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

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

On Conatus' (CNAT) second-quarter 2018 conference call, investor focus will remain on the company's progress with respect to its lead candidate, emricasan.

Conatus Pharmaceuticals Inc. CNAT is scheduled to report second-quarter 2018 results on Aug 1 after the market closes.

The company’s earnings history has been a mixed bag so far, having missed expectations on two occasions, exceeded in one quarter and met estimates once with an average negative surprise of 55.24%. The company met estimates in the last reported quarter.

Shares of Conatus have dropped 12.4% year to date versus the industry’s increase of 10.5%.

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. In the quarter the company announced completion of enrollment in a phase IIb ENCORE-PH study.

The fourth phase IIb study on emricasan is POLT-HCV-SVR which is evaluating the candidate for post-orthotopic liver transplant (POLT), recipients with re-established liver fibrosis. In April, the company announced that emricasan failed to meet the primary endpoint in the study. The company may evaluate emricasan further in this particular subset.

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 second-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 to be reported. 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.

Earnings 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 20 cents each. 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% 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.

Stocks That Warrant a Look

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

BioDelivery Sciences International, Inc. BDSI is scheduled to report second-quarter 2018 results on August 9 after market closes. The company has an Earnings ESP of +3.23% and a Zacks Rank #2.

Aduro Biotech, Inc. ADRO is expected to release second-quarter 2018 results on August 1. The company has an Earnings ESP of +4.55% and a Zacks Rank of #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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