Catalyst Pharmaceuticals Stock Forecast: Some diseases so uncommon that they affect fewer than 200,000 patients.
Such conditions fall under the United States’ classification of rare or orphan diseases, because they are so unusual. These conditions are more challenging to diagnose, simply due to physicians’ lack of experience with them, and treatment options are limited.
Worse still, it is hard for patients and caregivers to find support, information, and resources along the way.
In addition to the difficulties that come with diagnosing and treating rare diseases, there are other problems. The biggest is that the market for rare disease treatments is so small that many biopharmaceutical companies can’t afford to invest in the type of research and development necessary to create breakthrough therapies. There is simply no guarantee that they will get a return on their investment – even if they are successful beyond all expectations.
The United States passed the Orphan Drug Act in 1983 to make financial incentives available for companies willing to pursue treatments for rare diseases.
That was a huge leap forward for the 25-30 million Americans living with one of the estimated 7,000 conditions that fall into this category. In the decade before the Act was passed, less than 10 rare disease treatments came to market. Since 1983, more than 400 new therapies have been introduced.
While this isn’t a booming area from an investment perspective, some of the companies working on orphan disease treatments do have the potential to generate substantial profits. Catalyst Pharmaceuticals is hard at work in this biopharmaceutical niche, and investors want to know, is this one of the companies that has what it takes to go big?
Catalyst Pharma Stock Crashes After Failing Trials
Catalyst Pharmaceuticals [NASDAQ: CPRX] was founded in 2002 with a mission: to make a meaningful impact in the lives of those suffering from rare diseases.
In 2006, the company held its IPO, and for the next six years, it focused its efforts on developing therapies to prevent stimulant dependence.
The October 2019 announcement that CMS trials failed drove Catalyst Pharma’s stock prices down overnight. Shares lost 13 percent of their value in just a few hours.
Analysts looked at the actual impact of the CMS trial results, and they found that that investors were right to abandon ship.
There are between 1,000 and 1,500 patients diagnosed with CMS in the United States, and the drug – had it been successful – would have been a first-line treatment for most of them.
The cost for each patient to receive the therapy would have been approximately $375,000 per year, so sales revenues would have been anywhere from $90 million to $200 million.
Considering Catalyst’s current market cap is $510 million, this potential revenue likely played an important part in investors’ original decision to buy – and the loss of this potential revenue is a good reason to sell.
Is Catalyst Pharma a Buy?
Now, Catalyst does have other projects in the works. There are trials underway to study applications for amifampridine in the treatment of MG and SMA.
If the drug candidate is successful in treating MG, sales revenue could reach $191 million. However, Alexion Pharmaceuticals already leads the market in MG treatment, which means Catalyst will face tough competition when it comes to capturing market share. With all of this in mind, is Catalyst Pharmaceuticals [NASDAQ: CPRX] stock a buy?
The bottom line is that Catalyst Pharmaceuticals stock is too risky for most investors. A small group who can afford to lose their investment – and can hold their Catalyst stock long-term – may eventually profit, but chances may be slim.
The Nitty Gritty of Catalyst Pharma Drugs
In partnership with Northwestern University, Catalyst licensed the rights to a family of GABA inhibitors that showed encouraging results, and it started the preclinical development of product candidate CPP-115.
In 2010, CPP-115 was added to the FDA’s Orphan Drug program for the treatment of infantile spasms, and in 2011, it was granted license to market GABA inhibitors for the purpose of easing Tourette’s syndrome symptoms.
Catalyst Pharmaceuticals started down a new path in 2013, exploring applications for amifampridine in the treatment of rare and orphan diseases.
Specifically, it launched a number of trials to study the impact of amifampridine on Lambert–Eaton Myasthenic Syndrome (LEMS) – a debilitating autoimmune disease that causes the immune system to attack connections between nerves and muscles. The resulting LEMS treatment was given Breakthrough Therapy Designation by the FDA.
By 2015, Catalyst developed an amifampridine-based treatment for Congenital Myasthenic Syndrome (CMS). This is an orphan disease with the same neuromuscular symptoms as LEMS, but it is not caused by an autoimmune disorder. CMS is thought to be exceptionally rare, in part because it is difficult to diagnose.
November 2018 was an important turning point for Catalyst Pharmaceuticals. The amifampridine product received FDA approval for treatment of adults with LEMS.
Today, Catalyst is looking into other applications for the drug, with clinical trials underway for amifampridine-based treatment of Myasthenia Gravis (MG) and Spinal Muscular Atrophy (SMA). The company is also in the process of designing trials for the use of amifampridine therapies in treating Downbeat Nystagmus (DBN).
Catalyst Pharmaceuticals Stock Forecast
Unfortunately, October 2019 brought bad news from the CMS trials. The amifampridine-based drug candidate did not achieve the expected results in CMS patients, essentially failing to meet the primary endpoint of late-stage clinical testing.
This is the biggest risk biopharma companies and their investors face – an abrupt end to what had appeared to be a promising therapy. There won’t be sales revenues to make up for the research and development expenses that went into the drug, which means poor financial results for the business.
The question for investors is, can Catalyst Pharmaceuticals recover? After all, it appears to be getting positive results in its amifampridine trials for treatment of other conditions.
Unfortunately for hopeful investors, the outlook appears grim for now. While analysts have a higher price target on the stock compared to where it currently sits, the promise of a quick turnaround in financials is low.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.