After a little research it appears that shorts are working overtime to hold Catalyst Pharmaceuticals (Nasdaq: CPRX) under $3.0. Only 5 days ago we were at $3.20. A month ago and before the PDUFA date for Firdapse was on anyone’s radar we were at $3.30. Six months ago CPRX was on the cusp of breaking $4. So why the steady decline? In a nutshell, shorting and weak hands folding. Because three things are obvious; retail investors, institutions and insiders believe in the future of CPRX.
Short Interest is Up
It does not stand to reason that Catalyst is less valuable now near the final hour of getting their first FDA approved product with exclusive commercial rights for 7 years. I believe shorts are the responsible culprits and data backs up this assertion.
As of today there is 1,782,300 million shares sold short; nearly double the trading volume average. Seeing that trading volume yesterday was 179% of the average further corroborates shorting is up. In fact, shorting is up nearly 7% yesterday from previous day, or 95,500 shares. Fortunately for longs the shorts only have 1.8 days to cover. Initiation of covering could be enough of a reprieve to ignite the run-up we’ve all been waiting for. From a long-term investment perspective stakeholders should not be unhinged. CPRX has 52% and 6.78% institutional and insider ownership, respectively. Moreover, insider buying action and option exercising back in June are bullish indicators.
A catalyst is coming
Shorts better cover soon. The pdufa date of November 28 is approaching fast. Given that Firdapse is approved in the EU and CPRX generated ample data supporting the drugs efficacy and safety approval is likely. Short caught unawares will be scrambling to cover. This is even more likely to happen since approval could come any day because the company has priority review status.
CPRX CCO Increased Share Count 12,828%
Nearly 13,000% increase in shares! I know, it sounds crazy. I had to take a double look just be sure, but data does not lie. At the time of the Form-3 filed in June this summer CPRX’s Chief Commercial Officer owned 3,094 shares. Then she exercised a 3 series of options buying 133,333 shares at $3.41 bringing her new total stake to 403,094 shares. Two big takeaways. Firsts, CCO felt buying 400,000 shares at $3.41 was a prudent investment. And second she has not sold a single one since.
CPRX Director Bought 20,000 shares at $3.41
CPRX director Mr. Donald Denkhaus increased his stake 17% by purchasing 20,000 shares at $3.41. His total ownership is now 140,000. He also has not sold any shares either despite the gradual departure from his and the CCO’s purchase price. I wonder why? I’d bet it has to do with value awareness and faith in longevity of the company.
What Can We Do?
Buy the dips and hold strong. Anytime a long sells out of fear he or she forwards the short agenda. Personally as a shareholder at MSMM I will be increasing my position. After so many days of attacking the shorts will be forced to rest as not too draw scrutiny and regulatory attention from the SEC. They will also be forced to cover soon. Hopefully, collectively this will get CPRX the opportunity it needs for a retail influx to drive the price back up to the $3 range. As for our swing price target, it has been revised to $3.20-$3.80.
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