Biopharma Eyes Worst Day in Years on Rival's FDA Nod

CPRX put volume is pacing for an annual high

Managing Editor
May 7, 2019 at 11:13 AM
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Catalyst Pharmaceuticals Inc (NASDAQ:CPRX) stock is suffering steep losses this morning, down 38.8% at $3.74, after rival Jacobus Pharmaceutical received approval from the Food & Drug Administration (FDA) for its Ruzurgi drug to treat children with rare auto-immune disorder Lambert-Eaton Myasthenic Syndrome (LEMS). What's more, CPRX put volume is pacing for an annual high.

Today's defeat has CPRX on pace for its worst day since April 2016. Prior to today, the equity was trading at decade-plus highs north of $6. However, even with the shares in a tailspin, the Catalyst Pharma stock has still nearly doubled year-to-date.

Considering the stock's long-term outperformance, it's no surprise that all six covering brokerage firms held "strong buy" recommendations coming into today. Further, Cantor Fitzgerald reiterated an "overweight" rating and $10 price target on CPRX, and said it was "disconcerting" that "seizures have been observed in patients without a history of seizures, yet we believe approval" for Jacobus' Rizurgi drug "was granted without substantive published pediatric safety studies."

Short interest on the pharma stock fell 17.9% during the past two reporting periods, but still represents 8.4% of the security's total available float. Today, however, CPRX is on the short-sale restricted list.

As alluded to earlier, Catalyst Pharma is attracting option traders, with nearly 1,300 puts exchanged so far -- 32 times the average morning volume, and pacing for an annual high. it looks like some traders may be buying to open the June 5 put, which accounts for about half of the total put volume. Buyers of the put expect CPRX to extend its retreat south of $5 before June options expire.

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