Roth Capital Partners raised its price target for Conatus Pharmaceuticals (NASDAQ:CNAT) to $12 from $4, reflecting a revised valuation. The stock closed at $7.58 on April 21.
Analyst Sa’ar Yaniv writes that the revision takes into account discussions with management, 2016 results, assessment of the competitive cirrhosis space, and clarity from the Novartis deal last December.
“We believe the shares are undervalued,” despite rising approximately 60% since December 20, following the Novartis deal, to jointly develop Conatus’ emricasan drug candidate for NASH cirrhosis, he added.
“Due to our confidence in Novartis’ capabilities, we are more comfortable in emricasan’s probability of ultimate approval, and increase our probability of approval in our … model to 35% from 25%,” Mr. Yaniv said.
Conatus received $65-million initially from Novartis, consisting of $50-million upfront and a $15-million convertible note. It should receive another $7-million on initiation of the ENCORE-LF Phase 2b study in the second quarter this year.
He said the infusion of cash removes the need for dilutive financing, which decreases the number of projected shares in the second quarter of 2018 to 27.6 million from 32.1 million previously.
