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  • ONCS- The 2015 Biotech Breakthrough Stock?

    This is a piece of what we sent our Free members on Dec 17th at 43 cents per share. The stock is now 49 cents up about 14% or so.

    Join us free at for the best ideas and market face ripping gain potential.

    ONCS- 110 million market cap, 44 cents, recently traded at 62 cents in early December on spate of positive data from trials, partnerships, and more.... has pulled back on likely year end tax and profit related selling. Non-invasive investigational therapies that are designed to destroy solid tumors and metastatic cancer and preserve quality of life.

    The total market cap is 100 million compared to 2.5 billion for Bluebird for example. One of Merck's top scientists who has 50 published peer reviewed white papers left Merck last year to join ONCS as their Chief Medical Officer. We expect at some point they will do a reverse split to move the share price up and get institutions involved.

    The CEO and Founder was a V.P. at INO (Inovio). In recent studies their T-Cel therapies showed complete immune response rates and partial response rates in over 30% of patients. The stock is flying under the radar and though it may take some time to get legs, we are picking up an initial small position and then watching the news closely.

    We are borrowing this 1 Billion valuation analogy (A 10 bagger if so) by a poster who has done his homework.

    So although Biotech has been hot and could correct hard at anytime, we are living in a great period and T-Cell immunotherapy and CAR-T technologies may be transforming cancer treatment unlike anything we have seen in 20-30 years

    Disclosure: The author is long ONCS.

    Additional disclosure: high risk, we have only 2% of our portfolio in this position.

    Dec 29 9:56 AM | Link | Comment!
  • CNAT- Emericasan Liver Platform Way Undervalued By Market?

    Conatus Pharmaceutical- $6.58 close of 9/4/14

    September 2nd Updated Corporate Presentation Link

    Join our service for free at www.stockreversals.comBiotech Disruptor Update: Recent pullback provides attractive entry. Targets $12-$19 3-6 month potential. In addition, company is hitting the roadshow circuit today September 4th in front of large investors.

    Recently the valuation and stock price of CNAT has come under a correction mostly due to lack of Top Line phase 2 data we are awaiting, and also we believe a lot of recent confusion related to Corporate filings and recent events and announcements. Our opinion is this confusion and short sightedness amongst investors and traders is giving market participants an amazing lower risk entry point into what could be a 70-200% gainer over the next 3-6 months. We do our best to explain below and will disclose as well that we are aggressive buyers over the last several trading days at 6.75 and below especially due to this opportunity.

    We are big believers in doing the fundamental research, understanding the catalysts for shareholders, and adding to our positions on weakness in our favorite companies. We often mention them on Stocktwits such as BLUE ($23 in May and now nearing $40, TEDU at $9 and ran to $15, LEJU at 12 which ran to 18, and the list goes on. In short, we like misconceptions or laziness by investors that provides us great money making entry points in individual stocks/companies. We think that is the case now with Conatus (NASDAQ:CNAT)

    We had originally written a full report on CNAT as a Biotech Disruptor at $7.70 per share a few months ago. We said a 6-9 month holding period could yield a $12-$30 stock price for upside potential. We compared CNAT with ICPT in the liver treatment space, with Intercept having a 5 Billion market cap and CNAT only 120 million. Now, CNAT is at about 100 million in market cap at $6.50 per share with the recent misconceptions and confusion on filings and other data or lack thereof.

    The stock has been as high as $8.80 and as low as $6.10 per share recently since our report.

    With ICPT moving forward with NASH studies, CNAT traders and investors were hoping for a much faster data release turnaround on NASH studies they are conducting. When they announced a few weeks ago they would delay top line data on their NASH trial into 1st quarter 2015, short term investors sold the stock off. Around the same time as they were filing their 10Q quarterly report as required by the SEC, they also congruently filed a "Shelf Registration" for up to 150 million. This spooked investors and they sold the stock again. A shelf registration is very common in Biotech because due to pending data companies are often locked from offering stock with near term data from trials and or insiders are blacked out. So when a company has a window ahead of top line data coming out, they may file this shelf so they can raise funds easily and at attractive stock price levels.

    Our opinion is that investors who understand the story and what management is doing are not worried, but short term traders are too lazy and they sold on this NASH delay and Shelf news. What we believe is really going on is prudent management of shareholder funds, which frankly the company has consistently demonstrated. They believe the best near term opportunity for shareholders is for them to pursue indications for ACLF or Acute on chronic liver failure. The most direct pathway to a phase 3 trial and FDA approval regulatory wise is to move the ACLF indications up in the cue. To wit, the company has 3 top line data results expected between now and the end of the 4th quarter…and it is these results that we expect could propel the stock much higher. There is an immediate unmet medical need regarding ACLF conditions and management believes shareholders are going to be best served near term going after this area. The company also plans to market for this indication on their own, hence the need at some point to cash up. Our take is management is making a bold chess move that should pay off in a much higher market cap, and then they will raise some funds at much higher prices per share.

    Some have also espoused on Stocktwits that a very recent filing had this actual topline data in it. Nothing could be further from the truth, in fact the filing they just make is an Investor Presentation dated 9/2/14 that they plan to use starting 9/4/14 (Thursday) in front of institutional investors. The SEC likes all investors to have access to the same information, hence the filing. In that presentation, the data that is included is actually as much as 10 years old, and not newly released top line phase 2 trial data. So once again, lack of understanding and confusion has caused the share price to fall recently because some traders thought the company was burying this data and not putting out a Press release. We contacted the VP of Investor Relations on September 3rd and this is what he said:

    The only confusion I've encountered was in connection with a reference to data from a previously completed trial in our About Emricasan Clinical Development section. The referenced trial was completed about ten years ago, before the predecessor company, Idun Pharmaceuticals, was sold to Pfizer. This language has been published and has been included in many of our prior releases for its historical value. We will announce results from ongoing trials when they become available.


    Alan Engbring

    We would bring to your attention this quote from The Behavioral Economist in his 8/25/14 Seeking Alpha article which has a $19 3-6 month target on CNAT and updates:

    The company is focused immediately on indications and ailments which allow them to meet two fundamental prerequisites; (1) pursuing regulatory pathways that have clear definitions at the FDA, which increases the probability of late trial success and approval, and (2) focusing on dire illnesses, with the possible consequence of death being front and center, in order to capture the attention of the FDA, enrolled patients, and the medical community. NASH, while enticing and a point of focus, doesn't meet those two criteria, respectively. Thus, the delay of NASH results is a non-issue, whereas the anticipation of top line data later this year from trials such as the pharmacokinetics study in ACLF should be of great interest.

    …It is clear the company is preparing for, what they anticipate to be, positive trial results. After all, each of these existing trials represents a potential indication to pursue at the phase 2b and/or phase 3 levels, and with a registered shelf they are in position to pursue such without delay if applicable. All of these decisions, according to Mr. Engbring, are not only judicious and confident, but also in the best interest of shareholders.

    In summary, we remain very excited about the investment potential for CNAT shareholders and as such, we have been steady buyers under $7 and aggressive in fact recently under $6.75 per share. We believe the combination of short term thinking by traders, misunderstanding of filings and top line data releases (3 due in next 3 months) are creating a low risk entry with massive upside potential.

    Just our opinion, as always… our terms of use agreement always applies to all communications.

    Disclosure: The author is long CNAT.

    Additional disclosure: All information subject to our terms of use agreement on our website. We may buy, sell, hold and or trade around positions at anytime.

    Tags: CNAT, biotech
    Sep 05 10:24 AM | Link | 12 Comments
  • Conatus- Several Catalysts Ahead Could Change Valuation Dramaticallly

    Conatus (NASDAQ:CNAT) a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease. Conatus is developing emricasan as a first-in class, orally active caspase protease inhibitor designed to reduce the activity of enzymes that mediate inflammation and cell death, or apoptosis. Conatus believes that by reducing the activity of these enzymes, emricasan has the potential to interrupt the progression of liver disease. For additional information, please

    Our Immediate Takeaway: Intercept Pharmaceuticals (NASDAQ:ICPT) is valued at 5.5 Billion; Conatus at about 130 million. ICPT is going after the same targets as CNAT in terms of Liver Diseases... ICPT stock has risen from $18 in 2012 to $225 currently in 2014 and as high as $500, with analysts targets of as high as $700. ICPT rose based on a NASH (nonalcoholic steatohepatitis) phase 3 trial that was going so well it was halted. NASH has a population target of 6-10 million americans by itself. ICPT went up almost 30 times in value on the news...

    We think Conatus can certainly head higher in market cap given their methodologies in the same markets and stages they are in. To help reference, below is the summary of what ICPT does. Then read on about CNAT and maybe you can connect some dots like we are trying. The catalysts are numerous in the last 6 months of 2014 as discussed in this article.

    Intercept Pharmaceuticals, Inc., a development stage biopharmaceutical company, focuses on the development and commercialization of novel therapeutics to treat chronic liver and intestinal diseases utilizing its proprietary bile acid chemistry. It primarily develops obeticholic acid, a bile acid analog that is in Phase III clinical trials for the treatment of primary biliary cirrhosis; in Phase IIa clinical trial to treat portal hypertension; in Phase II clinical trial for the treatment of alcoholic hepatitis; in Phase IIb clinical trial for the treatment of nonalcoholic steatohepatitis; and in Phase IIa clinical trial to treat bile acid diarrhea. The company was founded in 2002 and is headquartered in New York, New York.


    Emricasan is a first-in-class, orally active pan-caspase protease inhibitor designed to reduce the activity of all ten human caspases, which are enzymes that mediate inflammation and cell death, or apoptosis. Conatus believes that by reducing the activity of these enzymes, emricasan has the potential to interrupt the progression of liver disease and potentially provide treatment options in multiple areas of liver disease. They have observed compelling preclinical and clinical trial results that suggest emricasan may have clinical utility in slowing progression of liver diseases regardless of the original cause of the disease. To date, emricasan has been studied in over 500 subjects in ten clinical trials. In a randomized Phase 2b clinical trial in patients with liver disease, emricasan demonstrated a statistically significant, consistent, rapid and sustained reduction in elevated levels of two key biomarkers of inflammation and cell death, alanine aminotransferase, or ALT, and cleaved Cytokeratin 18, or cCK18, respectively, both of which are implicated in the severity and progression of liver disease.

    The company went public in July of 2013 at $11 per share. Many of the insiders participated in the offering, taking up roughly 10% of the offering in fact and NONE of them have sold a single share since the IPO. 6,000,000 shares were sold raising gross $66,000,000. As of the most recent quarterly report CNAT maintains about $52,000,000 in cash, so far judiciously using shareholder dollars.Current Market Cap:

    16 million shares outstanding at $7.66 is about a 123 million market cap. 52 million in cash, giving Enterprise Value of 71 million as of 7/15/14. Conatus' financial position should be enough to fund operations through 2016, even without any additional contributed amount from any collaboration that can be realized with strong Phase IIb data in ACLF or other indications

    Insiders are all in: Aligned with Shareholders at $6.87 basis

    Via reading the IPO filings we find that pre IPO insider stockholders have a cost basis Pre-IPO of an average of $6.87 per IPO share adjusted for 9.6 million shares or over 60% of the company PRE IPO. We find this interesting because its more common when we review filings to find that insiders have an extremely low basis relative to the IPO price. In this case, the average price per share paid is not that far off the current market price of CNAT shares, and the shares trade at a nice discount to the IPO price some 11 months later!

    80% of the shares are controlled by insiders and institutions. That means only about 3 million shares in the float, causing volatility, but also creating a potential explosion in price on good news and developments we foresee later in 2014. Several developments between July through December 2014 could propel interest and share price much higher.

    Catalysts: (Second half 2014)

    Phase 2b trial results expected 2H14 for ACLF

    Phase 2 results for NASH expected 2H14 (NASH is a serious chronic liver disease caused by excessive fat accumulation in the liver that induces chronic inflammation. This leads to progressive fibrosis that can lead to cirrhosis, eventual liver failure and death.)

    Initiation of Phase 2b for Chronic Liver Failure Indications 2H14

    Possible partnerships for further Phase 2/3 trials

    (click to enlarge)

    At $7.66 per share currently you are getting $3 in cash, so your net valuation is $4.66 per share or about 75 million. You are not paying much more than insiders average Pre-IPO cost, and your getting the company at a $3.34 discount to the July 2013 IPO.Worth a Read: Two articles laying out the story very well on CNAT

    We would advise reading this very thorough and objective June 12th 2014 article including a one on one interview with the founder and CEO of CNAT. Review article here

    In addition this March 2014 article we found enlightening vis a vis comparing with ICPT

    The Science and the story:

    We like the science of this Protease Inhibitor based methodology for Liver enzyme based therapy by CNAT. Originally the technology was developed by the CEO, Dr. Mento and then the private company was sold to Pfizer. Later, Pfizer stopped further development and CNAT acquired the rights and now has the FDA green light to continue to proceed. Pfizer stopped the development from Phase 3 because there were some elevated liver enzyme levels and there was concern by the FDA that perhaps those could be cancer causing agents. Pfizer elected not to conduct further studies to prove this to be not the case, and so CNAT executives who had developed the protease inhibiting technology swooped in and re-acquired full rights to themselves again. They went public shortly thereafter.

    In the meantime, CNAT hired outside experts to evaluate the Phase 3 trial results and data points. All of the reports that came back indicated the liver enzyme related issues would not be cancer causing agents. FDA then had CNAT conduct further studies which they did, and in January of 2013 the FDA handed them the green light to continue. They raised money in the July 2013 offering, and that is where we are now in June of 2014... furthering the studies. (See article we linked above)

    We think the stock is suffering from a "historical bias" in the minds of investors relating to the Pfizer situation, and that is creating a huge discount and therefore the opportunity in our opinion to enter at a low risk entry point (NYSE:LRE). The CEO has eluded to this himself in interviews.

    Recently IDIX was acquired by Merck for 3.8 billion, laying down a huge valuation for Hepatitis C pipeline (LIVER) and that moved some liver treatment biotech's upward quickly. We had a 10 million share explosion which is 3x the float on CNAT in one day. The stock spiked from $6 to $10. Roth Capital also put a $19 price target on the shares recently around the same time. The stock backed off, then had another huge volume day a few weeks ago and again the week after running upwards to fill a gap above at $9.50, then pulling back yet again. We think this type of action is a pre-cursor to potential future upward movements that likely could spike the stock upwards like ICPT (not necessarily same price of the stock, but same potential explosive move and they are also working on the NASH disease like CNAT. ICPT had their trial halted due to the fast responses patients were seeing and the stock exploded). To wit, in Clinical Trials, CNAT's Emricasan inhibited apoptosis, fibrosis and inflammation in a model of NASH. (See before and after photos on this page below)

    Liver disease effects almost every cancer patient as it is, and any company that is making headway tends to get acquired quickly or their share price moves sharply higher.

    Our opinion is that Conatus is an emerging technology leader in this field and the shares have the type of potential for massive upward movement as various trials continue to develop, patients are enrolled in new trials, and data comes out continually. Much of this will begin likely in the 2nd half and into the 4th quarter of 2014 we think in terms of timeline.

    Six Phase 1 trials conducted in the US, EU and Asia with Predominantly healthy volunteers

    Four randomized, placebo-controlled Phase 2 trials conducted in the US and EU Included patients with liver diseases due to a variety of causes with Emphasis on HCV infection.

    • Clinically relevant results
    • Reproducible reductions in elevated biomarkers of inflammation and apoptosis

    The company is fully funded through their clinical programs and trials, and have patent protections into 2028. Initial small, targeted indications may offer accelerated regulatory pathways and additional indications may access much larger populations. Conatus believes their one drug therapy attacks the various "insults" to the liver. See diagram below:

    (click to enlarge)

    Here we see some before and after slides from existing trials showing efficacy: Note that NASH is why ICPT stock blasted up...

    (click to enlarge)


    Our view essentially is the current share price discounts the market cap of the company to only 123 million. ICPT is at 5 billion to give you a competitor valuation sample. Of the 123 million market cap we have 52 million in cash, fully funded. Insiders and institutions control 80% of the stock. Insiders did not pay much more than $6.87 per share for 60% of the company pre-IPO. Insiders bought 10% of the offering at $11 per share, well above their $6.87 basis average. Not one insider has sold a single share since the IPO. Catalysts exist in the 2nd half of 2014 that could push the market cap dramatically higher very quickly as there are only 3 million shares in the float. These are the type of risk reward set ups we like to find in Biotech, and among our past picks included CUR which doubled, BLUE which rallied from $23 to $40 in 4 weeks, and EPZM which doubled in 7 weeks last November into early January 2014. We think that patient investors who can accumulate shares under $9.50 could be well rewarded over the next 6-12 months for the risk you take as an investor. Traders may come and go, but the upside here is potentially extremely high due to the huge addressable markets, the continuing issues facing liver disease and cancer patients, and the science itself that CNAT controls.


    Obviously with any Biotechnology stock in various stages of trials for various indications things can go awry at anytime. Results may not be what is expected or forecasted. Share prices can drop dramatically based on not meeting endpoints in studies for example.

    Disclosure: The author is long CNAT.

    Additional disclosure: We released this report on June 25th to our registered Free members on We are updating it a little bit and releasing it on our Insta-blog today for a brief period of time. We are active traders and may buy, sell, or hold any stock mentioned at any time in any of our communications. Trade at your own risk.

    Jul 16 8:52 AM | Link | 2 Comments
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