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Conatus Pharmaceuticals (CNAT) continues the trend of huge pharmaceutical and biotechnology movers this week, peaking on June 11 at an intraday high of $9.87 a share.
The past week has seen huge moves in biotech after Merck & Co. (MRK) announced its purchase of Idenix Pharmaceuticals Inc (IDIX) at a 239 percent premium. Analyst speculation that Achillion Pharmaceutical Inc (ACHN) may be next then resulted in a whopping 170% gain for that small-cap biotech over Monday and Tuesday.
Both companies are conducting trials specifically involving treatment for degenerative liver and hepatitis C virus (HCV), an area of high medical need that is as of yet unmet. In a study done in early 2013, Transparency Market Research projected the global liver disease market would reach $10.9 billion by 2018, gaining ground at a rate of 8.6% each year.
Conatus opened at $6.35 a share, only a 5% jump from the previous day’s closing price of $6.05. However, investors began pouring into the stock and pushed shares higher in morning trading. Just after noon EDT, shares peaked at an intraday high of $9.87 for a gain of 55%.
Without a specific piece of news that could drive the move, it appears as though the current market fervor over potential hepatitis C treatments is probably playing a role in the day’s huge gains. The nature of the gain would seem to indicate that speculative buying ahead of a potential buyout was the catalyst, much like what’s driven Achillion higher this week, with momentum buyers jumping onto stock started to take off and driving it even higher.
Emricasan, the Prospective Cure-all
As one of the few companies currently developing treatment for a wide range of liver diseases, Conatus is particularly appealing for its potential to reach millions in the healthcare market. At the going rate of around $1,000 per pill for Gilead Sciences’ (GILD) Sovaldi, hepatitis C treatments present incredibly lucrative profit potential.
But Conatus’ shining star, Emricasan, is a treatment for a variety of liver diseases. Clinical trials have shown the drug is effective regardless of the initial factor causing organ damage, from alcoholism to the hepatitis C virus (HCV). At a shareholder meeting in May, the company announced it had initiated another series of clinical trials of Emricasan for three diseases: acute-on-chronic liver failure (ACLF), recurrent post-transplant liver fibrosis in individuals with the hepatitis C virus, and nonalcoholic fatty liver disease (NASH).
The drug has proven impressive in trial thus far. Previously manufactured by Pfizer, Conatus acquired the rights to Emricasan in 2010. Development had previously been put on hold at Pfizer due to clinical safety concerns involving cancer risk signals.
Prior to its IPO, Conatus received clearance from the FDA to conduct safety studies and clinical development in more than 500 individuals. Trials returned positive results without issue, and although the resurfacing of cancer risk signals is still a concern, the evidence to-date is promising.
Huge Prospects in Profits
The market for these diseases is estimated around 147 million individuals. With so few biotech players in the liver disease market, Conatus shows significant potential for huge profits if these trials are successful. Particularly given that the drug shows so much versatility. The lucrative HCV market that’s driving profits for Gilead right now could easily just be a segment of the total patient population that would be served by Emricasan.
Should Emricasan prove safe and effective in all tested instances of liver damage, its release to the healthcare market could push Conatus to the forefront of liver disease treatment.