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What's in the Cards for Conatus (CNAT) This Earnings Season?

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Conatus Pharmaceuticals Inc. CNATis slated to report first-quarter 2018 results on May 2, after the market closes.

The company’s earnings history has been disappointing so far, having missed expectations on two occasions, missed in one and registered in-line results in another with an average negative surprise of 55.24%. Last reported quarter, the company delivered a positive surprise of 11.76%.

Shares of Conatus have plunged 61% in a year’s time versus the industry’s 12.6% rally.


Let’s see, how things are shaping up for the upcoming release.

Factors at Play

With no approved product in Conatus’ portfolio at the moment, the company is yet to generate revenues. Hence, investors’ focus will be on the company’s progress with respect to the lead candidate, emricasan, an orally active pan-caspase protease inhibitor.

Emricasan is under evaluation in various phase IIb studies for the treatment of chronic liver disease including NASH fibrosis. There are now four ongoing emricasan phase IIb trials, which consist of three other ENCORE programs on patients with fibrosis or cirrhosis caused by nonalcoholic steatohepatitis (NASH) in various patient populations. Data from these analyses are expected between 2018 and 2019.

The company also plans to initiate a new study called ENCORE-XT, a planned extension trial on patients, who completed the ENCORE-PH or ENCORE-LF studies with continued monitoring for efficacy, safety, clinical outcomes and a healthy quality of life.

Apart from emricasan, the company’s portfolio has IDN-7314, presently undergoing a phase II study for treatment of primary sclerosing cholangitis. We expect an update on the same on first-quarter conference call.

Emricasan has also been extensively profiled in in-vitro tests and studied in many preclinical models of human disease. In April, Conatus announced positive results from both in-vitro and in-vivo studies, demonstrating reductions of hepatic tissue factor-driven coagulation.

It is important to note that Conatus has an exclusive option, collaboration and license agreement with Novartis AG NVS for the worldwide development and commercialization of emricasan. With Novartis sharing half the development costs related to Conatus’ phase IIb studies on emricasan, the company now anticipates lower spending on in-licensing and internal pipeline.

Earnings Whispers

Our proven model does not conclusively show that Conatus is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Conatus has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 17 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Conatus carries a Zacks Rank #3, which increases the predictive power of ESP. However, a company’s 0.00% Earnings ESP makes surprise prediction difficult.  

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Conatus Pharmaceuticals Inc. Price and EPS Surprise

Conatus Pharmaceuticals Inc. Price and EPS Surprise | Conatus Pharmaceuticals Inc. Quote


Stocks That Warrant a Look

Here are some health care stocks with the right combination of elements to beat estimates this time around:

Gilead Sciences, Inc. GILD is scheduled to report first-quarter 2018 financial numbers on May 1. The company has an Earnings ESP of +0.32% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Celgene Corporation CELG is scheduled to release first-quarter results on May 4. The company has an Earnings ESP of +0.63% and a Zacks Rank of 3.

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