Catalyst Pharmaceuticals Inc (NASDAQ: CPRX) is up slightly this morning after a tremendous decline in value yesterday. Surprisingly for many, the declines came on a positive announcement. The FDA has approved the company’s Firdapse for a rare condition known as LEMS. Nonetheless, the stock fell more than 11% through the session. With the recent approval and declines, many are asking if this is a dip worth buying. Today, we’ll talk about:
- Why CPRX fell on the FDA approval;
- whether or not now is a good time to buy the dip;
- what we’re seeing from the stock; and
- what we’ll be watching for ahead.
Why CPRX Fell Yesterday
As mentioned above, yesterday was a shocker for many watching Catalyst Pharmaceuticals. After announcing that Firdapse was approved by the United States Food and Drug Administration, the stock fell, clocking in losses of more than 11%. So, what’s the deal?
Well, there are a couple of reasons that the stock fell. First and foremost, at the end of the most recent quarter, the company had under $70 million to work with. Sure, that sounds like a lot of money, but the reality is that this is a very small amount, especially when it comes to commercialization of a new drug. With that said, it’s arguable that CPRX will have to raise funds relatively soon if they want to properly commercialize Firdapse in the United States.
The second issue has to do with the fact that this isn’t the first approval for Firdapse. In fact, the drug has been approved in the EU for some time, and hasn’t been the biggest of revenue generators. In fact, in the first nine months of the year, EU sales have only come to about $15 million.
Considering these two factors, investor concerns seemed to outweigh investor excitement yesterday, leading to declines even though the news was positive.
Should You Buy The Dip?
This is a tough one. In my personal opinion, it might be worth waiting until the company announces their fund raise. After all, they are going to need funds and like most in the same position as CPRX, these funds are likely to be raised in a dilutive way. So, when the raise is announced, it’s likely that we’ll see further declines.
On the other hand, I’m not necessarilly worried about the company’s ability to generate revenue off of this drug. Sure, the Firdapse has only led to $15 million in sales in the EU in the first 9 months, but the United States is a completely different market. In fact, it’s one that I believe the company will be able to generate hundreds of millions in sales per year within.
Considering this, it’s likely a wise choice to wait until an offering is announced. However, following the declines after an offering announcement, this looks like a strong long-run play.
What We’re Seeing From The Stock
Catalyst Pharmaceuticals had a rough day in the market yesterday, but is starting today on a slightly positive note. At the moment (7:30), CPRX is trading at $2.78 per share after a gain of $0.01 per share or 0.36% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the iWatch Markets team will continue to keep a close eye on CPRX. In particular, we’re interested in following the company to see if a fund raise comes soon. We’re also watching the commercialization efforts with regard to Firdapse in the United States. Chances are that the potential of the company’s product in the US market is far higher than the potential of the product in the EU. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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