Why Aratana Therapeutics Inc. Shares Clawed Higher

Why Aratana Therapeutics Inc. Shares Clawed Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Aratana Therapeutics , a clinical-stage biopharmaceutical company focused on developing branded therapies for the treatment of pets, roared higher by as much as 13% after announcing the acquisition of privately held Vet Therapeutics.

So what: Under the terms of the agreement, Aratana agreed to pay Vet Therapeutics $30 million in cash, issue 625,000 shares of common stock, and issue a promissory note totaling $3 million, which is due on or before Dec. 31, 2014. Aratana will also be on the hook for up to $5 million in potential milestone payments should Aratana's B-cell lymphoma product for dogs reach certain regulatory and manufacturing targets.

Now what: This is pretty much what I'd deem a no-brainer move for Aratana as it moves the company much closer to being a commercial-stage company, given that many of its in-house developments wouldn't seek approval for at least two or three more years. Vet Therapeutics already has a monoclonal antibody that's been granted a conditional license by the U.S. Department of Agriculture for treatment of canine B-cell lymphoma and has another antibody product for dogs to treat T-cell lymphoma currently under review by the USDA.

Aratana's significant pop since its IPO, however, is another story. While I do really enjoy the prospect of having another veterinary medicine pure play on the market to choose from, and it's clear that pet owners will pay through the nose to keep their member of the family healthy, Aratana's tripling since it debuted despite having zero approved drugs gives me cause for concern and leads me to believe that the above optimism is more than baked into its share price already.

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The article Why Aratana Therapeutics Inc. Shares Clawed Higher originally appeared on Fool.com.

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