I would characterize current interest in buying Zomedica (NYSEAMERICAN:ZOM) stock as risky bets more than actual investments.
The company seems to be stagnating in limbo. The potential of its Truforma veterinary diagnostic platform is clear.
People who jump in now are doing little more than betting that it will be a commercial success.
The thing is, the company’s ability to make Truforma commercially successful is very much unclear.
Zomedica has gone through important changes to its sales structure which have yet to be resolved. That’s a pretty discouraging sign. Management flatly admits that changes to its sales force will lead to a “later adoption curve than anticipated.”
It also implied in the same statement that delays in two of its tests for the Truforma platform are to blame for the slow start, but the fact is that Zomedica already has multiple units available to sell to veterinarians and veterinary offices.
The sales team is the most important saga in Zomedica’s narrative. It is the sales team that will either legitimize Zomedica as a business or keep it stuck in limbo.
The problem is that Zomedica is exactly where it was three or four months ago on its most important fronts.
The Sales Team Is Critical for ZOM Stock
Zomedica looked like it was charging out of the gates with its Truforma diagnostics solution earlier this year. Truforma came to market on March 15. It announced its first sale on March 16. The hype seemed to be substantiating and the future looked bright for Zomedica.
But something was wrong with that sales team. At that time the company was relying on Miller Veterinary Supply to sell Truforma under a distributor model.
The company announced less than a month later that it would build a direct sales force to sell Truforma. Zomedica stated that it had always intended to move to a direct sales format. It also stated that it anticipated changes at Miller Veterinary Supply would affect the relationship.
Whatever the cause, the outcome was clear: Zomedica is marketing and selling its diagnostics platform by itself.
Investors now are left with lots of questions about sales trajectory, but few answers.
Zomedica provided a business update on July 6 which doesn’t provide much clarity about current efforts to ramp up sales. The update simply stated that the company might have as many as 15 direct sales reps by the end of 2021. That tells investors something, but nothing substantial which would catalyze investment in my opinion.
Investors also know that Zomedica made $14,124 in sales in Q1. But the press release doesn’t elaborate how many TRUFORMA units it sold. This Seeking Alpha article suggests a price of $8,750 for the machine, but Zomedica doesn’t elaborate. But this does suggest that it sold a single unit in the quarter.
There’s little clarity there. However, the business update does provide clarity about Zomedica’s progress in commercializing additional assays.
Back in March, Zomedica offered three tests to be sold with the Truforma platform. The company stated that two more (fT4 and ACTH) “are expected to be available during the coming weeks.”
That business update from July 6 tells a very different story. Now the fT4 test is slated for late September / early October to be followed by ACTH “about two months later.”
Takeaway
Zomedica is exactly where it was a few months prior. Truforma has a ton of potential. There is no doubt that veterinary medicine is a profitable niche to be in.
But Zomedica hasn’t proven that it has the in-house capability to sell the platform. The company is having obvious trouble building its sales team. It has walked back its words regarding assay development as well.
Don’t write Zomedica off yet, but wait for it to prove its sales team is in place and that it can commercialize assays it promises to. Then it may be worth your money, but not now.
On the date of publication, Alex Sirois 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.
