This week turned out to be a nightmare for shareholders of Catalyst Pharmaceuticals (CPRX), as the stock price plummeted over 50%. So what caused investors to hit the exits? The key concern is competition.
On Tuesday, privately held and New Jersey-based Jacobus Pharmaceuticals secured FDA approval for its Lambert-Eaton myasthenic syndrome (LEMS) drug, Ruzurgi, for patients between six to 17 years of age. LEMS is a rare and progressive neuromuscular disease caused by problems in neuromuscular transmission. Investors see this approval as a very big problem for Catalyst as its lead drug, Firdapse, also contains the same active ingredient to treat LEMS. However, analysts remain largely positive in the long run.
“We believe that Jacobus’ approval […] is largely a symbolic FDA gesture addressing the political pressures surrounding drug pricing. Although the long-time brushfire competition between Catalyst (Firdapse) and Jacobus (Ruzurgi) ended up in both scoring a regulatory nod, we think the race was effectively over when Firdapse passed the finish line first and ended up with the big prize. Ruzurgi’s approval, in our view, has minimal impact on Firdapse for the following reasons: (1) Firdapse and Ruzurgi are approved in non-overlapping adult and pediatric LEMS patient population, respectively; (2) compared to the adult LEMS patient population, pediatric LEMS patient numbers could be insignificant,” said H.C. Wainwright’s Andrew Fein.
Echoing H.C. Wainwright’s sentiment, Oppenheimer analyst Leland Gershell says his initial impression is that of an over-reaction to the downside that may be driven more by fear than by fact. Gershell noted, “We expect to hear Firdapse’s launch continuing on the strong trajectory described on the company’s 4Q18 call held March 19, which will likely include sales as well as other metrics e.g. patient starts.”
Last but not the least, Cantor’s Charles Duncan commented, “We do not see this approval having a large impact in Firdapse’s market potential as we guesstimate that the pediatric population consists of <5% of the prevalent LEMS population. Therefore, we do not believe it is a slippery slope for Catalyst and Firdapse, as the company has already gained traction with a prescriber and patient base, despite only one quarter into its post-approval launch. In our view, the clinical development (two P3 trials), expanded access, and patient assistance program underscores Firdapse leadership in the LEMS community. This creates goodwill that should benefit the brand and the company in its efforts to identify additional LEMS patients, and in its future label expansion efforts (CMS, Musk-MG). Also, we see the two labels as clearly distinguished and therefore, should there be efforts to capture adult market share made for Ruzurgi, then the label would be violated, in our view.”
These analysts are not the only fans of the biotech company on Wall Street, as TipRanks analytics exhibit CPRX stock as a Strong Buy. Based on 6 analysts polled in the last 3 months, all 6 rate the stock a Buy.
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