Conatus Pharmaceuticals (CNAT) Q4 Earnings: What's In Store?

Conatus Pharmaceuticals Inc. (NASDAQ:CNAT) is expected to report fourth-quarter 2016 results next month. Conatus’ performance so far has been impressive, with the company surpassing expectations on three occasions, while posting in-line results in one. Overall, the company has posted an average beat of 12.50%.

Conatus Pharma’s shares have lost 4.4% so far this year. This compares unfavorably with the 10.1% increase registered by the Zacks classified Medical – Products industry during this period.

Let’s see how things are shaping up for the fourth quarter of 2016 results.

Factors at Play

With no approved product in Conatus’ portfolio at the moment, the company does not generate revenues yet. Hence, investor focus is expected to remain on the company’s progress with emricasan, a first-in-class, orally active pan-caspase protease inhibitor, being developed for the treatment of patients suffering from chronic liver disease.

Emricasan is being evaluated in various phase II studies for the treatment of chronic liver disease, including NASH fibrosis. In Nov 2016, Conatus initiated ENCORE-PH, evaluating the effect of emricasan for the reduction of hepatic venous pressure gradient (HVPG) in patients with compensated or early decompensated liver cirrhosis caused by NASH, and severe portal hypertension (PH) confirmed by HVPG of greater than or equal to 12 mmHg at baseline.

Conatus also plans to initiate additional studies – ENCORE-LF and ENCORE-XT on emricasan under the ENCORE program on a staggered basis through the first half of 2017.

In Dec 2016, Conatus signed an exclusive option, collaboration and license agreement with Novartis AG (NYSE:NVS) for the worldwide development and commercialization of emricasan. Conatus will receive an upfront payment of $50 million from Novartis and is entitled to receive future milestone payments and royalties on sales, if emricasan is approved. This strategic agreement with Novartis will not only help Conatus to gain expertise, but will also provide the company with much needed funds for the development for emricasan.

Meanwhile, operating expenses at the company are expected to rise, particularly research and development expenses, due to continued investment toward the development of emricasan.

What Our Model Indicates

Our proven model does not conclusively show that Conatus is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP is 0.00% since the Most Accurate and the Zacks Consensus Estimate both are at a loss of 32 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Conatus carries a Zacks Rank #4. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Pacira Pharmaceuticals, Inc. (NASDAQ:PCRX) is scheduled to release results on Mar 1. The company has an Earnings ESP of +20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Keryx Biopharmaceuticals, Inc. (NASDAQ:KERX) has an Earnings ESP of +37.04% and a Zacks Rank #3. The company is also scheduled to release results on Mar 1.

A Full-Blown Technological Breakthrough in the Making Zacks’

Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>