Elanco: Big companies have to get past cognitive dissonance to reach innovation
Elanco has been open in recent years about the need to change tack on R&D in light of the clear trends concerning antibiotics and pet products. Animal Pharm editor Joseph Harvey attended the recent Animal Health Investment Europe meeting in London to talk to some of the company's leading R&D figures.
Elanco's recent R&D history has produced some key examples on work the company is doing internally and externally.
Internally, the firm has been bringing to market vaccines and pet products acquired through its deals for Novartis Animal Health and Lohmann Animal Health.
"There's an area of psychology called cognitive dissonance, which I think applies here," Elanco's vice president of global research and development Aaron Schacht explained to Animal Pharm. "If you look at how much we – any big company – spend on R&D, of course we think we're the best.
"But you have to have some humility and listen to the wisdom of the crowd. There has to be a balance between internal and external innovation. We can close some of the gaps we have with partners."
Mr Schacht came to Elanco at the end of 2015 from Eli Lilly's Biomedicines division. He not only brings a background in chemistry and business development to the firm but also an understanding of investment and the start-up realm.
He stated: "Inside or outside, there are three things we always look for with any type of innovation. Great ideas, great talent and investment against the risk curve. It's part of my job to think: 'How do I put all of these together?'
"We also think about these three things when we put together our R&D team, who look at both external and internal innovation."
"You have to have some humility and listen to the wisdom of the crowd. There has to be a balance between internal and external innovation."
Mr Schacht said Elanco is always on the look-out for smaller companies to work with. This strategy is already in action with Elanco's partnership with Aratana. When trying to measure the success of the current animal health biotech scene, Mr Schacht said the real measure of some of the industry's younger firms will be when they reach an exit such as acquisition.
He suggested Elanco's set-up with Aratana is working proof that a co-commercialization deal can work in animal health between a big player and younger business – a relationship that is currently not that common in the industry.
Functional culture clash
This team features Kristin Bloink – Elanco's senior director of global research and external innovation, who joined the firm via the Novartis acquisition.
At the London event, Dr Bloink told delegates: "We think it's absolutely critical to be finding those key academic partnerships, start-up companies and all that good science we can make part of our portfolio. We need not be shy. There's a lot of great stuff coming out of human health and there's a lot great stuff we can do with our own hands and we can be successful."
"It has to be a functional culture clash between internal and external innovation. I've always thought animal health has been more mature on this topic than human health."
She pointed to the success Elanco has had through collaborating with start-ups (co-promoting Galliprant with Aratana) and academia (launching the Clynav fish DNA vaccine).
"We think there are three major levers we want be utilizing to be successful," she said. "New technology, closer collaborations and One Health.
"When I talk about One Health, I mean translational medicine. We know the human health companies have a problem. They have a phase II failure rate of 50%. So they are having problems with pre-clinical evaluations. They are getting to those phase II trials, which is typically a $100 million trial in the human pharmaceuticals space, and they are hitting a failure.
"They need help with better pre-clinical opportunities. One of the things an animal health company can do is be partnering with those human health biotechs, as well as the larger human health players, and using national disease models to help advance our knowledge earlier point in that proof-of-concept pre-clinical phase. At Elanco, we are leveraging that space quite significantly."
Dr Bloink echoed Mr Schacht's thoughts on going beyond the four walls of Elanco's R&D capabilities.
She told Animal Pharm: "How do we pivot into a company with a whole diversified portfolio? Who has the capabilities? Who has those things you want to have a strategic partnership on?
"Human health has a lot of trouble being objective to the external – the 'not invented here' syndrome.
"It has to be a functional culture clash between internal and external innovation. I've always thought animal health has been more mature on this topic than human health because animal health has never had a big budget. It has always had small discovery research units, so we've had to shop externally."
Nutrition's role at Elanco
Aside from the current strategic review of Elanco being undertaken by its parent Eli Lilly, the animal health business has some long-term aspirations concerning R&D.
Currently, sales in the companion animal market represent around 35% of Elanco's annual turnover. With Elanco aiming to improve its product mix in the coming years, the firm may want this proportion to be nearer the 50% mark in the future.
In food animals, Elanco is going through a reorganization. It is currently balancing a potential divestment of its recombinant bovine somatotropin assets with the introduction of innovative fish vaccines and the changes its eight-point antibiotic stewardship program will bring.
One area where Elanco will be looking for innovation is animal nutrition, as this area comes more into play with the decline in antibiotic usage. Mr Schacht told Animal Pharm: "Nutritional health could be the next vaccines."
Tim Schell, who is part of the company's nutritional health R&D and regulatory team, told the investment forum about the key role animal nutrition will play in future years.
"We need to take a leadership role going forward," he said. "We need to be proactive in finding those new things and we need to make sure we can maintain confidence in the food supply. We need to make sure we have the consumer trust both in the health of our animals and in the safety of our food supply.
"The regulatory environment will play a key role in how we go forward. There are a lot of regulatory options but we've got to make sure we're partnering up with the regulatory agencies."
This is a key area of expertise for Dr Schell, who is a swine nutritionist by training but also spent 14 years at the US FDA approving animal drugs and feed ingredients.
Dr Schell described the search for antibiotic alternatives: "We've had one of our key tools reduced and now we need to find replacements. One of the big things we need to do is take a look at those other tools we have available to us and see if we are optimizing the way we use those.
"So we might go back and look at things we've glanced over in the past because we can't just dismiss them. That's where I think the tremendous opportunity is. Where the challenge is great, the opportunity is great.
"The science in this area is advancing rapidly. A lot of the science we have dismissed years ago, we're now taking a closer look at and it is advancing rapidly. Probiotics a few years ago? Enzymes a few years ago? We would have probably dismissed those very easily. We're now learning a lot more about what they do and how they work and how they might fit in to an overall plan.
"Frankly, as a scientist, I don’t want to be in an industry where all the answers are known. We don't have the luxury of just dismissing a science, we have to look at it and make sure, if there's potential out there, we utilize it."
"There is going to be the opportunity to do a lot of things with the microbiome over the next few years – this is a very evolving science."
Dr Schell also spoke about the animal health industry's shift in mind-set – from treatment stance to one of prevention. He also mentioned the growing focus on maintaining a healthy microbiome in animals.
"One definition of a healthy gut is that it's free from disease and it can do what it's supposed to do – that is to promote the immune system and aid in the digestion and absorption of nutrients," he explained. "More specifically, a healthy gut is going to control your infections, control your inflammation, increase nutrient utilization and it's going to optimize the microbiome. These are all intertwined and work very closely together.
"The diversity in feed additives used around the world leads to a very diverse microbiome. If we're going use something like probiotics or enzymes, we have to be very cognizant of the fact the microbiome and the feed profile is very different around the world. Having this complex diet leads to many complexities in the microbiome.
"There is going to be the opportunity to do a lot of things with the microbiome over the next few years – this is a very evolving science. Elanco has teams of people that are looking at nothing but antimicrobial alternatives. We are also heavily investing in vaccines and then we've started a nutritional health division focused on those items that would fit into a nutritional category regulatory-wise."
But could this increasing focus on nutritional health see Elanco competing against other multinationals such as Cargill?
Mr Schacht fielded this question: "Frankly, with a company like Cargill, we're collaborators and competitors with them. These are converging domains around what it takes to sustain a heathy animal or a healthy production system – we'll find ourselves bumping into each other even more.
"That ought to be a collaborative approach. The companies that come from the nutrition side bring skills that the companies that are focused on pharmaceutical strategies don’t necessarily have."