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Conatus (CNAT) Beats on Q2 Earnings, Stops Emricasan Studies

Zacks Equity Research

Conatus Pharmaceuticals Inc. CNAT reported a loss of 2 cents per share in the second quarter of 2019, narrower than the Zacks Consensus Estimate of 12 cents and also the year-ago loss of 15 cents.

Moreover, revenues of $10.8 million rose 22.7% year over year owing to an increase in net cumulative catch-up revenues recognized from its partner Novartis NVS. Moreover, the top line comprehensively beat the Zacks Consensus Estimate of $7 million.

Shares of Conatus have plummeted 82.3% so far this year against the industry’s increase of 12.3%.

Conatus has no approved product in its portfolio at the moment. The revenues generated by the company are all related to its collaboration with Novartis for the worldwide development and commercialization of emricasan. Due to lack of an approved product, the company is totally dependent on emricasan for growth.

However, following a series of disappointing results from the study on emricasan, Conatus and Novartis have decided to stop planning for the further development of emricasan. Moreover, along with earnings release, Conatus stated that is in discussion with Novartis for winding down the collaboration altogether.

Emricasan, a caspase inhibitor, was being developed for the treatment of patients with fibrosis or cirrhosis caused by nonalcoholic steatohepatitis (NASH). Conatus acquired the worldwide rights to emricasan from Pfizer PFE in July 2010.

Quarter in Detail

In the second quarter, research and development expenses were $8.6 million, down 19.6% from the year-ago figure, mainly owing to lower expenses related to emricasan and lower personnel costs.

General and administrative expenses were $3.1 million, up 19.2% from the year-earlier quarter, primarily due to the recognition of severance and noncash stock compensation costs.

Emricasan Fails

In June, Conatus announced top-line results from the phase IIb ENCORE-LF study on emricasan for treating patients with decompensated nonalcoholic steatohepatitis (NASH) cirrhosis. The study failed to meet its primary endpoint. Consequently, the company decided to discontinue further development of emricasan in the ENCORE-LF study.

At the same time, Conatus announced outcomes of the phase IIb ENCORE-PH program, which evaluated emricasan for a 24-week extension period. Although results were consistent from the initial 24-week treatment period, the study missed predefined objectives.

Last December, Conatus presented top-line data from the ENCORE-PH study wherein emricasan demonstrated clinically meaningful treatment effects on the compensated NASH cirrhosis patients, who face the peril of passing to the decompensation state. However, the study failed to attain its primary goal.

Earlier this March, Conatus announced that the ENCORE-NF study, which evaluated emricasan for treating patients with biopsy-confirmed NASH and liver fibrosis, could not achieve the primary goal as it lacked the desired effect on earlier-stage NASH fibrosis patients.

Also, in June 2019, Conatus announced that it is planning to explore and evaluate strategic alternatives to add shareholder value. The company appointed Oppenheimer & Co., Inc, an independent investment bank and financial services company as its financial advisor for assistance.

Conatus also decided to slash its staff headcount by almost 40% as part of its restructuring plan and suspend the development of its preclinical candidate CTS-2090, which was being assessed for treating autoinflammatory diseases.

As of Jun 30, 2019, Conatus had cash, cash equivalents and marketable securities of $28.7 million compared with $33.8 million as of Mar 31, 2018. The company expects the current year-end balance in the range of $10-$15 million.

Conatus Pharmaceuticals Inc. Price, Consensus and EPS Surprise

Conatus Pharmaceuticals Inc. Price, Consensus and EPS Surprise

Conatus Pharmaceuticals Inc. price-consensus-eps-surprise-chart | Conatus Pharmaceuticals Inc. Quote

Zacks Rank & Key Pick

Conatus carries a Zacks Rank #3 (Hold). A better-ranked stock in the healthcare sector is BeiGene, Ltd. BGNE, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BeiGene’s loss per share estimates have been narrowed 2.7% for 2019 and 2.2% for 2020 over the past 60 days.

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