Sector Spotlight: Animal Health

The proliferation of pet ownership is providing tailwinds for the animal health industry. Small and mid-size players are innovating to provide products ready to commercialise and complementary to their big pharma peers, with Inflexion among a select number of investors experienced in helping them to accelerate their journeys.

Dogs have long been wo/man’s best friend. But since the pandemic, pets really are living their best lives: according to Forbes over a third of US Zoomers treat their pets to birthday presents and cakes,

Some may deem this barking, but the fact is that pets are living longer (by up to 230% in some markets) and people are treating them as a real part of the family.

Governments are taking note, with rising pet ownership globally causing growing scrutiny of pet-related policies. For example Brazil has opened state-run pet hospitals, while Australia and the UK are targeting laws at helping renters with pets.

The increasing love for pets is seeing companies create new products to protect them, with firms taking different approaches. “Mid-size companies generally look for opportunities already developed and approved in at least one regulatory jurisdiction as it’s ready to commercialise,” explains Dr Paul Dick of Paul Dick & Associates, a global animal and human health consultancy. Part of Inflexion’s network of sector experts, he adds that this may be rooted in the lineage of many top-tier players, many of which have come out of big human pharmas and so retain a focus on regulated blockbuster drugs.

It’s created an ecosystem where early stage companies are doing a significant amount of the R&D, and then ensuring that their innovations are backed up with regulatory approvals and manufacturing sites set up as it creates attractive purchasing opportunities for the large corporates. “If something is already established, it creates an attractive purchasing opportunity and the larger corporates are set up with cash to action it,” Paul points out.

Private equity supporting innovation

Investors have taken note, with investment into pet product companies surging from $378 million in 2019 to $3.07 billion in 2023, while the number of deals concluded almost doubled from 56 to 111.

With a handful of experienced healthcare investors in the space, small and mid-sized firms stand to benefit from the right backer, according to Paul. “Beyond funding, an experienced investor can help to accelerate R&D, regulatory product approvals, and enter new jurisdictions.” Once a product is established in key initial target countries, a private equity firm can help to commercialise it globally, including getting registrations and expanding manufacturing capacity to meet the needs of a global marketplace.

Such scale can suffice to attract a large pharma for in-licensing or even buying. “Or the company may remain standalone and grow further with private equity, which can be a great support for refining go-to-market strategies, building out sales teams, and driving M&A to grow businesses,” Paul says.

Digital and AI capabilities can help connect vets with producers and consumers, and these are growing niches that Paul feels some private equity firms are particularly well suited to help with.

Pet supplements specialist Lintbells illustrates the positive impact an experienced backer can have. As the number one pet supplements player in the UK, Lintbells commanded a fifth of the UK pet supplements market worth £100 million when Inflexion invested in 2017. Management have been working with Inflexion on growing Lintbells’ UK market share, enhancing its digital presence, building its direct-to-consumer offer and overseas growth, particularly in North America. Its YuMOVE brand encompasses the number one joint mobility supplement for dogs and cats, and supplements for digestive health, calming, skin & cost and dental.

Inflexion are drawing on its experience in the pet-care market through investments in Kynetec and Medivet to support Lintbells’ management team to grow its UK market share, launch new products, make an acquisition, and enter new geographies, particularly in North America. The investment has also boosted the business’s digital presence and accelerated the delivery of its D2C proposition.

Having advised businesses in the space for 30 years, Paul has sage advice for ambitious teams: “Plant a seed, nurture it to grow with good research, regulatory approval, strong commercial team, and replicating that in significant markets. It’ll get you bought down the line.”