• Zomedica’s (ZOM) Truforma has failed to launch among vets.
• It bought another company, PulseVet, that is demonstrating revenue.
• Zomedica can sustain its losses but isn’t worth buying at even 35 cents/share.

Zomedica (NYSEAMERICAN:ZOM) stock remained in penny stock “jail” after earnings failed to impress the market early this month.

The company lost $18.4 million, five cents per share, on revenue of $4.1 million during 2021, according to a 10-K filed March 1. Only $73,000 came from Truforma, the blood testing kit that briefly made Zomedica a meme stock last year.

Instead, the company’s earnings release emphasized Pulse Veterinarian Technologies, bought for $71 million in October. PulseVet offers shockwave equipment used to treat orthopedic issues, kidney stones, and stimulate tissue growth in pets. PulseVet revenue for the fourth quarter was $4 million, up 66% from the year before.

Hiding Failure

Truforma was supposed to revolutionize veterinary treatment of adrenal diseases. It uses bulk acoustic wave (BAW) technology from Qorvo (NASDAQ:QRVO), a radio systems company currently valued at $14 billion.

The hype around Truforma sent ZOM stock as high as $2.50/share in February 2021. The stock was trading March 23 at about 35 cents/share. The company was able to sell a lot of stock around Truforma. It had nearly three times as many shares, 964 million, at the end of 2021 as at the start.

This made the operating cash flow loss of $14.3 million look sustainable. It also let Zomedica buy Alpharetta, GA based PulseVet for cash. Zomedica ended the year with $195 million in cash, three times more than it had a year earlier.

The problem is that PulseVet, while delivering revenue, isn’t delivering enough to justify even Zomedica’s current price. Assuming it can deliver the 66% growth it showed in the fourth quarter, the PulseVet business may bring in just $25 million in 2022. The company’s market capitalization is $350 million.

When I last wrote about the company in July, Zomedica said it was betting heavily on Greg Blair, hired last May as vice president of business development, to push Truforma to vets.

Losing Hope in ZOM Stock

Yahoo Finance no longer lists any analysts for Zomedica while Marketwatch could find just one, at H.C. Wainwright. There are now no earnings whispers for Zomedica, which is next due to report numbers on May 31.

I wrote last year that Zomedica had entered a “radio silence” about Truforma, after it stumbled out of the gate with an endorsement from “Tiger King” star Carole Baskin. That was followed by the resignation of CEO Stephanie Morley and Blair’s hiring, amid some fanfare. But a glance at Blair’s LinkedIn page in March showed him most excited about his franchise in British Swim School, a water safety program.

The Bottom Line on ZOM Stock

It’s possible that Truforma will take off in time. It’s natural for a company with a launch whose success is delayed to buy something else, in the same way an NFL football team might buy a veteran quarterback while waiting for a draft choice to learn the game.

Zomedica raised enough cash on the Truforma hype train to stay afloat for years to come. It bought a growing company in PulseVet and has enough cash to sustain its losses.

It’s also possible that Truforma is what I call a dry hole, an interesting idea that the market just isn’t interested in.

That seems most likely at this point. Truforma has been on the market for about a year. If a major veterinary group were buying it in bulk, even now, Zomedica would put out a press release.

That it hasn’t means we have to measure the stock based on PulseVet, a money-losing therapeutic that might bring in $25 million this year. I can’t justify investing on even a $380 million market cap, based on that.

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On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.