On the Watch: Catalyst Pharmaceuticals (CPRX)

Kyle DennisKyle Dennis ·

The setup: Catalyst Pharmaceuticals (CPRX) has been forecasting a fourth-quarter Phase 3 data release for its drug Firdapse in treatment of a rare autoimmune disease, Lambert-Eaton Myasthenic Syndrome (LEMS). Based on the timing of the beginning and end of trial enrollment, I expect that Phase 3 data to come in December.

How I’m playing it: Right now, the chart is making a nice triangle continuation pattern. It closed Friday at $2.75, and I think it’s a good buy somewhere in the $2.60 to $2.70 region, for a potential run back up to 52-week highs of about $3.15.

How I evaluate catalysts: I’m an event-driven trader, but some catalysts are more compelling than others. I look for three factors: the specific date of a data release, the disease indication being trialed, and the size of the company.

  • Specific dates make a difference, because more people are interested in playing a stock if they know exactly when data is coming out. That’s why I am watching Eiger BioPharmaceuticals (EIGR), because we know their next release is at the J.P. Morgan healthcare conference. See why Kyle is watching Eiger Biopharmaceuticals (EIGR)
  • Treatments for rare diseases like LEMS, or incurable conditions — like cancer or Alzheimer’s disease — are strong catalysts. Drugs for chronic conditions like arthritis are less exciting to traders and don’t work as well.
  • The size of the company matters too; multi-billion-dollar companies like Bristol-Myers Squibb Co.  (BMY) don’t move much on drug-trial data. If a small company hits well on their drug, it means a ton for their stock; likewise, if the drug fails, the consequences could be severe. The best catalyst runs tend to occur when the risk is high and the stakes are higher.

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Kyle Dennis runs Kyle Dennis’ Biotech Breakouts (biotechbreakouts.com). He is an event-based trader, who prefers low-priced and small-cap biotech stocks. He has no stocks, options or open orders in CPRX but day-traded it on Oct. 27 for a small loss.

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