Pet healthcare stock Zomedica (NYSE:ZOM) has had a torrid run at the markets of late. ZOM stock has generated a negative 56% return in the past six months and is now languishing in the penny stock territory.
With the dismal performance of its Truforma diagnostics platform so far, the company hasn’t been able to gain much traction. As we look towards 2022, there aren’t many catalysts that could turn its fortunes around.
Zomedica became a popular meme stock in the early half of 2021. Since then, its shares have plunged more than 70% below the high set during the first quarter last year.
Investors are justified in their disappointment, though, as they had high hopes from its Truforma platform for veterinarians.
Unfortunately, there have been limited sales so far, and the platform hasn’t been able to gain much traction. Therefore, it remains more of a speculative play at this stage, with limited catalysts potentially turning their fortunes around this year.
Third-Quarter Earnings Recap
Zomedica recorded a hefty third-quarter net loss of $6.3 million, up 26% from the prior-year period. Revenues for the period came in at just $22,514. Commercialization of Truforma began in March 2021, so the results include just three months of the platform’s performance. Moreover, supply chain headwinds also impacted production and the sales of Truforma.
Additionally, the company’s research and development costs decreased significantly from $2.7 million to $0.3 million from the third quarter last year. However, the lower research and development (R&D) costs were offset by increasing selling, general and administrative expenses.
The reduction of R&D expenses is primarily due to the transition towards commercialization activities and the completion of its first three assays. As the company increases its investments into new assays, these costs will rise.
Zomedica’s strategy to expand and continue acquiring new companies should bode well in the longer run. Remarkably, despite the acquisition of PulseVet, it still has $199.5 million in its cash till.
With a patchy 2021, Zomedica will want to push into high gear into 2022. We’ll be getting an update on its progress and plans this year through CEO Larry Heaton from his address at the virtual H.C. Wainwright BioConnect 2022 Conference. It will be interesting to see what areas he touches upon, but most investors would be looking for some roadmap for this year.
Furthermore, it will be interesting to see how Pulse Veterinary Technologies or PulseVet’s acquisition impacts Zomedica’s business. PulseVet’s shock wave technology is useful for several conditions in veterinary patients.
Some of these problems may include wound healing, osteoarthritis, and others. The company’s third-quarter results didn’t have much of an impact on PulseVet, which was acquired in October last year
Moreover, we’ll also be seeing the launch of several new assays this year. Heaton talked about how the company was working with its partner Qorvo Biotechnologies to develop a bunch of new assays for Truforma in 2022.
Zomedica may also release its free thyroxine (fT4) and Adrenocorticotropic hormone (ACTH) assays, which were supposed to be released late last year. Invariably, the addition of new assays and the impact of PulseVet will improve the quality of Zomedica’s product. However, how much of these developments translate into meaningful sales remains to be seen.
Zomedica stock had a dismal run last year, and I expect pretty much the same in the immediate future. This year, it has plenty to prove, and it doesn’t have the growth drivers to have a meaningful impact on its top and bottom lines.
I’ll closely follow its CEO’s address at the Wainwright BioConnect conference to look for any bright spot. Nevertheless, it’s tough to feel giddy about ZOM stock at this time.
On the date of publication, Muslim Farooque 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.