Zomedica: Buy, Sell, Or Hold?

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Development stage veterinary diagnostic and pharmaceutical company Zomedica Corp. (ZOM - Get Rating) develops products for companion animals such as cats and dogs and horses. Its stock has soared 940.2% over the past three months primarily because Carole Baskin of Netflix, Inc.‘s (NFLX) hit show ‘Tiger King’ promoted the company in a show in January. Reddit users then grabbed the stock, which led to a short squeeze.

However, ZOM  has retreated  5.7% over the past month and 15.9% since announcing its first sale of Truforma products on March 16. Furthermore,  the company recorded no revenue in fiscal 2020 and a $16.9 million net loss for that period.  So, ZOM’s near-term prospects don’t seem promising.

Here are the factors that we  think could influence ZOM’s performance in the coming months:

Unsuccessful Commercialization of Truforma

Investors were looking forward to ZOM’s first sale of its Truforma diagnostic product, which uses Bulk Acoustic Wave (BAW) technology developed by Qorvo, Inc. (QRVO). The product delivers a non-optical and fluorescence-free detection system for use at the point-of-care. However, ZOM has lost nearly 16% since its first sale of the platform on March 16,  and the stock continues to suffer.

Selling Shares to Stay Afloat

On February 16, ZOM announced that the underwriter of its previously announced public offering had exercised in full it’s over-allotment option to purchase additional common shares of the company at a price of $1.90 per share. ZOM  has generated roughly $200 million in proceeds from the stock sale and intends to use it for the continued development of its diagnostic platforms, strategic acquisitions, and for other general corporate and working capital purposes.

The company closed a $173.50 million offering in February, further diluting existing shareholder’s ownership percentage in the company. ZOM also generated roughly $30 million last  July 2020 through a public offering of its common shares.

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