Sam Al-Murrani explains why animal health is nowhere near the innovation 'hump'
The lifeblood of many industries stems from investment and innovation. Animal health is no different. Dr Sam Al-Murrani has extensive knowledge of these areas through his role of guiding animal health start-ups towards investment. Animal Pharm editor Joseph Harvey spoke to Dr Al-Murrani about his formula for investment success and where animal health innovation will come from.
Early on in his academic career, Dr Sam Al-Murrani witnessed a portent of his future role in influencing innovation in animal health.
He gained his undergraduate degree in animal science from the University of Edinburgh and completed a PhD in immunology/biochemistry at the Roslin Institute and the Department of Veterinary Pathology at the University of Edinburgh.
It was during this time in Edinburgh, that Dr Al-Murrani was within extremely close proximity of a beacon that represented the cutting edge of animal-based innovation. His lab was directly across the street from the Roslin workspace where Ian Wilmut and Keith Campbell cloned Dolly the Sheep.
Moving to the US, Dr Al-Murrani worked mostly in the human therapeutics space with numerous academic institutes. In combination with his scientific expertise, he also holds an MBA in finance from Baker University, Kansas.
Additionally, Dr Al-Murrani is inventor of several granted patents relating to potential diagnostic, prognostic and theranostic targets in human oncology therapies and diagnostic targets for feline degenerative joint disease – two areas where research can cross the One Health continuum.
"It's a fairly complicated market. You can make money in animal health; you just need to know what you're getting into."
This mixture of perspectives from the worlds of human health, veterinary science and finance allowed Dr Al-Murrani to found Babylon BioConsulting – a specialist in counselling for pre-revenue companies across the breadth of human and animal health.
Dr Al-Murrani's expertise has been relied on many times at the Kansas City Animal Health Corridor Investment Forum. At the event he has featured on the selection committee, the coaching team and the judging panel.
At the most recent KC Investment Forum, Dr Al-Murrani represented two young firms vying for investor attention. NeuroCycle Therapeutics is aiming to bring its itch and epilepsy products for companion animals to commercial realization, while Prommune has a novel vaccine and immunoactivator platform for tackling zoonotic infections such as swine influenza virus.
Advice for animal health start-ups
Dr Al-Murrani told Animal Pharm he sees hundreds of start-up companies every year from both human and animal health. The advice he gives to these firms comes with a heavy dose of reality.
"I tell them to aim as high as they can but just don't expect a check today," he explained. "A lot of start-ups come to these investment forums, they don't get investment and they come away disappointed. But they are getting free publicity – use it to your advantage – meet and talk to people."
"We're nowhere near the hump. Animal health still hasn't explored everything. I'm optimistic for the future."
When picking out a potential prime opportunity for investors in the animal health space, Dr Al-Murrani has an equation he always keeps in mind.
"M2 – market and management," he said. "That is what's important. You can have a good technology, but if the market is small and without good management, a good technology will fail. But with a good market and good management even mediocre technologies can flourish."
Dr Al-Murrani also suggested a novel product is not going to excite all investors in the same manner. He said innovation is "in the eye of the beholder" and a start-up's pitch "is not going to be seen by everybody in the same way".
Where are the innovative spaces in animal health?
"There are definitely some markets worth looking into," Dr Al-Murrani said. "Replacements for antibiotics are the Holy Grail at the moment, next-generation vaccines and immunomodulators, and medicines for allergies and itching in pets. Vaccines always interest me. Data technology is a growing segment but a lot of people don't know what to do with it."
He said innovation in animal health has to be geared towards what the consumer wants: "A lot of companies think they are business-to-business but they have to be consumer-centric regardless."
He said there is currently a high influx of other consumer-facing technology companies bringing data tools into the animal health market. While there are some interesting investment opportunities in this space, Dr Al-Murrani said it will be hard for these firms to differentiate themselves from their rivals.
He remains very positive for future investment opportunities: "We're nowhere near the hump – animal health still hasn't explored everything. I'm optimistic for the future. There are hundreds of technologies out there. The animal health space is just going to get bigger. It has to. Just look at the trends in pets and the need for more protein to feed the growing earth population."
One area that particularly excites Dr Al-Murrani is veterinary diagnostics. This represents a sector with few players and room for substantial growth.
He noted: "I think diagnostics are extremely undervalued. If you look at the vet diagnostics companies – IDEXX, Abaxis, Heska and Antech – versus the S&P Index, they're outperforming it. Diagnostics companies are a huge proportion of the value in animal health and they are forgotten about.
"If you take IDEXX; its shares are doing so well. A billion dollars of sales after 20 years, now that's pretty good.
IDEXX share price progression
"Animal health is not just vaccines and pharma. If you add diagnostics, that's another $10 billion. With pet food and production animal feed, which can influence health in meaningful ways, the animal health market is close to $75bn, it just depends what you want to include."
Support for innovation
However, while the ground seems fertile for novel ideas in animal health. Is there enough financial support for young firms?
"Lots of investors don't know much about animal health," he pointed out. "I get calls on a weekly basis from investors who have no clue. But it's a fairly complicated market. There is no cost reimbursement for pets and a limited, although growing pet insurance market. Only about 40-50% of pets go to the vet regularly. There are many things happening at the same time in this market – it's very nuanced. But you can make money in animal health; you just need to know what you're getting into."
With only a handful of venture capital firms interested in animal health, Dr Al-Murrani called for more investors to dedicate attention to opportunities in veterinary medicine.
He said this lack of venture capital or private equity support is made all the more apparent in the US, when there is no equivalent of the National Institutes of Health (NIH) in animal health. The NIH is a US government agency focused on disseminating funds for biomedical research in the human health space. It invests around $32bn annually in medical research, with about 80% of funding awarded through 50,000 competitive grants to universities, medical schools and other research institutions.
Helping the smaller animal health companies with crucial investment will not only help bring innovation to market but it will also see the industry build a strata of mid-sized players.
"About 80% of the animal health market is owned by 10 players and many hundreds, maybe even thousands of companies worldwide own 20%," explained Dr Al-Murrani. "This means the market is lop-sided. There are a few big fish in a small barrel and there are almost no medium-sized fish. You have poor and rich, with nothing in between. This is what we need to build up. Love them, like them or hate them, everybody has a place in the industry."