Why Catalyst Pharmaceutical Partners Is Rising On Heavy Trading
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On April 18th shares of Catalyst Pharmaceutical Partners (NASDAQ: CPRX) began spiking on heavy volume trading from $.47 to slightly over $1.00 in just three days. Since then, buying has remained heavy almost every day with the price recently hitting $1.61. Shares appear to be in a consolidation and are holding well over $1.20. Catalyst only has about 42 million shares outstanding, but since April 18th has traded over 100 million shares.
The reason for the run on Catalyst shares appears to have been started by an analyst report from Aegis Capital that initiated coverage on that same day of April 18th. The Aegis report explained why Catalyst was so undervalued and provided compelling projections for their drugs Firdapse and CPP115.
On May 20, 2013, an article entitled, “Catalyst’s CPP115 May Be Big Pipeline In Just One Little Pill” offers one possible explanation why trading volume and buying continued to remain high. The article addressed the blockbuster potential of CPP115.
With over 100 million shares trading since April 18th, it is apparent buyers have a large appetite to continue accumulating shares. With only 42 million shares outstanding and over 100 million shares changing hands since April 18th, it is also apparent that with this continued heavy buying may not leave much stock for sale at these prices and shares may soon see an explosive price rise.
There are several factors all pointing to continued rising prices very similar to Acadia Pharmaceuticals (NASDAQ: ACAD) that traded from $1.36 to over $20.00 in only 12 months. There is even an article predicting that Catalyst will outperform Acadia. The similarities between Catalyst and Acadia are remarkable. Acadia appears to about a year ahead of Catalyst, but Catalyst has a more impressive pipeline.
On June 27th, the company provided a positive update on the progress of the Firdapse Phase III trial reporting that enrollment is expected to be completed in the 4th quarter of 2013 and top line results are expected to be reported in the 2nd quarter of 2014. Firdapse is already approved and selling in Europe and therefore, is expected to be approved in the United States.
Firdapse is likely to be commercially available in North America by early 2016 and generating peak revenues of between $200 to $400 million for Catalyst. BioMarin (NASDAQ: BMRN) out-licensed the North American rights for Firdapse to Catalyst in October 2012 and the event went unnoticed by investors probably because of the overshadowing news of the failure of CPP109 Phase II trial for cocaine addiction.
On July 11th, an article, “Exploding Pipeline Makes BioMarin Attractive Takeover Target”, explains why Catalyst is an obvious takeover target. In fact, BioMarin has already purchased 17% of Catalyst shares at an incredibly low price of just under one dollar and rumors are now circulating about a new BioMarin takeover for the balance of the shares at prices ranging from $5.00 to $10.00 per share.
The article states, “In October 2012, BioMarin may have made the single best investment in their entire history by investing only $5,000,000 for a 17% stake in Catalyst Pharmaceutical Partners. At the same time, they out-licensed the North American rights for Firdapse to Catalyst that has already begun the Phase III clinical trials. It is especially important to note that Catalyst also owns CPP115 that is likely very attractive to BioMarin because it appears to be a serious contender for several Orphan Drug indications such as, Epilepsy, Refractory Epilepsy, Tourette Syndrome, Infantile Spasms, Movement Disorders, Post Traumatic Stress Disorders and other indications. CPP115 was designed by the well-known Dr. Richard Silverman, who also designed the blockbusters Lyrica and Neurontin for Pfizer (NYSE: PFE). Pfizer is also seeking opportunities in Orphan Drugs and they know how successful Dr. Silverman has already been for them so it would not be a surprise if Pfizer also becomes interested in BioMarin if CPP115 becomes part of their pipeline.”
“With BioMarin’s resources, CPP115 would be an extremely valuable addition to their pipeline that could increase their valuations substantially in the next two to three years. CPP115 could almost double the size of BoMarin’s already robust pipeline. Catalyst is therefore another logical but understandably quiet takeover target for BioMarin.” BioMarin’s CEO has openly stated his plan to expand their pipeline by acquiring smaller companies in an article, “BioMarin CEO Seeking Deals to Expand Push for Treatments of Rare Diseases”.
On July 18th, The Life Sciences Report published an interview of two analysts that are bullish on Catalyst .
Every insider transaction for 2012 and 2013 has been on the buy side with no insider selling.
Institutional holdings are increasing.
The short interest in Catalyst has increased to 4,556,915 shares as of July 31st and could ignite panic buying from a short squeeze if prices continue to rise.
The combined projections for Firdapse and CPP115 peak sales translate to $48 per share.
All these underlying forces explain why Catalyst is the subject of continued heavy buying and suggest that Catalyst will soon be the next Acadia.
The company has adequate cash for the next year but may wisely do a capital raise when prices are substantially higher as they are now clearly heading in that direction. Catalyst Pharmaceutical Partners is poised to see substantially higher prices in the short and long term.