Catalyst financing looks favorable Print E-mail
By Rob Goldman   
Tuesday, 10 August 2010 03:07
After striking a favorable financing deal with Fidelity last Friday, Goldman Small Cap Research has reiteratied a Speculative Buy recommendation. Catalyst Pharmaceutical Partners, (NASDAQ:CM: CPRX) announced that it had come to an agreement on a Registered Direct Offering placement with two of Fidelity’s large biotech mutual funds in the amount of $1.5M, and at a price of $1.11. What is most interesting is that the offering price represented no discount to the closing market price, and no warrant coverage, thus limiting dilution.

Plus, Catalyst closed the transaction directly with Fidelity without the use of an investment banker or advisor. This deal is significant because it was executed at the market, rather than at a moderate discount, which is what usually occurs. It is a tremendous validation of Catalyst’s prospects and Fidelity now owns roughly 7% of estimated fully diluted shares. Importantly, this offering will enable Catalyst to have enough cash to last it through various trials and development through 4Q11/1Q12. We hear that some investors have remained on the sidelines, concerned that the Company did not have sufficient cash beyond mid-2011. With those concerns aside, a major overhang is now lifted.  

On the heels of this news and based on the fact that the CPRX chart looks extremely bullish, Goldman Small Cap Research believes that investing in Catalyst at current levels is a no-brainer. Chartists should be aware that the stock has traded above its 13-day, 20-day and 50-day moving average and the chart looks great. With only modest resistance to around $1.30, it could jump to $2.00 on even moderate volume. It closed on Friday at $1.20.

In addition, near term events such as the start of the UPenn CPP-109 cocaine/alcohol study and the launch of the Phase IIb CPP-109 study in coordination with NIDA should be further up-tick triggers. Remember, CPRX has the only late-stage product to treat cocaine addiction. With funding and validation from NIDA and Fidelity, major organizations are making real bets on the Company’s prospects. Investors should strongly consider it as well. Goldman rates Catalyst a Speculative Buy with a $5.00 price target.

 

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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