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Conatus Pharmaceuticals Inc. (CNAT - Snapshot Report) announced that its pipeline candidate emricasan has been granted orphan drug status. Conatus is developing emricasan for treating liver transplant patients with reestablished fibrosis.

The designation is granted by the FDA to indications being developed to treat rare diseases (affecting less than 200,000 people in the U.S.) having significant unmet medical needs. Moreover, the status makes emricasan eligible for seven years of marketing exclusivity in the U.S. following approval for the orphan indication.

Additionally, this status also provides several other benefits such as tax credits to Conatus on the candidate’s development costs and exemption of prescription drug user fee. We expect investors to react positively to the news, facilitating the development of Conatus’ lead pipeline candidate for the above indication.

We note that Conatus is currently developing emricasan for treating patients with acute-on-chronic liver failure (phase IIb). The placebo-controlled, double blind, multi-center study (n~60), initiated in Sep 2013, is evaluating pharmacokinetics, pharmacodynamics and the safety of emricasan in patients with acute-on-chronic liver failure (ACLF). Conatus expects initial data from the study in the first half of 2014.

Moreover, the candidate is also undergoing phase II development for treating patients suffering from severe alcoholic hepatitis. While releasing its third quarter 2013 results last month, the company announced that the study was initiated by the translational research and evolving alcoholic hepatitis treatment consortium. Furthermore, the company stated on the third quarter 2013 conference call that it intends to commence a phase IIb study in patients with chronic liver failure in the second half of 2014 following completion of the phase IIb study in ACLF patients. We expect investor focus to remain on the company’s pipeline development efforts.

Conatus carries a Zacks Rank #3 (Hold). Some other stocks worth considering include Actelion Ltd. (ALIOF), AMAG Pharmaceuticals, Inc. (AMAG - Snapshot Report) and Amgen Inc. (AMGN - Analyst Report). While Actelion holds a Zacks Rank #1 (Strong Buy), AMAG and Amgen carry a Zacks Rank #2 (Buy).

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