• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Healthcare

Making a Bet on Pets

Kindred Biosciences is a unique player in an underserved market.
By SHAM GAD Jan 13, 2014 | 03:00 PM EST
Stocks quotes in this article: PETM, PETS, MWIV, KIN

As I was leaving the grocery store the other day, I walked by the pet store located in the same shopping center. I observed the activity inside and outside and was reminded of what many believe today -- when it comes to their pets, Americans rarely spare any expense, whether it is for pet food, toys or healthcare. Our pets have become family members. Pet owners are willing to spend whatever it takes to provide their pets with the best.

This loyalty to pets has manifested in the stock market. Businesses such as retailer PetSmart (PETM), online pharmacy PetMed Express (PETS), and animal-health-products supplier MWI Veterinary Supply (MWIV) have been solid winners for years. Marketers have also pounced, offering products like organic pet food, all-natural pet-grooming products, and much more.

So it was a touch of irony that Sunday night I learned that value investor Seth Klarman's Baupost Group took a nearly 18% stake in Kindred Biosciences (KIN) just weeks after the company's initial public offering. It was a tiny IPO by Wall Street standards, less than $100 million raised, so it's understandable why the IPO got no attention. But with a current market cap of $200 million, this little business deserves attention.

Kindred is a biotech focused on animal healthcare. Much the same way biotechs create human drugs, Kindred is attempting to do the same for animals. Specifically, the company is focusing on treatments for cats, dogs and horses. Kindred is entering a very unfilled, but unique, field. If humans can be cured of life-threatening diseases, why can't animals?

The value proposition of what Kindred does is twofold. First, the cost to bring a NADA (new animal drug application) from the concept stage to marketing approval is a fraction of the costs for a human drug. Second, while it may take five or more years before a human drug is approved, it can take as little as two years for a NADA. This structure gives Kindred not only the ability to pursue more drug candidates, but do so at a very attractive return on investment. In fact, Kindred plans to have at least one treatment ready for marketing by mid-2015. 

Kindred offers a unique opportunity in an underserved market. The looming risk for any player is a failure to market any potential drug candidate, but those odds are improved in the animal health market. Yet the upside revenue and profit potential is just as great as some human-based drug candidates.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Gad was long KIN.

TAGS: Investing | U.S. Equity | Healthcare

More from Healthcare

There Are Market Bright Spots, but I View the July Rally as a Head Fake

Bret Jensen
Aug 3, 2022 10:30 AM EDT

It's hard to see stock valuations rising when inflation remains high and the economy appears headed for a recession if it isn't in one already.

A Recession Appears Inevitable, but There Are Still Places to Invest

Bret Jensen
Jul 27, 2022 10:30 AM EDT

A few homebuilders and healthcare stocks seem likely to hold up better than most of the market in a recession.

Change Healthcare Continues to Knock on a Breakout Level

Bruce Kamich
Jul 25, 2022 11:25 AM EDT

The CHNG chart is at an interesting juncture.

The Healing Process Begins for Cano Health

Bruce Kamich
Jul 21, 2022 1:30 PM EDT

Here's how to approach CANO as the shares have made a bottom formation.

With HCA Healthcare, I'm Getting Healthy Indications

Bruce Kamich
Jul 21, 2022 9:20 AM EDT

The healthcare provider is set to report earnings Friday.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • 01:44 PM EDT STEPHEN GUILFOYLE

    This Holding Lights Up With Strong Earnings

    Check out the latest from TheStreet's Stocks Under...
  • 09:24 AM EDT PETER TCHIR

    Jobs Report Reaction: Incredibly Strong, But Questions to Ask

    An incredibly strong July jobs report. Not only d...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login