Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Catalyst Pharmaceuticals Stock Is Tumbling Today

By George Budwell - Sep 23, 2019 at 12:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Catalyst's latest bout of volatility could be a great buying opportunity for risk-tolerant investors.

What happened

Shares of Catalyst Pharmaceuticals ( CPRX 2.02% ), which specializes in drugs for rare diseases, are down by 12.7% as of 11:06 a.m. EDT. The culprit?

Oddly enough, Catalyst's shares are tumbling by double digits this morning without a discernible news event. That's not completely abnormal for small-cap biotech stocks, but this latest move lower does arguably underscore just how nervous the market is about the company's ongoing lawsuit against the Food and Drug Administration over the approval of Jacobus Pharma's Lambert-Eaton myasthenic syndrome (LEMS) drug, Ruzurgi, last May.   

Chalkboard chart showing a positive trend line turn negative.

Image source: Getty Images.

So what

Catalyst's shares have been on a roller-coaster ride ever since the FDA approved Ruzurgi, and for good reason. Although this rival LEMS medication is approved only for patients between the ages of 6 to 17 years, it could, in theory, be prescribed for off-label use by adults, which means it poses a significant competitive threat to Catalyst's LEMS drug, Firdapse. Firdapse was launched as a treatment for adult LEMS patients last January, and it quickly grabbed the lion's share of the market.   

Now what

Should investors take advantage of this dip? So far Ruzurgi hasn't had much of an impact on Firdapse's commercial launch, and Wall Street seems to think it will stay this way for the foreseeable future. Firdapse's sales, after all, are forecast to grow by an impressive 51.4% next year. In fact, Catalyst's shares are presently trading at less than three times its projected 2022 revenue, a rock-bottom valuation for an orphan drug company. In short, risk-tolerant investors may indeed want to grab some shares on this hefty pullback. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Catalyst Pharmaceuticals, Inc. Stock Quote
Catalyst Pharmaceuticals, Inc.
CPRX
$7.07 (2.02%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.