing
more in geographic markets that have experienced a quicker recovery
from COVID-19. These include countries in northern Asia and
Australasia.
Mr Kelly also pointed out: "We're not a recession-proof industry
but we're more resilient to recession than other industries."
He said the consequences of COVID-19 will be felt more heavily
on the companion animal health sector than in the livestock space,
as treatments and vaccinations of pets decline.
The food animal market will see a shift to swine and poultry,
away from beef and dairy - something that tends to happen in most
economic crises, as consumers target cheaper protein sources.
Mr Kelly noted a particular challenge for the animal health
sector will be if any shutdowns of manufacturing facilities create
a shortage of vaccines. He said Zoetis has seen some reduced
capacity in some manufacturing sites. However, the firm has
maintained full supply of its products and has yet to close any of
its facilities.
Positive outlook
Both panelists were optimistic for the long-term growth
prospects of the animal health sector. Ms Turner suggested the
human-pet bond continues to get stronger and, during the current
crisis, the number of companion animal adoptions has increased and
animal shelters are largely empty.
"The industry is going to continue to grow," she told webinar
attendees. "Is it going to grow at the same rate? We can't answer
that. But is that demand going to continue to be there? Yes. We've
anticipated this market is going to be a multi-billion-dollar
market and it still has a tremendous runway for growth all over the
world. That is not going to change."
Mr Kelly added: "Certainly, the growth in the industry is going
to be reduced over the next one to three years, compared to what we
might have predicted six months ago, but our industry is a lot more
resilient when you compare it to other sectors. Our industry is
better placed than most to capitalize on the opportunities that
still exist out there."
Animal health companies will need to re-evaluate how they
structure their businesses in the future, according to Mr Kelly. He
said this should stoke increased investment in digital
technologies, while companies will also focus on better managing
capital, inventory, warehousing and logistics.
Telemedicine adoption rates
IDEXX has been helping veterinarians with workflow improvements,
as well as helping them adapt to a paperless and contactless
practice. Ms Turner pointed out the significant increase in
adoption of the veterinary telehealth services that IDEXX offers.
She expects use of these services to continue beyond the pandemic.
However, she said the broader usage of telehealth around the world
for consultations will depend on national regulations.
In fact, regulation has slowed the adoption of telemedicine in
many places.
Mr Kelly noted: "Typically, telemedicine has not been seen as a
valid veterinary-client relationship. We have seen a relaxation of
regulations. We've certainly seen it in the US, Canada, the UK and
France with this coronavirus challenge. We've even partnered with
some of the companies that provide these services in North
America."
The webinar and panel discussion were a precursor to Kiscao
Research's first virtual event, which will
take place on June 23-25. Animal Health Investment One will feature
presentations, discussion and networking.