This past week was a good one for Conatus Pharmaceuticals (CNAT) as it had announced that Novartis (NVS) has taken the option to license Emricasan. The deal was first announced back in December of 2016, but at that time Novartis hadn't fully exercised its option to license the drug. At that time it was just a preliminary step to get a deal done. Well this past week Novartis has finally chose to license the drug Emricasan.

Conatus had already received $50 mil upfront as part of the preliminary part of the deal. With the option being exercised by Novartis this now opens Conatus to many good perks. Some of them are: 

1. Having 50% of all phase 2b trials being paid for that deal with Emricasan against liver targets
2. Having all phase 3 trials being paid for in full 
3. Opening the gate for potential $650 million in milestone payments pending positive clinical, regulatory, and commercial milestones
4. Option for Conatus to receive larger royalty share in the United states upon commercialization
5. Double-digit royalties for Emricasan products marketed
6. single-digit royalties for combination products dealing with Emricasan

Novartis exercising its option to license Emricasan is now pending to close in Mid-2017. That is because the deal is subject to pending regulatory and other closing conditions. Once that happens Conatus will receive $7 million dollars upfront, along with all the other benefits listed above. Conatus will have cash to run operations until 2019. Pending the possibility of receiving some of the $650 million milestone payments means it won't have to dilute at all. Novartis taking the option to license the deal doesn't completely eliminate the risk of owning Conatus but it greatly reduces it.