What's in Store for Conatus (CNAT) This Earnings Season?

Conatus Pharmaceuticals Inc.CNAT is slated to report fourth-quarter and full-year 2017 results on Mar 7, after the market closes .

The company's earnings history has been disappointing so far, having missed expectations on three occasions and registered in-line results in another with an average negative surprise of 60.53%. Last quarter, the company delivered a negative surprise of 160.00%.

Shares of Conatus have surged 35.4% in a year's time, comparing favorably with the industry 's 13.1% rally.

Let's see how things are shaping up for the upcoming release.

Factors at Play

With no approved product in Conatus' portfolio at the moment, the company is yet to generate revenues. Hence, investors' focus will be on the company's progress with the lead candidate, emricasan, an orally active pan-caspase protease inhibitor.

Emricasan is under evaluation in various phase IIb studies for treatment of chronic liver disease including NASH fibrosis. There are now four ongoing emricasan phase IIb studies, which include three other ENCORE programs on patients with fibrosis or cirrhosis caused by nonalcoholic steatohepatitis (NASH) in various patient populations. Data from these studies are expected between 2018 and 2019.

The company also plans to initiate a new study called ENCORE-XT, a planned extension trial on patients, who completed the ENCORE-PH or ENCORE-LF studies with continued monitoring for efficacy, safety, clinical outcomes and a healthy quality of life.

Apart from emricasan, the company's portfolio has IDN-7314, presently undergoing a phase II study for treatment of primary sclerosing cholangitis. In October 2017, IDN-7314 was granted an Orphan Drug Designation for the indication in the EU. We expect an update on the same on fourth-quarter conference call.

It is important to note that Conatus has an exclusive option, collaboration and license agreement with Novartis AG NVS for the worldwide development and commercialization of emricasan. With Novartis sharing half the development costs related to Conatus' phase IIb studies on emricasan, the company now anticipates lower its spending on in-licensing and internal pipeline.

Earnings Whispers

Our proven model does not conclusively show that Conatus is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Conatus has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a loss of 15 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Conatus carries a Zacks Rank #3, which increases the predictive power of ESP. However, a company's 0.00% Earnings ESP makes surprise prediction difficult.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Conatus Pharmaceuticals Inc. Price and EPS Surprise

Conatus Pharmaceuticals Inc. Price and EPS Surprise | Conatus Pharmaceuticals Inc. Quote

Stocks That Warrant a Look

Here are some health care stocks with the right combination of elements to beat estimates this time around:

Gemphire Therapeutics GEMP is expected to release fourth-quarter 2017 results on Mar 21. The company has an Earnings ESP of +24.74% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Aptose Biosciences, Inc. APTO is expected to report fourth-quarter financial numbers on Mar 27. The company has an Earnings ESP of +20.00% and a Zacks Rank of 3.

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Novartis AG (NVS): Free Stock Analysis Report

Conatus Pharmaceuticals Inc. (CNAT): Free Stock Analysis Report

Gemphire Therapeutics Inc. (GEMP): Free Stock Analysis Report

Aptose Biosciences, Inc. (APTO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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