Conatus' Emricasan Fails In Phase II Study, Shares Sink

Shares of Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) plunged more than 33%, following the announcement that its pipeline candidate, emricasan, failed in a phase IIB study – POLT-HCV-SVR. The candidate did not achieve primary endpoint in the study, which evaluated it in patients with fibrosis or cirrhosis who have undergone liver transplant.

However, shares of Conatus have returned 30.1% so far this year compared with the industry’s gain of 0.7% in the said period.

Data from the POLT-HCV-SVR study showed that emricasan did not achieve a significantly better overall response rate compared with placebo in the overall patient population. However, in patient subset with advanced fibrosis or early cirrhosis, emricasan provided evidence of an anti-fibrotic treatment effect in 95% of the patients compared to 58.3% for placebo. The company may evaluate emricasan further in this particular subset.

Emricasan, an oral caspase inhibitor, is being developed in collaboration with Novartis (NYSE:NVS) . The POLT-HCV-SVR study is evaluating emricasan in patients with fibrosis or cirrhosis caused by recurrent HCV infection. Although the patients achieved sustained viral response following HCV therapy, the transplanted livers had residual fibrosis or cirrhosis. Apart from this study, three phase IIb studies are evaluating emricasan in patients with fibrosis or cirrhosis caused by nonalcoholic steatohepatitis ("NASH").

Data from these three studies are expected in the second half of 2018 and in 2019. Investors are likely to remain focused on these data readouts for future prospect of emricasan.

With no treatments currently sanctioned for NASH fibrosis, the market opportunity for emricasan seems significant. NASH is predicted to become the leading cause of liver transplantation by 2020.

Zacks Rank & Stocks to Consider

Conatus currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the pharma sector include Horizon Pharma Public Limited Company (NASDAQ:HZNP) and Ligand Pharmaceuticals Incorporated (NASDAQ:LGND) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Horizon Pharma’s earnings estimates increased 10% to $1.43 for 2018 and 15% to $1.77 for 2019 over the last 60 days. The company delivered a positive earnings surprise in three of the four trailing quarters with an average beat of 68.92%.

Ligand’s earnings per share estimates increased 11% to $4.20 for 2018 and 12% to $5.32 for 2019 over the last 60 days. The company delivered a positive earnings surprise in three of the four trailing quarters with an average beat of 24.88%. The company’s shares have increased 17.3% so far this year.

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