Novartis-backed Conatus highlights a silver lining, but PhIIb NASH-related setback causes whiplash in share price

The fairy tale story at Conatus Pharmaceuticals has taken a nasty twist.

A little more than a year after pharma giant Novartis stepped in with an upfront payment to bag licensing rights to its liver drug that was as big as the biotech’s market cap, their first Phase IIb trial for liver disease failed the primary endpoint. And their stock price $CNAT immediately tanked, plunging 34%.

Steven Mento

There was virtually no difference between the response rate in the overall population taking emricasan compared to a placebo. Investigators, though, did find some encouragement in subgroup analysis, noting some better numbers for advanced fibrosis and early cirrhosis. But there were also several misses as well.

That’s clearly not what the San Diego-based biotech was looking for when they started the POLT-HCV-SVR trial about 4 years ago. Novartis provided a $50 million upfront, agreed to pay half of the Phase IIb costs for part of the overall program and said it would provide another $7 million if it decided to exercise its option in the deal.

According to an SEC filing at the time, Novartis also said it would provide up to $650 million in milestones for the work, which includes two other Phase IIb trials. Novartis is looking for drugs it can combine with an internal Farnesoid X receptor (FXR) agonist in clinical development for NASH. The pharma giant is also on the hook to execute Phase III, if it chooses to move ahead.

Conatus CEO Steven Mento stayed focused on the positive:

We are particularly encouraged by the 95% response rate in a subgroup of advanced fibrosis and early cirrhosis patients with a favorable two-year safety profile. In addition, in patients with the potential to continue worsening, those less than F6 at baseline, only 2 of 26 (7.7%) on emricasan compared with 5 of 17 (29.4%) on placebo showed an increase in fibrosis score at year 2 – a treatment difference of 21.7 percentage points. We also plan to evaluate responses in additional subgroups in a variety of secondary and exploratory endpoints to learn as much as possible from this data-rich trial.

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