After the Latest Plunge, Catalyst Stock Just Might Be Worth Buying


Catalyst stock - After the Latest Plunge, Catalyst Stock Just Might Be Worth Buying

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The sharp drop of more than 50 percent in shares of Catalyst Biosciences (NASDAQ:CBIO) last month is something speculators very often face. That is because of unfavorable results from its drug study posted on June 18. The big question shareholders now face is if the Catalyst stock will ever recover.

Catalyst posted an update to its CB 2679d/ISU304 Factor IX Clinical Program in Hemophilia B. In its Phase I/II trial, two patients experienced positive factor IX activity levels. That was the good news.

The bad news was that they had neutralizing antibodies observed. The results effectively stopped additional dosing in additional patients until the company identifies what caused the antibody and what it must do to stop it.

The presence of the antibody compromises the effectiveness of the drug therapy. So, when CBIO stock traded from $3.11 (a 52-week low) to its $37 peak, speculators more than priced in perfect results from the study.

The micro-cap size (of $131 million) in the stock market often adds volatility to its shares. The violent drop, accompanied by a strong volume of shares trading hands, could suggest more downside for shareholders.

Drug Pipeline and Catalyst Stock

Investors must now consider what is in Catalyst’s drug pipeline. It has another novel drug under a study called Marzeptacog alfa (activated). The company completed Phase ½ and began enrolling subjects for the Phase 2/3 clinical trial. One of the hopes of this drug is its potency, which is nine-fold more potent than NovoSeven.

The hemophilia market has a potential market size of $3.4 billion in annual sales. CB 2679d/ISU304’s disappointing set-back resets expectations for investors but the Marzeptacog alfa study still has near-term potential for getting to market.

Catalyst Bio uses subcutaneous delivery for its product, which is common for patients suffering from diabetes and HGH deficiency. In this mode of delivery, subjects potentially have fewer bleeds. Have lower joint and muscle damage, and need fewer hospital stays and outpatient visits.

Setback in Catalyst Stock Explored

Catalyst’s set-back with CB2679d runs contrary to some of the activity results. In fact, four out of five subjects had trough levels of over 12 percent which is sufficient enough to protect them against spontaneous hemarthrosis. IT is also 22-fold more potent than BeneFIX, albeit through IV dosing. After six daily doses, the median FIX activity topped 15.7 percent.

Due to the need to review results and then adjust the therapy, Catalyst stock may languish in the $10 range or lower until uncertainties clear. The Phase 2B study start will probably get delayed. This would study would have explored reducing the frequency of dosing, studying the IV loading dos to increase collagen IV saturation at a quicker rate.

More on Factor VLLA (Marzeptacog alfa)

Subjects experienced a 6 to 9-fold improvement in potency, in comparison to therapy with NovoSeven. The Phase 1 clinical trial, involved 25 severe hemophilia patients with and without inhibitors. The study demonstrated excellent patient safety and tolerability.

Phase 2 included up to 12 adult subjects to study multi-dose and dose escalation. When the study is complete, the interim data will give the company safety and tolerability dosing information, the potential inhibitor formation in subjects, and the ABR, or Annualized bleed rate, compared to the recorded historical ABR.

If the patient has no bleeds after 50 exposure days, they will then move to a follow-up for reviewing safety. With this data scheduled for release some time soon, positive numbers could give CBIO stock a much-needed lift.

Balance Sheet and Catalyst Stock

With over $135 million in cash, helped by a $115 million follow-on financing at $34 a share, the company has plenty of cash to fund its R&D. Its full 2017 expenses totaled $22.8 million, compared to the $1 million in revenue that year.

Although investors who bought Catalyst stock stock at its peak will sit on paper losses, the company’s strong cash position suggests it will not need to return to capital markets, this would reduce share dilution risks.

For now, the stock may get stuck in a trading range of between $10 – $15. A drop is also possible if markets disfavor investing in unproven drug companies.

Still, the company’s potential in developing and selling a drug in a multi-billion market outweighs the short-term risks.

Disclosure: the author does not own shares in any of the companies mentioned.

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