(Adds stock move)
Dec 19 (Reuters) - Swiss drugmaker Novartis on Monday said it signed a licensing deal to co-develop a fatty liver disease drug with Conatus Pharmaceuticals Inc, under which the small U.S. company will receive $50 million up front.
The agreement will enable the companies to jointly develop the Conatus drug emricasan, an experimental first-in-class oral treatment for non-alcoholic steatohepatitis (NASH) with advanced fibrosis and cirrhosis.
The vote of confidence in the Conatus NASH program, along with the cash infusion, more than doubled the share price of the California company. Conatus shares rose to $4.20 in extended trading from a Nasdaq close at $1.96.
Several drugmakers are pursuing treatments for NASH, a chronic, progressive fatty liver condition involving inflammation and scarring that is seen as a huge unmet need with a potentially enormous patient population.
In addition to the upfront payment, Conatus is eligible to receive significant payments for certain development, regulatory and commercial milestones, and would get tiered double-digit royalties on emricasan single-agent sales and tiered single- to double-digit royalties on sales of combination products containing emricasan, the companies said.
Conatus has the option to co-commercialize emricasan in the United States.
Under the collaboration, Conatus will conduct multiple Phase IIb clinical trials with emricasan in NASH. If those succeed, Novartis would conduct Phase III studies of emricasan and begin development of the drug in combination with its own experimental treatment for chronic liver disease, known as an FXR agonist.
"For Conatus, the near-term infusion of capital and Phase IIb cost-sharing allows us to fund ongoing operations through 2019," Conatus Chief Executive Steven Mento said in a statement.
The Novartis commitment to fund Phase III trials means "the resources are in place to complete emricasan development both as a single agent for NASH cirrhosis and as a single agent or part of a combination therapy for NASH fibrosis," Mento said.
It is estimated that NASH affects 3 percent to 5 percent of the U.S. population and could become the leading cause of liver transplants in the United States by 2020. (Reporting by Bill Berkrot; Editing by James Dalgleish)