Aratana Therapeutics Reports Third Quarter 2018 Financial Results

LEAWOOD, Kan., Nov. 1, 2018 /PRNewswire/ -- Aratana Therapeutics, Inc. (Nasdaq: PETX), a pet therapeutics company focused on the licensing, development and commercialization of innovative therapeutics for dogs and cats, announced its third quarter 2018 financial results. For the third quarter ended September 30, 2018, Aratana reported total net revenues of $21.6 million and net income of $8.8 million or $0.19 diluted earnings per share. The net revenues for the quarter included a $15.0 million commercial milestone, which resulted in profitability for the quarter.

Aratana Therapeutics logo

"It's evident there is significant enthusiasm among our customers in the pet therapeutics segment of the animal health industry. We believe a majority of U.S. veterinary clinics have already purchased two or more of our therapeutics," stated Steven St. Peter, M.D., President and Chief Executive Officer of Aratana Therapeutics. "We are especially pleased with the strong performance of Galliprant, which in addition to gaining market share, also earned Aratana its first commercial milestone."

Business Updates

  • Aratana recorded ENTYCE® (capromorelin oral solution) net product sales of $1.3 million in the third quarter of 2018. While ENTYCE net product sales to distributors remained consistent with net product sales generated in the prior quarter, in target accounts served by Aratana's sales team, purchases have increased sequentially quarter-over-quarter. Approximately half of the approximately 25,000 veterinary clinics in the United States have ordered ENTYCE, an appetite stimulant for dogs, although nearly half of net product sales are from the clinics where Aratana's sales team has had direct interactions. The Company plans to continue its efforts to build the inappetence market through education and extending duration of ENTYCE therapy.
  • In the third quarter of 2018, the Company reported $1.9 million of NOCITA® (bupivacaine liposome injectable suspension) net product sales compared to $0.7 million in the third quarter of 2017. NOCITA provides local post-operative analgesia for certain canine and feline surgeries and continues to show sequential growth primarily due to strong re-order rates. Aratana believes the sequential growth is also correlated to strong brand awareness and satisfaction among surgeons.
  • In August 2018, the Company received FDA approval expanding the NOCITA label as a peripheral nerve block to provide regional post-operative analgesia following onychectomy in cats. Results from a study in client-owned cats showed NOCITA demonstrated a statistically significant improvement in pain evaluation success rates and was well-tolerated. NOCITA is currently available in a 20 mL vial size and Aratana anticipates commencing the regulatory process to add a 10 mL vial size. If approved, the 10 mL vial size could be available to veterinarians in the fall of 2019.
  • Aratana recorded $18.4 million in licensing and collaboration revenue in the third quarter of 2018 for GALLIPRANT® (grapiprant tablets) from Elanco Animal Health, Inc., which included a $15.0 million commercial milestone for GALLIPRANT net product sales exceeding $35.0 million. Licensing and collaboration revenue also included $3.4 million of revenue generated from Elanco's net product sales of GALLIPRANT of approximately $18.0 million. During the third quarter of 2018, Elanco introduced re-supply of the 100mg SKUs. According to third-party market research conducted through August 2018, GALLIPRANT continues to grow market share in a competitive category and is the leading branded NSAID prescribed by veterinarians. Under the collaboration agreement with Elanco, the Company is entitled to two additional payments totaling up to $60 million upon the achievement of certain sales milestones.
  • In August 2018, Aratana submitted the Target Animal Safety technical section to the FDA's Center for Veterinary Medicine for AT-002 (capromorelin) for cats. Target enrollment for the pivotal field effectiveness study evaluating the therapeutic candidate for weight management in cats with chronic kidney disease is anticipated to be completed in mid-2019. Aratana anticipates submitting the technical section for chemistry, manufacturing and controls (CMC) in 2018.

Financial Results
The Company recorded net income of $8.8 million for the third quarter of 2018 or $0.19 diluted earnings per share compared to a net loss of $8.9 million or $0.21 diluted net loss per share for the corresponding quarter of 2017. Aratana reported $21.6 million in net revenues for the quarter ended September 30, 2018 compared to $6.2 million in net revenues in the third quarter of 2017. In the third quarter of 2018, net revenues included a $15.0 million one-time GALLIPRANT commercial milestone; $3.4 million in licensing and collaboration revenue for net product sales of GALLIPRANT by Elanco; $1.9 million in net product sales of NOCITA; and $1.3 million in net product sales of ENTYCE. In comparison, in the third quarter of 2017, the Company recognized $3.2 million in product sales of GALLIPRANT related to the sale of finished goods to Elanco; $1.2 million in GALLIPRANT licensing and collaboration revenue; a one-time payment of $1.0 million for the manufacturing transfer of GALLIPRANT to Elanco; and $0.7 million in net product sales of NOCITA.

The cost of product sales totaled $2.2 million in the third quarter of 2018 compared to $3.7 million in the corresponding period in 2017. The decrease year-over-year in cost of product sales was primarily due to Elanco assuming responsibility for GALLIPRANT manufacturing.

Research and development expenses totaled $1.5 million in the third quarter of 2018 compared to $3.2 million for the corresponding period in 2017. The decrease in research and development expenses was primarily due to fewer on-going pivotal studies compared to the corresponding period in 2017.

Selling, general and administrative expenses totaled $7.0 million for the third quarter ended September 30, 2018 compared to $6.9 million for the same period in 2017.

As of September 30, 2018, Aratana had approximately $56.4 million in cash, cash equivalents, restricted cash and short-term investments, which includes net proceeds in the third quarter from its at-the-market sales agreement of approximately $4.9 million. The one-time $15.0 million GALLIPRANT commercial milestone earned from Elanco is expected to be paid to Aratana in the fourth quarter of 2018. The Company continues to make its scheduled principal debt payments, which are approximately $5.3 million for the remainder of 2018.

Webcast & Conference Call Details
The Company will host a live conference call on Friday, November 2, 2018 at 8:30 a.m. ET to discuss financial results from the third quarter ended September 30, 2018.

Interested participants and investors may access the audio webcast or use the conference call dial-in:

1 (866) 364-3820 (U.S.)
1 (855) 669-9657 (Canada)
1 (412) 902-4210 (International)

A replay of the third quarter 2018 results teleconference will be available the same day of the event by approximately 11 a.m. ET and an audio webcast will be accessible for 90 days in the Aratana Investor Room. For a replay of the call, use the below dial-in and conference ID 10125816:

1 (877) 344-7529 (U.S.)
1 (855) 669-9658 (Canada)
1 (412) 317-0088 (International)

Aratana anticipates its cash, cash equivalents, restricted cash and short-term investments to be approximately $60.0 million at 2018 year-end.

About Aratana Therapeutics
Aratana Therapeutics is a pet therapeutics company focused on licensing, developing and commercializing innovative therapeutics for dogs and cats. As a pioneer in pet therapeutics, Aratana's mission is to deliver safe and effective therapeutics that elevate the standard of care in veterinary medicine. We work with companion animal veterinarians to bring new therapeutics to market that support the needs of pets and their owners. For more information, please visit www.aratana.com.

IMPORTANT SAFETY INFORMATION
GALLIPRANT® (grapiprant tablets) is not for use in humans. For use in dogs only. Keep this and all medications out of reach of children and pets. Store out of reach of dogs and other pets in a secured location in order to prevent accidental ingestion or overdose. Do not use in dogs that have a hypersensitivity to grapiprant. If Galliprant is used long term, appropriate monitoring is recommended. Concomitant use of Galliprant with other anti-inflammatory drugs, such as COX-inhibiting NSAIDs or corticosteroids, should be avoided. Concurrent use with other anti-inflammatory drugs or protein-bound drugs has not been studied. The safe use of Galliprant has not been evaluated in dogs younger than 9 months of age and less than 8 lbs (3.6 kg), dogs used for breeding, pregnant or lactating dogs, or dogs with cardiac disease. The most common adverse reactions were vomiting, diarrhea, decreased appetite, and lethargy. Please see full product label or call 1-888-545-5973 for full prescribing information.

ENTYCE® (capromorelin oral solution) is for use in dogs only. Do not use in breeding, pregnant or lactating dogs. Use with caution in dogs with hepatic dysfunction or renal insufficiency. Adverse reactions in dogs may include diarrhea, vomiting, polydipsia, and hypersalivation. Should not be used in dogs that have a hypersensitivity to capromorelin. Please see the full Prescribing Information for more detail.

NOCITA® (bupivacaine liposome injectable suspension) is for local infiltration injection in dogs only. Do not use in dogs younger than 5 months of age, dogs that are pregnant, lactating or intended for breeding. Do not administer by intravenous or intra‐arterial injection. Adverse reactions in dogs may include discharge from incision, incisional inflammation and vomiting. Avoid concurrent use with bupivacaine HCl, lidocaine or other amide local anesthetics. Please see the full Prescribing Information for more detail.

NOCITA® (bupivacaine liposome injectable suspension) is for use as a peripheral nerve block in cats only. Do not use in cats younger than 5 months of age, that are pregnant, lactating, or intended for breeding. Do not administer by intravenous or intra‐arterial injection. Adverse reactions in cats may include elevated body temperature, infection or chewing/licking at the surgical site. Avoid concurrent use with bupivacaine HCl, lidocaine or other amide local anesthetics. Please see the full Prescribing Information for more detail.

Forward-Looking Statements Disclaimer
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements with respect to anticipated financial performance; the expected timing of payment of the $15.0 million commercial milestone earned in the third quarter of 2018; potential future milestone payments; our anticipated use of cash in the remainder of 2018; our ability to bring innovative therapeutics to the market; steps necessary for and timing of regulatory submissions and approvals of therapeutic candidates; study, development and commercialization of therapeutics or therapeutic candidates; timing of anticipated study results; increased market recognition of and demand for our therapeutics; efforts to build the inappetence market; potential use and timing of availability of the 10 mL vial size of NOCITA; and statements regarding the Company's efforts, plans and opportunities, including, without limitation, advancing our therapeutic candidates and offering safe and effective therapeutics that elevate the standard of care in veterinary medicine.

These forward-looking statements are based on management's current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: our history of operating losses and our expectation that we will continue to incur losses for the foreseeable future; failure to obtain sufficient capital to fund our operations; risks relating to the impairment of intangible assets; risks pertaining to stockholder class action lawsuits; unstable market and economic conditions; restrictions on our financial flexibility due to the terms of our credit facility; our substantial dependence upon the commercial success of our therapeutics; development of our biologic therapeutic candidates is dependent upon relatively novel technologies and uncertain regulatory pathways, and biologics may not be commercially viable; denial or delay of regulatory approval for our existing or future therapeutic candidates; failure of our therapeutic candidates that receive regulatory approval to achieve market acceptance or achieve commercial success; product liability lawsuits that could cause us to incur substantial liabilities and limit commercialization of current and future therapeutics; failure to realize anticipated benefits of our acquisitions and difficulties associated with integrating the acquired businesses; development of pet therapeutics is a lengthy and expensive process with an uncertain outcome; competition in the pet therapeutics market, including from generic alternatives to our therapeutic candidates, and failure to compete effectively; failure to identify, license or acquire, develop and commercialize additional therapeutic candidates; failure to attract and retain senior management and key scientific personnel; our reliance on third-party manufacturers, suppliers and partners; regulatory restrictions on the marketing of our approved therapeutics and therapeutic candidates; our small commercial sales organization, and any failure to create a sales force or collaborate with third-parties to commercialize our approved therapeutics and therapeutic candidates; difficulties in managing the growth of our company; significant costs of being a public company; risks related to the effectiveness of our internal controls; changes in distribution channels for pet therapeutics; consolidation of our veterinarian customers; limitations on our ability to use our net operating loss carryforwards; the impact of tax reform legislation; impacts of generic products; safety or efficacy concerns with respect to our therapeutic candidates; effects of system failures or security breaches; delay or termination of the development of grapiprant therapeutic candidates and commercialization of grapiprant products that may arise from termination of or failure to perform under the collaboration agreement and/or the co-promotion agreement with Elanco; failure to obtain ownership of issued patents covering our therapeutic candidates or failure to prosecute or enforce licensed patents; failure to comply with our obligations under our license agreements; effects of patent or other intellectual property lawsuits; failure to protect our intellectual property; changing patent laws and regulations; non-compliance with any legal or regulatory requirements; litigation resulting from the misuse of our confidential information; the uncertainty of the regulatory approval process and the costs associated with government regulation of our therapeutic candidates; failure to obtain regulatory approvals in foreign jurisdictions; effects of legislative or regulatory reform with respect to pet therapeutics; the volatility of the price of our common stock; our status as an emerging growth company, which could make our common stock less attractive to investors; dilution of our common stock as a result of future financings; the influence of certain significant stockholders over our business; and provisions in our charter documents and under Delaware law could delay or prevent a change in control. These and other important factors discussed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 14, 2018, along with our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management's estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change, except as required under applicable law. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Contacts
For investor inquires:
Craig Tooman
ctooman@aratana.com
(913) 353-1026

For media inquiries:
Rachel Reiff
rreiff@aratana.com
(913) 353-1050

ARATANA THERAPEUTICS, INC.

Consolidated Statements of Operations (Unaudited)

(Amounts in thousands, except share and per share data)
















Three Months Ended


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017

Revenues













Licensing and collaboration revenue


$

18,385


$

2,192


$

21,982


$

3,899

Product sales



3,170



3,971



8,524



11,217

Total revenues



21,555



6,163



30,506



15,116

Costs and expenses













Cost of product sales



2,172



3,690



4,013



10,475

Royalty expense



1,346



441



3,067



1,117

Research and development



1,507



3,220



5,288



11,574

Selling, general and administrative



7,010



6,910



21,418



21,323

Amortization of intangible assets



129



85



388



235

In-process research and development







500



Total costs and expenses



12,164



14,346



34,674



44,724

Income (loss) from operations



9,391



(8,183)



(4,168)



(29,608)

Other income (expense)













Interest income



159



138



441



311

Interest expense



(716)



(870)



(2,357)



(2,601)

Other expense, net



(1)



(5)



(4)



(14)

Total other expense



(558)



(737)



(1,920)



(2,304)

Net income (loss)


$

8,833


$

(8,920)


$

(6,088)


$

(31,912)

Net income (loss) per share, basic and diluted


$

0.19


$

(0.21)


$

(0.13)


$

(0.80)

Weighted average shares outstanding, basic



47,310,408



42,445,553



46,128,197



39,820,573

Weighted average shares outstanding, diluted



47,485,384



42,445,553



46,128,197



39,820,573

 

 

ARATANA THERAPEUTICS, INC.

Consolidated Balance Sheets (Unaudited)

(Amounts in thousands)










September 30, 2018


December 31, 2017

Assets







Current assets:







Cash, cash equivalents and short-term investments


$

56,021


$

67,615

Accounts receivable, net and prepaid expenses and other current assets



21,315



4,048

Inventories



13,732



13,576

Total current assets



91,068



85,239

Property and equipment, net



811



1,166

Goodwill



40,846



41,295

Intangible assets, net



6,228



6,616

Restricted cash



351



350

Other long-term assets



499



526

Total assets


$

139,803


$

135,192

Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable, accrued expenses and other current liabilities


$

5,905


$

11,163

Licensing and collaboration commitment



200



7,000

Current portion – loans payable



22,583



17,333

Total current liabilities



28,688



35,496

Loans payable, net



2,660



19,492

Other long-term liabilities



60



70

Total liabilities



31,408



55,058

Total stockholders' equity



108,395



80,134

Total liabilities and stockholders' equity


$

139,803


$

135,192

 

SOURCE Aratana Therapeutics

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