Aratana shares soar on first FDA approval of canine arthritis drug

It's been a turbulent year on Wall Street for Aratana Therapeutics ($PETX), but on March 21 investors finally got what they've been waiting for from the 6-year-old company: a major product approval. The company announced that the FDA approved Galliprant (grapiprant), Aratana's drug to treat pain from osteoarthritis in dogs. The news sent the company's shares up 15% by the end of the day to $5.19.

Galliprant is the first approval in a class of nonsteroidal anti-inflammatory drugs (NSAIDs) known as piprants. There are other NSAIDs on the market to treat pain in dogs, including Zoetis' ($ZTS) best-selling Rimadyl (carprofen), a COX-2 inhibitor. But Galliprant targets a different pain receptor called EP4, and Aratana hopes to market it based on data showing both efficacy and a lack of dangerous side effects like gastrointestinal bleeding.

Steven St. Peter

That sales effort isn't going to happen as soon as investors might like, however. During its investor day in New York last November, CEO Steven St. Peter said Aratana wouldn't be ready to launch Galliprant until this fall--a timeline he reiterated following the release of Aratana's fourth-quarter earnings on March 14.

During a conference call with investors after the earnings release, St. Peter explained that getting Galliprant on the market would take longer than the typical pharma launch. In addition to building up supply and working out labeling, the company needs to put in place a combination of marketing strategies: direct selling, working with distributors and setting up deals with large hospital chains, like VCA ($WOOF). If Aratana achieves all three, it will "get pretty decent penetration" of the market, St. Peter said.

Aratana has mapped out about two dozen territories for direct selling, St. Peter said during the call. The company is working on securing the rest of the marketing channels, he said, adding that in the meantime, concentrating on those 24 territories would allow Aratana "to be a lot more capital conscious."

The lag between the approval and launch will also give Aratana plenty of time to work on a marketing message that will resonate in the competitive market for treating pain in dogs. It's not just the branded version of Rimadyl that's dominating the market, but also the generic, made by Portland, ME-based Putney, a company that's in the process of being acquired by Dechra. Several other animal health companies are working on osteoarthritis treatments for dogs, including Nexvet Biopharma ($NVET), which recently charted positive trial results for its monoclonal antibody.

St. Peter is confident Aratana's new drug will be able to grab significant market share. "As the first approved product in the new piprant class, Galliprant offers veterinarians a needed therapeutic option for the millions of dogs treated each year for osteoarthritis," St. Peter said in the press release announcing the FDA approval.

Aratana is also seeking European approval for Galliprant. The company hopes to attract a marketing partner to help it commercialize the product there.

Two more product approvals are expected this year for Aratana: Entyce (capromorelin) to stimulate appetite in dogs and Nocita (bupivacaine) a long-acting pain reliever for dogs that have undergone surgery. Aratana will be ready to supply Nocita, thanks to its partnership with Pacira Pharmaceuticals ($PCRX), which makes a version of the drug for people, but it will need some time to scale up its supply of Entyce, St. Peter told investors during the conference call.

He added that properly spacing out the launches of the three products would be essential to their success. The idea, he said, is "to separate those out a little bit so that you and your distributors … can really focus on the launch of [each] product."

- here's the press release on the approval of Galliprant
- access the FDA's press release here
- read a transcript of Aratana's fourth-quarter earnings call at Seeking Alpha