Friday, January 24, 2014

Seeking Alpha: Amidst Huge Unknowns, Conatus Pharmaceuticals Worth A Closer Look

The unexpected success of Intercept Pharmaceuticals' (ICPT) Phase IIb trial in non-alcoholic steatohepatitis (also known as NASH) not only propelled those shares, it has brought more attention to liver disease as a therapeutic class and individual biotechs like Conatus Pharmaceuticals (CNAT).

Although Conatus is a one-drug stock at this point, it is pursuing multiple under-treated indications with its lead drug emricasan. Biotech investors can, and do, argue extensively about the odds that a particular drug will make it to market and what kind of revenue it will earn once it makes it there, but there's usually general agreement about pricing and likely dosing. Not so with Conatus, as nobody seems to know how long patients will take the drug the company is developing, nor what the market will bear for it.

Amidst that significant uncertainty, I still believe that Conatus is worth a closer look today. The liver failure market is significantly underserved today, with thousands of patients dying for lack of enough donor livers and adequate stabilization/supportive therapy. Should the company's efforts in NASH pan out, the market potential could be orders of magnitude higher, though again the question of pricing would become a large one. I currently estimate a fair value of $23, but this estimate is highly sensitive to changes in the drug price as well as the ultimate odds of approval.

Follow this link for the full article:
Amidst Huge Unknowns, Conatus Pharmaceuticals Worth A Closer Look

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