Aratana Therapeutics (PETX) is a $290 million market cap veterinary biotechnology company with sole focus on how to solve unmet and under-served medical needs in pets with serious diseases. The company is working to pass animal therapeutics from the bottom to the top, through stages of formulation, preclinical and clinical studies, regulatory approval, manufacturing, and commercialization. The company is regarded as a leader in developing drugs for use by pets. The company has two products approved for animal pain, with several candidates with market launch dates anticipated soon. Galliprant is approved for use in dogs for control of pain and inflammation associated with osteoarthritis. Nocita is approved for post-cranial cruciate ligament surgery pain. Two cancer drugs, tactress and blontress for use in T-cell and B-cell lymphoma are also conditionally and fully available to veterinarians via USDA agreement, respectively. The company is in the final stages of regulatory process Entyce, a drug for appetite stimulation in dogs, with potential launch in fall 2017. PETX anticipates USDA license for candidate AT-014 in canine osteosarcoma in 2H 2017. Candidate AT-016 is being developed with collaborator VetStem BioPharma for osteoarthritis pain in dogs, with results of this pivotal safety study expected in 2017. This study is particularly interesting to Strong Bio, and stands out in the veterinary market targeting companies, because AT-016 is an adipose-derived allogeneic stem cell therapeutic. The combined 2015 estimated markets for pet pharmaceuticals came in at about $7.5 billion dollars.
Galliprant (grapiprant tablets) is an orally administered first-in-class piprant (a non-COX-inhibiting prostaglandin EP4 receptor antagonist) indicated for osteoarthritis pain and inflammation in dogs. The drug is in co-promotion with Elanco Animal Health, a division of Eli Lilly (LLY). Elanco has exclusive rights to develop, manufacture and market Galliprant globally. Galliprant demonstrated statistically significant in pain measures in a four week placebo-controlled study of 285 dogs. A nine month safety study dosed animals with 15-fold increase over normal dosing regimen, and showed no clinically significant changes in liver, kidney, blood, or reaction parameters. The most common adverse reactions were vomiting, diarrhea, decreased appetite and lethargy. PETX reports that the drug can be used by puppies as young as 9 months (or weighing 8 pounds or more), with half or full tablet once-daily dosing. The drug was commercially available in January 2017, with FDA CVM approval coming in 2016. EMA submissions took place in 2016 with estimated approvals in 2017. It is estimated that one in five dogs suffers from osteoarthritis, with an increasingly competitive (PetVivo (OTCPK:PETV) and Zoetis (ZTS)) market estimated at nearly $3 billion.
Nocita (bupivacaine liposome injectable suspension, AT-002) gained FDA CVM approval for local post-operative analgesia for cranial cruciate ligament surgery in dogs in 2016. One administration has a relatively long-lasting 72 hour effective window, releasing bupivacaine over time from liposome suspension. It became commercially available in October 2016. "We believe Nocita will help transform the way veterinarians control post-operative pain for dogs undergoing cranial cruciate ligament surgery," stated Steven St. Peter M.D. in the company announcement, President and Chief Executive Officer of Aratana Therapeutics. Adverse reactions in dogs included discharge from incision, incisional inflammation, and vomiting. Logical label expansion for the drug would be other related surgeries, international expansion, and use in other animals. AT-003 is being developed by PETX for post-operative pain in cats, currently in pivotal studies.
The company has two cancer medications for animals, Tactress and Blontress. PETX was granted conditional licensure of Tactress1 (AT-005), a monoclonal antibody for use in dogs with T-cell lymphoma, by USDA Center for Veterinary Biologics in 2014. Final labeling awaits USDA approval, with the therapeutic currently available to veterinary oncologists under conditional license from USDA. Blontress (AT-004) novel B-cell lymphoma monoclonal antibody for use in dogs was given full license from USDA. Blontress is partnered with a third party for U.S. and Canada commercialization. PETX retains development and commercialization rights for other geographies. B-cell lymphoma is a common cancer in dogs, and progresses quickly if untreated. Because chemotherapy, the treatment of choice in lymphoma, has a lot of undesired treatment effects, better therapies are needed. A third anti-cancer immunotherapy, AT-014, is being developed with a product license with USDA for osteosarcoma in dogs. The company is a pioneer in the canine cancer space. It was estimated that in 2015 pet owners shelled out over $15 billion dollars for cancer treatment in animals, with $500 million being estimated for dogs alone.
ENTYCE (capromorelin oral solution; ghrelin receptor agonist) development is in final approval stages for appetite stimulation in dogs, having been approved by FDA in June 2016. PETX presented data from a study of 244 dogs at American College of Veterinary Internal Medicine in June 2016, reporting that 68.6% of pets taking Entyce had an increase in appetite (as reported by owners; 44.6% for placebo). 56.2% of the Entyce treated dogs displayed increased appetite-related behaviors compared to 26.8% of placebo. 76% of the dogs gained weight on Entyce, in contrast to 45% of placebo dogs, over the four day study period. In an April 2017 update, PETX announced it recently met with FDA Center for Veterinary Medicine (CVM) regarding manufacture of ENTYCE. The company anticipates that upon approval from FDA CVM it can begin its sole commercialization launch in the fall of 2017. Entyce label expansion study for weight management in cats with chronic kidney disease initiated in Q1 2017. Ghrelin receptor agonists have demonstrated anti-inflammation, vasodilation, increased cardiac output and vascular resistance, and increased IGF-1 levels. Thus label expansion in the future could include such indications as anorexia, negative energy balance, chronic heart failure, inflammation, chemotherapy, arthritis, inflammatory bowel disease, and gastroparesis.
PETX reported a 1Q 2017 loss of $12.6 million, compared to prior 1Q 2016 loss of $18.1 million. $3.8 million in net revenues was primarily received from Galliprant sales ($2.5 million) and $300 thousand in Nocita sales. The company reported $68 million in cash on hand at end Q1 2017, and raised an additional $24.4 million in a May 2017 equity offering of 5 million shares at $5.25 per share. Aratana expects Galliprant sales to continue to grow into one of the top pet products in the U.S., and as it reaches milestone payments from Elanco, contribute significantly to the company bottom line. PETX expects to launch Entyce during the fall of 2017, potentially helping enable the company to reach early 2019 with current cash on hand.
Because studies in animals are much less expensive to conduct than large scale international clinical trials, the company's threshold for drug approval is easier to attain in terms of financing, provided its candidates demonstrate solid efficacy. It is also less rigorous from a regulatory perspective to gain approval of animal products. Challenges for manufacturing appear to be significant, but manageable. The company has a number of candidates in development, forming a promising pipeline, and its sales are increasing, and it will be interesting to see how this sales data compares with launches for drugs to treat humans, and how label expansion efforts go from species to species. Most interesting of all are its efforts in development of allogeneic stem cell treatments for canine osteoarthritis. Perhaps stem cell advances in pet therapies will finally usher in new therapies for humans, which seems to have hit resistance for a number of social and regulatory reasons. Moreover, there is a success model for animal treatment companies like ZTS, which should provide the market a basis for PETX share ascension. Still, with a market cap of under or near $300 million, and large addressable markets, it looks like a good place for an initial position to Strong Bio anywhere around $7 per share.
Risks specific to PETX would be market uncertainty as well as competition. For instance, even though appetite stimulation in dogs has a market, cannabinoids would be regarded by Strong Bio as having shown better efficacy, and may be sold at significantly less expensive prices. Still, these mechanisms are separate, and veterinarians should appreciate having more options. Cancer treatment markets for pets are expected by several experts in the field to burgeon in the coming years. However, information on the actual study data for blontress and tactress is difficult to find, making it hard recommend PETX stock without using words like "potential" until more information on these studies is made available. If the reader knows where information can be found feel free to add it in the comments section. Stem cell therapies, although promising, are unproven as well, and will require time to elucidate functionality and efficacy.
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