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Catalyst Pharmaceuticals (CPRX) is a small-cap biopharma company focused on in-licensing, developing, and commercializing novel medicines to treat rare diseases. It has a market cap of just under $2 billion, notes Tyler Laundon, editor of Cabot-Small Cap Confidential.

While the company came public in 2006, current growth is a result of a collaboration struck with BioMarin (BMRN) in 2012 when Catalyst obtained the North American rights to amifampridine. At the time, amifampridine was being developed to treat Lambert-Eaton Myasthenic Syndrome (LEMS), a neuromuscular disorder that often causes severe and progressive muscle weakness and fatigue.

LEMS occurs when the immune system disrupts communication between nerves and muscles and disrupts the release of an important chemical called acetylcholine (ACh). If lacking the proper release of ACh, muscles don’t fully function. LEMS impacts about 3,000 people in the U.S. and many more worldwide.

In 2018, Catalyst obtained FDA approval for amifampridine tablets (commercial name is Firdapse) for adults with LEMS. The commercial launch was in early 2019, and the product is now available for adults. A pediatric label expansion is now in a Phase 3 trial. Canada has approved the treatment for adults, and expansion efforts in Japan are underway.

Catalyst is also on the prowl for assets to spur more growth. In 2021, the company began evaluating drug candidates beyond neuromuscular diseases in an effort to diversify its revenue base. Management has said it will seek to acquire companies, and to acquire or in-license drug products that are in development.

On that note, in July 2022, Catalyst acquired the rights to Ruzurgi from Jacobus Pharma. This acquisition settled an ongoing patent dispute and helped remove an overhang from CPRX stock.

Then on Dec. 19, Catalyst announced the acquisition of the rights to FYCOMPA from Eisai. This drug is approved for epilepsy, should generate $136 million in the 12 months ending March 31, 2023, and it should add to Catalyst’s earnings. The $160 million acquisition also includes an option to evaluate and potentially acquire an additional epilepsy drug from Eisai. 

Clearly, Catalyst management is thinking of building a bigger company. In Q3, the company added $35 million to its balance sheet to end the quarter with $256 million in cash. Revenue grew by 59% to $57.2 million. EPS was $0.26 (+86%). 

Analysts expect revenue growth of around 49% ($210 million) in 2022 and growth of 20% ($250 million) in 2023. Expected EPS is $0.73 (+33%) for 2022 and $0.88 (+19%) for 2023. The stock is a speculative Top Pick for the new year.

About the Author

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential. He has spent his entire career managing, consulting, and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company's long-term success.

Accordingly, his research focuses on assessing the viability of management's growth strategies, trends in addressable markets, and achievement of major developmental milestones. Tyler's small-cap portfolios favor a high allocation to stable, high growth companies, upon which he layers strategic purchases of higher risk, event-driven investments.

He first began publishing his analysis of small-cap opportunities in 2009. Since 2012, he has led his subscribers into 10 doubles. Between 2012 and September of 2015, his small-cap recommendations generated cumulative returns of over 2,300%, including both winners and losers, and outperformed the Russell 2000 Index by an average of 28% per year.

Prior to joining Cabot, Tyler founded and operated a small business for 15 years. He then worked as a consultant for start-up technology companies, as well as Vermont's largest health care institution. From 2009 to 2015, he was the chief analyst of growth stocks at Wyatt Investment Research, where his research spanned the full spectrum of the growth stock universe, from micro-cap start-ups to multi-national mega-caps.

Tyler holds a B.S. and MBA from The University of Vermont, where he graduated as Valedictorian. He has been a long-time contributor to the Wall Street's Best Investments, has been quoted by U.S. News & World Report, and has presented investing ideas and strategies for The Money Show and Bloomberg Markets LiveINSIGHTS.

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