PropThink: CPRX Weakness After Capital Raise Presents Buying Opportunity
(Thomson Reuters ONE) -
Catalyst Pharmaceutical Partners (NASDAQ:CPRX) announced that in a direct public
offering of 4 million shares of common stock and 1.2MM warrants, it will be
raising $6 million in gross proceeds. The market reacted ahead of the bell
driving CPRX down more than 20%. Most investors will be using the opportunity to
take profits because - as of Monday's close - share price has tripled since
early July. Shares had, in fact, reached a new 52-week high this week of $1.97.
And for those looking for near-term catalysts, today's weakness may be a good
chance to buy.
The raise should come as little surprise to analysts. As of its 2Q earnings
report on August 15, CPRX had just $7MM in cash and burned an average of $6MM
annually for the last three years - one year of operations on hand usually
implies a capital raise is imminent. And with clinical trials ongoing, R&D
expenses are only going to increase this year. Management likely saw the
market's high valuation as a good opportunity to raise capital without risking
too much downside for the company's valuation, plus with a catalyst on the
horizon investors are likely to re-enter with confidence. The raise should net
the company around $5 million to continue development operations. Catalyst is
developing two drugs to fight addiction and manage pain, CPP-109 and CPP-115.
CPP-109 is in Phase II testing for cocaine and methamphetamine addiction.
Investors have been bullish all through the second half of this year and the
stock is likely to recover quickly after today's trading session. CPRX volume is
trending well-above 3-month averages in the last six weeks. The run-up in August
is due in large part to the expected announcement of top-line Phase II data in
September, and as that catalyst still sits on the table, momentum is likely to
drive shares back up to previous highs.
Click here to see this article on PropThink.com.
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identifying and analyzing technically-complicated companies and equities that
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