William Blair Bullish on Aratana Therapeutics Inc (PETX) Despite Delayed Commercial Launch for Entyce


Aratana Therapeutics Inc (NASDAQ:PETX) shares were falling nearly 18% on the heels of Friday’s announcement revealing that Entyce, approved in the U.S. for post-surgical pain in dogs, has encountered a manufacturing clearance delay. The setback will push the drug’s commercial launch from this month back to the fourth quarter. Though William Blair analyst John Kreger finds the news “slightly less Entycing,” the delay does not sway him from his bullish attitude on the biotech firm’s long-term prospects.

Therefore, the analyst reiterates an Outperform rating on shares of PETX without listing a price target.

As far as the analyst understands the situation, the chief reason for the delay is that “the FDA sign-off process for commercial manufacturing has taken longer than expected,” and the agency is requesting resolution for various outstanding issues prior to the official commercial launch. Though the original plan for Aratana and its partner Eli Lilly’s Elanco was to launch both Entyce and Galliprant, designed to treat osteoarthritis in dogs, now just Galliprant will be launched at the forthcoming NAVC Veterinary Conference.

In reaction to the delay, the analyst has updated his model taking into account Entcye will no longer be commercially available until the tail end of this year, cutting projected Entyce revenue in the first three quarters of 2017. For 2017, the analyst reigns in revenue from a former estimate of $36.9 million down to $27.7 million. Additionally, the analyst has raised his 2017 per share loss forecast by $0.14 to a loss of $1.09.

Ultimately, “2017 continues to be the year when Aratana will transition from the development stage to commercial. We expect product sales to ramp up steadily during the year, allowing the company to move toward a self-funding status as early as next year. We are disappointed by the unexpected regulatory delay for Entyce and expect Aratana to give up some of its recent gains as a result. This does not alter our longer-term view of the company‚Äôs potential, but illustrates the execution risk for smaller companies as they move into the launch stage,” Kreger concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rates based on how their calls perform, four-star analyst John Kreger is ranked #539 out of 4,382 analysts. Kreger has a 71% success rate and gains 12.6% in his annual returns. However, when recommending PETX, Kreger loses 11.6% in average profits on the stock.

Additionally, David Gu of Jefferies rates a Buy on PETX with an $11 price target, marking a nearly 67% upside from where the shares last closed; Erin Wilson of Credit Suisse rates a Buy with a $10 price target, which represents a close to 52% upside from where the shares last closed; Carl Byrnes of Lake Street rates a Buy with a $15 price target, marking an approximately 128% upside from where the shares last closed; and Douglas Tsao of Barclays rates a Buy with an $11 price target, which represents a just under 67% upside from where the shares last closed.