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Conatus (CNAT) Up 36.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Conatus Pharmaceuticals . Shares have added about 36.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Conatus due for a pullback? 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’ Q2 Loss Narrows, Revenues Lag Marginally

Conatus incurred a loss of 15 cents per share for the second quarter of 2018, narrower than the Zacks Consensus Estimate of 20 cents and the year-ago quarter’s loss of 19 cents.

Conatus has no approved product in its portfolio at the moment. The revenue figures generated by the company are all related to its collaboration with Novartis for developing emricasan.

Revenues came in at $8.8 million, down 12% year over year due to lower reimbursement from partner Novartis on R&D costs incurred for the development of emricasan. The top line marginally missed the Zacks Consensus Estimate of $9.06 million.

In the second quarter, research and development expenses were $10.7 million, down 18.9% from the year-ago period’s count, mainly due to lower spending associated with the ongoing ENCORE studies.

General and administrative expenses were $2.7 million, slightly up from the year-ago quarter’s $2.2 million on higher personnel costs.

Guidance

Conatus continues to expect its 2018 year-end cash balance between $35 million and $40 million.

However, with Novartis sharing half of Conatus’ development costs for phase IIb studies on emricasan, the latter expects its current financial resources to be sufficient for funding operations through the end of 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 9.2% due to these changes.

VGM Scores

At this time, Conatus has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

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

The company's stock is suitable solely for momentum based on our style scores.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Conatus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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