Animal Health Company Makes $245M Acquisition

GREENFIELD, IN — Elanco Animal Health announced that it is acquiring Aratana Therapeutics, a pet therapeutics company, in a $245 million deal.

Aratana is a developer of medications for dogs and cats, including Galliprant, a pain reliever for canines with osteoarthritis.

Elanco has also signed a development and commercialization agreement with VetDC for Tanovea-CA1, the first U.S. Food and Drug Administration conditionally approved canine lymphoma treatment.

In conjunction with the agreements, Elanco announced the formation of a commercial team dedicated to the veterinary specialty business. If the transaction is approved, the Aratana field force would transition into this commercial team.

Aratana Acquisition

Elanco stated in a press release that it has been a strong supporter of Aratana since its beginning, including investing as a limited partner in Cultivian, one of the venture capital funds that participated in Aratana’s early financing rounds. The relationship continued in 2016 with a global agreement for the exclusive rights to develop, manufacture and commercialize Galliprant.

The transaction “would allow Elanco to capture the full value of this important, growing product,” according to the release. Aratana further contributes two additional marketed products to Elanco’s portfolio: Entyce, the only FDA-approved veterinary therapeutic to stimulate appetite in dogs, and Nocita, a long-acting local anesthetic that provides up to 72 hours of post-operative pain relief following certain surgeries in dogs and cats. In addition, Aratana has a pipeline of five product candidates in development for conditions ranging from atopic dermatitis and pain/inflammation to oncology.

“Aratana has been one of the most innovative start-ups in animal health, bringing breakthrough solutions to the market,” said Jeff Simmons, president and CEO of Elanco. “We look forward to putting greater energy behind these brands with our increased share of voice in the field while leveraging Aratana’s strong presence in the specialty market to capitalize on new opportunities for key existing Elanco companion animal therapy brands. We believe the deal would bring greater value to veterinarians and pet owners, as well as both Elanco and Aratana shareholders.”

Craig Tooman, president and CEO of Aratana, said, “This proposed transaction acknowledges Aratana’s contribution of pet therapeutics to the animal health industry, specifically recognizing our strong track-record as a drug developer and our field team’s unmatched expertise delivering innovation to veterinary specialists. As a newly independent, premier animal health company, we believe that Elanco would help expand our portfolio with their substantial resources and presence within the companion animal segment.”

The company explained:

The acquisition is structured as a stock-for-stock transaction, with a cash contingent value right (CVR) of $0.25 to be granted to Aratana shareholders as of the closing date if capromorelin achieves certain sales levels before the end of 2021. Subject to the terms of the agreement, upon the closing of the transaction, Aratana shareholders will receive 0.1481 shares of Elanco and one CVR for each share of Aratana. Shares to be issued for the acquisition represent approximately 2 percent of Elanco shares outstanding. Based on the exchange ratio and the closing prices from April 24, 2019, Aratana’s shareholders would receive the number of Elanco shares equivalent to an implied value of $4.75 per Aratana share, representing a premium of approximately 40 percent, plus one CVR per Aratana share. This stock portion of the deal is valued at approximately $234 million, excluding the potential CVR payment, or up to $245 million with the CVR payment. The transaction is expected to close in the mid-year timeframe, but remains subject to customary closing conditions, including approval by Aratana shareholders and clearance under the Hart-Scott-Rodino Antitrust Improvements Act. The proposed acquisition has been unanimously approved by the Aratana board.

VetDC Collaboration

Based in Fort Collins, CO, VetDC is a spinoff from Colorado State University established to identify, develop and commercialize oncology therapies for pets. Elanco and VetDC have reached an agreement for the commercialization of Tanovea-CA1, the first FDA conditionally approved treatment for lymphoma in dogs.

The company stated: “It is an easy-to-administer, well-tolerated chemotherapy specifically designed to target and kill canine lymphoma cells via up to five 30-minute IV treatments. While full FDA approval is pending, the initial response in a clinical study has been significant with a 100 percent response rate when used as a first-line treatment and 64 percent response rate for relapsed dogs.”

Terms of the agreement were not disclosed.

“As pets live longer, they face increased risk of cancer-related diseases,” said Aaron Schacht, executive vice president, innovation, regulatory and business development, of Elanco. “Elanco’s business is built on our ability to identify and deliver novel solutions to meet our customers’ greatest health challenges by harnessing multiple sources of innovation. Elanco seeks to be the innovation partner of choice for emerging companies such as VetDC. We are excited to collaborate with our VetDC colleagues to pursue the full approval of Tanovea-CA1 and leverage our new specialty sales approach to increase access to this important technology.”

Dedicated Veterinary Specialty Focus

“These agreements and the dedicated focus on the veterinary specialty sector fit perfectly into our overall strategic plan, furthering Elanco’s focus on companion animal therapy and better positioning us to capitalize on key underlying market fundamentals,” Simmons said. “Thanks to advances in veterinary medicine, such as parasiticides and vaccines, pets are living longer and experience many of the same diseases of aging as humans, including arthritis and cancer. Further, consumers have an increasing expectation of care for these ailments. Our actions today enable us to take another step forward in fulfilling the needs of pet owners worldwide as they help their pets live longer, healthier, higher-quality lives.”