BST Trade Alert: April 8, 2014
April 8, 2014
Recommendation:
Buy Catalyst Pharmaceutical Partners (NASDAQ: CPRX) up to $2.30
About the Company:
Catalyst is a development-stage biotech focused on developing drugs for rare neuro-muscular and neurological diseases. It currently has three drugs in development for the treatment of Lambert-Easton Myasthenic Syndrome (LEMS), infantile spasms, and Tourette’s disorder.
For purposes of this trade, we’re focusing on the company’s leading drug candidate – Firdapse – which is currently in phase 3 testing. Firdapse is being developed initially for the treatment of LEMS, a rare, debilitating and sometimes fatal autoimmune disease.
Catalyst acquired the North American rights to Firdapse in October 2012 through a licensing agreement with BioMarin Pharmaceutical (NASDAQ: BMRN). Under the deal, Catalyst will complete the phase 3 trial of Firdapse in the US that was previously started by BioMarin.
And if the drug is ultimately approved by the FDA, Catalyst will pay royalties on any future sales to both BioMarin and the drug’s original developer, Huxley Pharmaceuticals.
We think the odds favor a successful US phase 3 trial and FDA approval of Firdapse.
Extensive clinical testing has already shown that the drug is safe, effective, and well tolerated. In fact, the European Medicines Agency approved Firdapse in 2009 for the treatment of LEMS. And the FDA has already awarded it orphan drug status.
What’s more, BioMarin is already having great success marketing the drug in Europe.
Its revenues from the sale of Firdapse have grown from $6.4 million in 2010 to over $16 million last year. And at least one Wall Street analyst is projecting sales will top $50 million a year by 2017.
Given the drug’s success in Europe over the past four years, it stands to reason that Firdapse will ultimately be approved by the FDA.
We’ll take a closer look at the drug in a moment, but first, a quick review of the company’s financial condition.
The most important observation is that Catalyst is in no danger of experiencing a liquidity crunch any time soon. Here’s why…
At the end of December 2013, the company had $23.7 million in cash on the books. And thanks to a recent public offering, Catalyst has added another $26.8 million to the company coffers.
Based on trailing twelve month figures, the company’s cash burn rate is running at about $2.5 million per quarter.
After accounting for potential spending during the first quarter of 2014, the company should now be sitting on a cash hoard of around $48 million with no debt. Clearly, Catalyst has sufficient capital to fund the Firdapse trial to its completion in the third quarter of 2014.
Let’s now dig a little deeper into the company’s leading drug candidate…
About the Drug:
As I mentioned above, Catalyst’s most clinically advanced drug candidate is a treatment for Lambert-Eaton Myasthenic Syndrome (LEMS) called Firdapse. LEMS is a rare and sometimes fatal autoimmune disease characterized by muscle weakness.
Firdapse is Catalyst’s and BioMarin’s trade name for amifampridine phosphate.
Support for the clinical efficacy of amifampridine is derived from six different published studies. The data from these studies show statistically significant improvements across a number of independent measures of neurological function.
More specifically, results of these studies demonstrate that amifampridine is a more effective treatment for LEMS than placebo or a comparable treatment called pyridostigmine.
In addition, supportive data from multiple published uncontrolled investigations and case reports demonstrate that amifampridine provides long-term benefits. And these data also show that removal of patients from the drug can lead to a recurrence of symptoms, but with reintroduction of the drug, improvements in muscle function are regained.
That certainly sounds like strong evidence of efficacy to us.
But is it safe?
Safety data from clinical data published over the last 30 years show amifampridine is well tolerated at doses below 80mg per day. The most frequently reported adverse events include unusual sensations (like pins and needles) and gastrointestinal disorders.
However, these events were typically mild or moderate in severity, transient, and seldom required dose reduction or withdrawal from treatment.
So, what’s the next step for Firdapse?
Catalyst is focusing its efforts on completing the phase 3 trial in the US. The study’s primary endpoint is a comparison of changes in muscle strength between patients taking amifampridine phosphate and those taking placebo. Secondary endpoints include an assessment of disease symptoms and changes in walking speed.
On April 1st, management reported that patient enrollment in the trial is now complete. And they further advised that the trial is on track to deliver top-line data in the third quarter of 2014.
About the Market for This Drug:
LEMS is a rare autoimmune disorder that affects approximately 1 in 100,000 people in the US and EU. Based on current population figures, Catalyst estimates that approximately 4,650 people in North America suffer from LEMS.
But just because the patient population is small doesn’t mean Firdapse can’t be a profitable drug.
According to an article on The Street, Firdapse carries an estimated pricetag of $60,000 per patient per year. Based on that figure, the drug could generate peak sales of over $200 million in North America alone.
And if Firdapse is ultimately shown to be a safe and effective treatment for other rare diseases similar to LEMS, the drug could generate peak sales of up to $500 million.
No question about it, Firdapse has potential to be a huge money maker for Catalyst.
About the Potential Catalyst:
Top-line data from the US phase 3 trial of Firdapse in LEMS are expected in the third quarter of 2014.
About the Shares:
CPRX has been moving higher in a strong uptrend over the past year. In fact, the stock has climbed from just $0.49 a year ago to a recent price of $2.22.
That’s a monster one-year gain of 353%!
Nevertheless, we think CPRX still has plenty of upside remaining.
The stock currently sports a market cap of just $120 million. But Firdapse has peak sales potential of between $200 and $500 million. Therefore, we think the stock could easily double in value or more on positive phase 3 trial results.
And right now, the stock probably offers the best entry point we can hope to get.
After setting a 52-week high in September 2013, CPRX suffered a steep decline in October-November that wiped out 65% of its value. And while it has since recovered a bit off the November low, the stock is still trading at a 39% discount to the 52-week high.
Grab your shares of CPRX today. Let’s get positioned in the stock well before the herd rushes in ahead of the upcoming phase 3 trial results.
Key Facts:
| Company: | Catalyst Pharmaceutical Partners |
| Ticker: | CPRX |
| Recent Price: | $2.22 |
| Market Cap: | $120 million |
| Avg. Daily Volume: | 1,003,890 shares |
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Category: BST Trade Alert
