Bets on Zomedica’s In-Office Vet Test Could Payoff or Bust by Year-End
Having recently lost an aged cat to kidney failure, I decided it was time to look at Zomedica (NYSE:ZOM) again. When I last examined ZOM stock at the end of March, shares traded for around $1.70. Now at around 80 cents a piece, the firm sports a market capitalization of $777 million.
Zomedica has begun offering a test called Truforma, for adrenal and thyroid health in dogs and cats. The system is designed for use in clinics, meaning answers can come back immediately. This can distinguish a practice from competitors. As pet hospitals consolidate, combining into networks, the idea becomes practical.
The kit is new, however, so there’s little for an investor to hang their hat on. Speculators sent the stock above $2.50 in February. After two weeks on the market, Truforma sales were running at a $320,000 a year rate.
ZOM Stock Gets a Seasoned Salesman
To get the run rate higher, president Stephanie Morley stepped down and Zomedica hired Greg Blair, an experienced executive most recently at Elanco Animal Health (NYSE:ELAN). Our Will Ashworth found that in his former role, Blair was involved in 40 different acquisitions. Blair now has a cash kitty of $277 million to work with.
The money should go into sales. As I noted in March, Truforma works on a system of disposable cartridges. Think of it as a razor-and-razor blade model — once it’s in the money flows.
What veterinarians are looking for are conditions like Addison’s Disease and Cushing’s Disease. These are treatable in both dogs and cats. It costs, but today’s American pet owners love their animals very much. In FoxyRoxy’s last months, we were pushing fluid directly under her skin with a needle. We do these things. We can cover pet surgeries, pills and injections. There’s a good reason upstart Lemonade (NYSE:LMND) is going all in on pet insurance.
The short story is this: If a local clinic network gets just one Truforma machine, it could generate thousands of dollars per month from loving pet parents, as opposed to letting their friends cross the rainbow bridge. The goodwill could also grow the networks’ reputation. In a competitive market it makes sense.
The Task Ahead
Blair probably has a year to make this work. There are about 30,000 clinics in the U.S., but over 10% are now owned by corporations. About half the referral practices are also corporate-owned.
We should know by year-end if Truforma can make the grade. While the sales effort is underway, the company will be trying to get more tests approved. Each test means a new set of reagents and more value for the system.
If it can make sales, Blair has the savvy to know what to do next. Zomedica might become an acquirer of smaller vet medicine companies. Blair might also sell the company to Elanco or another large company, at a price that justifies the current market cap.
Our Josh Enomoto calls this a low probability outcome. Our Ian Cooper also thinks there’s not much to get excited about here.
Ian Bezek thinks the first quarter excitement over Zomedica might have been young traders confusing it with Zoom Video (NASDAQ:ZM). A distribution agreement with Miller Veterinary Supply should mean we get quick answers.
Pure Speculation at This Point
Zomedica is a pure speculation. The good news is it’s a short-term one.
I’m not a vet. I’m not an expert on veterinary diagnostics, or on the medical equipment vets use behind the scenes. But I know enough about the vet industry to see where Zomedica has a chance to succeed.
It’s just a chance, however. Don’t put any money into this stock that you’re not ready to lose. You can get 1,000 shares for about $800 right now. That money might be gone by Christmas, or it could be $2,400. Either way we’ll know a lot more by then.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.
