As a serial entrepreneur, Jean Hoffman negotiated development and manufacturing deals in China, founded a consulting and M&A advisory firm, and developed a complex data system that Thomson Reuters bought for undisclosed millions. Now, she’s pursuing her biggest business endeavor yet — a $100 million opportunity — an idea that was inspired by her cat.
Hoffman’s entrepreneurial epiphany was sparked when Dude, her beloved 10-year-old feline, got sick. Dude was hungry all the time, lost weight, and the sheen on his black coat began to dull. He was soon diagnosed with hyperthyroidism — a chronic condition common in older cats. The illness required taking Tapazole, a drug originally made for humans, which cost around $2 a day and needed to be administered for the rest of Dude’s life. For Hoffman, there was no question, Dude — who ate crumbs off the dining table, opened doorknobs with his paws, and enjoyed going for walks — was a full-fledged (albeit four-legged) family member. The new drug regime and the long-term financial outlay was well worth it. But still, the idea of the cost concerned her. “Not everyone could afford it,” she says.
Tapping her nearly three decades of experience in the pharmaceutical industry — particularly her work as the CEO of Newport Strategies, which pioneered a system to uncover profitable pharmaceutical opportunities — Hoffman, 53, began investigating the market for pet medications. She was familiar with the success companies had achieved in the $36.8 billion generics market and she was also aware of the savings generics offered consumers. (Although generic medicines account for three quarters of all prescriptions dispensed in the United States, it totals less than one quarter of all dollars spent on prescription medications, according to IMS Health, a pharmaceutical research and consulting organization in Norwalk, Conn.) But unlike the market for human drugs, where 100% of medications have a generic alternative as soon as the patent expires, 94% of pet medications didn’t have a generic. “There was a shocking lack of alternatives,” she says. “People had to pay very high prices on drugs that could have been available much more cheaply.”
In 2006 Hoffman launched Putney with a mission to provide lower cost pharmaceutical options for pet owners and more palatable (read: beef flavored) drugs for cats and dogs. Partially spurred by a down economy, the Portland, Maine-based company has maintained significant growth and anticipates $13 million in sales in 2010, approximately double what it did last year. In November — a difficult time raise capital — Putney was bolstered with a $6.7 million investment. “Jean’s idea is a good one and her history of executing her ideas is also very good,” says Peter Werth, the CEO of ChemWerth, a generic drug development and supply company who organized the team of private investors and invested personally. “It’s like a horse race, with Jean we are betting on the horse. Putney has the best model and Jean has the best plan we’ve seen; it’s got fantastic potential.” With the infusion of cash, Putney went on a hiring rampage, adding five key positions including a head of development who was formerly at pharmaceutical giant Eli Lilly’s animal health division Elanco. The investment also boosted research and development; Putney now has about 20 potential generic pet-drug targets in the pipeline and hopes to achieve more than $100 million in sales by 2013.
In a country where according to the American Pet Products Association, we’ll spend an estimated $47.7 billion on pets this year, and where pets have their own big box stores, frequent flyer miles, and social media networks, the veterinary pharmaceutical market — things pets actually might actually need — is exploding. Rockville, Maryland market research firm Packaged Facts estimates that 71% of U.S. dog- or cat-owning households use pet medications. Pet owners spent $5 billion on pet meds in 2007, a number expected to grow to $8.6 billion by 2012.
The trend is partly spurred by the “humanization” of pets — nearly half of U.S. households with pets regard the animals as family members, according to the Schaumburg, Ill. American Veterinary Medical Association. We take better care of our pets (they live inside, some sleep in our beds and a growing number eat organic food) and they live longer lives — yielding a new aging pet population. The pet boomer phenomenon means that more companion animals are living longer — and suffering from age-related issues such as joint, coronary, and cognitive conditions, which has lead to more trips to the vet and prompted top global pharmaceutical companies to ramp up development of pet medications. In 2007 Eli Lilly introduced Reconcile, the first SSRI class antidepressant approved by the FDA for treatment of separation anxiety and obsessive-compulsive disorder in dogs. Pfizer, which spends $300 million each year developing new pet pharmaceuticals, launched four new FDA-approved pet drugs in the last three years, including Slentrol — the first prescription drug for managing canine obesity.
The drugs are in demand, but they don’t come cheap — a dose of some of the newer “lifestyle” drugs, such as Slentrol, can cost $1-2 a day. And in a troubled economy that is affecting pet owners (one sad sign: pet abandonment is up in the U.S.), there are a variety of services on the rise to make medications more affordable. Walgreens now includes pets on its prescription savings club family memberships. (Vets commonly prescribe pets with the same drugs humans take.) Medtipster, a Troy, Mich.-company that has a search engine that locates discounted generic prescription medications at pharmacies and drug stores is launching a site for pet generics after receiving thousands of emails requesting it, according to Jason Klein, the president of Medtipster. “There is a tremendous potential for generics,” says David Lummis, senior pet market analyst at Packaged Facts. “This is a very untapped area of the market and because of the recession a lot of pet owners are looking for more affordable options for their pets.”
Putney originally made available human drugs that vets prescribe to treat pets, but its biggest opportunity is with a generic version of a painkiller known as Carprofen and used to treat pain and inflammation from osteoarthritis. The branded version, sold as Rimadyl, and owned by Pfizer, is one of the top drugs prescribed by veterinarians. The cost for pet owners depends on the dosage, but Rimadyl could cost $2-$3 a day for a dog the size of a Labrador — and many dogs take it for life. Putney’s caplet generic is sold for 25% less, making it a prime opportunity for savings for pet owners and increasing profits for vets. “People are always happy to save money. “Drugs have become more expensive over the last 10 years, it has become more of a factor for people, says, Dr. Chuck Lemme a vet in Cedar Rapids, Iowa.
Still, competing against the big dogs is not easy. Giants like Merck & Co, Sanofi-Aventis, Eli Lilly, and Bayer have significantly sized animal health offerings — and powerful legal teams that protect their products. In 2007 Pfizer, whose global animal health division does $2.8 billion a year, sued Putney over its first product, a generic human drug that contained the same active ingredient as one of Pfizer’s drugs that treats skin infections for dogs. Putney’s generic stayed on the market, though it did have to stop using a brochure. (Both Hoffman and a Pfizer spokesperson declined to comment on the settlement.) An additional potential issue: Pfizer has some exclusive contracts with major distributors that prohibit them from carrying generic versions of Rimadyl. Though while this might make business tougher, it doesn’t make it impossible as vets can purchase medicines from a variety of channels.
There’s also competition from existing generic drug companies. Vedco in Saint Joseph, Missouri was the first to sell a generic caplet of the bioequivalent of Rimadyl. “Novox has grown at record proportions in the past two years, probably due to the recession,” says Craig Campbell, general manager at Vedco. Additionally, the business is further complicated by a development schedule and regulatory procedures that can be onerous. It takes one to two years to develop new drugs and two to four years to get them approved by the FDA.
Hoffman, a lifelong animal lover (her first job was caring for people’s pets; later she cleaned horses’ mud stalls and taught riding) is undeterred by the challenges. She’s excited about the drugs in Putney’s pipeline — a Carprofen chew is expected to launch in 2011 pending FDA approval, and a variety of ointments, injectables, and caplets to treat pet’s eyes, ears, and skin, as well as antibiotics and antiparasitics are being explored. She says she’s not afraid of any more catfights. “We will probably manage to offend everyone, but we are here to serve the vets and help treat more pets so that they can live longer happier lives like Dude did.”
Dude lived an additional seven years on medication. If Hoffman accomplishes what she sets it to do, a lot of pets will live as long, for a cost that’s a lot less. Maybe cats really can have nine lives.