Pet Therapeutic Entyce Can Drive Aratana Higher, Stifel Says In Upgrade

Aratana Therapeutics Inc PETX, which has a portfolio treatments for pet diseases and disorders, is likely to ride high on product momentum, according to Stifel. 

The Analyst

Analyst Jonathan Block upgraded shares of Aratana from Hold to Buy and raised the price target from $6 to $8, suggesting 106-percent upside for the equity. 

The Thesis

Stifel's recent optimism on Aratana is based on Entyce, the company's FDA-approved therapeutic for appetite stimulation in dogs that launched in October, Block said in a Monday note. Going by its early traction, the analyst said he expects Entyce to be the company's main revenue driver in the coming years.

Galliprant, Aratana's canine osteoarthritis drug, is being sold worldwide by Elanco, with the former receiving mid-teen royalties and potential milestones totaling $75 million, Block said. The analyst expects the first $15-million milestone payment to accrue in 2018 and to be paid out to Aratana in 2019. 

Galliprant alone could be worth $2-$3 to Aratana's stock, the analyst said. Entyce could help the company's shares appreciate from current levels, Block said. 

"Furthermore, we argue that Aratana's portfolio, which contains three material new chemical entities, may be appealing to a big animal health company looking to kickstart top-line growth." 

Elanco would be the most obvious candidate, as the company seeks to strengthen its overall portfolio ahead of a potential spin-off or sale, the analyst said. 

The Price Action

Aratana shares were down more than 23 percent over the past year through Monday.

The shares were rallying more than 11 percent at the time of publication Tuesday.

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