Catalyst Pharmaceutical Partners (NASDAQ: CPRX) filed its IPO in November 2006 and lost 50% of its value within the first twelve months. Many biotechs that file IPOs lose much of their initial value on share dilution, and lack of faith in preclinical studies (which should always be met with skepticism). Nonetheless, the stock managed to stabilize in recent years, and its flagship product CPP-109 has been getting more attention from biotech investors.
CPP-109 (vigabatrin) is being investigated in the treatment of drug addictions, although Catalyst seems especially interested in cocaine addiction. Their nearly-finished phase IIb trial, officially titled "Vigabatrin For The Treatment of Cocaine Dependence: A Phase II Study," was designed to compare a patient arm with CPP-109 in addition to therapy with a placebo arm that received only therapy. The success of the trial will depend on statistically significant improvement in abstinence (with regards to cocaine usage) of the vigabatrin arm versus the placebo arm.
CPRX rallied 162% in the last three months solely on anticipation of the top-line data, and on bullish speculation over the company's change to an earlier-than-expected release date for it. Recall that, earlier in the year, Catalyst was expecting the data release as late as Q1 2013. A July 2012 press release claimed that changes to the statistical model of the clinical trial were "fixed," and the company was expected to release in September 2012. It's apparent that the market took this as a sign that the top-line data was going to be amazing.
In a frustrating press release near the end of September 2012, the company moved the date (again) to the first half of November 2012. In another market move that only proves the obsession over these phase II results, shares of CPRX dropped almost 20% in the next three trading sessions. Generic psychoactive compounds like bupropion and naltrexone are already widely used for substance addictions (in conjunction with baseline therapy). Nicotine, alcohol, and opioid addictions are already covered by FDA approvals, but as of right now there is no FDA-approved medications for cocaine addictions. There are off-label alternatives like Pfizer's (NYSE: PFE) gabapentin/Neurontin, but its efficacy is questionable at this point.
The FDA gave Catalyst a lot of help with fast track designation, which implies that Catalyst is probably going to get some leniency when it comes time to submit the NDA for CPP-109. Also something to note, while clinical trials for vigabatin only compare the drug to placebo arms (with nothing but therapy), the lack of official FDA-approved competition makes it a non-issue. The real issue is the potential for visual defects, and even potential blindness, through excessive usage of vigabatin. While we haven't seen Catalyst struggle with these vision-related safety issues yet, the existing data from small-population trials is not all that convincing.
Still, it seems likely that Catalyst will post good phase II efficacy results for CPP-109. If we see a "sell the news" reaction in November, it'd provide a solid chance for new investors to pile in for the anticipation of phase III data (if they choose to do so, of course). Also consider waiting for CPP-115 to finish phase I studies. Not only is this improved sibling of CPP-109 expected to be far more potent, but Catalyst's statements imply that CPP-115 doesn't put patients at risk of vision loss. If this turns out to be true, CPP-115 is a much safer play for Catalyst's niche in the psychoactive drug market.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.