Shares of Catalyst Pharmaceutical Inc (Nasdaq: CPRX) are expected to trade between $12.17 and $14.65. The overall recommendation is Sell
Catalyst Pharmaceutical Inc Stock Latest Price for 17.09.2022
|Share Volume||7.89 M||Higher|
|Average Share Volume||3.46 M||NA|
|Forward PE (1 Year)||19.46||NA|
Catalyst Pharmaceutical Inc Stock Performance Chart
|Stock Name||1 day||5 day||1 Month||6 Month||YTD||1 Year|
Catalyst Pharmaceutical Inc Stock Forecast: Support and Resistance
It is everyone’s dream to catch the multibagger return stock and hold it for a decade at least. Since Covid outbreak, pharmaceutical companies have been outperforming the overall market and has become favourite for investors.
Many biotech companies have given handsome returns in last five years. For example, Veru Inc (Nasdaq: VERU) has shot up by 558% in past five years. Similarly, Moderna Inc stock (Nasdaq: MRNA) has given 640.54% returns in same time frame. This is mainly due to development of Covid and other disease vaccines that can cure such rare diseases in human beings.
Catalyst Pharmaceuticals Inc stock (Nasdaq: CPRX) is another addition in list of outperforming stocks that has beaten overall market by a distance. While CPRX stock has given 449.59% returns in last half a decade, Nasdaq 100 index has given 99.94% and S&P 500 has given only 54.80% return in same time frame.
While lot of positives can be attached to CPRX stock and company, there are inherit risks also associated with it. In this article, we will analyse the positives and negatives for the company and what lies ahead for this small biotech company.
CPRX Stock Forecast: Bull Case
Targeting Rare Disease LEMS – Lambert Eaton myasthenic syndrome (LEMS) is a condition of immune system attacking neuromuscular junctions- where nerves and muscles meet and is associated with small cell lung cancer. It hit the market in 2019. Firdapse is a drug to cure this rare disease which is developed by BioMarin Pharmaceuticals and licensed by Catalyst. So, Catalyst objective is to target rare diseases which is not targeted by any other company. In other words, it does not have any competition whatsoever when it comes to treating LEMS and hence it can penetrate deep in the market. Moreover, this drug is predicted to generate $205 million of sales in 2022, about 41% higher than sales of 2021 of $141 million.
Plans of Global Expansion- Till now, Firdapse is available only in US and it has treated around 750 people in the country. Currently, phase 3 clinical trials are going, but after that company will start the process of seeking Firdapse approval in Japan. It is conducting a small registrational study in Japan since last few months. Now, this is the make-or-break moment for the company. If it gets approval in Japan, it will be able to apply for similar approval in other countries as well and expand its presence outside US. While, the drug has produced exceptional revenue results in US, global presence will add significantly to revenue and profitability.
CPRX Stock Forecast: Bear Case
LEMS is indeed a rare disease- We talked about the exclusivity of the Catalyst in treating LEMS above as a positive factor, but it is negative factor also. LEMS is very rare disease that it happens to only 1 out of 100,000 people. This disease was diagnosed in 2019 only and hence not many nations even now about it. In US, only 3000 people are diagnosed till now with this disease. Hospitals also are not aware of the process to diagnose this disease and the ways to recommend Firdapse for a particular patient. In other words, there is very little awareness about LEMS to common people and hospitals. This makes the customer base of Catalyst very limited and very hard to expand in any country. Awareness programs for people and hospitals will take years to actually produce results. `Talking about global expansion, nobody knows how many people suffer from LEMS in Japan or any other country. Hence, there is no data to predict the future growth of the company.
Not Much on the Horizon- While it is great that Firdapse is producing excellent results and adding to the growth of the company, but company has nothing else other than Firdapse to look out for. Its pipeline is quite sparse. It has only two programs in the pipeline- an early-stage investigation for longer acting form of Firdapse and phase 3 clinical trials on concluding whether Firdapse is safe and effective for children or not. Both the programs are very conservative in its approach. Not focusing on developing drugs for any other rare disease means that it is possible that Catalyst will penetrate fully LEMS population and it is still loss-making company. There are only 300 cases of LEMS per year in US and there will be very little room to grow for the company.
CPRX Stock Forecast: Fundamental Analysis-
Fundamentally company looks strong on paper. It has grown its revenue to zero in 2017 to $140.83 million in 2021. It expects to generate $205 million in 2022. Add to it, it has positive cash flow of about $60 million which is very important for any biotech company to finance its R&D developments and expenditure for approvals and clinical trials.
It has total debt of only 4.20 million against shareholders’ equity of $237.79 million in 2021, which is again a good sign for any growing company. It has return on equity (ROE) (Net profit/shareholders equity) as 23%. In other words, company has made $0.23 per $1 of shareholders’ capital. Lastly it is trading at P/E ratio of 27 which is lower the industrial P/E of 30.
Conclusion: CPRX is a Buy, Sell or Hold
There are very few small cap biotech companies with positive cash flow. It is also interesting to note that Catalyst did a share buyback program in 2021, which depicts the confidence of the top management in the company. It has spent around $14.6 million in share buyback program and there are more coming on the way.
The problem is company has not looked beyond Firdapse in all these years. The thinness of the pipeline of the company means that it takes huge leap of faith to buy the shares at this point of time. Approval in Japan will add wings to the company’s revenue and profitability and open gates for further global expansion.
CPRX is a risky investment and has great upside potential. It is meant for high-risk tolerant investors. The current shareholders should not opt out of it as fiscal results are improving every quarter.
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