On Wall Street, Questions Remain For Conatus Pharma

Conatus Pharmaceuticals, a $100-million market cap biotechnology company that focuses on the medicines to treat liver diseases, announced on Wednesday results from its Phase II study of emricasan in 22 Portal Hypertension (PH) patients, which demonstrated a significant decrease in the cCK18 biomarker and, in a subgroup of 12 severe patients, a significant reduction in HVPG (hepatic venous pressure gradient). In a report published Thursday, Charles Duncan, PhD of Piper Jaffray cautioned investors regarding potential "over-interpretation" of the data given its small, short study design and his specuation around the predictive value of study endpoints. "We view the data as an incremental positive insofar as they confirm emricasan's mechanism, and showed significance in a new, mixed etiology (albeit very small) patient group," Duncan wrote. "However, at this stage we are cautious of readthrough to a larger trial for several reasons. The first is replicability in a sufficiently powered study: was HVPG decrease in 12 patients a signal or noise? The second is translation from biomarkers or surrogate improvements to meaningful impact on hepatic decompensation and long-term liver structure and function." Duncan also noted that it is likely the company will explore a larger Phase IIb trial in the HVPG>12mmHg subgroup. Bottom line, Duncan maintained a Neutral rating and $5 price target in advance of more complete HP data and visibility into how HP and other indications fit into the company's one to three year plans.

Liisa Bayko of JMP Securities highlighted two key data points that support a bullish thesis: 1. "A statistically significant and clinically meaningful change in portal hypertension as measured by HVPG in the subgroup of patients with severe PH at baseline (≥12 percent mmHg)." 2. "No benefit in patients with a lower level of PH at baseline (<12mmHg) and trend of higher pressure (though not statistically significant). We are highly encouraged by a consistent response in the more severe disease sub-group (18 percent reduction in HVPG total with 8/12 patients with ≥10 percent change). "To put this data into context, we note that a Phase 2a study of OCA in a somewhat comparable patient population reported a 24% reduction in HVPG; a 10-20% reduction is considered clinically meaningful," Bayko commented. "However, we struggle to understand the opposite trend in the lower HVPG subgroup. We look to clarification on tomorrow's management call regarding: 1) the potential contribution of beta blockers on the outcome; and 2) individual patient response in the lower HVPG group and whether the rise was driven by a few outliers." Bottom line, Bayko suggested that the data could be presented as a "late breaker" during an upcoming Liver conference in November which may contain additional details to explain the results. Shares remain Market Outperform rated with an unchanged $14 price target.