Conatus Pharmaceuticals Inc. ($CNAT) stock shot up to $5.50 in its Tuesday trading session, creating a new 52 weeks high. The stock eventually closed at $4.73, 141% higher than its previous close. The company had announced its new collaboration with Novartis. The agreement deals with development and commercialization of NASH candidate emricasan.
The company will have the option of co-commercializing the drug in the US on cost and revenue sharing basis. It will also have limited rights for developing other pan-caspase inhibitors. Conatus Pharmaceuticals is set to receive an $50 million upfront payment and the right to borrow up to $15 million from Novartis in the form of convertible notes. The company will also receive $7 million following the exercise of the license option.
The agreement also stipulates Novartis to bear half of the cost of Conatus Pharmaceuticals’ Phase 2b development costs after the option exercise, including the ENCORE-LF, ENCORE-PH, POLT-HCV-SVR and ENCORE-NF studies. Phase 3 costs in their entirety will be borne by Novartis.
The deal has been received positively by the stockholders as well as the analysts. HC Wainwright doubled its price target for the stock to $18. The stock analysis firm said that the company may also venture into oncology market in the coming years. SunTrust also increased the target price for the stock to $26, up from previous target of $17.