What happened

Shares of Catalyst Pharmaceuticals (NASDAQ:CPRX), 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.