It's fully possible that the meme coin Shiba Inu (SHIB +3.22%) could go on a bull run this year as cryptocurrencies start to recover with gusto from the bear market. But for those seeking an investment in an asset that'll actually grow sustainably in value over an indefinite period as a result of producing things that people actually want to buy, investing in joke cryptocurrencies is probably equivalent to barking up the wrong tree.
That said, there's reason to believe that Catalyst Pharmaceuticals (CPRX 0.32%) is well on its way for a bull run.
CRYPTO: SHIB
Key Data Points
With a new drug and plenty of cash, the future looks bright
Catalyst has a trio of growth drivers in play this year. First, there's the new medicine called Agamree it's launching in Q1. Agamree is a steroid that's indicated to treat Duchenne muscular dystrophy (DMD), and thanks to its anticipated sales, financial analysts on Wall Street estimate that the company could bring in an average of $467 million in 2024. That's a significant uptick from management's guidance for as much as $395 million for 2023.
Agamree is just one medicine that'll see fresh sales, however. It also makes a drug called Fycompa for epilepsy, as well as Firdapse, its flagship treatment for Lambert-Eaton myasthenic syndrome (LEMS), a rare neuromuscular illness. Firdapse launched at the start of 2019, and Fycompa only launched at the start of 2023, so there's likely more top-line and also bottom-line growth on the way for both as they penetrate their markets.
The final catalyst for Catalyst in 2024 is its wad of cash. At the end of Q3, it had $121 million in cash, equivalents, and short-term investments. It also has a trailing-12-month (TTM) free cash flow (FCF) of $95 million. As if that weren't enough, on Jan. 5 it priced a public offering of its stock with the aim of raising $150 million. Once the offering closes on Jan. 9, the biotech will have a hearty pile of dough. And for reasons we'll get into in the next section, having so much money on hand is a majorly bullish factor due to the way that Catalyst does business.
NASDAQ: CPRX
Key Data Points
Being a shareholder can be difficult sometimes
Catalyst isn't exactly like other biotech companies. Rather than doing research and development (R&D) work in-house, it largely prefers to acquire the rights to late-stage pharmaceutical assets, finish them up by running additional clinical trials if necessary, and then file for approval. Then, it conducts additional late-stage clinical trials to try to expand the indications that the drug can be prescribed for. The more cash it has at the ready, the more aggressively it can bid for assets -- and the more assets it can buy to then commercialize for growth.
The upside of doing things this way is that it enables the company to keep its R&D expenditures lower as a proportion of its revenue compared to its peers in biopharma. Catalyst only spends around 9% of its annual sales on R&D, whereas major pharmaceutical businesses spent close to 19% on average in 2022.
The downside is that as a shareholder, it's quite difficult to have much of an idea about what specifically the company is going to do to keep growing in the future. In short, management won't make any friends by overcommunicating about potential acquisition targets, as deals could fall through before fruition. Likewise, while shareholders might glean the occasional clue about which disease areas are of particular interest in management's search, the company is limited to purchasing only what is actually for sale.
So being in the dark is more or less inherent to investing in Catalyst as it's currently envisioned and operated. That makes it hard to develop a strong long-term thesis for holding it, not to mention the conviction to follow through with retaining the stock.
Nonetheless, the stock's returns over the last few years are more than enough to keep shareholders (including myself) on board. Since early 2019, its shares are up by 514%. Such growth is, of course, far less than Shiba Inu. On the other hand, you won't need to wait around for a cryptocurrency bull market to see Catalyst Pharmaceuticals stock go on a bull run, and the fact that it's a profitable business makes it a lot less risky as well.
