Parnell records strong sales growth, stays focused on arthritis approval

Wall Street

Parnell CEO Robert Joseph

Ongoing efforts by executives of Parnell Pharmaceutical Holdings ($PARN) to boost the Aussie company's visibility on Wall Street got a bit of a boost Wednesday morning. Parnell announced that sales in the last half of 2014 jumped 29% year over year to 3.7 million Australian dollars ($2.9 million). The company's net loss narrowed from AUS $5.1 million ($4 million) to AUS $2.9 million ($2.3 million).

Parnell has more than a half-dozen drugs in its pipeline, but it is pouring most of its resources into gaining U.S. and European approval for Zydax, its drug to treat pain and improve mobility in dogs with osteoarthritis. The company is currently running a pivotal trial of the drug and is on track for a potential approval in 2016, CEO Robert Joseph told FierceAnimalHealth after the earnings release.

"That's progressing as expected, and the results [of the trial] will be announced upon completion in the second quarter of 2015," Joseph said.

Osteoarthritis is one of the most competitive pursuits in animal health. Nexvet Biopharma ($NVET) and Kindred Biosciences ($KIN) are among the rivals developing arthritis treatments, but the folks at Parnell aren't concerned. "We don't see this as becoming increasingly competitive at all because it's a massively underserved market," Joseph said. "When we brought the product to market in Australia 7 years ago, it was entirely accretive. In the U.S. that's even more the case."

That's because the market in the U.S. is currently dominated by nonsteroidal anti-inflammatory drugs, which can cause harsh side effects, Joseph said. "The average length of therapy in the U.S. today for a dog with osteoarthritis is 70 days, and that's because the drugs that are currently approved are not safe for long-term use," he said. "More than 20% of dogs have osteoarthritis but only 5% of dogs are treated. So there's a significant opportunity with the new drugs coming to market. There's no doubt in my mind that will be accretive."

Parnell CSO Ed Robb

Chief Scientific Officer Edward Robb added that he thinks Parnell will be able to set itself apart by marketing Zydax as a product that can significantly improve mobility in dogs. "Osteoarthritis is a disease, but mobility is more of a lifestyle," Robb told FierceAnimalHealth. "Look at people as you walk around and you see them running with their dogs and playing Frisbee. To improve mobility with a disease-modifying drug really changes the game."

Parnell also plans further development work on iKAM, an app designed to help dog owners manage their pets' osteoarthritis. "iKAM gives us a significant opportunity to grow the market for osteoarthritis drugs," Joseph said. "We tripled the sales of Zydax in Australia when we introduced the iKAM technology. We took the number of dogs treated in some clinics from 5% to 15% to 20%. It validates the significance of digital technologies as a value proposition and helps differentiate us commercially."

While Parnell's stock did edge up slightly on Wednesday following the earnings release, its share price of $4.42 is way off the company's 1-year high of $9.48. Joseph believes investors are still trying to get a handle on the prospects for the animal health industry, but once they do, he predicts they'll come around to the idea that it offers plenty of growth opportunities.

"Investors were led to believe there was no risk in developing animal health products. We can say it is far less risky and much faster than developing human health products, but it is not without risk," Joseph said. "People still don't quite understand animal health. If companies like Parnell can continue to deliver significant revenue growth throughout 2015, the needle will change, and investors will start to model animal health companies more effectively."