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In the speculative world of biotech investing, investors look to get in stocks early before positive, market moving company events happen. These events are usually connected to FDA decisions or product launches. It is not uncommon to see a biotech company rise over 200% within days after positive news provides a huge catalyst to increase the stock price.

Thankfully for risk tolerant investors, these speculative biotech opportunities come along very often if you are listening to the right catalyst clues and doing important due diligence. The challenge for investors is to pick the right investment opportunities that carry the most reward with less risk.

Developing drugs targeting orphan disease indications have recently been some of the best performers in biotech. The following company will be no different.

Catalyst Pharmaceutical Partners (NASDAQ:CPRX) is a specialty pharmaceutical company focused on the development and commercialization of prescription drugs targeting rare (orphan) neuromuscular and neurological diseases.

Catalyst #1: CPP-109/115 Top line data for Tourette Syndrome expected in October

Dr. Richard Silverman, a professor of chemistry at Northwestern University, developed pregabalin, the chemical that Pfizer (NYSE:PFE) now markets as Lyrica and Neurontin.

A license agreement with Northwestern University, under which it acquired worldwide rights to commercialize new GABA aminotransferase inhibitors and derivatives of vigabatrin that were discovered and patented by Northwestern. Catalyst has designated the lead compound to be developed under this license as CPP-115.

CPP-115 is an analogue of the existing approved vigabatrin that is being sold under the name Sabril. Sabril is currently used to treat Epilepsy and Infantile spasms.

CPP-115 has two potentially significant advantages compared to CPP-109 (vigabatrin). First, CPP-115 may not cause the visual field defects associated with chronic administration of vigabatrin. Second, CPP-115 has been shown to be at least 200 times more potent than CPP-109 in both in-vitro and animal model studies. The increased potency could enable the development of superior or alternative dosage forms and routes of administration. Catalyst hopes that these important benefits will allow it to develop a broad range of other central nervous system therapies, beginning with infantile spasms, epilepsy and/or other selected diseases in which modulation of GABA levels might be beneficial, such as Tourette Syndrome, Post Traumatic Stress Disorder (PTSD) and movement disorders.

Catalyst is currently testing CPP-109 (the weaker version of CPP-115) for a Phase II study being undertaken at Mt. Sinai School of Medicine in New York to evaluate the use of CPP-109 in treating patients with Tourette Syndrome. This is an open-label study designed to enroll 6 to 10 subjects, from which Catalyst expects results as soon as this October. If data shows evidence of reduction in the number of tics, Catalyst intends to develop CPP-115 for this indication.

Catalyst #2 Firdapse Top line Phase III results in 1h 2014

Catalyst in-licensed the North American rights to Firdapse from BioMarin (NASDAQ:BMRN).

BioMarin retains a 16% ownership stake in Catalyst, which indicates that BioMarin has high confidence in Catalyst's ability to drive Firdapse through to approval in the U.S.

The drug is used to treat a very rare disorder called Lambert-Eaton myasthenic syndrome (LEMS), an ultra-rare disease that afflicts maybe 4,000 people worldwide. It is already approved in Europe for this indication. The company estimates sales of 100 million in the United States alone.

Firdapse also has the opportunity to expand its indication into Myasthenia Gravis and/or Congenital Myasthenic Syndrome both of which are also CNS orphan indications. The company estimates that Firdapse could generate between 200-500 million dollars yearly.

Conclusion

For investors looking to invest in the next biotech company poised to produce significant short term returns due to upcoming catalysts, Catalyst Pharmaceuticals provides an attractive speculative pick for potentially high returns.

The company is undervalued with their potential pipeline due to their innovative drugs. This is why I give the company a short term target of $2.50 per share for 2013 and a target of $5.00 for 2014. This represents close to 100% return for 2013 and close 250% for 2014.

Analysts are also taking notice:

Scott Henry, ROTH Capital Partners (7/3/13) "We reiterate our Buy rating on Catalyst Pharmaceutical Partners lnc. shares for three key reasons: 1) Firdapse is on track for enrollment completion in Q4/13, data in Q2/14, 2) Firdapse has potential revenue expansion opportunities and 3) The company's shares appear undervalued. . .Catalyst Pharmaceutical represents an under-the-radar orphan drug company that has considerable price appreciation potential. It has cash to last through data readout in Q2/14."

Raghuram Selvaraju, Aegis Capital Corp. (6/28/13) "Yesterday, Catalyst Pharmaceutical Partners lnc. provided investors with a detailed update of its progress in advancing the Firdapse phase 3 trial. . .the enrollment status is encouraging. . .we believe that the recruitment base Catalyst has accessed should enable the company to comfortably complete the study on schedule. . .and in our view, one of the most appealing aspects of the company is the fact that the firm's pipeline candidates all have solid backgrounds.".

Disclosure: I am long CPRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Catalysts Pharmaceuticals Primed For An Easy Double For 2H Of 2013