Companion pet health is a major concern for pet owners and veterinarians alike with over 60% of households in the U.S. playing host to companion pets, such as cats and dogs, it isn’t surprising to know that U.S. spending on pharmaceuticals, biologicals and parasiticides was US$4.2 billion in 2014.
The global animal drug market is relatively robust and is estimated to expand at a CAGR of 4.9% until 2025. With owners spending more than ever on medicines to help their pets live longer, companies have spotted an open-ended opportunity in providing drugs and therapies that support veterinarians high medical standards to better serve the animals in their care.
Zomedica Pharmaceuticals Corp. (TSX: V.ZOM, Forum) is one of these companies that have entered the companion animal health space with an aim to take a sizeable market slice by targeting the unmet needs of clinical veterinarians. Right now, 41% of drugs found in the veterinarian’s pharmacy cabinet are FDA Center for Veterinary Medicine (CVM) approved animal drugs. The remaining 59% are unapproved animal drugs, or approved human drugs used off label. This reliance on human drugs leads to issues with safety/efficacy, compliance, price and availability when treating pet patients. Zomedica intends to create a FDA-CVM approved pipeline that will address all of these issues and support veterinarians’ high medical standards.
The company is also focusing on the personal and financial well-being of veterinarians by providing products that help vets lower costs, increase productivity and grow revenue while better serving the animals in their care. This kind of value-added service hopes to generate customer loyalty across the globe, including the 57,000+ companion animal veterinarians practicing in the U.S.
It’s a fairly fragmented market, but I think Zomedica has really set itself apart from the competition with its novel product delivery platform, pipeline development strategy and unique public market approach. To top it all off, the company has multiple clinical veterinarians in executive leadership that advocate for the vet customer to help ensure products reflect their needs, while also considering market and business objectives.
But speaking of public markets, Zomedica is currently the only companion animal health pharmaceutical company listed on the TSX Venture Exchange, known mostly for mining and resources. This move stymied many, but there was a method to this unique path as Zomedica CEO Gerald Solensky explained, “There were two distinct advantages to listing on the TSX Venture Exchange. One was a competitive advantage. You see, going public in the States takes approximately three to five years and costs significantly more than the type of vehicle, being a CPC, which is only available in Canada.”
“Two would be the manner with which we were able to negotiate and posture ourselves to utilize a go-public vehicle like the CPC, and the amalgamation terms and conditions in which we closed on. So first, it is very cost-effective and timely, and second, there’s a definite advantage to being able to enter the public markets without our competition being aware of every bit of strategy we have.”
Being one of the few animal health life sciences companies on the Venture Exchange also gives the company incredible niche value for Canadian fund managers and investment banks who wish to diversify their assets under management, affording Zomedica unique funding opportunities as it sets out to build an industry-leading portfolio.
Now that we’re talking about portfolios, Zomedica has just submitted its first Investigational New Animal Drug (INAD) application to the FDA Center for Veterinary Medicine as Solensky affirmed, “From Day One, we outlined the milestones in our near-term and long-term strategies, and we’ve been achieving them. This announcement is just another example. Our expectations are to continue that momentum in other areas of the development of our pipeline.”
While we’re on the topic of product pipeline, Zomedica recently signed a transformative joint research collaboration deal with CTX Technology, based out of Tucson, Arizona. CTX is working on proprietary peptide-based skin-penetration platform technology expected to improve topical delivery of therapeutics and cosmetics in humans.
This alternative drug delivery tech complements Zomedica’s own unique delivery platform, offering even further advantages to veterinarians in terms of ease of application and enhanced effectiveness in maximizing companion animal care and treatment. Solensky added, “I’ve always said the power of a company and one of the main reasons for its success is the people driving it forward. In CTX Technology, we have some of the best minds in the business to collaborate with while retaining an option for a world-wide exclusive animal health space clawback for exclusivity in their patents.”
“As well, the collaboration between two life science companies; one from the human-side, the other from the companion animal side, presents a unique translational research opportunity to bridge the gap between human and animal medicine. What’s also nice about our deal is we get to add all this brain power and resources to our R&D efforts without it driving up our burn rate. We have the best of all worlds in this agreement.”
Solensky’s long-term vision sees a continually nimble Zomedica with the pronounced ability to pivot. That way the company can execute on its present capital building strategy and allocate dollars to keep its corporate sights on the horizon for new opportunities while eyeing others in the space for complementary partnerships or M&A potential.
Zomedica is pushing to be recognized as a senior-level capital markets organization and as such has been acting in accordance to all the protocols to what is normally customary of the big board-side exchange obligations. One example of this is the filing of their last quarterly financial statement which was submitted with the level of detail and financial data of a big board pharma.
Solensky commented, “Our goal from the onset was to act like a public company, even while private. This is where we’ve drawn a line in the sand. We will always clearly communicate our financial performance, because we want to be seen as the company we think we are.”
Right now, Zomedica is doing alright for cash and has a minimal burn rate, however, it is involved in a capital intensive business and will need to keep the raising of capital as a main objective for the company, whether that capital comes from M&A activity or heading back to the market. Solensky assured me that gross proceeds from said capital raising will be predominately directed toward the acceleration of pipeline, M&A opportunities as well as the execution of the company’s globalization strategy and expansion of Zomedica’s leadership team.
The next 12 months are going to busy for Zomedica and beyond 2016, Zomedica does have plans to cross list to a foreign exchange.
Zomedica is chomping at the bit, but has a defined long game strategy in place and as a result, has an extended runway of capital growth in front of it. This is good news for the retail investor as it gives them the rare opportunity to get in on an ROI roughly equal to what VC/PE firms swallow up before companies like Zomedica go public.
Solensky affirmed, “We’re in it for the long haul. In order to set forth what we did when we originally developed Zomedica, we will continue maintaining our position as the “voice” of the veterinarian, using our understanding of product development and taking advantage of an ability we have with the expert team we have in both the business and science side to capitalize on opportunities in the marketplace through M&A deal flow, and through the identification of other technologies and medical devices that could enable us to see revenue recognition before our pharmaceutical development.”
Others have recognized the value of this mandate and Zomedica’s ability to reach its announced milestones. One clear indication of this confidence is the tight nature of the company’s share float. This unwillingness on behalf of the early shareholders to let go of their shareholdings has kept market cap above the company’s going-public price.
If Zomedica leadership, with over a century of combined experience in clinical veterinary medicine, drug discovery and development, capital markets, and business development, can continue to pull the trigger on its growth strategy while maintaining its unique value-added relationship with veterinarians, investors could be exposed to a continuously healthy long-term ROI – the kind you can retire on. Don’t take my word for it however. As always, do your due diligence before making any investment decision.
--Gaalen Engen
https://twitter.com/gaalenengen
FULL DISCLOSURE: Zomedica Pharmaceuticals is a Stockhouse Publishing client.