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Why Catalyst Pharmaceuticals Stock Crashed in August

By George Budwell – Sep 8, 2020 at 11:00AM

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Catalyst can't seem to catch a break in the clinic these days.

What happened

Shares of the rare-disease drugmaker Catalyst Pharmaceuticals (CPRX 1.14%) fell by a staggering 23.7% during the month of August, according to data provided by S&P Global Market Intelligence. Catalyst's shares hit the skids last month following a negative late-stage readout for its flagship drug, Firdapse, as a treatment for muscle-specific kinase myasthenia gravis (also known as MuSK-positive myasthenia gravis). MuSK-positive myasthenia gravis is a debilitating neuromuscular disorder with few viable treatment options. 

Unfortunately, this latest failure is the drug's second major miss in the clinic in less than a year. In 2019, Firdapse also flopped in a late-stage trial for another neuromuscular disorder known as congenital myasthenic syndrome. Taken together, these two lost indications were worth upwards of $400 million in annual sales for Catalyst's one and only approved product. 

A businessman with a laptop folded over his head, while holding a sign that reads help in all capital letters.

Image source: Getty Images.

So what

Not that long ago, Wall Street and retail investors alike flocked to this small-cap biopharma stock in the hopes that Firdapse could one day achieve peak annual sales in the area of $700 million to $1 billion. With two of the drug's most lucrative indications now off the table, however, Catalyst's shares have seemingly lost a good bit of their luster. Underscoring this point, the drugmaker's shares have now fallen by close to 60% relative to their 52-week high. 

Now what

Can Catalyst bounce back? While it might be tempting to buy this beaten-down biotech stock after this rapid and rather sharp decline, it's probably a better idea to watch this story unfold from the safety of the sidelines. Firdapse's once-promising growth story hasn't exactly gone according to plan, after all. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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