Zomedica is a winner with her Pet Lab product and cash balance
Zomedica (NYSEAMERICAN:ZOM) looks like it will be a winner once its veterinary desktop lab test product launches on March 30. ZOM’s stock is already up 850% so far this year. In fact, it peaked at $ 2.70 in early February in anticipation of this product’s launch.
In addition, the company has been very smart to take advantage of its huge price hike. On February 8, he raised an additional $ 185.4 million. In fact, as of February 26, Zomedica had an incredible $ 277.5 million in cash on its balance sheet, based on an 8-K repository.
Compare that to his balance sheet a year ago at the end of 2019, when he only had $ 510,000 in cash. In fact, not even later than September 30, he had only $ 52 million in cash. The company very smartly took advantage of the rise in price and issued stocks near their peak.
Zomedica also indicated on February 26 that he now has nearly 1 billion shares in circulation (947.3 million). This gives it a market cap of $ 1.77 billion. As a result, the $ 277.5 million in cash represents 29.3 cents per share in cash. It also represents 15.6% of the total market value of Zomedica.
Additionally, the company said just $ 90 million would be enough to fund operations until at least 2023. At this point, Zomedica believes it will be positive free cash flow.
It is for a business with no income and only prospects that this will happen. It was then that Zomedica launched Truforma, its new in-house animal diagnostic laboratory for veterinarians, on March 30.
Outlook for Truforma
Now that the company has plenty of cash, it can step up its launch and marketing efforts in connection with the launch of Truforma in the United States. This should help it launch successfully.
Truforma is a lab testing product that vets can use in their offices instead of sending it to a lab for testing. It is only for dogs and cats that have stomach or gland problems.
Recently a vet wrote an article in Seeking Alpha explaining the meaning of this Truforma device, if successful, for veterinary practices. As a diagnostic tool, it will allow pet owners to get immediate treatment for their pets.
This is going to be very popular with these owners and will generate great amounts of goodwill and of course income streams for the veterinary practices.
In addition, Zomedica announced that it had signed a distribution agreement with Miller veterinary supply. Miller will represent Zomedica from Texas to Maine. This will allow Zomedica to distribute Truforma fairly quickly to a large number of veterinary practices.
Zomedica says it will implement a controlled release of Truforma in at least three “strengths” in a limited geographic area in order to test its distribution system.
Over time, it will cover five different dosage tests for dogs and cats with gastrointestinal issues. However, as a result of this, the company plans to expand its ability to publish a family of other tests to test other emergency-type conditions.
What to do with ZOM stock
The vet’s Seeking Alpha article points to a huge risk. There is no data yet as to whether the Truforma instrument will provide statistically significant results that work.
Nonetheless, it will be the first point-of-care instrument that can test the pancreas and the proximal and distal small intestine for dogs and cats in distress.
Zomedica refers to an article in its most recent 10-K (page 1) that the animal diagnostics market is expected to reach $ 2.8 billion by 2024 up from $ 1.7 billion in 2019. They also refer to an IHS Markit benchmark that the global veterinary immunodiagnostics market will reach $ 2.1 billion by 2022.
Suppose the United States is probably about half of this market or $ 1.05 billion by 2022. Next, suppose Truforma captures 10-15% of this market, or $ 101-157.5 million per year. Eventually, it will expand abroad.
Therefore, at 10 times the sales, Zomedica is worth say $ 1.57 billion. Add the cash balance of $ 277.5 million and its total value is $ 1.85 billion.
At the time of this writing, ZOM stock was worth $ 1.96 per share with 947.298 million shares outstanding.
On the high side, with 10% global market share ($ 210 million per year) and a sales multiple of 15 times, the value is $ 3.15 billion. Adding in the $ 277.5 million in cash, it’s worth $ 3,427.5 million, or $ 3.61 per share.
Therefore, ZOM’s stock is worth between $ 1.96 and $ 3.61, depending on its peak sales. This represents a potential gain of up to 64% from the current price of $ 2.20.
As of the publication date, Mark R. Hake does not hold a long or short position in any of the securities mentioned in this article.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.