What happened

Shares of Catalyst Pharmaceuticals (NASDAQ:CPRX) are jumping today, up 16.7% as of 11:41 a.m. EDT. The small-cap drug stock appears to be rebounding after a massive sell-off on Tuesday on news that the U.S. Food and Drug Administration (FDA) had approved a rival's new drug for the treatment of rare neuromuscular disorder Lambert-Eaton myasthenic syndrome (LEMS). Catalyst's Firdapse had been the only FDA-approved drug for LEMS. 

So what

It was certainly understandable that Catalyst stock would take a big hit after the surprising FDA approval for Jacobus Pharmaceuticals' Ruzurgi. After all, Catalyst was counting on enjoying a monopoly for a while in treating the rare disease after launching Firdapse earlier this year.

Businessman pulling red line that was going down back up

Image source: Getty Images.

Today's bounce for Catalyst appears to reflect some uncertainty for investors as to just how damaging the approval of Ruzurgi will be to sales for Firdapse. The FDA only approved Ruzurgi for treating pediatric patients between the ages of 6 and 17. Firdapse is approved for treating LEMS in adults -- and the disease primarily impacts adults.

However, physicians can prescribe drugs off-label for an indication that isn't approved by the FDA. If Jacobus prices Ruzurgi a lot lower than Firdapse's annual price tag of $375,000, it stands to reason that many physicians would prescribe it instead of Catalyst's drug. 

Now what

The questions about the state of the LEMS market will be resolved over the coming months as Catalyst and Jacobus compete against each other. In the meantime, Catalyst has results from several late-stage clinical studies on the way.

The company expects to announce results from phase 3 studies of Firdapse in treating congenital myasthenic syndromes (CMS) and MuSK-myasthenia gravis (MuSK-MG) in the second half of this year. Results from a phase 3 proof-of-concept study of the drug in treating spinal muscular atrophy (SMA) should also be announced in the first half of 2020.