Zomedica’s Early Launch Is Music to Shareholders’ Ears

In my last article about Zomedica (NYSEAMERICAN:ZOM), I said that the March 30 launch of its Truforma diagnostic platform for dogs and cats couldn’t come soon enough. While I liked ZOM stock as a speculative bet, I argued that the sooner it could register sales, the sooner investors would gain some confidence in the company’s product and business plan. 

a puppy and a kitten sniggling together. represents pet stocks
Source: Shutterstock

Almost one month to the day of my February article, Zomedica stock has gone sideways, even though it launched Truforma on March 16, two weeks ahead of schedule.

“It is a credit to both our employees and to the stellar team with whom we have worked at our development partner, Qorvo Biotechnologies LLC, that we have created a unique and valuable diagnostic tool, and have delivered it to the veterinary market slightly ahead of our previously announced schedule,” CEO Robert Cohen said in a news release. 

ZOM stock fell from a high of $2.49 to $2 in recent days. With Truforma now available to vets across the country, I expect Zomedica’s story will start to make the rounds. 

Here are three reasons why. 

Truforma Can Save Lives

The first buyer of Truforma was Guardian Veterinary Specialists, a New York state specialty pet hospital about 50 miles from New York City. Guardian’s founder and president, Jason Berg, practiced veterinary neurology since 2000. 

Berg’s excited about Truforma and what it can do for his four-legged patients and their concerned owners. He believes the on-site thyroid testing for dogs and cats can save the lives of companion animals from coast to coast. 

With more than 70 patents issued or pending, Truforma’s technology appears to be a home run in the field of veterinary medicine. Although a speculative bet, if you own a cat or dog, you owe it to yourself to find out more about the product, both as an investor and pet owner. 

I know I will be learning all I can about the product in the weeks ahead. 

The Size of the Market Is Significant

Motley Fool contributor Adria Cimino recently highlighted that the diagnostics market for companion animals is expected to reach $3 billion by 2025. Naturally, the big players such as Idexx Laboratories (NASDAQ:IDXX) will have something to say about Zomedica’s Truforma push. 

However, the reality is that increased pet ownership during Covid-19 has made more humans aware of the importance of animal health.  

Louise Grubb, CEO of U.K. therapeutics company TriviumVet, recently wrote a guest column for Life Science Leader. In it, Grubb argued that the increasing number of pets combined with the fact these pets live longer means that the animal health industry will have to get more innovative.

Interestingly, for most of the world, the split between companion animal spending for dogs and cats versus feed animals such as pigs and cows is 40%/60%. However, that split in the U.S. is flipped, so companion animals account for 60% of animal health spending and feed animals 40%.

Grubb mentioned that one necessity in the future would be  point-of-care diagnostic tools to enable vets to treat diseases early before they become chronic. Truforma enables vets like Jason Berg to do that. 

ZOM Stock Could Be Cheap

The SPAC market has gotten so busy these days that companies with no revenue expected until 2024 are snagging massive valuations based on hope and a dream. I’m speaking of QuantumScape (NYSE:QS), the developer of a solid-state lithium-metal battery that’s expected to drive electric vehicle sales to new heights. 

Let’s save some of this enthusiasm for Zomedica.

If we assume that the diagnostic market grows to $5 billion annually by 2025 as projected, and Zomedica grabs 10% of the market, that’s $500 million in annual revenue. Today, it has minimal revenue, and its market capitalization is $2.1 billion. 

Based on $500 million in 2025 revenue, it has a 2025 forward price-sales ratio of 4.3x. In 2026, QuantumScape is projected to have $275 million in annual revenue. Based on a market cap of $20.2 billion, that’s a valuation of 73.5 times its 2026 sales. 

Sure, the global potential for point-of-care animal health diagnostic tools isn’t nearly as high as the market for solid-state lithium-metal batteries. Still, all Zomedica has to do is grab a small sliver of the pie, and shareholders ought to make out like bandits. 

As speculative stocks go, Zomedica’s become one of my favorites. If you can afford to lose 100% of your investment, it’s a long-term buy. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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