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Aratana Therapeutics, Inc. (NASDAQ:PETX)

Q2 2014 Earnings Conference Call

August 12, 2014 08:30 ET

Executives

Steven St. Peter - President and Chief Executive Officer

Craig Tooman - Chief Financial Officer

Analysts

Tim Lugo - William Blair

Jon Block - Stifel

Charles Haff - Craig Hallum

Operator

Good morning, and welcome to the Aratana Therapeutics’ Second Quarter 2014 Financial Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Dr. Steven St. Peter. Please go ahead, sir.

Steven St. Peter

Thank you, operator. This is Steven St. Peter, President and CEO of Aratana Therapeutics. I am in our Leuven, Belgium office. With me on the line from the U.S. is Craig Tooman, our Chief Financial Officer. We are joined by other Aratana colleagues in Kansas City and San Diego. So, depending on where you are, good afternoon, good morning or good very early morning.

Welcome to Aratana’s second quarter 2014 earnings call. I will make a few opening comments, then review the continued progress in product development. Craig will then review the financial results. After the prepared comments, we are pleased to take questions.

Before we begin, I would like to let you know that we will be making some forward-looking statements today. Actual events and circumstances which maybe beyond our control may differ from today’s forward-looking statements, including, but not limited to as a result of the risks, uncertainties and other important factors set forth in our filings with the SEC.

This quarter marked an important milestone for Aratana. During the quarter, we crossed our one year anniversary as a public company. We at Aratana are very proud of what we have been able to accomplish with the additional resources of being a public company. We thank our investors and others on this call for your continued confidence and continued support. Furthermore, this quarter’s results reflect a full quarter of consolidated operating results for each of our two recent acquisitions, another first. It’s hard to imagine that approximately one year ago pet therapeutics did not really exist as the public market investment category.

Yet beginning with the Aratana’s initial public offering, which followed the Zoetis IPO, we would now see multiple public offerings in the animal health sector, with more on the horizon. This activity was reflected earlier this month in the New York Times business section a front page article entitled Start-Ups Work on Biotech Drugs for Pets. Each of the four photographs and much of the article was Aratana-related, including a conspicuously large picture of me and my dog flow. While it is gratifying to see our company in the New York Times, you can be certain that the Aratana folks are staying focused on the important mission of developing new therapeutics to address pet serious medical needs.

Aratana has more than 15 therapeutic product candidates in development addressing conditions such as cancer, pain, inappetence, viral disease and skin conditions. During the quarter, our products were being investigated in more than a dozen different clinical studies in cats and dogs. Behind those product candidates, which are already in clinical studies, we are working on many other product concepts and we have a busy business development effort. Today, our product candidates include those small molecules and biologics: traditional pharmaceuticals, monoclonal antibodies, cancer vaccines and stem cell-based therapies and we intend to deliver our medicines as oral tablets, oral liquids, chewables, topicals, injectables, intravenous infusions and intra-articular preparations. We believe that our pet therapeutics pipeline exceeds that of most of the large animal health companies and we believe that is unmatched amongst the emerging competition from pet biotechs. So, yes, we have a lot going on at Aratana, but we approach it as carefully as one would, a human drug development portfolio with a large world-class team that can get it done. And we proceed with the sense of urgency and purpose.

Let me cover a few highlights. In June, Aratana made its tradeshow debut at the American College of Veterinary Internal Medicine Forum in Nashville, where we and key opinion leaders presented data on several of our pipeline products to veterinarians. That product information and those publications are now available on our newly re-launched website. Also in June, we entered into a development and commercialization agreement with Vet-Stem, an animal health company focused on regenerative medicine for their K9 osteoarthritis product. Since licensing AT-016, a dose confirmation field study has been initiated.

During the quarter, we began two studies for AT-005 K9-specific monoclonal antibody against CD-52 in lymphoma, trials called T-CHOMP and T-LAB, which are each combination studies using established chemotherapy protocols. Towards the end of the quarter, we completed the work necessary to file a conditional license application with the USDA for a first cancer vaccine, AT-014 for osteosarcoma. We went from in-licensing the product to making a regulatory submission for marketing authorization in less than one quarter. This is my comment about Aratana having a sense of urgency.

With respect to our oncology pipeline, we anticipate that AT-004 will receive full USDA licensure this year, AT-005, a full license next year, and AT-014 will receive a conditional license by 2016. We have made progress in other oncology programs, including programs designed to address cancer in cats. With respect to our pain pipeline, we are in the midst of a total field effectiveness study in dogs for AT-001 grapiprant and we anticipate starting the pivotal field effectiveness study in dogs this year for AT-003, bupivacaine extended release injectable suspension. As mentioned, we have initiated a dose confirmation field study in dogs for AT-016, which we believe has the potential to address pain and may actually achieve disease modification and in each of AT-001 and AT-003 is moving forward in cats.

2014 is also a year of transitioning towards becoming a commercial company. While our first product launches come in 2016, we will start selling AT-005 under a conditional license later this year. This gives us the opportunity to establish a brand with our customer and partners, the companion animal veterinarian. During the quarter, we added our ninth board member and with last week’s announcement of our 10th board member, we believe that we have now completed the transition to a public company Board of Directors. Finally, during the quarter, Aratana had entered into an agreement and an amendment of the Square 1 Bank credit facility and we recently filed and received an effectiveness notice on an S-3 registration statement.

Now, let me provide some additional product development updates. First, let me discuss AT-001 grapiprant, which is our EP4 antagonist for the treatment of pain associated with osteoarthritis. Last quarter, we announced that we had initiated a pivotal field effectiveness study in dogs. We expect the enrollment to be complete in the fourth quarter of this year and we continue to anticipate top line results in late 2014. We continue to expect approval in 2016.

With respect to AT-001 in cats, a pilot field study in degenerative joint disease was initiated during the quarter with completion expected during the first half of 2015. We believe that if successful Aratana would be the first company to receive a multi-week claim for cats with osteoarthritis in the U.S. As many of you know, the currently marketed COX-selective NSAIDs are not labeled for long-term use in cats. I will now talk about AT-002 capromorelin, our ghrelin agonist for inappetence. The company previously announced that it has initiated pivotal field effectiveness study in client owned dogs. We continue to expect high top line results in the first quarter of 2015 and the company continues to anticipate U.S. approval in 2016. With respect to AT-002 in cats we met with the FDA and presented the study protocol to treat chronically diseased client owned cats. In this study we are measuring appetite stimulation and body weight. We started this pilot study during the second quarter of 2014.

Next I would like to review AT-003, new bupivacaine extended release. We are within a few patients of completing a 40 subject pilot field study in client owned dogs. This study is evaluating AT-003 for post-operative pain management following orthopedic surgery. We also expect to start a cat pilot lab study in the fourth quarter 2014.

Let me now turn to our antibody franchise. First, AT-004 is an aid for the treatment of B-cell lymphoma in dogs. We continue to expect the full license this year furthermore Aratana has submitted two manuscripts to peer review journals on two separate studies investigating the utility of AT-004 in combination with certain chemotherapy protocols. These studies are supportive. We are pleased to announce that manuscripts have been accepted and what we presented at the Veterinary Cancer Society conference in October 2014. AT-004 is partnered in the U.S. and Canada, so Aratana does not control the commercialization of this product, but Aratana does retain an attractive double-digit royalty.

We continue to expect full USDA licensure for AT-005 is an aid for the treatment of T-cell lymphoma in dogs in 2015. During the second quarter, we initiated two additional studies that will help position the product in chemotherapy based cancer treatment protocols. We expect the studies to be fully enrolled by the end of 2014 or shortly thereafter. In the fourth quarter of 2014, we will make AT-005 available for commercial sell to our investigators in selective other sites. Starting in the fourth quarter of 2014, we anticipate generating modest product revenue for AT-005. However, even more important than the early revenue is our ability to work with the selective sites and they are incorporating AT-005 into their routine care of dogs with T-cell lymphoma and establishing product pricing.

Aratana’s other priority development programs include our first cancer vaccine AT-014 for osteosarcoma in dogs. We expect additional clarity on our path forward once we meet with the USDA in response to our recent license application. We expect that meeting to take place later in 2014. And finally with respect to AT-016, we expect to complete the dose confirmation study in the coming quarters at which time we will assess the path forward with our partner, Vet-Stem.

While not a priority program within our pain and oncology franchises let me briefly discuss AT-006, our partnered program for feline ocular herpes infection. When possible Aratana’s preferred regulatory strategy is to conduct studies and to satisfy regulatory requirements for both the U.S. and Europe. When we acquired Okapi Sciences, the source of AT-006, an EU study using only German sites was underway but the U.S. development path had not been fully explored. For a variety of reasons including our desire to harmonize the development plan to satisfy both U.S. and EU requirements we started enrollment of cats in the German study. Thus while this eliminates the possibility of an EU regulatory filing in 2015, we believe we can increase the probability of eventual success and improve the overall development plan.

Now I would like to update on our option program. During the quarter we extended the duration of the AT-beta through the first half of 2015. The option agreement allowed for an extension and given that we are still generating proof of concept data Aratana pursued this approach. We had not previously announced the therapeutic area of focus for AT-beta but today we are announcing that AT-beta is for seizure in dogs. However, during the quarter, we completed the proof of concept study on AT-Gamma. AT-Gamma is a small molecule or CRTh2 antagonist for atopic dermatitis in dogs which has been studied in humans for atopic dermatitis and asthma.

We are pleased to announce that we have delivered a notice of intent to exercise this option. When we entered into the binding term sheet a year ago, contract terms were pre-specified, specifically $1 million upfront, mid single-digit royalties and other clinical development and approval milestones. We expect to have a full license agreements signed within 90 days. This concludes the product development update. Allow me to make a few comments regarding business development. Our business development objective is to leverage our unique combination of animal and human health expertise connections and our innovative biotech mindset to be the partner of choice in pet therapeutics.

Business development activities will be focused on traditional end licensing such as the Vet-Stem agreement during this quarter and the option programs. As previously stated, we do not anticipate additional company acquisitions in 2014. Notwithstanding of our large pipeline, we do continue to seek additional molecules before license or option and we are currently evaluating several candidates. However, as you can imagine, we carefully balanced the goal of further expanding our pipeline with the financial and human capital requirements, and a sharp focus on return on invested capital.

Business development also includes seeking partners within the pet therapeutics ecosystem. So, Aratana is increasingly active in the veterinary medicine industry. The end of August is one of the most exciting weeks in the industry as the Central Veterinary Conference, the Animal Health Investment Forum and the Animal Health Corridor Homecoming Dinner are all held in Kansas City from August 22 to August 25. Once again, I would like to remind you merger calendars for our annual Aratana Open House on Sunday August 24 in Kansas City. Last year’s Open House was a great success with over 200 attendees and we look forward to another successful event in 2014.

And with that, I’d like to ask Craig to update you on the financials. After which, we will take questions.

Craig Tooman

Thank you, Steven and good day everyone. As reported in prior quarters, Aratana is emerging into a global company with a diverse and highly innovative pipeline of programs. Per today’s press release, Aratana reported a consolidated net loss of $9.3 million or $0.32 per basic share for the three months ended June 30, 2014. This compares to a net loss of $4.2 million for the second quarter of 2013, which represents Aratana’s financials before the acquisitions of Vet Therapeutics and Okapi Sciences, and as a private company.

For the six months ended June 30, 2014, the company reported a net loss of $18.4 million or $0.66 per basic share. This compares to $8.3 million loss for the same six-month period in 2013. This quarter, we reported 300,000 in license and collaboration revenue. The majority of the revenue reported is R&D collaboration revenue for ongoing development efforts for AT-006. For the treatment of ocular lesions associated with the feline ocular herpes infection based on our collaboration agreement with Novartis Animal Heath. There is also a portion of revenue reported this quarter related to the deferred upfront payments for our products, AT-004, our monoclonal B-cell lymphoma product, and the AT-006 collaboration agreements. These revenues will be reported throughout the remaining service period for each product.

Now, let me turn to our R&D expenses. During the quarter, we reported R&D expense of $4.3 million compared to $2.5 million for the second quarter ended June 30, 2013. For the six-month period ending June 30, 2014, R&D reported $7.9 million of expense versus $4.6 million for the same period in 2013. The increase is primarily due to the number of the programs we currently have in our pipeline as well as advancements in our programs which Steven is highlighted already. As a result of obtaining an exclusive license for a novel allogeneic stem cell therapy technology, AT-016 from Vet-Stem, we reported an extensive $500,000 on the in-process R&D line on the statement of operations. Vet-Stem will continue to lead the development effort for this product with support from Aratana.

Turning to our G&A expenses which also contained expenditures associated with our commercial organization. This quarter, we reported $4.4 million compared to $1.3 million for the second quarter of 2013. Year-to-date through June 30, 2014, we have reported G&A expense of $9 million compared to $2.5 million in 2013. The increase is due to additional cost required for public companies, professional fees for purchase accounting of our recent acquisitions and an increase in commercial expenses as we continue to build an infrastructure to accommodate the near-term marketing and sales efforts for our late-stage products, specifically AT-005.

For the six-month comparison, you will recall in the first quarter of 2014, we have certain one-time non-cash expenses associated with accelerated stock vesting of a former employee during the quarter of approximately $1 million. I would also like to remind you that in 2014 due to the recent acquisitions, part of the increase is related to general operating expenses for our San Diego and Belgium locations.

Finally, again as a result of our recent acquisitions, the company reported amortization expense of $582,000 related to its B-cell and T-cell lymphoma intangible assets. The intangible assets associated with AT-004 are being amortized over its 20-year estimated useful life, which started as part of the Vet Therapeutics acquisition since conditional approval had been received. Conditional approval for AT-005 was received in January 2014 and therefore we began amortizing this intangible over its 20-year estimated useful life during the first quarter of 2014.

Regarding our cash position on June 30, 2014, Aratana had a total of approximately $70.7 million in cash, cash equivalents and short-term marketable securities. In the first half of 2014, we used cash of approximately $60 million to fund our operations. As stated in our year end earnings call, in 2014, we continue to anticipate use of cash from operations between $35 million and $40 million. We remain fiscally responsible on the use of our cash by focusing our activities on those areas, where we can achieve differentiation in market success. Also as we continue to advance our pipeline, we anticipate spending in R&D to be approximately $25 million to $30 million in 2014. Aratana believes that its existing cash and cash equivalents are sufficient to fund its operations through 2015.

I am also pleased to report that in June we entered into amendment to our Square 1 credit facility, which Steven highlighted. This amendment fixed the annual interest rate to 5.5%. Most importantly, as you will recall, we were obligated to begin repaying our principal balance starting in April over the next 24 months. This is important period for Aratana in terms of advancing development programs and establishing the commercial presence in the veterinary market. Therefore, we change the terms to allow for interest-only payments through June 2016 at which time Aratana will have the option to amortize the principal amount of the loan over 24 months.

That being said, to be flexible for any future financings, the company filed a shelf-registration statement on Form S-3 in July 2014 with the SEC, which was made effective on July 30, 2014. The registration statement will allow Aratana to issue various types of securities from time-to-time in support of our growth objectives. Any offering of securities covered by the shelf-registration statement will be made only by means of written prospectus, a prospectus supplement authorized and filed by us.

In summary, we are pleased with the progress the company has made in the last 12 months, including the integration of recently acquired companies. We continue to advance our D pipeline of therapeutics for the treatment of pets. We remain focused on making innovative and effective products for serious diseases that affect our family pets.

With that, I will hand the call back to Steven who will open it up for Q&A. Steven?

Steven St. Peter

So, thanks, Craig. We will now take questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question is from Tim Lugo, William Blair. Please go ahead.

Tim Lugo - William Blair

Thanks for taking my question and congratulations on what looks like a pretty busy quarter.

Steven St. Peter

Thanks Tim.

Tim Lugo - William Blair

I guess a couple of product questions and then maybe one financial question, for the Advaxis program, it looks like that was filed under a full license with the FDA, not conditional licensure. Can you just give me maybe some background on the choice of that and maybe update us on manufacturing and the potential timing and market entry for that product?

Steven St. Peter

So, Tim, we filed for a conditional license on that program. We stay licensure, but it’s a conditional license and then we would then move to a full license after that, so sorry, if we were confusing on that. And manufacturing is going to be a key area there. I mean, the product is actually made by an FDA site under their GMP, but we actually have to move into a USDA site to get it manufactured according to their regulations. So, that’s what a big part of focus will be with respect to our meeting with the USDA on the conditional licenses, how we can make that happen. So, at this point, certainly until we have had that meeting what we are saying is that we won’t be in the market with conditional license before 2016, but we will keep updating you once we have some feedback on the exact timing there.

Tim Lugo - William Blair

Okay, that makes sense. And perhaps for AT-Gamma, there are several products in atopic dermatitis out there in development. Can you maybe give us some color on how you view this product being differentiated from some others in development and also what is currently being used?

Steven St. Peter

Yes. So, as far as we are aware, the only CRTh2 antagonist being developed for test it will be our molecule. I mean, there are human companies that are developing the molecule for humans. In fact, you may recall that AT-Alpha was also actually a CRTh2 small molecule antagonist. And so we made a conscious decision not to move that one forward instead we have moved forward this one, which was the AT-Gamma. And so this drug comes from a human biotech that has been in Phase 2 and has actually had the product in dogs before. And we have some dog safety and now we have completed some kind of proof-of-concept.

And so I think mechanistically as we think about why this mechanism is particularly useful is we don’t think the problem in atopic dermatitis is itching, it’s not a problem that we would address with anti-histamine for instance. And while you can’t address it with steroids, there are some sort of long-term consequences of steroids. And so the Apoquel product, JAK2 inhibitor that Zoetis is marketing very successfully, is that’s actually geared more towards pruritus, as opposed to actually impacting the underlying disease. So, one of the things that we will be doing in our development path is obviously we will look at pruritus, but we will look at some other variables to really validate that it’s the cell population that you need to deal with to address the overall disease. So, we think it will be a very different therapy and that it’s targeted and really gives us the underlying biology and that’s why we are particularly excited about that particular molecule.

Tim Lugo - William Blair

Thank you. That’s helpful. And Craig, maybe one last question, can you talk about the credit facility and your choice of June 2016 interest-only timeframe, is that your current best estimate for becoming cash flow positive? And maybe can you outline over the next several quarters, what cash outflows to partners should be expected maybe for milestone payments or any other contractual payments?

Craig Tooman

So, the timing of the restructuring the loan was really geared toward the subsequent period after the equity financing. So, has nothing to do with anything other than us opportunistically looking at our cash needs over the next couple of years and we are very pleased to have such a great interest rate of 5.5% and lock that in and move to interest-only and really reserve those funds to fund the operations both from a development and commercial standpoint, so really nothing more significant on the date there. In terms of the cash outlay going forward, again we are very pleased that we gave guidance at the beginning of the year, cash from operations used between $35 million and $40 million. And we have reiterated that guidance as you know today knowing that we had entered into these obligations with third-parties. So, it still is included within that guidance.

Tim Lugo - William Blair

Great, thanks for the questions.

Steven St. Peter

Hey, Tim. Just before we take another question, I am just going to clarify something I said. So, with respect to the USDA, I mean, you actually file for a product license and as the USDA decides whether it’s a conditional license or a full license, but we anticipate that it would probably be a conditional license.

Tim Lugo - William Blair

Okay, thank you for clarifying that.

Operator

Our next question is Jon Block from Stifel. Please go ahead.

Jon Block - Stifel

Great, thanks. And maybe Craig actually I will just follow up with some of your comments on cash burn, R&D spend came in considerably lower than what we had estimated. And I think year-to-date, you mentioned it’s right around $8 million, but you still mentioned $25 million to $30 million for the year, why are you reconfirming $25 million to $30 million and if so can you just talk to maybe some of the programs that would cause the number to be so back end weighted? Thanks.

Craig Tooman

Yes. So, obviously we have programs that are advancing in the latter half of the year and will absorb more funding. In addition to the recent programs that we have just added from the in-licensing project, so the combination of those two has us leaving room in the back half of that guidance.

Jon Block - Stifel

Okay, great. And then Steve maybe just one for you, you have got a competitor that’s talked about releasing some data on CereKin next week and maybe just at a high level, if you can talk to us on what you think the impact could be both positive and negative? In other words, if the data is positive, it probably ushers in a future competitor, but are there some positive implications from you guys, in other words, that it’s in front of veterinarians, it is giving them an alternative to some of the current solutions on the market, which could be positive for you guys long-term or on the flip side of that, do they beat to market and you have got those headwinds when you look out in 2016 and beyond? Thanks.

Steven St. Peter

Thanks Jon. I guess I would say that I think it’s a positive that CereKin or diacerein is being brought to the U.S. I mean the product is approved in humans. It’s under review by some of the authorities for its sort of safety and efficacy. But it is approved in humans not widely used in humans, so it is available to veterinarians in Europe and they don’t use it in Europe. But I guess it’s a good thing that veterinarians have more options because veterinarians will ultimately decide to what extent they would like to have product or don’t like that product. But we and we totally agree about the unmet needs in the osteoarthritis pain market in dogs. And so this gets to that the idea the non-Coxib NSAID I mean their product will be apparently a twice a day product which obviously ours we are forward once a day product.

So look I would like alternatives to veterinarians but at the end of the day it’s going to be the better product that wins and that’s simply a decision that veterinarians are going to make based on their experience. So and I guess more people come to the market earlier potentially builds the market which is a good thing, it prepares the market for the message that it’s not all about Coxib NSAID, but I think when we come to market in 2016 we feel like the EP4 receptor target with all of the data that we have generated. And you will remember Jon at the ACVIM we presented data of several post-surgeon presentations on our drug. And there is a bunch of science around our drug. We didn’t just take a generic from Europe and run a pivotal field effectiveness study and pushed it on the market. We are actually trying to really help veterinarians understand how to approach pain. So look I think we root for success in terms of the more options for veterinarians but at the end of the day we want our product to be the one that veterinarians for further use based on the science and the clinical experience.

Jon Block - Stifel

Perfect. Thanks for your time guys.

Operator

Our next question is Charles Haff, Craig Hallum. Please go ahead.

Charles Haff - Craig Hallum

Hi. Thanks for taking my questions. My first question is on AT-006 I just wanted to understand your commentary a little bit better on the regulatory strategy that you pursued there could you review that one more time?

Steven St. Peter

Yes. So, Charles thanks for joining this morning. So AT-006 when we acquired Okapi, Okapi had a German study only underway in multiple sites looking at the drug in cats to impact the disease. I mean typically you don’t do a multi-site European study as your pivotal study, but the study was underway and moving forward as a study that our partner in that deal was I think satisfied with. But as – once we bought the company and begin to work with it what we begin to realize is A, I think we mentioned on our prior call difficulties in enrolling that study just a challenge to get the German sites to kind of up and running and enrolling. And secondly, we also had the challenge of expiring clinical material as you are trying to run the study you have got expiry on materials, so you got to make the decision to manufacture more material or not. We also had a meeting with the center for veterinarian medicine in U.S. about what they would like to see from the development perspective.

And there are few other things that kind of we’re on the table. So, we just decided look that study – that’s ongoing in Germany that we just recently stopped enrolling. We’re going to see that data in this quarter and hopefully it will inform us as to how move forward. We’re still excited about the product. So, we’ll use that data is really pilot data to then inform a study or development plan that allows us to go through both the U.S. and Europe. And that really is kind of Aratana way as we really like that type of approach and so that’s where we are at the program now and we’re obviously working with our partner to bringing that thing forward. So, I hope that clarifies what was going on in that program.

Charles Haff - Craig Hallum

Yes, that makes sense. Thanks for the color. And then my last question is when you look at the animal health sector, there is obviously a lot of activity going on here. How do you kind of see this industry kind of unfolding, Steven, over the next couple of years? Do you feel like we’re going to get consolidation within that period or do you think that there may be consolidation after that period. And then also do you see the animal health distributors possibly getting involved and directly marketing products and sales through exclusive licensees with products. Do you think that it’s going to be an open platform?

Steven St. Peter

Okay. So, thanks, Charles. On the evolution of the market, I mean, we talk about the fact that we think this is a large in drilling market with a lot of unmet needs, I mean, today, we estimate that pet owners spend less than $10 per pet per year on pet medicines when you exclude things like flea, tick, heartworm, and vaccine. So, we think that if you bring forward safe and effective medicines the market is huge. So, we think that there is a room for more than one competitor in the market and we think it builds the overall market. There is more awareness about the fact that veterinarians today are regulated to using human products kind of off label for more than 90% of the things they treat.

So, we think that more noise around the availability of safe and effective products approved by regulatory authority. That message is one that’s going to grow this overall market. And so, I think we’re in that growth phase and we’re seeing that now – you’ve seen as I mentioned earlier a number of IPOs, there is more to come and we grew for more success in terms of awareness. But at the end of the day, I think the most meaningful companies will be the one that build their companies based on innovation and true value propositions with veterinary in the pet owner that really impact the medical diseases in important way.

So our – we are focused on that. We’re not focused on talking fast about how big the market is and how you can quickly get a product to the market. We’re focused on building big brands, long-term product value and having the IP to back that up to make these big and valuable products over time. And so, I hope that helps on the evolution and inevitably consolidation comes and I think most industry, but not in my mind in the hyper growth phase. I think that comes later. So, this lead that will come and I frankly I think the consolidation of the animal health market among the top five players that’s really driven around their need to consolidate around the mature market, which is the edible market over the production animal market. So, I wouldn’t confuse the consolidation around production animals with inevitably, there is going to be consolidation around the pet therapeutics opportunity because we’re in the – what I call that hyper growth phase.

Charles Haff - Craig Hallum

And do you see any changes?

Steven St. Peter

Sorry, go ahead.

Charles Haff - Craig Hallum

Yes, that is what I was going to ask you, the distributors?

Steven St. Peter

Yes. So with respect to distributors, we do anticipate working with the distributors and we will have an Aratana sales force to really in fact we already have a commercial organization, in preparation of our introduction of AT-005 and we’ll continue to build that because we have to get the value proposition out there and represents the products. But ultimately you can better reach the rest of the clinics with distributors and distributors call on pretty much all of the veterinarians. And so independent distributors today do represent products, but I don’t think there are the best introducing products. You really need a hybrid approach.

Charles Haff - Craig Hallum

Okay, great. Thanks for taking my questions.

Operator

(Operator Instructions) Having no questions, this concludes our question-and-answer session. I would like to turn the conference back over to Dr. Steven St. Peter for any closing remarks.

Steven St. Peter

So, thank you operator and thank you everyone for joining this morning. I would just reiterate how excited we are at Aratana to continue to move the model forward and make great progress in now our dozen plus clinical studies as well as our more than 15 products in development. And we just continue to see a very exciting opportunity and we are thrilled to be able to execute. Thanks.

Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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