The dog days of summer: Mark Heffernan strikes gold with pet health
Serial entrepreneur Mark Heffernan recently had his Dublin-headquartered company, Nexvet, listed on Nasdaq. He spoke to Donal Lynch about his big year
It was during Mark Heffernan's move from his native Australia to Ireland in 2003 that he had the idea that would spawn his future business. At considerable expense he had brought the family dog to Dublin, and when the animal later became sick with a number of different ailments, vet bills began to mount.
Heffernan would opt to have interventional surgery done on the animal, but to no avail. The dog eventually died. While the pet owner in him grieved, the serial entrepreneur in him wondered about the possibilities of the animal pharmaceuticals industry. If he was prepared to shell out large amounts of cash to save his pet, it was likely that others were too. And with his background in science (he holds a PhD in biochemistry and molecular biology) and drug development (he had worked in R&D for two Australian biotech companies), he perhaps had the ideal mix of expertise to make inroads into this prospective market.
While this kernel of an idea gestated, Heffernan and his wife, Trish, made a life for themselves in Dublin where he began a search for new biotech start-ups. The year after moving here, he co-founded and became CEO of Opsona, a Trinity College biotech spinout, which focused on developing human monoclonal antibodies for inflammatory diseases.
He agrees that at that time, Ireland was not exactly a hotbed of successful biotech start-ups, but says "the basic support for fundamental research really made me interested".
"We spent about a year pulling our business plans together. We got seed capital from Enterprise Ireland and that gave us enough to do what we needed to do with Trinity on the technology," he says.
Under Heffernan's leadership, Opsona developed R&D facilities in Dublin and Lausanne and successfully raised financing from such major pharmaceutical companies as Novartis, Roche and Genentech.
"We raised €60 million, which was the highest capital ever raised for a biotech company in Ireland at the time," Heffernan recalls.
He would steward Opsona to signing multi-million euro research and licence agreements with multinationals including Wyeth/Pfizer and Schering-Plough, and the Irish business community began to take note. In 2008, he was a finalist in the Ernst & Young Entrepreneur of the Year awards.
But Heffernan was only getting started. Two years later, he founded Nexvet Biopharma, and in the years since then the company has surpassed Heffernan's success with Opsona.
Nexvet Biopharma, which was founded in Melbourne (where much of its research is carried out), listed earlier this year on the Nasdaq and has recently signed a lucrative R&D deal with Japanese animal health group Zenoaq. Its current focus is on addressing chronic pain and inflammatory disease in dogs and cats.
"The company came out of the quiet period a few months ago and has also just emerged from the 'lock-up' period where our existing shareholders prior to the IPO have the ability to trade," says Heffernan.
Drug development for humans is a massively expensive and difficult (and, of course, potentially lucrative) undertaking. New medicines have hundreds of hurdles they can fall at, and the process through which they come to market is often referred to as "the Valley of Death".
But, as Heffernan says, this process is somewhat simpler in animal drug development, and much of this owes itself to the fact that for pet drugs, humans, rather than animals are the 'guinea pigs'.
"We look at products which have a strong amount of evidence supporting their efficacy in man, typically stage 2 or 3 studies or beyond, and then we use our proprietary platform to create 100pc dog or cat versions of those products," says Heffernan. "The overriding advantage of pet medicine is that you can accelerate drug development in half the time and at a fraction of the cost compared to human medicines."
The relative ease with which the drugs can be brought to market means that it has been easier for Nexvet to raise capital. Prior to its $40m IPO, the company had already raised some Aus$80m in venture capital.
"One of the key differences for us when compared to manufacturers of drugs for humans is that we don't have to do the same amount of pre-clinical work before we move into the species we're trying to treat," Heffernan says.
That said, the process through which Nexvet adapts drugs for dogs and cats is still complex and costly.
"You can't take these human drugs and simply inject them into a dog or a cat. We all, animal and human, develop antibodies to fight infection," says Heffernan.
"A couple of decades ago there was an identification of mono- clonal antibodies, which is a single, highly-characterised anti- body that acts as a therapeutic to a specific target to bind and neutralise a particular cell - a cancer cell, for instance. These antibodies are proteins which are very specific to the species from which they come. If you injected a human antibody into a dog, you'd see an immune response - you might see anaphylactic shock.
"We get around that by injecting a fully adapted dog or cat antibody into the animal. We develop these from scratch and these overcome those adverse immune responses in the animal."
The worldwide animal health industry has grown year-on-year over the last decade, and animal pharma is regarded as one of the safer biotech stocks.
In the US, the industry is valued at about $60bn and has grown at about 6pc a year over the last decade. About $15bn of that is in veterinary care, and of that about $2bn to $3bn is in pharmaceutical products. The reason for this growth, Heffernan speculates, is that pets "have become members of the family".
"They've moved from being stuck outside in kennels to sleeping on the bed with their owners," he says. "In the western world, populations are all getting older and you have ever-increasing numbers of people living alone and living in apartments.
"Pets are increasingly becoming important companions and components of people's personal lives. All of this means that the amount we are prepared to spend on our animals' well- being has steadily increased."
He says there is a "bell-shaped curve" in terms of people's willingness to shell out on their pets.
"Unless the animal is terminal, vets are more and more reluctant to euthanise," he says. "If you look at osteo conditions for pets at the moment, they are managed using small molecule therapeutics. These cost about €1,500 to the owner - every year.
"Oncology is another big area - people spend on average €5,000 for chemotherapy. On hip replacement it's up to €10,000."
Ireland, he says, is broadly following the trend in the rest of the western world.
"Europe accounts for 30pc of the worldwide market, the US for 50pc and the rest of the world for the remaining 20pc," he says.
The R&D deal between Nexvet and Zenoaq made headlines.
"It's an exciting transaction," says Heffernan. "They're a highly innovative research-focused company. They've been developing a number of monoclonal antibodies to cat and dog diseases. What they need is assistance in species translation. The targets we're working together on will have a big impact in tumour and inflammatory settings."
He remains coy on the financial specifics, other than to say that the two companies will share costs and Nexvet will retain rights to US markets with Zenoaq retaining Europe and Asia.
Heffernan was born in Victoria and did his undergrad and PhD in Monash University in Melbourne. His PhD was industry-funded, and this, he says, spurred his interest in entrepreneurship.
"We decided on Ireland for a number of reasons. There's my heritage, and I still have some family there. The biotech investment is good. I felt there was an amount of intellectual property there which could be commercialised. And within a short time of arriving I was meeting with academics around the country, looking at technology.
"We identified three outstanding researchers - Kingston Mills, Luke O'Neill and Dermot Kelleher - at Trinity College. Supported by Enterprise Ireland, we got going and announced our first capital raise in late 2004."
Heffernan remained at Opsona until 2011 before deciding to return to Australia after his wife became pregnant with their third child. The trip back was also to co-found Nexvet with David Gearing, who is the company's chief scientific officer. He says that meetings with JP Morgan at the annual human biotech investor summit in San Francisco last year and the reception he and his Irish CFO David Lismore received over 40 or 50 meetings made them realise they were on to a winner.
Lismore told him on the plane on the way back to Australia that he had never seen a company idea greeted as warmly by investors, and within three months they had raised more than US$31m.
Heffernan says Ireland and Australia share similar strengths and weaknesses in terms of bringing drugs to market, but he points out that Australia, crucially for start-ups, has a significantly better climate for accessing credit.
"There are some phenomenal researchers in both places, but both countries need to lean heavily on the US in terms of commercialisation," he says. "The advantage that Ireland has is in the area of biological manufacturing. That's one of the big reasons we have our corporate HQ at UCD.
"Of course, Ireland also has a very competitive corporate tax rate. In Australia, you have an R&D tax credit which comes by way of an annual refund in the vicinity of 43pc. Nexvet structures itself to build on core functions in these different locations."
Heffernan is coy on acquisitions the company may pursue, but you detect a quiet satisfaction in the quantum leaps it has made in recent months.
"Three years ago, we were two people with an idea. Now we're 30 people across three continents," he says.
"We've got a number of big clinical milestones coming up, and these are really exciting times. We're definitely a space to watch."
Sunday Indo Business