Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Catalyst Pharmaceutical Partners (NASDAQ:CPRX), a small-cap, clinical-stage biopharmaceutical company focused on developing novel therapies to treat rare neurological diseases and disorders, tumbled as much as 42% after a rival disclosed positive test results for the same indication as its lead drug, Firdapse.

So what: As reported by, privately held and New Jersey-based Jacobus Pharmaceuticals presented late-stage study findings via a poster presentation at the American Academy of Neurology's annual meeting. The presentation demonstrated that its experimental drug 3,4 DAP, a drug designed to increase the release of acetylcholine, which is a chemical that transmits signals from nerve cells to muscle fibers, met its primary endpoint in treating patients with Lambert-Eaton Myasthenic Syndrome, or LEMS. LEMS is a rare and progressive neuromuscular disease caused by problems in neuromuscular transmission.

This is a potential problem for Catalyst because its lead drug, Firdapse, also contains the same active ingredient to treat LEMS. Not surprisingly, Catalyst announced positive top-line phase 3 results for Firdapse as a treatment for LEMS in September. As noted in its press release, there was a statistically significant change in the myasthenia gravis score, and a highly statistically significant change in subject global impression relative to the control group. Because the Food and Drug Administration grants orphan drug status and patent protection for seven years to rare drug developers, the idea is if Jacobus were to beat Catalyst Pharmaceuticals to the approval punch, it could be left out in the cold.

Source: Food and Drug Administration, Facebook.

Now what: First, I think it's important to note that Catalyst has bounced well off its lows of the day as investors begin to digest this information. With Catalyst reporting its phase 3 results last year and bearing both the orphan drug designation and Breakthrough Therapy Designation it could still hold the fast lane to a LEMS approval.

On the other hand, it's important to note that competition does exist -- and this competition should make investors evaluate whether Catalyst has a deep enough pipeline to merit a $300 million, or higher, valuation. Beyond LEMS, Firdapse is being studied in two additional indications, and CPP-115 is being examined in three early stage studies for Tourette's, infantile spasm, and complex partial seizures. In other words, there's potential here, but any chance of immediate revenue likely flies out the window for two-plus years if LEMS is taken off the table.

With $39 million in cash and cash equivalents remaining (which is a cash runway through 2016 per the company), if Firdapse isn't able to secure a LEMS approval it's very likely Catalyst will turn to a dilutive common stock offering to raise cash, potentially hurting shareholder value even more. Taking that into consideration, I'd much rather remain on the sidelines and keep my eye on commentary from Catalyst moving forward than speculate as to what might happen next.