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Conatus (CNAT) Down 33.1% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Conatus Pharmaceuticals Inc. (CNAT - Free Report) . Shares have lost about 33.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to their next earnings release, or is the stock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Conatus Q1 Loss Narrows Y/Y, Revenues Beat Estimates

Conatus Pharmaceuticals reported first-quarter 2017 loss of $0.14 per share, in line with the Zacks Consensus Estimate and narrower than the year-ago figure of $0.35.

The company recognized $7.0 million as collaboration revenues for the first quarter of 2017 due to the start of ENCORE-LF program. It also beat the Zacks Consensus Estimate of $5.88 million. The collaboration revenues were related to an agreement with Novartis, which was inked in Dec 2016, for the worldwide development and commercialization of emricasan, as a single agent treatment for NASH (Nonalcoholic steatohepatitis) cirrhosis in both compensated and decompensated patients.

In the first quarter, research and development expenses were $7.9 million, up 68% from the year-ago quarter. This was mainly due to cost related to the ongoing Encore studies. General and administrative expenses were $2.8 million, up 7.7% from the year-ago quarter. This was primarily due to an increase in personnel costs partially offset by lower consulting fees.

The company has raised $15 million from Novartis by issuing a convertible promissory note. It anticipates another $7 million as Novartis exercises its option to an exclusive license for the global development and commercialization of emricasan in May 2017.

Guidance

Cash, cash equivalents and marketable securities are expected between $45 million and $55 million by year-end 2017.

Conatus expects its current financial resources, together with the anticipated license option exercise milestone payment and expense reimbursements related to the Novartis agreement, to be sufficient for continuing operations through the end of 2019.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

VGM Scores

At this time, Conatus' stock has a nice Growth Score of 'B', while its Momentum is lagging a lot with a 'F'.  The stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable solely for growth.

Outlook

While estimates have been broadly trending upward for the stock, the magnitude of these revisions have been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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