Zomedica (NYSEAMERICAN:ZOM) stock remains a speculative bet on an emerging pet-care diagnostics sector.
The company has begun to commercialize its Truforma platform for veterinary diagnostics. Investors who judge the company by its slide in stock price over the past months may be missing the greater picture here.
There is an opportunity to pick up shares that have potential to rise significantly as a buy-and-hold proposition.
ZOM stock will rise if the company does two things: It needs to impress veterinary clinics of the utility of its Truforma platform, and build out its direct sales team to do so.
ZOM Stock and Youthful Trouble
Zomedica is an animal health company which only recently began selling its point-of-care veterinary diagnostics platform, Truforma.
The platform is used in diagnosing feline and canine adrenal and thyroid issues. However, the company plans to expand its assay series to include other diagnostic areas. The appeal of the platform is that it cuts down the time to complete a diagnosis.
The potential for the Truforma platform is obvious.
But it is also very new, and Zomedica is a company not without trouble. Further, Zomedica’s rollout of its Truforma platform has been bumpy.
Any potential investor must first realize that Truforma is a very new product. Its first commercial sale occurred on March 16. At that time, Zomedica was relying on Miller Veterinary Supply, the oldest U.S. veterinary supplies distributor, to sell its products. Based on the news that Truforma’s first sale occurred on March 16, markets may have assumed that the company was on the right foot out of the gates.
However, less than a month later, on April 15, Zomedica announced that it was transitioning from a distributor-based sales model to a direct-sales model.
We can’t conflate correlation with causation, but it should be noted that ZOM stock more than halved in the same period. In any case, the move is an interesting one.
As Zomedica CEO Robert Cohen noted in the press release:
“While this effort may slow initial sales of TRUFORMA, we have taken this action now to avoid any disruption to our customers and to provide a stronger foundation on which to build the marketing and sales of both TRUFORMA and any future products developed or acquired by Zomedica.”
We can also assume that the decision to take the leap into direct sales model was championed by Chief Commercial Officer Brük Herbst. Herbst is the former head of sales and marketing at IDEXX Laboratories (NASDAQ:IDXX), a much larger veterinary products company.
He said that the value of a direct-sales organization was apparent in his former role. Herbst anticipates the shift will significantly improve Zomedica’s longer term prospects to sell into the veterinary market.
It’s very difficult to argue with the logic there. An in-house sales force has much more incentive to move the Truforma platform.
Opportunity Is There
The change makes ZOM stock fundamentally different. Markets may have assumed a month ago that Zomedica could come onto the scene and sell its platform quickly and establish its name fast. With this news, it has become apparent that Zomedica is a longer-term investment.
ZOM shares could be purchased for about $1 on April 29.
Yes, the company lost $19.8 million in 2019, and another $16.9 million in 2020. However, those were the company’s pre-revenue stages. It didn’t have a commercially viable Truforma platform at that time.
The company has proven Truforma’s commercial viability with initial sales traction in the past month. Sure, it has had to retool its sales model, but longer term, that’s going to be a strength.
There’s plenty of risk in ZOM stock. But at around $1 there’s a perfectly reasonable argument that picking up a few hundred or thousand shares could pay off handsomely.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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