Conatus (CNAT) Loss Wider Than Expected In Q3, Sales Miss

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) reported third-quarter 2017 loss of 13 cents per share, wider than the Zacks Consensus Estimate of 5 cents. However, the loss was narrower than the year-ago figure of 31 cents.

Conatus’ shares have underperformed the industry so far this year. The stock has lost 17.1% versus the industry’s 21.1% increase.

Conatus has no approved product in its portfolio at the moment. However, the company recognized $9.6 million as collaboration revenues for the third quarter of 2017. Revenues missed the Zacks Consensus Estimate of $16 million.

The collaboration revenues were related to an agreement with Novartis AG (NYSE:NVS) , inked in December 2016, for the worldwide development and commercialization of Conatus’ lead candidate, emricasan. Per the deal, Novartis will share 50% cost of four ongoing phase IIb clinical studies (ENCORE program) on emricasan.

In the third quarter, research and development expenses were $11.2 million, up 133% from the year-ago quarter. This was mainly due to costs related to the ongoing ENCORE studies. General and administrative expenses were up 14.3% to $2.4 million compared with the year-ago quarter, mainly due to an increase in personnel costs and professional fees.

Emricasan in Focus

Emricasan is being developed for treatment of patients with fibrosis or cirrhosis caused by nonalcoholic steatohepatitis (NASH).

With the initiation of ENCORE-LF clinical trial in May, there are now four ongoing emricasan phase IIb clinical studies. These include three ENCORE studies on patients with fibrosis or cirrhosis caused by nonalcoholic steatohepatitis (NASH) in various patient populations and a fourth ENCORE study on POLT-HCV-SVR patients.

Data from all these studies are expected between 2018 and 2019.

The company also plans to initiate a new study — ENCORE-XT — on emricasan under the ENCORE program.

Apart from emricasan, another candidate in the company’s portfolio is IDN-7314, currently undergoing a phase II study for treatment of primary sclerosing cholangitis (PSC). In October, IDN-7314 was granted an Orphan Drug Designation (“ODD”) for the indication in the EU. Notably, the candidate already enjoys ODD in the United States.

Guidance

Conatus raised its cash guidance for 2017. With Novartis sharing half of the development costs related to Conatus’ phase IIb studies on emricasan, the company now expects lower spending on in-licensing and internal pipeline.

Hence, the company now expects its year end cash balance to be between $70 million and $75 million by year-end 2017 compared with $55 million and $65 million, expected previously.

Conatus expects its current financial resources to be sufficient for funding its operations through the end of 2019.

Zacks Rank & Key Picks

Conatus currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Ligand Pharmaceuticals Inc. (NASDAQ:LGND) and Exelixis, Inc. (NASDAQ:EXEL) . While Ligand sports a Zacks Rank #1 (Strong Buy), Exelixis carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates have moved up from $3.68 to $3.70 for 2018 over the last 30 days. The company delivered positive earnings surprises in two of the trailing four quarters with an average beat of 6.19%. The share price of the company has surged 41.8% year to date.

Exelixis’ earnings per share estimates have moved up from 62 cents to 64 cents for 2017 over the last 60 days. The company came up with positive earnings surprises in each of the trailing four quarters with an average beat of 572.92%. The share price of the company has soared 62.5% year to date.

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