Media Coverage

Aratana rounds off 2017 with lower loss and strong revenues

Mar 16, 2018 - Animal Pharm
By Sian Lazell 
Animal Pharm
March 16, 2018

Aratana's net loss continued to decline in the fourth quarter of 2017 as its saw a large increase in revenues and lower R&D expenses.  

Net loss in Q4 was down 33% to $15.6 million while the firm's revenues saw a huge year-on-year increase to $10.4m in the quarter.

Revenues in Q4 included $2m in licensing and collaboration revenues and $8.4m in product sales. Around $6m of this was related to product sales of Galliprant as finished goods under Aratana's supply arrangement with Elanco, which it signed in January 2017. Galliprant is a treatment for the control of pain and inflammation associated with canine osteoarthritis.

Aratana added sales also included of its Nocita (bupivacaine liposome injectable solution) post-operative analgesia product for cranial cruciate ligament surgery in dogs have increased each quarter since its launch in 2016. The firm believes this is a result of strong re-order rates, with approximately two-thirds of accounts re-ordering in 2017.

R&D expenses in Q4 2017 were down by 61% to $3.5m. Selling, general and administrative expenses remained level at $7.6m.

Firm gains pace each quarter in face of yearly loss

Despite an improved picture in Q4, Aratana still recorded a widening loss of $47.5m for the full year in 2017, representing a yearly increase of 41.5%.  

Revenues for the year were down by 34% to $25.6m. Product sales amounted to $19.7m, including $15.5m from sales of Galliprant finished goods to Elanco. Licensing and collaboration revenue totaled $5.9m, of which $5.4m related to Galliprant. Aratana also received a one-time non-recurring manufacturing payment of $1m in 2017. 

R&D expenses in 2017 halved to around $15.1m. Aratana said this was mainly due to lower milestone payments related to Galliprant, Entyce (capromorelin oral solution) – an appetite stimulant for dogs – and Nocita, as well as fewer on-going pivotal studies compared to the previous year.

Selling, general and administrative expenses in 2017 saw only a slight increase to $28.9m in 2017. Aratana expects these expenses to be up slightly in 2018 as it invests in further adoption and awareness of its commercially available therapeutics.  

As of December 31, 2017, Aratana had approximately $68m in cash, cash equivalents, restricted cash and short-term investments. In January 2018, Aratana also received net proceeds of approximately $11.7m from the sale of shares of the company's common stock from under its at-the-market sales agreement.

Despite revenues showing a yearly decrease in 2017, the last year has seen Aratana's performance begin to gain momentum on a quarter-by-quarter basis. It recorded revenues of $3.8m in Q1 following significant turnover generated from its debut product launch and in Q2 sales amounted to $5.2m. The firm's net loss was down 33% year-on-year by Q3 and revenues totaled $6.2m in the quarter. 

Over 2018, Aratana expects around $35m of cash to be used for on-going operations and $17.3m of cash to cover its existing debt principal obligations. The firm believes its current cash, cash equivalents, restricted cash and short-term investments, with aggregate net proceeds from its at-the-market sales agreement in January, will be sufficient to fund its current operating plan and debt obligations through at least March 31, 2019. 

Outlook could be challenged

Commenting on Leawood, Kansas-based Aratana's Q4 results, investment specialist William Blair said: "Compared with our estimates, Galliprant licensing and collaboration revenues and Nocita sales came in slightly ahead of our estimates, while Entyce sales were slightly below. In aggregate, we view the quarter as relatively in line with our estimates (when looking beyond a few unusual items) but we believe the big question mark continues to be the company’s need to raise additional cash at an already washed out stock price.

"We maintain our Outperform rating on Aratana given our view that the stock is well below the value of the lead products but acknowledge the near-term outlook could be challenged until the balance sheet is improved.

"Galliprant licensing and collaboration revenues of $1.5m exceeded our estimate by over $200,000, reflective of a step-up in sales and market penetration compared with the prior quarter. According to Aratana's partner Elanco, Galliprant sales reached $8m in the fourth quarter compared with $6m in the third quarter. This speaks to increased penetration in vet clinics and good reorder rates, in our view.

"Excluding the $1m one-time milestone received from Elanco in the third quarter, the licensing and collaboration fees increased roughly $300,000 sequentially. Galliprant was also approved for sale in Europe in January, so we are comfortable sales for this product should continue to move steadily higher during 2018.

"Entyce revenues of $1.3m came in below our $2.1m estimate but management noted that it doubled its target for vet clinic penetration in the product's first quarter since launch. Though we expect to decrease our 2018 revenue estimate following this quarter's performance, we still believe that the product has a nice long-term opportunity. We believe the ramp-up of Entyce revenues will be crucial to the company's ability to reach cash flow breakeven and the stock's ability to rebound."

Milestones and plans for 2018

In 2018, Aratana said it will focus on continuing to drive clinic placement while increasing clinics' use of Entyce.

The firm has made several other recent milestones, including commencing an extended field study at approximately two dozen veterinary oncology practice groups across the US for its canine osteosarcoma vaccine, which it received a conditional license for in December.

It also submitted results to the US FDA's Center for Veterinary Medicine from both the pivotal safety and pivotal field effectiveness studies for AT-003 in cats for post-operative pain in 2017. The firm subsequently received the target animal safety technical section complete letter. If the effectiveness technical section is approved, Aratana expects to file the supplemental New Animal Drug Application (NADA) for AT-003 in the second quarter of 2018. If approved, the Nocita label would then be expanded to include cats.

Additionally, Aratana recently announced an R&D collaboration with AskAt. The collaboration includes an option agreement for multiple therapeutic candidates with potential in pain, allergy and cancer. The agreement includes exclusive worldwide rights to develop and commercialize AT-019, an EP4 receptor antagonist therapeutic candidate with potential in pain, inflammation and other indications. 

Reprinted with permission of Animal Pharm News




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