$CPRX - FDA Approved Drug, Strong Financials, EPS Growth, Price Target Upside - What's Not to Like?

Summary Came across my screener for value stocks, in particular the Return on Invested Capital (ROIC) at 58% (1) which is a positive indicator Recent share buyback was announced so I wanted to see if this was good for CPRX  CPRX has the only FDA approved drug to treat a rare autoimmune disease and achieved record revenues this year through the sale of the drug Strong financials, positive insider ownership, and upgraded price targets makes this an attractive investment Company Summary Catalyst is a biopharmaceutical company focused on developing and commercializing innovative therapies for people with rare debilitating neuromuscular and neurological diseases. Essentially CPRX has the first FDA approved drug to treat LEMS - Firdapse What is LEMS? Lambert-Eaton myasthenic syndrome (LEMS) is an autoimmune disease — a disease in which the immune system attacks the body's own tissues About 1 /1,000,000 Americans have LEMS here CPRX sells the treatment for $375,000 per year here March 14, 2021 – YE and Q4 Highlights Achieved record revenues for Firdapse® in treating adult LEMS patients. Initial patent was issued in the fourth quarter of 2020 for the use of 3,4-diaminopyridine (the patent expires in 2034 with four other patents pending in that estate). Expansion of the company's strategic focus to include acquiring or in-licensing innovative, technology platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases. Firdapse® long-acting formulation development program continues on schedule, with additional PK work expected to be conducted during 2021. A proof-of-concept study evaluating Firdapse® as a treatment for Hereditary Neuropathy with Liability to Pressure Palsies (HNPP) is scheduled to start in the third quarter of 2021. Plans to present MuSK-MG Firdapse® study hypotheses and a revised protocol to the FDA for discussion during the first half of 2021.  Recent News Catalyst Pharmaceuticals Announces $40 Million Share Repurchase Program here Key Quote: This share repurchase program reflects our confidence in the long-term outlook for the Company, including our ability to continue to generate strong cash flow," said Patrick J. McEnany, the Company's Chairman and Chief Executive Officer. "We believe that our strong balance sheet, earnings power and borrowing capability have us well-positioned to successfully execute both on our recently announced strategic initiative to expand our product and pipeline portfolio of therapies to treat other rare diseases and on this share repurchase program. We believe that executing on both of these objectives will help drive stockholder value." What Happened: Current Market Cap ~ 486 M and they buyback $40M, then there should be about an 8% increase in stock price – which is essentially what happened on Monday Are Share Buybacks Good or Bad? here A stock buyback occurs when a company buys back its shares from the marketplace. The effect of a buyback is to reduce the number of outstanding shares on the market, which increases the ownership stake of the stakeholders. I highlighted a dew of the pros and cons below  Buyback Pros The stock is undervalued and a good buy at the current market price. A buyback will create a level of support for the stock A buyback will increase share prices.  Buyback Cons The impact on earnings per share can give an artificial lift to the stock and mask financial problems that would be revealed by a closer look at the company’s ratios. Companies will use buybacks as a way to allow executives to take advantage of stock option programs while not diluting EPS. Buybacks can create a short-term bump in the stock price that some say allows insiders to profit while suckering other investors. Summary of CPRX Buyback I don’t think they are doing the buyback to mask poor performance – they have a strong balance sheet and financial metrics Return on Invested Capital (ROIC) The ROIC is the operating profit divided by the invested capital. It tells us how much money the company can generate with new capital by investing in profitable projects. Simply, If the ROIC is 10%, it tells us that the company is generating $10 of profits with each $100 that it invested in the company. ROIC for CPRX is at 58% - so for every $100 invested they generate $58 – this is significant! Note this ROIC is from TradingView but I also came across an ROIC of 44% here Financial Highlights EPS shot from US$0.31 to US$0.72, over the last year. You don't see 133% year-on-year growth like that, very often. Catalyst Pharmaceuticals shareholders can take confidence from the fact that EBIT margins are up from 31% to 35% Price to Book (FY) 2.7 Price to Earnings Ratio (TTM) 6.2 Price to Sales (FY) 3.9 Enterprise Value/EBITDA (TTM) 5.1 Price to Free Cash Flow (TTM) 7.7 Return on Invested Capital (TTM) 58 Basic EPS (TTM) 0.72 Insider Picture Catalyst Pharmaceuticals insiders spent US$65k on stock, over the last year and no insider selling Insiders own $32m worth of shares – which is about 7.0% of the company. This demonstrates a degree of high-level alignment between management and shareholders   Analyst Ratings 3/18/2021 Roth Capital Boost Price Target Buy $6.50 ➝ $7.00 C. Wainwright reiterated a Buy rating on the stock with a price target of $9 TLDR CPRX has the only FDA approved drug for LEMS – rare disease – and they are selling treatments for $375,000 per patient per year Recent buyback bumped the price up - strong financials indicate positive buyback reasons, ROIC is impressive, and EPS growth is really strong Analyst price target upgrade indicates 40% to 80% upside

back

$CPRX - FDA Approved Drug, Strong Financials, EPS Growth, Price Target Upside - What's Not to Like?

Mar 23, 2021

bullish

general Analysis

[4 min Read]

blog post cover photo

Summary

  • Came across my screener for value stocks, in particular the Return on Invested Capital (ROIC) at 58% (1) which is a positive indicator
  • Recent share buyback was announced so I wanted to see if this was good for CPRX
  • CPRX has the only FDA approved drug to treat a rare autoimmune disease and achieved record revenues this year through the sale of the drug
  • Strong financials, positive insider ownership, and upgraded price targets makes this an attractive investment

Company Summary

  • Catalyst is a biopharmaceutical company focused on developing and commercializing innovative therapies for people with rare debilitating neuromuscular and neurological diseases.
  • Essentially CPRX has the first FDA approved drug to treat LEMS - Firdapse
  • What is LEMS? Lambert-Eaton myasthenic syndrome (LEMS) is an autoimmune disease — a disease in which the immune system attacks the body's own tissues
  • About 1 /1,000,000 Americans have LEMS here
  • CPRX sells the treatment for $375,000 per year here

March 14, 2021 - YE and Q4 Highlights

  • Achieved record revenues for Firdapse® in treating adult LEMS patients.
  • Initial patent was issued in the fourth quarter of 2020 for the use of 3,4-diaminopyridine (the patent expires in 2034 with four other patents pending in that estate).
  • Expansion of the company's strategic focus to include acquiring or in-licensing innovative, technology platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases.
  • Firdapse® long-acting formulation development program continues on schedule, with additional PK work expected to be conducted during 2021.
  • A proof-of-concept study evaluating Firdapse® as a treatment for Hereditary Neuropathy with Liability to Pressure Palsies (HNPP) is scheduled to start in the third quarter of 2021.
  • Plans to present MuSK-MG Firdapse® study hypotheses and a revised protocol to the FDA for discussion during the first half of 2021.

Recent News

Catalyst Pharmaceuticals Announces $40 Million Share Repurchase Program here

  • Key Quote: This share repurchase program reflects our confidence in the long-term outlook for the Company, including our ability to continue to generate strong cash flow," said Patrick J. McEnany, the Company's Chairman and Chief Executive Officer. "We believe that our strong balance sheet, earnings power and borrowing capability have us well-positioned to successfully execute both on our recently announced strategic initiative to expand our product and pipeline portfolio of therapies to treat other rare diseases and on this share repurchase program. We believe that executing on both of these objectives will help drive stockholder value."
  • What Happened: Current Market Cap ~ 486 M and they buyback $40M, then there should be about an 8% increase in stock price - which is essentially what happened on Monday

Are Share Buybacks Good or Bad? here

A stock buyback occurs when a company buys back its shares from the marketplace. The effect of a buyback is to reduce the number of outstanding shares on the market, which increases the ownership stake of the stakeholders. I highlighted a dew of the pros and cons below

Buyback Pros

  • The stock is undervalued and a good buy at the current market price.
  • A buyback will create a level of support for the stock
  • A buyback will increase share prices.

Buyback Cons

  • The impact on earnings per share can give an artificial lift to the stock and mask financial problems that would be revealed by a closer look at the company's ratios.
  • Companies will use buybacks as a way to allow executives to take advantage of stock option programs while not diluting EPS.
  • Buybacks can create a short-term bump in the stock price that some say allows insiders to profit while suckering other investors.

Summary of CPRX Buyback

  • I don't think they are doing the buyback to mask poor performance - they have a strong balance sheet and financial metrics

Return on Invested Capital (ROIC)

  • The ROIC is the operating profit divided by the invested capital. It tells us how much money the company can generate with new capital by investing in profitable projects.
  • Simply, If the ROIC is 10%, it tells us that the company is generating $10 of profits with each $100 that it invested in the company.
  • ROIC for CPRX is at 58% - so for every $100 invested they generate $58 - this is significant!
  • Note this ROIC is from TradingView but I also came across an ROIC of 44% here

Financial Highlights

  • EPS shot from US$0.31 to US$0.72, over the last year. You don't see 133% year-on-year growth like that, very often.
  • Catalyst Pharmaceuticals shareholders can take confidence from the fact that EBIT margins are up from 31% to 35%

Price to Book (FY)

2.7

Price to Earnings Ratio (TTM)

6.2

Price to Sales (FY)

3.9

Enterprise Value/EBITDA (TTM)

5.1

Price to Free Cash Flow (TTM)

7.7

Return on Invested Capital (TTM)

58

Basic EPS (TTM)

0.72

Insider Picture

  • Catalyst Pharmaceuticals insiders spent US$65k on stock, over the last year and no insider selling
  • Insiders own $32m worth of shares - which is about 7.0% of the company. This demonstrates a degree of high-level alignment between management and shareholders

Analyst Ratings

  • 3/18/2021 Roth Capital Boost Price Target Buy $6.50 ➝ $7.00
  • C. Wainwright reiterated a Buy rating on the stock with a price target of $9

TLDR

  • CPRX has the only FDA approved drug for LEMS - rare disease - and they are selling treatments for $375,000 per patient per year
  • Recent buyback bumped the price up - strong financials indicate positive buyback reasons, ROIC is impressive, and EPS growth is really strong
  • Analyst price target upgrade indicates 40% to 80% upside

page loading card

CPRX

Catalyst Pharmaceuticals, Inc.

6.64

0
0.00%

Return

-
Position Return %
0.00
Position Return
4.69
Price When Posted

Metrics

5.86
Target Price
8/ 10
Confidence
1-2 Months
Timeframe
catalyst icon
Earnings Release
catalyst icon
News
catalyst icon
SEC
Filing
catalyst icon
Sentiment
catalyst icon
Other Catalyst

Access the latest tools and discussion channels with an account

reddit-sentiment

Reddit Sentiment
Analysis

portfolio-balancer

Portfolio Balancer
with brokerages

sec-dashboard

SEC Dashboard
with NLP

aiodd-ad
next