Conatus' (CNAT) Q1 Loss In Line, Revenues Beat Estimates

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) has incurred first-quarter 2018 loss of 17 cents per share, in line with the Zacks Consensus Estimate and wider than the year-ago loss of 14 cents.

Shares of Conatus were up 2.79% in after-hours trading on May 2 following the earnings release. However, the stock has underperformed the industry in a year’s time, plunging 52.4%, way behind the industry’s rally of 10.9%.

Conatus has no approved product in its portfolio at the moment. The company recognized $9.7 million as collaboration revenues in the reported quarter related to an agreement with Novartis (NYSE:NVS) for the worldwide development and commercialization of Conatus’ lead candidate, emricasan.

Revenues surged 38.6% in the quarter under review compared with $7 million a year ago. This upside was driven by higher revenues derived from reimbursable costs connected to Novartis agreement and also owing to adopting the new ASC 606 revenue recognition standard. The top line also surpassed the Zacks Consensus Estimate of $9 million.

In the first quarter, research and development expenses were $12.1 million, up 53.2% from the year-ago period, mainly due to costs associated with the ongoing ENCORE studies on emricasan.

General and administrative expenses were $2.7 million, marginally down from the year-ago quarter.

Emricasan in Focus

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

With the initiation of ENCORE-LF study last year, there are now four ongoing phase IIb ENCORE studies on emricasan for the aforementioned indication. Data from all these programs is expected between 2018 and 2019. Positive results from these analyses will also pave the way for a phase III efficacy and safety trial on the candidate for the given disease.

In February, the company initiated a phase II post-treatment follow-up clinical program to evaluate the long-term adverse event rates in patients treated with emricasan in comparison to placebo in any of the four phase IIb clinical trials.

Apart from emricasan, the company’s portfolio consists of IDN-7314, being evaluated in a phase II study for the treatment of primary sclerosing cholangitis (PSC). In the second half of 2017, IDN-7314 was granted an Orphan Drug Designation (ODD) for the indication in the EU. Notably, the candidate already enjoys an ODD in the United States.

Guidance

Conatus continues to expect its 2018 year-end cash balance between $35 million and $40 million.

However, with Novartis sharing half of Conatus’ development costs for phase IIb assessments on emricasan, the latter expects its current financial resources to be sufficient for funding operations through the end of 2019.

Zacks Rank & Key Picks

Conatus carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the health care sector are Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) and Infinity Pharmaceuticals, Inc. (NASDAQ:INFI) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates have moved north from $4.20 to $4.43 for 2018 in the last 30 days. The company delivered a positive surprise in three of the trailing four quarters with an average beat of 24.88%. Share price of the company has surged 36.9% over a year.

Infinity’s loss per share estimates have narrowed from $1.69 to 74 cents for 2018 and from 94 cents to 66 cents for 2019 in the last 60 days. The company pulled off a positive surprise in three of the last four quarters with an average beat of 7.87%.

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