As the novel coronavirus pandemic has focused attention on pharma stocks deep in Covid-19 vaccination discovery, those drug makers and biotech firms with little or no pivot to a solution have been left to chart uncertain waters. Not so for Catalyst Pharmaceuticals (NASDAQ:CPRX) stock.
On the fundamental side, Catalyst offers a critical breakthrough for those suffering from Lambert-Eaton myasthenic syndrome (LEMS). According to the Muscular Dystrophy Association, LEMS is “a disease in which the immune system attacks the body’s own tissues. The attack occurs at the connection between nerve and muscle (the neuromuscular junction) and interferes with the ability of nerve cells to send signals to muscle cells.”
To address this rare and debilitating condition, Catalyst competed the Food and Drug Administration’s clinical development program and secured the agency’s approval for amifampridine. According to the company’s website, amifampridine (which is marketed as Firdapse) is a “neuronal potassium channel blocker, for the treatment of LEMS.” Most importantly, Catalyst states that “amifampridine is the only evidence-based, FDA-approved treatment for adult patients” with LEMS.
Obviously, this was a major score for Catalyst Pharmaceuticals stock. Generally speaking, the FDA approves very few drugs annually. So, getting the green light was a huge deal. In addition, Firdapse being the only drug approved for adult LEMS gave it uniqueness in the treatment market.
So, why is Catalyst Pharmaceuticals stock so unconvincing? While there are many factors involved, much of its present lethargy stems from two headwinds: Senator Bernie Sanders and good old competition.
Catalyst Pharmaceuticals Stock Gets Unwanted Attention
Although Catalyst was enjoying a major clinical victory, getting approval from the FDA is only half the battle. Certainly, you can make the argument that it’s the most important half. But until you sell the drug and start raking in the profits, that approval may be moot.
To presumably recoup its research, development and marketing costs, CPRX priced the treatment at $375,000 following the FDA’s November 2018 approval. As you can imagine, that’s when the political troubles started. According to Biospace.com:
Sanders called the $375,000 price tag for Firdapse exploitative and said that patients in ‘America should not be allowed to suffer or die because of the greed of a drug company.’ Sanders questioned how many patients will suffer or die due to the cost of the drug.
However, Catalyst fired back, saying in its response to Sanders that there were patients who received a LEMS drug for free, but only about 200 of the approximately 3,000 patients in the U.S. During this time, Biospace reported that family-owned Jacobus Pharmaceutical had “given away treatments to 200 patients battling LEMS.”
Here’s the deal — Jacobus’ drug Ruzurgi treats LEMS in children. However, through the FDA’s compassionate use program, Ruzurgi was made available for adults with LEMS.
Now, Catalyst Pharmaceuticals stock found itself facing two forces, both of them negative. Obviously, it’s never a good look to list your treatments well above the median cost of a home roughly around the time when Firdapse was approved. Yes, pharmaceutical companies can make the argument that the actual cost can be lowered due to financial assistance programs.
But politically, it’s not a good look no matter how you dress it up.
Second, Catalyst technically found itself with an unfair competitor. Under normal circumstances, Firdapse should have a seven-year market exclusivity window. But through the FDA’s compassionate use program, Jacobus’ Ruzurgi was able to sidestep that status.
Logically, then, Catalyst filed suit against the FDA, claiming that it illegally approved a rival drug. Late last month, however, CPRX received bad news: a federal judge threw out its lawsuit. And that’s why investors aren’t feeling the love for Catalyst Pharmaceuticals stock. Instead, they’re more likely feeling the Bern.
Where Does CPRX Go from Here?
Interestingly, District Court Judge Beth Bloom wrote that “Catalyst’s view of [applicable law] is not necessarily wrong, but it is not the only reasonable way to interpret the plain language of the statute.” Although clearly disappointed, management got some encouragement from that and, unsurprisingly, announced its intent to appeal.
I don’t want to get into the legalities of the pharmaceutical space, which can take up copious amounts of time and “paper.” However, from the surface, it certainly appears that Catalyst has a case. The bottom line is that through the compassionate use program, Jacobus was able to “beat” the exclusivity law.
I mean, that’s the whole reason why pharmaceuticals invest so much of their resources into being first place. This unfavorable ruling clouding Catalyst Pharmaceuticals stock would appear to set a negative precedent for the entire sector.
Therefore, those that are betting on CPRX may have justification for their bullishness. However, don’t discount the politics. From where I stand, it appears that former Vice President Joe Biden has a sizable lead in the election. Biden is, of course, a Democrat and I’m sure he’ll be more than willing to listen to Sanders despite their differences.
But for those that are tired of the drama, it may be better to wait until after the results come in (which could be a while) before wagering on Catalyst Pharmaceuticals stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.