Conatus Pharmaceuticals Inc (CNAT): Analyst Looks Forward to “Large Catalysts” Lying Ahead

Oppenheimer's Jay Olson is optimistic about CNAT's upside potential with the forthcoming topline data from the Phase 2 POLT study.

Conatus Pharmaceuticals Inc (NASDAQ:CNAT) has unveiled better-than-anticipated fourth quarter earnings last night have Street-wide investors all in an upbeat tizzy today. Shares have been fired up 14% today; and one bull is enticed by this drug maker’s opportunity ahead in the post-orthotopic liver transplant hepatitis C virus (POLT-HCV) infection market.

Oppenheimer analyst Jay Olson is quite upbeat on the biotech player’s lead asset emricasan, both in regards to its short-term prospect in the POLT arena as well as in nonalcoholic steatohepatitis (NASH) down the line.

In reaction to the quarterly update, the analyst maintains an Outperform rating on CNAT stock with a price target of $16, which implies a close to 104% upside from current levels. (To watch Olson’s track record, click here)

For the fourth quarter, Conatus posted $8.8 million in net revenue, coming up short of the analyst’s bullish forecast of $10 million and the Street’s $9.7 million. This notably includes a piece of Novartis’ up-front payments. A bright spot of the print points to GAAP EPS, which came up less than Olson anticipated at ($0.17), with both Olson and consensus calling for ($0.17).

Olson writes, “The company faces several near-term catalysts with four Ph2 trials reporting data. Top line for POLT (2Q18) will be the first measure for emricasan efficacy […] Management says CNAT is sufficiently funded ($75M cash at YE) to complete the four ongoing Ph2 trials. We see emricasan as a well-differentiated asset and are looking forward to the large catalysts that CNAT is facing with the Ph2 trials.”

Moreover, “We’re optimistic about the near-term POLT opportunity and longer-term potential in NASH where emricasan could be used alone or combined with other treatments based on the favorable profile demonstrated in Ph 2 studies,” adds the analyst.

Glancing ahead, the analyst is enthusiastic as he spotlights “several catalysts […] slated to read out over the next two years with potential to unlock significant value, in our view.” Four clinical studies of emicasan in liver disease are set throughout this year and the next; half in fibrosis and half in cirrhosis. These showcase various chances for CNAT shares to drive upside, wagers Olson.

The company’s POLT opportunity particularly has the analyst intrigued, as he sees a 7% probability of success for the Phase 2 POLT study primed for a readout in the second quarter of this year. This trial boasts “asymmetry toward upside,” notes the bull. Additionally, the analyst muses that the biopsy data from the study “could inform readouts in NASH cirrhosis.”

TipRanks highlights strong early bullish word circling this biotech stock. All 3 analysts polled in the last 3 months unanimously rate a Buy on Conatus stock. With a whopping return potential of nearly 126%, the stock’s consensus target price stands at $17.67.