Conatus Pharmaceuticals (CNAT): Analyst Is Putting Pen to Paper to Determine the Impact of Emricasan’s Setback

Nothing can kill a drug maker’s stock price like a failed clinical trial. Just take a look at the disaster that’s befallen Conatus Pharmaceuticals (NASDAQ:CNAT). The pharmaceutical company’s share price has fallen 31% in recent market action to $4.15, on news that a mid-stage study testing its lead drug emricasan as a treatment in liver transplant patients with fibrosis or cirrhosis failed to meet its primary endpoint.

In reaction, H.C. Wainwright analyst Ed Arce lowered his price target on CNAT to $15.00 (from $17.00), while keeping his rating at Buy. (To watch Arce’s track record, click here)

Arce commented, “In our view, the share price drop is an over-reaction to the top-line POLT miss, as we believe: 1) investor expectations were fairly low; and 2) investor focus is primarily on the expected 1H19 readout of ENCORE-LF (we and others have long regarded POLT as a niche “wild card” opportunity).”

“Yet data from this never-before-studied population also leaves some open questions. In addition to the likely confounding element of having all patients in this study on background therapy of an immunosuppressive regimen, we are left with at least two (as of yet) unanswered questions: 1) why did all three of the most severe F6 patients respond on placebo, when none of the five F6’s on emricasan did; and 2) why did the NASH CRN F2/F3 placebo group improve from a 20% response rate at Year 1 to 46.7% response at Year 2 (see slides 12 and 13 in the POLT results presentation), and what does improvement with simple passage of time mean for future therapies in this patient population?” the analyst wonders.

How does Arce’s bullish bet measure up against the word of the Street? Quite on point, it seems, considering TipRanks analytics still exhibit CNAT as a Strong Buy. Out of 6 analysts polled in the last 12 months, all 6 remain buyers of Conatus stock. With a return potential of 246%, the stock’s consensus target price stands at $14.33.

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