JLGutierrez
Right here’s an organization with one permitted product in a single uncommon illness, one other product simply permitted and about to be launched, income steerage for full 12 months 2023 being “between $390 million and $395 million,” and little to no debt – however a market cap of simply $1.7bn. We’ve got seen preclinical firms with increased market caps, haven’t we? Then why does this firm inventory fall drastically on elevating simply $150mn?
The issues with Catalyst Prescribed drugs, Inc. (NASDAQ:CPRX) are that it has no main knowledge catalysts to talk of, it has a significant patent problem brewing, it’s low on money with very excessive R&D and G&A bills, and it has no pipeline molecule past the permitted medicine. The present pipeline seems like this:
CPRX PIPELINE (CPRX WEBSITE)
The corporate is doing due diligence to amass one other epilepsy product after FYCOMPA, nevertheless, as they famous of their Nov earnings name, there isn’t any fast plan to finish such a purchase:
And so we’ve made it clear that from a strategic plan that our emphasis on our subsequent acquisition actually we’d prefer it one thing to be appropriate with our epilepsy franchise, and we expect it’s a rising alternative and clearly we’ve made that time. I’d not say that there’s something imminent. We’re in deep diligence from a few alternatives.
I lined CPRX in April, and I primarily targeted on the patent problem. I lined the identical patent problem in a January article; earlier than that, I had final lined CPRX in 2018, proper after the primary Firdapse approval in LEMS. The patent problem started after Teva Pharmaceutical (TEVA) filed an ANDA and questioned the validity of 6 Orange Ebook listed patents held on Firdapse. The sooner of those patents expire in 2032, so, with a bit of luck, CPRX had 9 extra years left to get income from Firdapse, which implies, given the ~$400mn they made final 12 months from the drug, and assuming a ten% progress for 9-10 years, that the drug is value a minimum of $8bn to CPRX, in simplistic phrases. That is what they stand to lose over the ANDA problem.
I mentioned the ugly 3,4-DAP story in particulars earlier. Frankly, it doesn’t make me comfortable that one thing like this may be doable. Drugs is usually a terribly ugly enterprise, however this isn’t the proper place to run an ethics monologue. Lengthy story brief, there’s some advantage to the ANDA, in my view. Courts have already dominated in opposition to the ANDA in a approach after they dominated in opposition to Jacobus, however we must see the way it works out. As I famous in my 2018 article, although, concerning the molecule:
…a base formulation found by Scottish scientists within the Seventies, used worldwide for many years for a nominal worth or without spending a dime, and now being marketed with unique pricing just by including a phosphate base to the chemical certainly appears someway unsuitable. The phosphate salt does nothing besides to make the drug preservable with out refrigeration.
Nevertheless, on reflection, I don’t assume it’s as black and white as I made it out to be. Phosphate salts are generally used to make medicinal merchandise secure. Nevertheless, Jacobus by no means bothered to do this out. The query needs to be: what occurs when 3,4-Diaminopyridine (3,4-DAP) turns into unstable and breaks down? What are the byproducts of that response? Are these byproducts protected? How widespread would it not be for a LEMS affected person to mistakenly ingress such a byproduct when taking 3,4-Diaminopyridine (3,4-DAP)? Does the brand new model from CPRX, which provides the phosphate salt, take away this downside? If it does, it doesn’t solely make 3,4-Diaminopyridine (3,4-DAP) extra secure and provides it longer shelf life – it additionally makes it safer.
On prime of that, there are scientific trials to show the protection and efficacy of the formulation. Jacobus didn’t do these trials – neither, for that matter, did TEVA. Due to this fact, CPRX did add worth to the unique compound, 3,4-Diaminopyridine (3,4-DAP). Thus, they need to be allowed to revenue from their entrepreneurship, if not for his or her innovation.
These are ethical questions, and traders would possibly marvel why I’m bothering them with this. Nevertheless, sometime a decide goes to sofa these ideas in authorized language and decide on that ANDA. These questions will then look worthwhile, all $8bn of it.
Financials
CPRX has a market cap of $1.7bn and a money stability of $121mn. The corporate filed a $500mn shelf providing in September, and ended up with a $150mn secondary providing in January. This worth needs to be added to their money stability, together with earnings, if any, from the quarter. Product revenues within the third quarter of 2023, have been $102.6 million, in comparison with $57.2 million for the third quarter of 2022, representing a rise of 79.5% year-over-year. This contains FYCOMPA web product revenues of $36.4 million, which is a brand new addition. Analysis and growth bills have been $83.7 million, whereas promoting, common, and administrative bills have been $33.6 million. The corporate mentioned full-year 2023 complete revenues can be between $390 million and $395 million. Given this fee of bills, and ignoring earnings, they don’t have money for greater than 2 quarters.
Backside Line
Catalyst inventory plummeted significantly two weeks in the past after posting that providing. The inventory nonetheless has not recovered. This presents a chance of kinds for Catalyst Prescribed drugs, Inc. shares, in case you are prepared to wager that the ANDA will likely be resolved in its favor. I’ve no explicit opinion on that, so I’ll stay impartial regardless of the engaging drop in worth.
Editor’s Observe: This text discusses a number of securities that don’t commerce on a significant U.S. alternate. Please pay attention to the dangers related to these shares.
