Catalyst Pharmaceuticals, Inc. (CPRX Quick QuoteCPRX - Free Report) is scheduled to report second-quarter 2016 results on Aug 9.

Catalyst has maintained an impressive track record so far. The company reported narrower-than-expected losses in two of the last four quarters, with a positive average surprise of 7.1%. Let's see how things are shaping up for this announcement.

Factors Influencing This Quarter

Given that Catalyst does not have any revenue-generating products in its portfolio yet, investor focus will remain on pipeline and regulatory updates. At present, Catalyst has three candidates under development – Firdapse, CPP-115 and CPP-109.

In Jun 2016, Catalyst reached an agreement with the FDA for a confirmatory phase III study protocol on lead candidate Firdapse for the symptomatic treatment of Lambert-Eaton myasthenic syndrome (LEMS). The company was handed a “refusal-to-file” letter from the FDA in Feb 2016 in connection with its New Drug Application (NDA) for the product.

The agency had determined that the company’s NDA was insufficient after a preliminary review. As part of the clinical protocol for the confirmatory study, the company plans to initiate a small, single-center study on Firdapse in the second half of 2016.

Catalyst is also evaluating Firdapse for the treatment of certain types of congenital myasthenic syndromes (CMS) and a specific form of myasthenia gravis. The company has initiated an investigator-sponsored phase II/III study on Firdapse for the symptomatic treatment of MuSK-antibody positive myasthenia gravis (MuSK-MG) in Feb 2016 and top-line results from this study are expected in 2017.

Apart from Firdapse, the company is looking to develop CPP-115 for the treatment of epilepsy (initially infantile spasms), and other selected neurological indications such as complex partial seizures and Tourette’s disorder. Catalyst is also working on a generic version of Sabril (vigabatrin), which is marketed by Lundbeck, for the treatment of infantile spasms and complex partial seizures.

Consequently, its R&D spending is expected to go up in 2016 due to clinical development efforts on Firdapse in the pediatric CMS population and MuSK-MG.

What Our Model Indicates

Our proven model does not conclusively show that Catalyst is likely to beat expectations this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%, since both the Most Accurate estimate and the Zacks Consensus Estimate stand a loss of 8 cents.

Zacks Rank: Catalyst carries a Zacks Rank #3. Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Note, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Mylan, Inc. has an Earnings ESP of +1.75% and a Zacks Rank #2. The company is expected to release second-quarter results on Aug 9.

Impax Laboratories Inc. has an Earnings ESP of +3.03% and a Zacks Rank #2. The company is expected to release second-quarter results on Aug 9.

Ironwood Pharmaceuticals (IRWD Quick QuoteIRWD - Free Report) has an Earnings ESP of +13.33% and a Zacks Rank #2. The company is expected to report earnings on Aug 4.

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