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Why Is Conatus (CNAT) Down 37.8% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Conatus Pharmaceuticals (CNAT). Shares have lost about 37.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Conatus due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Conatus' Q4 Earnings Top Estimates, Emricasan in Focus

Conatus incurred a loss of 13 cents per share for the fourth quarter of 2018, narrower than the Zacks Consensus Estimate of 14 cents and the year-ago quarter’s loss of 15 cents.

Revenues came in at $7.4 million, down 15.9% year over year due to lower reimbursement from partner Novartis for the costs incurred to support development of emricasan. The top line marginally beat the Zacks Consensus Estimate of $7 million.

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.

In the fourth quarter, research and development expenses were $8.9 million, down 18.3% from the year-ago period’s figure, mainly on account of lower spending associated with the ongoing ENCORE studies on emricasan. This was partially offset by higher spending related to new product candidate development.

General and administrative expenses were $2.5 million, marginally up from the year-ago quarter’s $2.3 million on higher personnel costs.

Guidance

Conatus expects the 2019-end balance in the range of $10-$15 million excluding any potential milestone payment under the Novartis collaboration.

As of December 31, 2018, Conatus had cash, cash equivalents and marketable securities of $40.7 million compared with $49.6 million as of Sep 30, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -320% due to these changes.

VGM Scores

Currently, Conatus has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Conatus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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