What happened

Shares of the rare-disease drugmaker Catalyst Pharmaceuticals (CPRX -1.37%) 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.