The novel coronavirus hit Catalyst Pharmaceuticals (NASDAQ:CPRX) at exactly the wrong time. In November of 2018, the company received U.S. Food and Drug Administration (FDA) approval for its one and only drug, Firdapse. Since then, the launch has not gone smoothly. But the company still has respectable fundamentals. In fact — despite ongoing legal proceedings — Catalyst Pharmaceuticals stock is looking a bit oversold.
The last two years have been a roller coaster for CPRX shareholders. The stock has closed as low as $1.99 and as high as $6.60. But what is the largest issue facing the company? The exclusivity, or lack thereof, of Firdapse.
Normally, when a company receives FDA approval, they have a window of time in which their drug has exclusivity. That hasn’t been the case for Catalyst, and it’s showing in the stock’s performance.
Three Facts Affecting Catalyst Pharmaceuticals Stock
In Firdapse, Catalyst has developed the first-ever approved treatment for Lambert-Eaton myasthenic syndrome (LEMS) in the United States. The disease affects 2.8 million people globally and about 1 in 100,000 people in the United States.
Of course, this is a breakthrough for treatment. However, there are three facts that we should take note of in the drug’s development. They affect the future of Catalyst Pharmaceuticals stock.
For one, a salient feature of Firdapse is that it is licensed for adult use. Second, it’s crucial to note that getting the drug approved is a significant accomplishment for Catalyst, too. This is largely because the company’s products have been rejected by the FDA before. And that leads us to our third fact — after one of its drugs was rejected, Catalyst co-marketed a LEMS treatment in Europe that it had licensed from BioMarin Pharmaceuticals (NASDAQ:BMRN).
These details will become important to consider momentarily.
Is Catalyst Being Treated Fairly?
Back in late October, Josh Enomoto wrote in detail about the landmines that Catalyst has faced since launching Firdapse. One of them is the drug’s price — Catalyst priced the treatment at $375,000. Let’s just say that caught the attention of the political class.
In February of 2019, Vermont Senator Bernie Sanders railed against Catalyst for price gouging. Part of Sanders’ complaint was that Catalyst was repurposing an old drug. Catalyst responded by noting that some patients (albeit less than 10%) received the drug for free. But that wasn’t enough to beat the bad optics — competitor Jacobus Pharmaceutical already had a LEMS treatment it was giving away to 200 patients.
However — as Enomoto points out — it’s important to note that Jacobus’ drug was licensed for LEMS in children, not adults. The FDA approved the drug, Ruzurgi, through its “compassionate use” program.
As a result, Catalyst filed a lawsuit with the FDA on the grounds of unfair competition. The gist of Catalyst’s argument is this: because of “compassionate use,” Firdapse is not getting the traditional seven-year market exclusivity window. A district court judge ruled against Catalyst, but the company is appealing.
Of course, in the background of this, investors in Catalyst Pharmaceuticals stock have been paying close attention.
Why Catalyst May Be Worth the Risk
Today, Catalyst Pharmaceuticals stock sits almost exactly where it was before receiving FDA approval. But — despite the setbacks the company has endured — the stock seems to have found a bottom several times at lows of around $2.60.
As of this writing, the company trades at $2.97. That means investors face a downside risk of about 14%. But is there upside? I think so.
For one, the company is profitable and has revenue coming through the door. In fact, Catalyst has seen its revenue grow by approximately 187% in the past year, despite the lawsuit.
Additionally, analysts absolutely love the stock. They’ve given it an average price target of $7.50, which would be a gain of over 150% from its current level.
Are there risks? Sure. The company could be embroiled in legal proceedings for quite some time. And Catalyst does not have a deep pipeline.
Nevertheless, some investors are selling the headlines. Maybe it’s time to start buying the news.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.