On Monday, Conatus Pharmaceuticals Inc (NASDAQ:CNAT) announced that the FDA has granted Orphan Drug Designation to the company’s drug candidate IDN-7314, for the treatment of primary sclerosing cholangitis (PSC).

In reaction, H.C. Wainwright analyst Ed Arce reiterates a Buy rating on shares of Conatus, with a price target of $18.00, which implies an upside of 204% from current levels.

Arce noted, “Currently, there are no treatments indicated for PSC, and continued progression eventually leads to liver transplant or liver failure. In the United States, approximately 29,000 patients have PSC. We point out that, by being granted orphan status, IDN-7314 now qualifies for various development incentives, including tax credits for qualified clinical testing, prescription drug user fee waivers and a seven-year period of marketing exclusivity in the U.S.”

“While IDN-7314 is not yet in the clinic, we believe preclinical studies along with its orphan status for treatment of PSC make it a strong early contender in Conatus’ independently developed pipeline,” the analyst added.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, Arce has a yearly average return of 25.6% and a 49% success rate. Arce has a -6.4% average return when recommending CNAT, and is ranked #151 out of 4600 analysts.

As of this writing, all the 7 analysts polled in the past 12 months rate Conatus stock a Buy. With a return potential of 161%, the stock’s consensus target price stands at $15.50.