What happened
Shares of rare disease specialist Catalyst Pharmaceuticals (CPRX -1.37%) jumped by a healthy 10.9% through the first days of trading this week, according to data from S&P Global Market Intelligence. The biotech's stock has been defying the 2022 bear market all year long.
Following this latest double-digit move higher, Catalyst's stock has now gained an eye-catching 125% so far this year. Meanwhile, the bellwether SPDR S&P Biotech ETF has lost a staggering 21.9% of its value in 2022. Catalyst's stock has thus been charging higher in an exceedingly difficult market for biotech stocks at large.
So what
What's fueling the drugmaker's northward move this week? Catalyst posted a fresh 52-week high and a new all-time high this week over excitement about its rapidly growing sales for the Lambert-Eaton myasthenic syndrome (LEMS) drug Firdapse.
As a result of Firdapse's quick commercial uptake, Catalyst is one of only a handful of cash flow positive small-cap biotech companies right now. In fact, the drugmaker has even been able to support a modest share buyback program since March 2021. Not many small-cap biotech companies have the financial resources to offer a shareholder rewards program.
Now what
Is Catalyst's stock a buy? While the company is still very much in growth mode, its shares may have a tough time pushing much higher in the short term. Speaking to this point, Catalyst's stock is now trading at over 5.6 times 2023 estimated sales. That's not the richest valuation among rare-disease stocks by a long shot, but it certainly doesn't qualify as a bargain, either.
That being said, it may also not be a great idea to take profits on this red-hot biotech stock. Catalyst owns a rock-solid revenue generator, which ought to help it unlock a fair amount of deep value for shareholders in the years ahead. So, if you've ridden the stock upward this year, the best plan of action may be to simply sit tight while the company builds out another set of value drivers.
