Image source: Getty Images.

What happened

Investors in Aratana Therapeutics (NASDAQ:PETX)a small-cap biotech company focused on developing therapies for pets, had a prosperous 2016. The company's shares rose by more than 42% during the year, according to data from S&P Global Market Intelligence.

PETX Chart

PETX data by YCharts.

So what

Here's a quick recap of the year's key news items:

  • In March, the company announced that the Food and Drug Administration had approved the sale of its first drug, Galliprant. This product is used to control pain and inflammation associated with osteoarthritis in dogs.
  • In April, management announced a global strategic alignment with Elanco Animal Health, a division of Eli Lilly (NYSE:LLY). The deal provided Elanco with the exclusive rights to develop, manufacture, market, and commercialize Galliprant globally and co-promote the drug with Aratana in the U.S. Aratana received an up-front payment of $45 million and is eligible to receive additional milestone payments worth up to $83 million, plus co-promotion fees and royalty payments. 
  • In May, it gained FDA approval for Entyce, a drug that is designed to stimulate a dog's appetite. Management believes that roughly 10 million dogs are diagnosed with inappetence each year.
  • In August, Aratana won FDA approval for Nocita, a local post-operative analgesia for cranial cruciate ligament surgery in dogs.

Given all of the good financial and regulatory news, it is easy to understand why shares rocketed higher during the year.

Now what

Estimates from the American Pet Products Association show that U.S. spending on veterinary care was more than $15.4 billion in 2015 alone. Better yet, that number continues to grow with each passing year, providing Aratana with a lucrative market opportunity. As long as the company can successfully execute with its drug launches, its future is looking quite bright. Signing the lucrative deal with Eli Lilly should go a long way toward helping the company achieve its goals, too.

However, even with a handful of products on the market, investors would be wise to remember that this company is still losing money. In addition, marketing new veterinary products isn't cheap or easy, so success is still far from guaranteed.

Sill, the data shows that pet owners are increasingly willing to pay up to take care of their animals, which is a positive tailwind for this company to ride. That makes Aratana Therapeutics a high-risk stock that just might be worth taking a bite out of today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.