Accelerating investment in animal health: The critical questions
With animal health companies around the world struggling to secure investment, maybe a shift in mind-set is needed? Investment specialist Kris Wadia highlights some important questions animal health stakeholders should be asking themselves.
With apparent growth drivers in place, the animal health sector must seem like an obvious target for investors. However, this is not always the case. Why the disconnect?
Below, I offer questions to each of the industry's major stakeholders – manufacturers, investors and entrepreneurs – on their contribution to accelerating investment in animal health.
ANIMAL HEALTH MANUFACTURERS
As the clinical growth engine of animal health, veterinary medicine manufacturers have a fundamental role to play in the investment eco-system. Here are some strategic questions senior executives might ask themselves.
Internal, external or both?
- Have we formally decided on whether we will accept investment ideas from inside or outside our organization (or both) or have we just drifted into a 'it depends' scenario?
- Do we intend to fund, incubate or acquire ideas from multiple sources including internal operations personnel, academia, veterinarians and others?
- If we intend to buy ideas, have our latest licensing and acquisition criteria been clearly communicated to our financiers, lawyers and accountants?
- If we are part of a human pharma company, have both human and animal divisions designated named individuals through which the interchange of ideas can formally take place?
- Do we have a formal process for regularly looking at reformulation of human drugs soon to be off-patent or the human therapeutic possibilities for veterinary drugs that have cleared animal safety testing but whose efficacy is lacking?
First, second or last?
- Have we formally decided on whether we will be first-to-market, early adopters or implementers of proven ideas only?
- Do we recognize the absence of a definitive point-of-view frustrates everyone who is keen to do business with us and could result in reputational damage?
- If we choose first-to-market, do we have a defined team and process in place to learn how other industries adopt novel technologies, so we don't turn away entrepreneurs just because 'it's never been done in animal health before'?
- How flexible are we prepared to be in terms of co-development? Will we collaborate or partner with contract research organizations and even our competitors?
- Are we prepared to share intellectual property and licensing ownership as part of a joint risk-reward deal or a payment-by-results agreement?
About Kris Wadia
Kris Wadia was most recently senior vice president at Quintiles, which is a leading services provider to the human pharmaceutical industry. Previously, he was managing director at Accenture – the global technology consultancy.
He is now a senior advisor to animal health businesses and can be contacted at email@example.com.
Have we offered a map or a maze?
- Once the strategic questions above have been answered, have we offered our investment idea providers a map or GPS with which to navigate our organization or will they get lost in our internal maze?
- Are our internal people, processes and technologies working in synch with the idea providers?
- Have we clearly flagged how investment and partnership opportunities arriving via our website should be routed when compared to traditional enquiries?
- Have we shared the broad therapeutic areas, species, geographies, drug delivery mechanisms, etc. in which we are prepared to invest?
- Have we engaged external help to source or evaluate some of the more creative proposals we are likely to receive rather than dismissing them because they don't fit our legacy business?
- Have we appointed a partnership manager or alliance manager to evangelize the investment ideas at the highest levels of management? Have we appointed a single point of contact for the idea originators after the initial deal has been signed?
As the financial growth engine, investors also have a major role to play. Here are some questions they could ask themselves as they seek a return on their funding of the animal health industry.
Have we managed our own expectations?
- Do we truly understand the size, scale and end-to-end value chains of the animal health industry as it stands today?
- Do we recognize that technology-based opportunities generating petabytes of valuable data are few and far between?
- Are we prepared to downscale our ambitions and look at small but potentially very profitable niches?
- Do we recognize that industry partners will not be impressed if we evaluate their opportunity using human health criteria and simply discount for size?
Would entrepreneurs regard us as 'easy to do business with'?
- Do we recognize start-ups in animal health may not be as knowledgeable about the investment ecosystem compared to other industries?
- Are we doing everything to support their understanding of complex financial terminology and models or are we assuming it's up to them to catch up?
- Have we given them our generic templates that allow them to provide information in a structured format which, in turn, allows us to respond in a timely manner?
- Do we have access to specialists in our preferred therapeutic areas and geographies so we can validate the science and regulatory environments as effectively as the financials?
- Do we recognize that several large and mid-size firms are still founder-led, so giving up ownership (even partially) involves managing the founder's financial and emotional needs?
- Have we appointed a partnership manager or alliance manager to remain the single point of contact for the investment and track progress against key performance indicators?
Have we invested in the industry and not just in start-ups?
- Given that true value emerges from market disruption, how much are we prepared to invest in supporting (or changing) the views of non-commercial entities in the investment eco-system?
- Can we help governments design programs that allow entrepreneurs access to funds for animal health investments in a structured and simplified manner?
- Are we helping academia develop their own innovation units that allow their researchers and alumni to spin-out credible ideas?
- Are we guiding not-for-profits on their internal decision-making processes and protocols for disbursing funds to better meet their social objectives?
- Have we attempted to bring industry leaders together to convince them that sharing data (within data protection guidelines) grows demand for everyone in the long run by unleashing market-changing solutions at scale globally?
Offshoring and digital
Entrepreneurs represent the lifeblood of any industry and are the human growth engine. Here are some questions they can ask themselves as they propose their novel ideas to industry giants and financiers.
Can we explain our value proposition on a single page?
- Do you recognize that if you cannot articulate your idea's value proposition and key features on a single page or a single illustration, you have just added time, cost and frustration for everyone?
- Given that not all investors are science-literate, have you explained your idea using an analogy that anyone can grasp?
- Does your one-pager address the needs of future customers, employees, investors and yourself clearly?
- Are you able to treat negative (but constructive) feedback about your proposal as valuable input for the next iteration, not as personal criticism?
- If you are looking to disrupt the entire industry, have you explained the stages in which you will achieve this, in order to be credible?
- Do you recognize that you may be better off building a minimum viable product (MVP) rather than spending more time tweaking your power-point presentation?
Are we prepared to walk away if there is no 'fit'?
- If you are fortunate to have an 'agreement in principle' to provide you the resources you need, are you prepared to walk away if the personal chemistry is wrong?
- Regardless of the duration of the investment, do you recognize you are now accountable for your actions to someone every day, month or quarter?
- Are you willing to admit to future partners that you still have not truly understood the exit plan for yourself, your team and the other investors because of the wide range of possible outcomes?
- Have you put extreme (and therefore unlikely) success and failure scenarios into a spreadsheet, calculated the financial outcomes yourself, and then had them validated by your future partner?
- In your desire to get started, do you recognize that if you accept verbal assurances of future investments or actions that you may be setting yourself up for major disappointments?
We've got the money… now what do we do?
- Do you know that the absence of relevant business skills early in a start-up's life is one of the top five reasons for their failure?
- Are you honest enough to admit that whilst you can manage the science, process or technology behind your idea, you really don't know how to manage the business?
- Do you recognize that HR, IT, finance, legal, procurement, compliance and similar functions are best left to management professionals or even outsourced?
- Do you accept that getting a business leader on board, even on a part-time or interim basis, will save you having to correct fundamental commercial errors in the future?
- Do you understand that outside of the laboratory, workshop or computer space, you will have to set aside time for management meetings, progress reviews, etc.?
- Are you prepared to sit at a desk in an open space along with everyone else without the traditional trappings of hierarchies, offices, personal assistants, etc.?
- Finally, are you willing to offer someone the coveted chief executive title if they are a better fit than yourself for growing your idea, your team and your stake in the business?