Image source: Flickr user Brad Holt.

What happened

Shares of Aratana Therapeutics (PETX), a small-cap biotech company solely focused on developing therapies to treat companion pets, surged 17% during the month of August according to data from S&P Global Market Intelligence. Two catalysts can be pinpointed for Aratana's strong month.

So what

The first catalyst can be traced to Aug. 4, when Aratana announced its second-quarter earnings results. For the quarter, Aratana reported $38 million in revenue and a profit of $21.2 million, or $0.61 per adjusted share. Comparatively, the company reported only $0.2 million in revenue in the prior-year quarter, and it lost $0.23 per share during Q2 2015. Furthermore, Wall Street had only been looking for Aratana to report a profit of $0.24 per share in the second quarter, meaning it absolutely crushed estimates.

Aratana is predominantly a clinical-stage research company, thus losses have been commonplace since inception. The reason for the surge in revenue and profitability stems from a strategic collaboration forged in April for Galliprant. The licensing deal allows Elanco, a subsidiary of Eli Lilly (LLY 1.42%), to develop and commercialize the animal health rights to Galliprant in exchange for an upfront payment of $45 million. Aratana recognized $38 million of that payment in Q2. Aratana is also eligible for up to $83 million more in development, regulatory, and sales milestones tied to Galliprant.

The other big catalyst was the Food and Drug Administration's Center for Veterinary Medicine (CVM) approving Nocita as a local post-operative pain medication for cranial cruciate ligament surgery in dogs. Nocita's approval on Aug. 15 marked the third time this year Aratana has had the CVM approve one of its products.

Image source: Getty Images.

Now what

Putting aside Aratana's one-time profit from the recognition of the majority of its Elanco upfront payment, investors should be aware that Aratana is likely to generate losses for at least the next three years.

However, with three drug approvals already under its belt and a bevy of clinical trials ongoing, Aratana's long-term future is looking bright. Wall Street believes that product sales for Aratana could jump as high as $94 million by 2019, which would almost certainly make the company profitable on an ongoing basis.

Even more intriguing is the strengthening data surrounding companion pets. According to a Harris Poll conducted in 2012, a whopping 91% of respondents affirmed that their pet was indeed a member of their family. As a member of the family, owners are willing to spend big bucks to ensure the health and happiness of their feline and canine friends.

Additional data from the American Pet Products Association estimates that U.S. pet industry expenditures will hit $62.8 billion in 2016. That's more than double the $29.6 billion spent on pets in 2002. Last year alone, per the APPA, $15.4 billion was spent on veterinary care, and nearly $16 billion is forecast to spent be on vet care in 2016. 

The data is pretty clearly on Aratana's side -- now it's just a matter of the company successfully launching its products and bringing new experimental therapies to trial.