By Sian Lazell
February 10, 2017
Global investment banking and wealth management firm William Blair said it has additional confidence in Aratana Therapeutics, despite the recently delayed commercial launch of Entyce.
William Blair said despite the delayed launch of Entyce, it believes Aratana is still performing well and the recent decline in the Kansas City-based firm's share price may make an "attractive entry point" for smaller capitalization investors.
Entyce is an appetite stimulant for dogs. The launch of the product has been delayed as Aratana has filed with the US Securities and Exchange Commission to transfer manufacturing of Entyce to a new vendor. The FDA has therefore requested additional information "regarding the proposed transfer in order to complete the supplemental application".
Although Aratana is working with the FDA to ensure Entyce is launched before the end of 2017, it will now focus on bringing Nocita (bupivacaine liposome injectable suspension) to market. Nocita was initially made available to veterinarians in October 2016.
William Blair said: "The animal health industry typically has had limited innovation among pharmaceuticals, so we believe Aratana stands out with three FDA approvals in the past year – a pattern appears to be helping build the company's brand among veterinarians. We observed steady booth traffic during the North American Veterinary Conference, as well as good attendance at scientific sessions relating to the company's new products.
"Although Nocita may be a smaller product than we originally expected due to its specialty nature, management commentary indicated that it is very excited about creating an inappetance market with Entyce."
The organization added the lack of alternatives for treating inappetance means Entyce could be a lead product on the market for dogs and potentially cats.
Aratana has commenced pivotal for Entyce and Nocita in cats, with William Blair describing Entyce as Aratana's "most notable pipeline opportunity".
The investment firm said it is updating model to reflect Aratana's comments on the two products, by increasing sales targets for Entyce but decreasing targets for Nocita. It said in 2020, it now expects Entyce to generate revenues of $69 million and Nocita revenues of $30m. It previously predicted revenues of $44m and $56m, respectively.
Aratana said regarding Galliprant – the firm's debut product, approved in March 2016 – it is pleased with how the co-promotion with Elanco is progressing. William Blair estimates Galliprant will generate $4.8m from milestones, royalties, and co-promotion fees in the first quarter of 2017, including a $4m milestone for commercial manufacturing of the product. It projects the product will generate just under $14m for the year including another $4m milestone related to approval in Europe.
Animal Pharm recently reported how Aratana saw its stock price increase following several significant product launches in 2016, after share prices had tumbled in the previous year as the company awaited its first significant revenues. The firm saw the biggest improvement in its share price out of the veterinary biotechnology firms listed, with its valuation on the Nasdaq up 43% by the end of the year.
However, between February 3 and February 7, the company's stock price fell from $8.03 to $6.14 – coinciding with the Entyce delay.
Despite this, William Blair said: "As of fiscal third quarter end, the Aratana had roughly $102m in cash and roughly $40m in debt. After the recent pullback, the company has a market cap $255m and with our belief that the company's three lead products alone should be worth about $14 per share, we believe the stock's risk/reward profile is quite compelling at these levels. We also like the potential for Aratana to be viewed as an attractive partner with the larger manufacturers as that group consolidates.
Reprinted with permission of Animal Pharm News