Why Is Catalyst (CPRX) Down 14% Since Last Earnings Report?
It has been about a month since the last earnings report for Catalyst Pharmaceutical (CPRX). Shares have lost about 14% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Catalyst due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Catalyst’s Q2 Earnings & Sales Top, 2023 Outlook Raised
Shares of Catalyst Pharmaceuticals, Inc. climbed 6.4% on Thursday after the company reported its second-quarter 2023 earnings results on Wednesday, after market close. The stock, however, lost 2.1% during the after-market hours on Thursday.
CPRX reported earnings of 33 cents per share for the second quarter of 2023, beating the Zacks Consensus Estimate of 25 cents. The company reported earnings of 20 cents in the year-ago quarter.
Adjusted earnings (adjusted for stock-based compensation, depreciation, amortization and tax provision) came in at 53 cents per share in the quarter compared with 28 cents a year ago.
Total revenues amounted to $100 million in the reported quarter, which surpassed the Zacks Consensus Estimate of $93 million. Total product revenues rose 87.5% from the year-ago quarter’s $53 million. The top line primarily comprised product sales of Firdapse, the first approved drug for the treatment of LEMS, Fycompa (perampanel) CIII and nominal license and other revenues.
Quarter in Detail
Firdapse generated sales worth $64.9 million in the second quarter, up 22.3% year over year, beating our estimate of $62.7 million. The surge was primarily driven by the organic sales growth of Firdapse. The drug has been witnessing strong demand and increasing prescription rates from both autoimmune and small cell lung cancer LEMS patients as well as continued diagnosis of new LEMS patients.
Catalyst also started recording sales of its newest epilepsy asset, Fycompa, starting first quarter of 2023. In January, CPRX acquired the U.S. rights for Fycompa (perampanel) CIII from Eisai Co., Ltd. This acquisition diversified the company’s portfolio with the addition of a commercial-stage epilepsy asset.
Fycompa generated robust net product revenues of $34.6 million in second-quarter 2023, which surpassed our estimate of $30.7 million. The second quarter of 2023 marked the first full-quarter performance of Fycompa CIII.
License and other revenues were nominal at $0.11 million in the reported quarter, up 64% year over year.
The cost of sales was $12 million in the second quarter of 2023, up about 58% year over year, comprising primarily royalties.
Research and development expenses were $3.96 million in the reported quarter, which are being relatively flat year over year.
Selling, general and administrative expenses totaled $28.4 million, up 120% from $12.9 million reported in the year-ago quarter. This uptick in expenses is due to commercial and marketing activities related to the launch of Fycompa in the United States in the reported quarter.
As of Jun 30, 2023, CPRX had cash, cash equivalents and investments worth $178.8 million compared with $148.2 million as of Mar 31, 2023.
2023 Guidance Raised
Catalyst raised its full-year 2023 total revenue guidance to the range of $380-$390 million from $375-$385 million, marking a 77-82% (previously 75-80%) increase in total revenues from 2022. This guidance also includes revenues generated from the sales of Fycompa CIII, which is expected to be $130 million for the 11 months ending December 2023.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -110.45% due to these changes.
VGM Scores
At this time, Catalyst has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Catalyst has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Catalyst is part of the Zacks Medical - Drugs industry. Over the past month, ImmunoGen (IMGN), a stock from the same industry, has gained 9.9%. The company reported its results for the quarter ended June 2023 more than a month ago.
ImmunoGen reported revenues of $83.15 million in the last reported quarter, representing a year-over-year change of +487.2%. EPS of -$0.02 for the same period compares with -$0.24 a year ago.
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