Zomedica (NYSE:ZOM) has gotten out of the penny stock dungeon by finally bringing a diagnostic system for vet offices to market. ZOM Stock currently sits around the $1.70 range.
But how many systems can they sell?
The system is called Truforma. It uses radio waves to run through a reagent and patient blood sample to diagnose thyroid and adrenal conditions in dogs and cats. Each test uses a separate disposable cartridge, and each reagent can perform a different test.
The market for such testing is real, about $1.8 billion last year. The market is estimated to grow to $3 billion by 2025. Pet ownership zoomed during the pandemic and better, simpler diagnostics can help vets gain share in their markets.
What’s the Deal?
Truforma uses Bulk Acoustic Wave (BAW) technology from Qorvo (NASDAQ:QRVO). BAW is used to analyze high frequency radio waves. Most of Qorvo’s applications seem aimed at telecom companies.
Acoustic waves have been studied in tissue analysis since the 1990s. Shear wave displacement can, in theory, deliver accurate information on the chemical composition of small samples. That’s what Qorvo has been working on in its biotechnologies unit, but it’s not yet ready for people.
Qorvo and Zomedica announced TruForma last May, using Qorvo acoustic resonators for chemical assays. The device is like a six-pound shoebox, the cartridges smaller than audiotapes from the 1970s. The system can do three tests today, with two more on the way.
Many Unknowns
But there are many unknowns. How much will Truforma cost, and how much will it cost to run? The one buyer identified so far, Jason Berg, runs a 29,000 square foot critical care pet hospital near the New York-Connecticut border. He has a lot of wealthy clients and can take a risk.
For Truforma to take off, however, the price of the device and the reagent cartridges must be affordable to smaller practices. It must become accessible to middle class pet owners. If a big chain like Mars’ Banfield or Blue Pearl standardized on it, that would be a game changer.
Then there’s the valuation. The company was worth about $200 million at the end of 2020. Its market cap entering trade March 24 was $1.75 billion. It hasn’t gotten 10 times bigger physically in that time.
Many Views
Naturally, InvestorPlace writers are divided on ZOM stock.
Our Mark Hake estimates that Truforma may be worth $3.15 per share on 10% of the pet diagnostics market. But Zomedica is not yet competing for all that market, just a small piece of it, with just a few tests.
The launch was music to investors’ ears, wrote Will Ashworth. With more than 70 patents issued or pending, it could be a home run.
But as Tom Taulli notes, the stock looks overextended. The shares are being pushed at Reddit’s r/WallStreetBets forum, the same people who told you to buy Gamestop (NYSE:GME) at $300. Our Thomas Niel has seen estimates of $53 million in sales in 2030. That’s not good enough.
The Bottom Line
Zomedica has, as Donald Rumsfeld once observed, known knowns, unknown unknowns and known unknowns.
We know what Truforma looks like and have an idea about how it works. We know it has competition but don’t know how Truforma stacks up on vets’ bottom line. We have no idea how many units and cartridges might be sold.
That’s too many unknowns for me. But at 66, I’m not looking at 10-year risk cycles. For younger investors, say those 40 or less, Zomedica looks attractive at under $2 per share. Just know that you’re going to have to hold this stock for several years before you know if you have a winner.
Or you can play the stock’s momentum, watching the daily price action, buying and selling, on rumors and press releases. People make money that way. Just make sure you have time to devote to it.
At the time of publication, Dana Blankenhorn owned no shares (directly or indirectly) in any companies mentioned in this article.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.
