Shares of Zomedica (NYSEMKT:ZOM) are off to a roaring start on Tuesday morning, up more than 25% at one point in pre-market trading after the Michigan vet-med firm came out with very positive business updates. At a penny-stock valuation, ZOM stock saw similar large moves in trading early last week.
Zomedica is a $500-million, pre-revenue vet-med company focused on developing novel diagnostics and innovative therapeutics for companion animals, like cats and dogs.
Its first major product, a unique diagnostics tech platform called Truforma, is on the cusp of commercialization. Once it debuts, many experts think that the platform will disrupt the veterinary diagnostics market.
ZOM Stock Reacts to Weekend Updates
To begin with, the shares could be reacting to Zomedica’s stronger balance sheet, which has seen more than $40 million of additional cash coming in to the company’s coffers as investors exercised their outstanding warrants. The recent increases in the ZOM stock price has fueled those transactions. Management said “cash and cash equivalents” now are in excess of $90 million, “sufficient to fund operations at least through calendar year 2023.” By then, it expects to be cash-flow positive.
There’s also a positive administrative development, as the company regained market compliance with NYSE American’s listing standards. Last April, as the novel coronavirus slammed markets, the low price of ZOM stock put the shares at risk and on the exchange’s list of noncompliant issuers.
Finally, management confirmed the company is on track toward the March 30 commercial launch of its Truforma point-of-care diagnostic platform. It will begin the initiative with three diagnostic assays, adding two more later this year, once it has some of the kinks worked out of the distribution system. Those new assays, including for diagnosis of certain gastrointestinal conditions in pets, are fundamental to the company’s collaboration with Qorvo Biotechnologies.
‘Humanization’ of Pets Emerges As Big Trend
The so-called “humanization of pets” is a quickly emerging trend, and spending on pet care has risen more than 100% since 2010. Early winners include other vet-tech firms Zoetis (NYSE:ZTS) and Idexx (NASDAQ:IDXX), and pet e-commerce company Chewy (NYSE:CHWY). Many investors like see ZOM stock as the next winner here.
InvestorPlace analyst Luke Lango last week told readers of his Hypergrowth Investing newsletter that peer vet-med stocks Idexx and Zoetis have historically traded around 7x sales. As Lago wrote, a 7x sales multiple on $250-plus million in revenues implies a potential future market cap for Zomedica of $1.75 billion. In turn, that implies a future price target for ZOM stock of over $3.
He wrote that “the big breakout in ZOM stock may be just beginning. This company is on the cusp of commercializing a breakthrough technology platform that could meaningfully disrupt the $2.8 billion and rapidly growing vet diagnostics market.”
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.