On May 8, 2019 Aratana Therapeutics, Inc. (NASDAQ: PETX), a pet therapeutics company focused on the development and commercialization of innovative therapeutics for dogs and cats, reported its first quarter 2019 financial results and recent business highlights (Press release, Aratana Therapeutics, MAY 8, 2019, View Source [SID1234535968]).

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"I am very pleased that we recorded revenue growth from all three of our marketed therapeutics in the first quarter, which has resulted in our strongest quarter of product sales in the history of the company," stated Craig Tooman, President and Chief Executive Officer of Aratana Therapeutics. "Moving forward, we plan to focus on driving revenues and successfully advancing our pipeline of best-in-class therapeutic candidates."

Proposed Merger with Elanco Animal Health
On April 26, 2019, Aratana signed an agreement to be acquired by Elanco Animal Health in a stock-for-stock transaction. Subject to the terms of the agreement, upon the closing of the transaction, Aratana stockholders will receive 0.1481 share of Elanco common stock and one contingent value right (CVR) for each share of Aratana common stock. The CVR of $0.25 in cash per Aratana share shall be granted to Aratana stockholders as of the closing date and paid if capromorelin achieves certain sales levels on or before the end of 2021. Including the CVR, the proposed transaction represents aggregate value of up to approximately $245 million, based on the proposed exchange ratio and the closing prices of Aratana common stock and Elanco common stock on April 24, 2019. The proposed transaction was unanimously approved by the Aratana Board of Directors and remains subject to customary closing conditions, including approval by Aratana stockholders and clearance under the Hart-Scott-Rodino Antitrust Improvements Act.

Financial Results
Aratana recorded $7.4 million in total revenues for the first quarter of 2019 compared to $4.0 million in total revenues in the first quarter of 2018. Total revenues in the first quarter of 2019 included $2.5 million in NOCITA net product sales, $1.5 million in ENTYCE net product sales and $3.4 million in licensing and collaboration revenue from Elanco for GALLIPRANT. The first quarter of 2019 net loss was $6.8 million or $0.14 diluted loss per share compared to a net loss of $8.5 million or $0.19 diluted loss per share for the corresponding quarter ended March 31, 2018.

The cost of product sales totaled $1.5 million in the first quarter of 2019 compared to $0.5 million in the corresponding period in 2018. The cost of product sales in the first quarter of 2018 were lower due to sales of inventories that were previously written down. Aratana anticipates margins will improve in 2019 compared to full year 2018, as inventories have normalized based on product performance.

During the three months ended March 31, 2019, royalty expense was $1.7 million, which was an increase of $0.9 million as compared to the corresponding 2018 period. The increase was primarily a result of an increase in net sales of GALLIPRANT by Elanco and increased net product sales of NOCITA and ENTYCE.

Research and development expenses totaled $1.8 million in the first quarter ended March 31, 2019 compared to $2.2 million for the quarter ended March 31, 2018. The first quarter of 2018 included a one-time $0.5 million option fee to AskAt Inc. Aratana anticipates research and development expenses to increase slightly in the remainder of 2019 as pipeline programs continue to progress.

Selling, general and administrative expenses totaled $9.2 million for the first quarter of 2019 compared to $7.7 million for the same period in 2018. The increase was primarily due to stock-based compensation and severance expenses related to the resignation of the former Chief Executive Officer of the Company in January 2019. The Company anticipates selling, general and administrative expenses to increase for the remainder of 2019 as compared to the corresponding 2018 period due to expenses related to the proposed merger and related matters. Selling, general and administrative expenses related to current operations are expected to be relatively consistent for the remainder of 2019 as compared to the corresponding 2018 period.

As of March 31, 2019, Aratana had approximately $37.4 million in cash, cash equivalents, restricted cash and short-term investments.

Business Highlights

NOCITA (bupivacaine liposome injectable suspension): NOCITA net product sales continued to increase sequentially quarter-over-quarter as a result of the growing account base and increasing size of average monthly orders. Additionally, the Company has commenced the regulatory process for a smaller 10 mL vial size, which if approved, may allow Aratana to expand the account base from mainly specialty clinics to general practice clinics.
ENTYCE (capromorelin oral solution): In the first quarter of 2019, ENTYCE net product sales increased by more than 15 percent compared to the fourth quarter of 2018. ENTYCE was ordered by more than 9,000 accounts in the first quarter of 2019, which is an approximately 60 percent increase over the same period of 2018, and on average, accounts ordered approximately 2.3 times within the quarter.
Capromorelin for Cats: In February 2019, the Company received a technical section complete letter for safety from FDA’s Center for Veterinary Medicine (CVM) for capromorelin (AT-002) in cats. The Company’s pivotal field effectiveness study evaluating the therapeutic candidate for weight management in cats with chronic kidney disease is anticipated to complete target enrollment mid-2019.
GALLIPRANT (grapiprant tablets): Elanco continues to report strong sales of GALLIPRANT in the United States and launched GALLIPRANT in Europe in the first quarter of 2019.
AT-019: In early-2019, Aratana started transferring the manufacturing process of the active pharmaceutical ingredient and early formulation work for AT-019, a potent and innovative EP4 receptor antagonist therapeutic candidate for pain, inflammation and other indications.
Webcast & Conference Call Details
Given the pending transaction with Elanco, management will not be hosting a conference call to discuss the Company’s financial results for the first quarter of 2019. For investor inquiries, contact Aratana directly.