Conatus Pharmaceuticals Inc. (NASDAQ:$CNAT), a biotech-pharmaceutical company focused on developing drugs to treat liver disease, has been seeing quite a rise in its stocks recently. This can be largely due to the company’s announcement a few days ago regarding its drug candidate IDN-7314 obtaining Orphan Drug Designation from the U.S. Food and Drug Administration. The IDN-7314 is designed to treat primary sclerosing cholangitis (PSC), a disease that affects the bile ducts of the liver, leading to cirrhosis or liver failure.

While the stock opened strong early Friday, June 3 — price was at $6.20, a 10.71% increase from the close on Thursday, June 2 — the hype of the designation has died down somewhat as the price took a tumble to $5.75, or a 7.27% decrease. Still, it may be worth investing in Conatus given its recent data.

Analyzing the Fundamentals

Currently, Conatus has a market capitalization of $186.50 million — a little lacking for a small-cap company. However, it currently holds $16.48 million of cash on the books which is pretty sustainable given its free cash flow of $25.87 million in the last year.

With no drugs on the market yet, earnings continue to fall for Conatus. Analysts have projected an earning of $-0.09 per share this quarter — a pretty good indicator as to why about 17% of all Conatus’ shares are currently owned by investment firms rather than individual investors.

Analyzing the Technicals

The technicals of Conatus’ stock looks a little more promising than its fundamentals. In recent weeks, Conatus hit a 52-week high at $9.40. In the past month, the stock has gained 19.92% and has outperformed the S&P 500 by 170.98 over the trailing year. Keep in mind that these numbers have been hit despite a high day-to-day volatility compared to other stocks in the healthcare sector.

However, looking at underlying movements of the stock, investors should note that it is trading on a float of 2.73% with $28.18 million sitting short. This could mean further declines in the future — perhaps even more than the one experienced on Friday afternoon. There may be a short squeeze for Conatus’ shares.

Featured Image: twitter