If you follow me on Twitter, it probably isn't a secret that I am long Aratana Therapeutics (PETX). I was planning on unveiling my long thesis to the public tomorrow during the day, however, Galliprant's approval today has changed this. I find it counterproductive for me to reword/rewrite my entire investment thesis to incorporate the latest validation of my thesis, therefore, I am releasing my thesis as is.
For those of you not familiar, Galliprant is Aratana's key pipeline asset on the verge of commercialization for canine osteoarthritis. Without getting into too much detail (these concepts are covered in my thesis), Galliprant's approval is a key validating event in my belief that Aratana is undervalued. The key driver of this valuation inefficiency, in my opinion, is of investors overvaluing AT-004 and AT-005, as well as overblowing the risk associated with Aratana's debt covenant. Essentially, the market's valuation of Aratana (prior to Galliprant's approval) implied that there would be ZERO value creation or monetization of Galliprant (AT-001), Entyce (AT-002), and Nocita (AT-003) outside of the US. Without going into details (covered in my thesis), I strongly disagree with this. Aratana has been working towards regulatory approval in the European Union (EU) for Galliprant, Entyce, and Nocita, and this is highlighted by Aratana's recently EU regulatory submission for Galliprant. Since Aratana is not hiring their own EU marketing team, it is glaringly obvious – even without Aratana saying so – that they will partner with an animal health company that has robust EU/ex-US marketing experience. I believe the market simply is not comprehending that Aratana plans on announcing an ex-US partnership for Galliprant, Entyce, and Nocita that will enable monetization of these assets outside the US. In addition, this partnership will include upfront and/or milestone payments that will be applied towards the $45 million in financing Aratana must raise prior to October 16, 2016. Of note, even if Aratana does not enter a partnership for Galliprant, Entyce, and Nocita in the next 6-9 months, my valuation model indicates that Aratana would still be undervalued. For more information, please read my investment thesis.
Authors Note: If you have any information that confirms or denies my thesis, I’d love to hear from you at: firstname.lastname@example.org
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