Conatus Pharmaceuticals

01/07/2015 7:00 am EST

Focus: STOCKS

Bret Jensen

Editor, Biotech Gems

Our top speculative pick—a recommendation with a high potential to outpace the market—comes from the small-cap biotech space, asserts Bret Jensen, editor of Small Cap Gems.

Conatus Pharmaceuticals (CNAT) is a biotechnology company focused on the development and commercialization of novel medicines to treat liver disease.

The stock has an approximately $120 million market capitalization, and during the last quarter of 2014, ranged between $6 and $8 a share.

Conatus came public in late July of 2013 and the stock has traded in a wide range of $5 to $15.50 a share since then.

The lead product of note for Conatus is Emricasan. This compound is a first-in-class, orally active pan-caspase protease inhibitor designed to reduce the activity of all ten human caspases.

These are enzymes that mediate inflammation and cell death, or apoptosis, for the treatment of patients with chronic liver disease and acute exacerbations of chronic liver disease.

Emricasan has achieved scientifically significant results in several Phase I trials and is now being tested in five Phase II trials for the treatment of a variety of diseases that impact the liver.

Conatus is a binary play. If Emricasan succeeds in trials to treat one or more of its targeted liver diseases, the stock is going to soar. If trials fail, the future of the firm as an ongoing entity is in doubt.

In short, this stock is the consummate high risk/high reward play, which I am optimistic about and hold within my own personal portfolio.

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