The Launch of Truforma Should Send Zomedica to An All-Time High

Zomedica (NYSEAMERICAN:ZOM) is a pre-revenue company that is about to bring its first product to market. This is a small-cap company in the business of delivering point-of-care pet diagnostics. After treading water for much of 2020, ZOM stock is up 786% in 2021. This puts the stock within striking distance of its all-time high. And a successful launch may do just that.

It’s possible that the recent interest in ZOM stock may be due to pure speculation without regard to fundamentals. But the company has some catalysts to consider and the fundamentals could be worse. Let’s take a closer look to see if this is a penny stock play.

A Boom By Another Name

America didn’t get the pandemic baby boom that many were expecting. It did however see an explosion in pet adoptions, particularly dogs. By the middle of last summer, it was clear that the surge that happened in March was becoming a full-fledged boom. And that is likely to continue into 2021. Some breeders say they have waiting lists that extend deep into this year.

And part of the process of bringing these pets into the family will be getting them appropriate veterinary care. If the pets are healthy, that doesn’t help Zomedica. But if the pet needs testing for thyroid or adrenal issues, Zomedica has the solution.

Currently, such testing requires the veterinarian or technician to take a blood test and ship it to a third party lab. This, of course, takes time and can create stress for pet owners.

Enter Truforma, a point-of-care test that veterinarians can use to run such tests in their office.

The Fundamentals Are Getting Better

Without any revenue coming through the door, the best thing that investors can hope for is a “less bad” earnings report. Fortunately Zomedica is delivering. For the full year 2020, the company reported a loss of $16.9 million. This was about a 17% improvement in how much money it lost the prior year. The negative 5 cents per share was also a significant improvement over the negative 19 cents per share reported in 2019.

Part of the reason for that number is that the company spent about $2 million less on research and development and cut general and administrative expenses by about $ 1 million.

And if the company has to wait for some revenue, it’s best to have some cash on hand. Zomedica had $76.7 million on its books at the end of last year as opposed to $14.9 the prior year.

Zomedica Stock Is Still a Risk

With any penny stock a range of outcomes is possible. As I’ve made mention of a couple of times in this article, Zomedica is a pre-revenue company. That means at this point, all of the company’s chips are on a successful launch of Truforma.

And one of the concerns about Truforma is that Truforma relies on licensed technology.  Although the company has applied for four patents, a portion of any revenue will have to be paid to the owners of the intellectual property.

This should bring up an additional concern. Just how big is Zomedica’s addressable market. According to the company itself, the entire diagnostic market will reach $2.8 billion globally by 2024. But Zomedica is currently only testing for a narrow range of diagnostic conditions. And that means it has a small sliver of this market. 

Penny Stocks Are For Your Play Money

When you’re investing in penny stocks, the axiom that pigs get fat, hogs get slaughtered is apt advice. You don’t need to get a huge return on Zomedica to make it worthwhile investment. The company has a first mover advantage in an underserved market.

But it won’t take much to send Zomedica shares lower.  If you are eyeing this penny stock, prudence would dictate waiting for some confirmation that Truforma is delivering as advertised. But if you simply can’t wait, it wasn’t so long ago that ZOM stock was trading for less than $2. That might be where I’d look to get in.