Aratana shares soar on positive trial of appetite stimulator for dogs

Investors in animal health startups have been impatient of late, but on Friday, anyone holding shares of Aratana Therapeutics ($PETX) had good reason to cheer. Late in the day, the Kansas City company announced successful results of a pivotal trial of capromorelin (AT-002), which stimulates appetite in dogs. The company's shares skyrocketed 25% to $16.74 in after-hours trading.

Capromorelin is a pill that mimics ghrelin, a hormone in the body that increases feelings of hunger and boosts weight. During the trial, dogs receiving the medication for four days experienced statistically significant increases in appetite compared to dogs taking a placebo, according to a press release from the company.

Aratana hopes to market the product for use in dogs that lose their appetites due to illness, medical treatments or other causes. "We believe it could be a first-in-class approved drug for treating inappetence in dogs," said Ernst Heinen, chief development officer for Aratana, in the release. The company intends to file the new data with the FDA and hopes to win approval to market the drug in 2016.

The top-line boost from the drug would certainly be welcomed by investors, as Aratana continues its efforts to turn profitable. The company has two lymphoma products on the market: AT-004, which was approved by the USDA in January, and AT-005, which is available on a limited basis under a conditional USDA license. In the first quarter, Aratana's net loss narrowed to $8.8 million from $9.1 in the same period last year, as the company began to bring in some revenues from the lymphoma franchise.

CEO Steven St. Peter

Still, Aratana's launch of its lymphoma products has been hampered by logistical and manufacturing difficulties. It originally developed AT-004 with Novartis ($NVS) Animal Health, which was bought by Eli Lilly's ($LLY) Elanco last year. Aratana regained full rights to the product in February, but the company is still working on building enough manufacturing capacity to handle AT-004 and AT-005. CEO Steven St. Peter has told investors Aratana is on track to fully launch the lymphoma franchise in 2016.

Investors who initially welcomed Aratana and other animal-health startups to Wall Street have not been all that patient in recent months, as they wait for good news to emerge from pipelines that sometimes seem to have more promise than substance. Jaguar Animal Health ($JAGX), which went public in May after several delays, has seen its shares fall from $7 to $4.92. And Kindred Biosciences ($KIN) has fallen from a 12-week high of $19.70 to $6.83.  

In that otherwise tough environment for animal health, the positive results on Aratana's capromorelin were clearly embraced. Even after the weekend frenzy had tempered a bit and Aratana's shares fell to $15.15, the company was still headed toward its best opening since late April.

- here's the press release