Elanco Bolsters Pet Products Pipeline With $234M Deal for Aratana
Drugs that treat dogs and cats are some of Elanco’s fastest growing products, and the animal health company is poised to make that category even bigger through a deal to buy pet medicines developer Aratana Therapeutics.
Greenfield, IN-based Elanco (NYSE: ELAN) announced Friday an agreement to acquire Aratana (NASDAQ: PETX) in a stock deal valued at approximately $234 million. Aratana shareholders will receive Elanco shares equivalent to $4.75 per every Aratana share they own, according to the deal’s terms. That’s an approximately 40 percent premium to Aratana’s closing stock price on Thursday.
The deal also comes with a contingent value right, an additional 25 cent per share payment that’s pegged to Aratana reaching sales targets for an appetite drug for dogs that it is also developing for cats. These additional payments could boost the deal’s total value to $245 million.
Shares of Leawood, KS-based Aratana jumped 37 percent following the announcement of the acquisition. Elanco’s shares dipped by about 1 percent.
Elanco is already well acquainted with Aratana. The animal health giant was an investor in Cultivian SandBox Ventures, one of the venture capital firms that backed Aratana. The companies become partners in the commercialization of grapiprant (Galliprant), an Aratana drug developed to treat osteoarthritis pain in dogs. That drug accounted for $23.3 million in 2018 revenue and is the company’s top-selling product, according to Aratana’s financial reports. In 2016, Elanco paid Aratana $45 million for the rights to sell that drug outside of the US, and for the right to co-promote it within the US. Last year, pet products accounted for more than $1 billion of Elanco’s $3 billion in total revenue.
Aratana’s portfolio includes two other commercialized products: capromorelin (Entyce), the appetite drug that is tied to the contingent value right in the acquisition agreement; and bupivacaine (Nocita), a long-acting local anesthetic for pain relief after certain surgeries in both dogs and cats. The company has five additional product candidates in its pipeline for conditions such as atopic dermatitis, pain and inflammation, and cancer.
Cancer is the focus of another deal Elanco announced Friday. The company signed an agreement to develop and commercialize rabacfosadine (Tanovea), a drug from Fort Collins, CO-based VetDC that has conditional FDA approval for treating lymphoma in dogs.
Rabacfosadine was discovered by Gilead Sciences (NASDAQ: GILD), which called the compound GS 9219 when it was studying it as a potential treatment for lymphoma in humans. The drug targets lymphoid cells, blocking DNA synthesis and leading to the death of cancerous cells. In 2011, Colorado State University spinout VetDC acquired veterinary rights to the intravenous drug. In tests, VetCD reported that the most common side effects were gastrointestinal problems and changes in white blood cell count, which is comparable to other chemotherapies.
In 2017, the FDA granted conditional approval to rabacfosadine for treating lymphoma in dogs. This type of approval allows a company to sell a drug and promote it. But the company must also collect additional data about the drug’s efficacy in order to support a submission for full approval.
Financial terms for Elanco’s commercialization agreement with VetDC were not disclosed. Elanco expects to close the Aratana acquisition in the middle of this year.