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Aratana's evolution shows how a start-up can impact industry rankings

Aratana Therapeutics has grown from a fledging start-up to the industry's 67th biggest company in the space of eight years. While this ranking is not necessarily a significant number, the firm's evolution into a prominent revenue-producing business is highly notable. Animal Pharm editor Joseph Harvey explains.

Next month, Animal Pharm will publish its latest Top 50 industry rankings report. While most of the companies near the top of the table are very familiar, the businesses ranked 20th and downwards tend to be local manufacturers that change places in the standings year-in year-out.

Animal Pharm keeps track of the firms ranked 51-70 to monitor acquisition targets and potential distribution partners.

The firms that miss out on the top 50 tend to be domestic leaders in developing markets such as Latin America and Asia. These companies are divided in the rankings by only a small margin of annual sales, making their industry positions very volatile.

However, one company stands out. Nestled, among regional players from Brazil and Japan is Aratana Therapeutics. Founded in 2010, Aratana is the only company in the rankings that was formed less than a decade ago (aside from India's Alivira Animal Health, which has built itself into a top 50 company by acquiring established businesses).

Aratana reported revenues of $25.6 million in fiscal 2017. If it doubles it annual turnover, it will be approaching the foot of the top 50.

In 2016, Credit Suisse suggested Aratana could record revenues of $195m by 2020. While this is only an estimate, if this figure becomes reality then Aratana could almost be a top 20 player in two years' time.

Disruption awaits

In fact, Aratana's rise is pertinent to another report soon to be introduced by Animal Pharm and Stonehaven Consulting. Next month will see the first publication of our Innovators & Disruptors report, which will divulge the leading start-ups in the animal health sector.

Not only will this report detail more than 100 young firms shaping the future of animal health innovation, but it will highlight the investors fueling working in this space.

There are several start-ups that are on the cusp of significant revenues in animal health such as Prevtec Microbia and Kindred Biosciences, which were part of a wave of initial start-ups in animal health that came to prominence at around the same time as Aratana.

Animal Pharm is looking beyond these recognized investment opportunities to showcase the young firms that could one day find themselves at the lower end of the industry rankings.

The large pool of start-ups in animal health is still a somewhat nascent phenomenon. There are a few examples of these firms being acquired: Zoetis and Nexvet; Zoetis and Scandinavian Micro Biodevices; Merck Animal Health and Harrisvaccines; and Vetoquinol and Farmvet Systems.

For the majority of start-ups, acquisition will not be an exit. Some will fall by the wayside, some will partner with industry and a handful will be bought. Although, for a small minority, solid revenues will be on the horizon. Who will be the next Aratana?

The answer may not necessarily lie in the pet therapeutics space, where Aratana and KindredBio reside. The broadening ecosystem of what is now deemed 'the animal health industry' means pertinent start-ups are forming in a much wider bandwidth. This includes diagnostics, genetics, microbiome health, nutrition, digital technology and medical devices.

A wider ecosystem

Another new Animal Pharm report will deal with this widening opportunity and how the animal health sector now encompasses a much broader landscape of companies then it has ever done in the past.

With the industry needing to detect and prevent diseases, as well as treat them, start-ups are drawing on expertise that sits outside the skillset of the multinationals.

Much like Aratana, which has enabled Elanco to sell innovative companion animal therapeutics through a licencing deal, these nimble start-ups will either form a bolt-on acquisition opportunity for the big players or represent the next high-riser in the Animal Pharm rankings.

For more information about these three upcoming reports, contact reports@agri.informa.com.

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