Aratana Q1 loss widens amid shift towards commercial enterprise

One week after announcing a commercial partnership with Eli Lilly’s ($LLY) Elanco, Aratana ($PETX) CEO Steven St. Peter remained upbeat about the deal, even as his company reported first-quarter earnings that fell short of expectations. After the market closed on May 5, the Kansas-based company announced that its revenues in the quarter came in at $172,000 and its net loss doubled year-over-year to $18.1 million (52 cents a share). Analysts had expected the loss to be 42 cents, according to Zacks Investment Research.
Aratana is preparing to launch its first major product, Galliprant (grapiprant), to treat osteoarthritis (OA) pain in dogs. The Elanco deal netted Aratana an upfront payment of $45 million and the potential for milestone payouts. In return, Elanco has exclusive rights to market the drug overseas, as the two companies co-promote it in the U.S. Aratana filed for approval of Galliprant in Europe in February and anticipates launching the drug there in 2017.
The Elanco alliance will allow Aratana to leverage the marketing expertise and sales presence of a much bigger animal health player, St. Peter told investors during a conference call after the earnings release. “We are very excited about the potential for Galliprant in the U.S., with the resources of the combined sales forces,” he said. “And we believe we have all the right components for a unique and very successful collaboration with Elanco.”
A collateral benefit from the deal, he added, is that it will free up Aratana to reallocate some of the commercial expenses it would have devoted to Galliprant to other development activities. For example, he said, Aratana can now move forward on pivotal studies for pipeline products such as AT-016 for dogs with OA pain and AT-018 to treat atopic dermatitis in dogs.
Aratana is also preparing for two more possible regulatory approvals this year: Entyce (capromorelin), which stimulates appetite in dogs, and Nocita (bupivacaine), a long-acting pain drug that’s designed to be used in dogs that have undergone surgery. When asked during the call whether discussions were underway for Elanco to partner on any products aside from Galliprant, St. Peter explained that because products like Entyce are meant for specialty practitioners, Aratana is much better equipped to market them than it is to take on full responsibility for Galliprant, which will be pitched to general practitioners.
“With osteoarthritis pain, it’s very competitive–a half-dozen products,” St. Peter said during the conference call. “Most of the large companies have offerings in OA pain, so … you’re really leaning into a seawall of competition. So I think being partnered … with one of the leading companies really allows you to have better success with that.”
Shares of Aratana, which had bumped up after the Elanco deal was announced, fell 4% in morning trading on May 6 to $5.47.