The Future of Pet Health

Issue $141

January 14th, 2025

Quick Hits:

🐱 The business of cats

🫢 Woman sues vet who left surgical tool inside her dog

🍱 17 tons of food donations were delivered to displaced dogs in L.A.

🐈 Declawing cats banned in Massachusetts

🚙 Meet the uber-famous Uber dog

🆘 SF SPCA is waiving adoption fees for puppies

This week we interviewed serial entrepreneur Todd Zion who’s the co-founder, president & CEO at Akston Biosciences Corporation.

You co-founded Smartcells Inc. back in 2003 and developed a once daily injectable self-regulating insulin product which ultimately sold to Merck for $500M, which was at the time, one of the largest preclinical pharmaceutical acquisitions ever. Could you elaborate on that entire journey?

SmartCells was our first company, founded on technology that I had developed as part of my Ph.D. research at MIT. We were able to leverage the entrepreneurial ecosystem at MIT and take advantage of their mentoring services and connections to potential investors. Ultimately, we decided to build a lean company with a singular mission: build up the technology to the point of obtaining a valuable pharma partnership or acquisition.

To that end, we raised funds from individual angel investors as well as government and non-profit grants. All told, we raised about $10M from investors and about the same amount from grants; enough to bring the technology into early-stage clinical trials. There were certainly some ups and downs along the way - and even a metaphorical near-death experience - but ultimately two pharma companies got into a bidding war for the technology, with Merck ultimately putting in a close-out bid to acquire the entire company.

When did you launch Akston Biosciences? What’s the company’s focus and why did you decide to transition the company from human to pet health?

Akston was officially launched in 2012 but it didn’t take outside investment until 2016. Before that, Akston was supported by investments from the management team and former SmartCells investors. Originally, the company was focused on additional applications of insulin engineering outside the scope of the Merck-acquired technology.

We launched a major project to develop a molecule to prevent the development of autoimmune diabetes in young children by targeting parts of the immune system that were inadvertently targeting insulin. This was supported by investors, NIH funding, and a partnership with the Helmsley Charitable Trust. This technology enabled us to develop ultra-long-acting insulins for the once-a-week treatment of diabetes.

This then led us to pursue applications in veterinary diabetes as a way to de-risk the technology in diabetic animals versus laboratory mice, create additional commercial verticals, and create opportunities for partnerships with vet pharma. Finally, the time was right to make the transition to animal health. According to Pew Research, nearly 97% of pet owners consider their pets to be family members. And when these owners look at a companion animal as family, there’s a willingness to spend more. For this reason and many others, the animal health market size has grown from $16.9 billion in 2019 and is now projected at $42.4 billion by 2030.

You recently partnered with Dechra Pharma, how does a commercial development partnership like that work?

There are several ways these can work, but typically the partner obtains an exclusive license to commercialize the technology in exchange for upfront, milestone, and product royalty payments. The partner also pays for some of the development costs. In this case, we took on the manufacturing responsibility because the vet pharma space lacks significant manufacturing resources to produce so-called biologic drugs such as our long-acting insulins.

This is not dissimilar to the partnership structure between Purdue and Energesis which led to research collaboration, IP agreements, and commercialization pathways. 

What unique challenges do you face in adapting human health technologies to the pet industry and designing therapies specifically for pets, whether it’s regulatory hurdles, market education, or R&D considerations?

Most pet medicines on the market today are repurposed human molecules which significantly reduce the development cost and regulatory burden. With protein-based medicines such as ours, you have to develop the molecules from scratch; designing them specifically for the species of interest. You cannot use human proteins, because the animals will develop an immune response against them, rendering them ineffective and potentially unsafe for use. The cost of developing these biological molecules from scratch scares away most entrenched players, ceding the opportunity to only the biggest, most dominant vet health companies.

By investing in a unique technology and manufacturing infrastructure, Akston has figured out how to do all of this much more cost-effectively. This is also important because another challenge in pet health vs. human health is the lack of insurance coverage for prescription medications. This means that pet parents are paying out of pocket, and we have to therefore be sensitive to the costs of our innovative technologies.

Another challenge has been convincing institutional investors to devote the necessary funds to fully develop these more expensive programs. The industry is used to putting small dollars in play to de-risk things and sell them quickly to existing vet pharmas. However, the opportunity to really make an impact comes from developing the medicines all the way through to commercial manufacturing and market launch, which is what we aim to do.

How has scientific innovation in pet health evolved over the past decade, and where do you see it heading in the next five years?

As mentioned before, a lot of pet health medicines have been repurposed human drugs, but over the last decade, we have seen larger companies invest in biologics, namely monoclonal antibodies. The first of these is now on the market to treat dermatitis, chronic pain, and cancer. There are fewer than a handful currently approved in pet health compared to over 150 approved in human health, so the pet health field is primed to see an explosion in R&D and product development in this category.

That said, Akston is poised to go one step further. High doses of monoclonal antibodies are required and these are dosed per body weight, making larger dogs much more expensive to treat than smaller dogs, for example. Our technology enables the animals to make their own antibodies using an extremely small amount of medicine, and these antibodies last much longer, thus reducing the cost and complexity of treatment. Furthermore, the same dose is required for small dogs and large dogs thus eliminating the cost of treatment discrepancy.

Can you provide an overview of Akston's funding journey, including the recent $9.6 million Series G financing, and how these funds have been allocated to advance your projects?

In the early years, the management team and close investors put in about $3M to get the company off the ground. After that, we raised about $15M from additional private investors (through the Series E referenced above) with follow-on management participation and with about $5M in total SBIR grants and about $6M in partnership funding through the Helmsley Charitable Trust. We raised a little over $30M during the Covid years (Series F and G) to support a pivot of our platform to develop a room-temperature, protein-based Covid vaccine for the developing world which went all the way through commercial manufacturing development and Phase III clinical trials in India.

After that, we pivoted back to our insulin products and eventually decided to commit 100% to animal health. The rest of our funding has come through partnership revenue associated with the Dechra collaboration. In the summer of 2024, Dechra acquired the program from Akston allowing us to invest more funds into our home-grown pipeline of products.

With reports indicating plans to raise up to $25 million, what are the strategic goals for this capital? 

Our next product is a cancer immunotherapy for dogs for which we are seeking conditional approval and market introduction in 2027. The funds will be used to develop all of the commercial manufacturing and finish the clinical trial testing required to support this goal while also providing resources to develop our fast-following candidates in dermatitis and chronic pain. The goal is to be self-sufficient and profitable within the next five years.

Drawing from your experiences with SmartCells and Akston, what guidance would you offer to emerging biotech entrepreneurs aiming to bring innovative therapies to market?

If it seems easy, you’re doing it wrong. Try not to get discouraged and try not to accept the status quo. Try to surround yourself with advisors, investors, service providers, and partners that match as closely as possible to your risk-reward profile.

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Finally, why didn’t the dog want to play football?

It was a boxer.

See you Friday!