Why Shares of Zomedica Corp. Dropped 22.5% in December - The Motley Fool

What happened

Zomedica (NYSEMKT:ZOM), a veterinary health company focusing on point-of-care diagnostic products for pets, saw its shares drop 22.5% in December, according to data provided by S&P Global Market Intelligence. The stock is up 14.19% the past year but has been on a wild ride. It was trading for only $0.07 a share in November of 2020. It then climbed up to a high of $2.91 on Feb. 8 but has been pretty much in decline ever since.

It began last month with a high of $0.41 per share on Dec. 1 only to close at $0.31 per share on Dec. 31. The stock is a retail-investor favorite, listed at No. 23 in the Robinhood Top 100.

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So what

Investors get excited about Zomedica because they see the company as a disruptor in the diagnostic pet-testing market. It's not a small market either as a study by Global Market Insights put the compound annual growth rate (CAGR) for the animal-diagnostics market at 8.5%, growing to be a $7.8 billion market by 2027.

However, there is reason to be concerned about the slow pace of the company's lead product, the Truforma platform, a device designed to be used in veterinary offices, offering assays to test for adrenal and thyroid disorders, and eventually for other diseases. Zomedica markets the platform as a way for vets to save money and time instead of paying for and waiting on independent labs to perform the tests. The problem is, since the company began marketing the product in March, it has had only limited sales, with a reported $52,331 in revenue through nine months.

Regardless of whether the product is a game-changer or not, it clearly will take a while for the company to be able to ramp up sales. In the meantime, Zomedica is losing money. It lost $15.1 million, or $0.05 per share through nine months, compared to a loss of $12.7 million, or $0.04 per share, in the same period in 2020.

Another worry for investors is the company's purchase of Pulse Veterinary Technologies (PulseVet) in October for $70.9 million. PulseVet sells machines that produce high-energy sound waves to promote tendon, ligament, and bone healing, and reduce inflammation in animals. The problem is, Zomedica provided no information as to what kind of revenue it expects PulseVet to produce.

Now what

Just because the animal healthcare stock soared last February doesn't mean it will rise again from the penny stock heap any time soon.

In the long run, the company may have to sell the platform at a discount to get it into more veterinary offices because the bigger money is to be made providing the assay inserts for the Truforma platform. The company needs to put up better sales numbers and more revenue before most long-term investors would be willing to jump in. In the meantime, the company does have $271.4 million in cash through Sept. 30, so it has time to turn things around.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Why Shares of Zomedica Corp. Dropped 22.5% in December - The Motley Fool
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