Catalyst Pharmaceutical Partners (NASDAQ:CPRX) is expected to report third-quarter 2014 results on Nov 13. Last quarter, the company had posted a narrower loss than the Zacks Consensus Estimate by 3 cents. The four-quarter trailing average surprise is 30.36%. Let’s see how things are shaping up for this announcement.
Factors at Play
Catalyst Pharma is working hard to develop Firdapse for the treatment of Lambert-Eaton myasthenic syndrome (LEMS). Hence, research and development expenses are expected to increase in this quarter.
Catalyst Pharma had acquired marketing rights in the U.S. for Firdapse from BioMarin Pharmaceutical Inc. in Oct 2012, as per which the former is responsible for the ongoing phase III study. In 2013, the FDA had granted ‘Breakthrough Therapy’ designation to Firdapse for the LEMS indication.
In Sep 2014, the company reported positive top-line data from the phase III study wherein Firdapse was significantly superior to placebo in both co-primary endpoints, quantitative myasthenia gravis score (QMG) and subject global impression (SGI). Consequently, Catalyst Pharma expects to initiate a rolling new drug application submission in early 2015.
We expect investor focus to remain on updates relating to the Firdapse study. It is going to be a challenge for the company as amifampridine, the active ingredient in Firdapse, will continue to be available from compounding pharmacies and is likely to be substantially less expensive than Firdapse.
Apart from Firdapse, Catalyst Pharma is evaluating its pipeline candidate CPP-115 in multiple indications including epilepsy and other neurological indications. However, the competition has intensified substantially in the epilepsy market also with competitors like UCB’s Keppra, among others.
Earnings Whispers?
Our proven model does not conclusively show that Catalyst Pharma is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.
Zacks ESP: Earnings ESP for Catalyst Pharma is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are a loss of 6 cents per share.
Zacks Rank: Catalyst Pharma carries a Zacks Rank #3 (Hold). Though a favorable Zacks Rank increases the predictive power of the ESP, the company’s 0.00% ESP makes a surprise prediction difficult.
We recommend caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Another Stock to Consider
Here is one other company you may want to consider as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Mallinckrodt has an earnings ESP of +5.22% and carries a Zacks Rank #2 (Buy). It is expected to report its fourth-quarter results on Nov 19.