Conatus Pharmaceuticals Inc. (NASDAQ: CNAT) saw its shares more than double early on Tuesday after the company reported an exclusive collaboration and license agreement for its cirrhosis treatment. Specifically, the company announced it has entered into an exclusive option, collaboration and license agreement for the global development and commercialization of emricasan with Novartis A.G. (NYSE: NVS).

Under the terms of the agreement with Novartis, Conatus will receive $50 million upfront, and it is eligible to receive $7 million following the exercise of the license option. Conatus can borrow up to $15 million in the form of convertible promissory notes under an investment agreement with Novartis.

Although this might not seem like much, this company only had a market cap of about $51 million before the move.

Conatus is eligible to receive significant payments if certain developmental milestones are met. Furthermore, the company is also eligible to receive “tiered double digit royalties on emricasan single agent sales and tiered single to double digit royalties on sales of combination products containing emricasan.”

Additionally, Novartis will pay 50% of Conatus’ Phase 2b emricasan development costs after the option exercise, including the planned ENCORE-LF trial in decompensated NASH cirrhosis which, under the current development plan consistent with recent regulatory agency recommendations, will be conducted as Phase 2b rather than Phase 2b/3.

Steven J. Mento, Ph.D., Conatus co-founder, president and CEO, commented:

We believe Novartis is ideally suited to collaborate with Conatus in the further development of emricasan for chronic liver diseases. This collaboration validates the Conatus emphasis on the initial development of emricasan as a single agent treatment for NASH cirrhosis in both compensated and decompensated patients, and sets the stage for simultaneous development of oral combination therapies for the treatment of NASH fibrosis including emricasan and one of the Novartis internal FXR (Farnesoid X receptor) agonists in clinical development. Their strong commitment to and expertise in liver disease, and proven record of success in drug development provide our best opportunity to deliver these potentially groundbreaking new therapies to chronic liver disease patients with high unmet medical need.

Shares of Conatus closed Monday at $1.96, with a consensus analyst price target of $9.67 and a 52-week trading range of $1.40 to $4.05. Following the announcement the stock was up over 130% at $4.60 in early trading indications on Tuesday.

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