Catalyst Pharmaceutical Partners: Undervalued With Catalysts Print E-mail
By Rob Goldman   
Friday, 21 May 2010 03:00

When a loved one is afflicted with a debilitating disease, it affects an entire family. When someone is afflicted with a drug addiction, it impacts an entire community.

The size of the cocaine dependence market and the related financial impact in the U.S. is huge and there is no FDA approved treatment for cocaine and other stimulant addiction. A 2009 report by the Office of National Drug Policy states that there are 3.6M chronic cocaine users in the U.S., with about 1,00,0000 receiving treatment for cocaine and other stimulant addiction. The National Institute on Drug Abuse (NIDA) estimates that substance abuse “costs” the U.S. $484 billion annually.

With no FDA approved treatment, the market and even the government are waiting for that holy grail that serve this critical unmet need that represents a billion-dollar market.

Enter Catalyst Pharmaceutical Partners (Nasdaq: CPRX) which we believe could become a cult favorite as a whole slew of news and milestones occur over the couple of months, starting with the commencement of new high-profile trials and studies.

Catalyst is a biopharmaceutical company focused on the development and commercialization of prescription drugs targeting diseases of the central nervous system with an emphasis on the treatment of drug addiction and epilepsy. The Company’s two products in development are based on vigabatrin, a GABA aminotransferase inhibitor, as Catalyst likely controls all current intellectual property for drugs that have a mechanism of action related to GABA aminotransferase inhibition. The Company has obtained from Brookhaven National Laboratory (CPP-109) and Northwestern University (CPP-115) exclusive worldwide licenses and patents for all rights to use or sell vigabatrin (CPP-109) and one of its analogues (CPP-115) for the treatment of addiction to cocaine, other addictive drugs, epilepsy and neuropathic pain.

According to CEO Pat McEneny, “A survey conducted by SAMHSA, noted that completion rates in 2000 for outpatient treatment were only 41% for alcohol and 21% for cocaine. For the treatment of cocaine dependence, there was a one-year relapse rate of 69% after 90 days or less of outpatient treatment and 80% after 90 days or less of long-term residential treatment. If a pharmacological treatment for cocaine addiction and/or other stimulant addictions, including methamphetamine, could be used in conjunction with in-patient or outpatient treatment, it would complement and significantly improve the effectiveness of counseling programs.”

The company has conducted three human trials in Mexico and 2 trials in the U.S using vigabatrin/CPP-109. As further validation of CPP-109’s potential, NIDA and Catalyst are collaborating on a Phase IIb safety and efficacy trial, with NIDA and the VA are footing roughly $7.2 million of the $10 million cost, with Catalyst contributing about $2.8 milllion in resources. Top-line results are expected in 4Q11 and recruitment will start soon. This is a significant milestone that we think will lead to a development deal with a major pharmaceutical firm.

Plus, vigabatrin, a novel GABA-AT inhibitor sold as Sabril, has a track record as an effective treatment for epilepsy worldwide. Catalyst plans to leverage Sabril’s success with CPP-115, a next generation vigabatrin analogue treatment for epilepsy and neuropathic pain which will enter Phase I human trials early next year. The current global epilepsy market is $17 billion. CPP-115 is uniquely positioned to ultimately become a major potential treatment in this market due to its potent action, yet greater side effect profile. With Sabril’s foreign sales and recent restricted U.S. approval, CPP-115 could become its patent protected, next generation, replacement.

The stock, which closed yesterday at $1.09, is definitely undervalued, in our opinion. The stock is probably worth at least 4-5 times that, especially if they are the first FDA approved treatment for cocaine and other addictive drugs, which would afford it a premium valuation. With the multiple indications of the platform and the potential to supplant current epilepsy treatments down the road, there is real hidden value here. We think that value will be uncovered soon, with the start of the CPP-109 Phase IIb study with NIDA around the corner.

 

Rob Goldman has 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund. Goldman produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select product represents the Firm’s internally generated stock ideas while the Opportunity product represents sponsored research reports. This coverage tends to be dominated by early-stage health care, technology and energy sectors. Six month or three month subscriptions can be commissioned by publicly traded company management, investor relations or consulting firms, investment banks, or related parties. Full disclosures and report details are available at goldmanresearch.com




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