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Conatus' (CNAT) Earnings, Revenues Miss Estimates in Q1

Zacks Equity Research

Conatus Pharmaceuticals Inc. CNAT incurred a loss of 14 cents per share in the first quarter of 2019, wider than the Zacks Consensus Estimate of 12 cents but narrower than the year-ago quarter’s loss of 17 cents.

Revenues came in at $7 million, down 27.8% year over year due to lower reimbursement from partner Novartis NVS for the costs incurred to support the company’s development of its lead pipeline candidate, emricasan. Moreover, the top line fell shy of the Zacks Consensus Estimate of $8 million.

Shares of Conatus have plunged 47.9% so far this year, underperforming the industry’s increase of 11.2%.

 

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.

Quarter in Detail

In the first quarter, research and development expenses were $9.4 million, down 22.3% from the year-ago period’s figure, mainly on account of lower spending associated with the ongoing ENCORE-PH study on emricasan. This was partially offset by higher spending related to ENCORE-LF study.

General and administrative expenses were $2.6 million, marginally down from the year-earlier quarter’s $2.7 million.

Emricasan in Focus

Emricasan, a caspase inhibitor, is 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.

The company is currently conducting two ongoing phase IIb ENCORE programs on emricasan for treating fibrosis or cirrhosis induced by NASH. Those are, ENCORE-PH (for portal hypertension) and ENCORE-LF (for liver function).

Last December, Conatus announced top-line results from a phase IIb ENCORE-PH. Under the evaluation, emricasan demonstrated clinically meaningful treatment effects on compensated NASH cirrhosis patients, who stand at a risk of passing to the decompensation state. However, the probe failed to meet its primary endpoint. Following a post hoc analysis, emricasan showed a clinically meaningful treatment impact compared with placebo. Additional results are now expected in mid-2019.

Meanwhile, during the first quarter of 2019, Conatus completed enrolling patients in the phase IIb ENCORE-LF study, the primary endpoint being event-free survival. Top-line data from the investigation is anticipated in mid-2019.

Notably, 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 these earlier-stage NASH fibrosis patients. Shares of the company significantly dropped back then.

Additionally, in the same month, Conatus announced that it has selected CTS-2090, currently in preclinical development, to move into clinical studies. CTS-2090 is an orally active, potent and highly selective inhibitor of caspase 1. The company plans to submit an investigational new drug (IND) application by the first half of 2020 to begin clinical assessments on the candidate for treating autoinflammatory diseases.

As of Mar 31, 2019, Conatus had cash, cash equivalents and marketable securities of $33.8 million compared with $40.7 million as of Dec 31, 2018. Conatus expects the 2019-end balance in the range of $10-$15 million excluding any potential milestone fee under the Novartis collaboration.

Conatus Pharmaceuticals Inc. Price, Consensus and EPS Surprise

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

Zacks Rank & Key Pick

Conatus carries a Zacks Rank #3 (Hold). A better-ranked stock in the healthcare sector is PDL BioPharma, Inc. PDLI, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PDL BioPharma’s earnings estimates have been revised 100% upward for 2019 and 30% for 2020 over the past 60 days. The stock has rallied 15.5% year to date.

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