Catalyst Pharmaceuticals, Inc. (CPRX) Earnings Call Transcript & Summary

Good afternoon, everyone. Thanks for joining us for the session with Catalyst Pharmaceuticals. My name is Balaji Prasad, I'm the senior analyst for the spec pharma sector for Barclays. I'm pleased to have with us today the management team from Catalyst, Richard Daly, CEO; and Steve Miller, Chief Scientific Officer. Rich, Steve, thank you for joining us today.

It is an honor. Thank you.

Maybe just to level set, could you -- I would invite you to just give a brief overview of the company, your outlook for 2024 and your key priorities and what we need to look forward to for the year as things progress and dig deeper into it.

Absolutely. So Catalyst is the orphan company focused right now in the CNS space and epilepsy space. Our key priorities for 2024, really, commercial execution, really focused on patient care and access, number one. Business development, really, we are a buy-and-build company. That's where we really focus our efforts. So we're looking for portfolio expansion. And then third, we're looking for life cycle management opportunities and the products we have as well as the opportunity to do geographic expansion. Geographic expansion is done through partnerships. We don't have footprints outside of the U.S. nor do we intend to have footprint, so we look for opportunities to partner. And then last, our fourth priority is really to maintain the financial discipline that we have had for our entire existence. We are a well-disciplined company, and we continue to want to do that. So we -- really, those are the key things that we look to do and we look to build on the excellence that we've had in the past.

Fantastic. So maybe taking -- starting with your flagship product, FIRDAPSE. So it's been a few years since you launched this, and help us understand what the competitive dynamics for the product looks like, the outlook for it and the milestones that we need to look forward to in the year, yes.

So the product has grown significantly year-over-year, and we continue to look for a relatively aggressive growth of the product in the neighborhood of 15% to 20% this year and in the coming years. We have a portfolio of patients, if you will, a pipeline of about 500 patients that are diagnosed but not treated. This is a prospecting business where our sales representatives go out and talk to doctors and will build on the portfolio or the pipeline of patients. We believe there are between 3,600 and 5,600 patients in the U.S. with LEMS, or Lambert-Eaton myasthenic syndrome. And we have, to date, treated only 1,100 of those patients. So there's an opportunity to continue to grow. And with the pipeline of patients of 500 patients that are in our portfolio, we can continue to deliver on this relatively aggressive growth of 15% to 20% this year, and we believe into the midterm, well into the midterm. So we're really excited about that. We're also looking for the opportunity to grow the business in a couple of different ways, and I'll speak to the first one, and Steve will speak to the second one. We were in this -- about 3% of patients who have small cell lung cancer also developed Lambert-Eaton myasthenic syndrome. 80% of those patients don't get any opportunity to have any treatment. So we're focused on the oncology arena. They are making the oncologists aware, so that they refer those patients to the neurologists where they can get the treatments. We see an opportunity there. The last opportunity for us domestically, and then we'll go to international, Steve will highlight that as well, is in the supplemental NDA we have for our 100 milligrams. So Steve, if you want to talk about that.

Sure. We have a supplement pending to increase the maximum daily dosage from 80 milligrams to 100 milligrams per day. The 40% of our patients are already on 80 milligrams per day, and we believe a portion of those will benefit from a higher dose, the physicians believes that, and so there appears to be demand for that. And so in addition to that, we had data from a variety of sources that supports increasing it to 100 milligrams per day. So we're very optimistic about this supplement getting approved by the FDA. Ultimately, when it's approved, we believe the average daily dose, which currently for our population is 61 milligrams per day for a patient will increase by about 5% to 10%.

And PDUFA coming up for June, right?

Yes, June 4, PDUFA.

Yes. I'm sorry, the PDUFA date is June 4, that's correct.

Got it. And post the PDUFA, what is the time line in terms of expanding this launch? Is it almost imminent? Or would you require time for it?

It will not be immediate. It will take several quarters for that increase in the average daily dose across the population because they have to go in and see their doctors and titrate up to a dose that they feel is optimal for them.

You know as a physician, and neurologists generally tend to go low and slow. So the physicians will be, I think, ultimately pretty cautious. So they'll start up. And we'll see that, as Steve said, over a couple of quarters.

Of course. So Rich, I just want to get back to your comment on the patient population and the 500 diagnosed but not treated, which forms a pipeline for you. And how would you go about the other undiagnosed patient population within the -- for the LEMS space, nearly 2,900, 3,000 patients?

Just to clarify, how do we go about finding those patients?

Getting them converted into future pipeline.

Right. So when we talk to the physicians, so the -- so we have 1,100 patients who have been treated. The average physician who is treating a LEMS patient has written a prescription for one patient. So this is a prospecting business. We have to go out there and find it. Typically, I worked in a rare space in the past. And what we've seen is there's a rule -- what we would call the rule of four. So if you think there are 100 patients in a given market, you launch the product, you find out there are 400 because there -- it's sometimes difficult to identify patients. And the LEMS market is a classic example of the rule of four. Their patients are hard to find, so it takes a fair amount of work, and our team has done a great job. So we do a lot of education within the neurologist. We help them understand how to diagnose. And sometimes, there's a great deal of confusion, sometimes with myasthenia gravis and other disease conditions as well. And so then Steve can talk to you about the VGCC test. There's a definitive test now for these patients, which is a tremendous advancement, and we're working hard to get them on a standard panel. So Steve, I don't know if you want to talk about the VGCC test.

Sure. There was a test that was approved in December of 2013 that is a direct antibody test for LEMS, and it's now available as just a standard test through Quest or Labcorp or any of the other large testing companies. And so part of our sales and marketing effort is to educate the physicians that if they suspect LEMS, here's how you test for it. And we give them a test number, so they can just order the test. And in addition to that, we even order the test for free if there's any uninsured patients or patients who have insurance that won't cover it.

Okay. Got it. And in terms of the patient opportunity on -- in the small cell lung cancer side, how do you think about the relative opportunity in both the LEMS space and the SCLC space? There's around 1,500 patients, as I said, 3% of small cell lung cancer. How do you think about the relative opportunities between these two?

So we think it's -- we think there's a significant opportunity there. The challenge is the oncologist wants to treat the cancer, which we understand and is preeminent. The opportunity then with the muscle weakness that the LEMS patient experience is it's a quality of life issue, and we want that patient to be memory referred. So it's a real coordination of care opportunity between the oncologist and the neurologist. So again, it's about educating the oncologists that when they see this patient who had the weakness, and the weakness that they experienced due to the LEMS is really sometimes the first time that they have, that they actually have small cell lung cancer. So when they experience the weakness, we want that coordination of care to occur and then be referred on. And so, actually, once the cancer is debulked, there's sometimes a belief that the LEMS will resolve. But again, Steve, I think, as a scientist, can speak to the fact that this actually doesn't happen. LEMS persist.

Yes. What happens is once your immune system has an autoimmune error and has -- produces antibodies that attack tissues in your body, including your nervous system, as long as there's any antigens present that activate those B cells to produce antibodies, they'll continue to do so. So even if the cancer gets cured, the B cells producing the pathological antibodies will continue. So LEMS persist beyond curing the cancer.

Got it. And so as I speak to the oncologists, I'd imagine that considerate -- that oncologists are considerate, are aware that there is a fairly high burden symptom for LEMS in patients with SCLC. And so in terms of maybe converting those into future pipeline, what are the milestones or at least the time line that you think of, that you can target this opportunity?

So we recently worked with the NCCN to have LEMS added to the diagnostic continuum of small cell lung cancer, and we continue to work with NCCN on the education. So we're looking to have the physician move that patient to the neurologist as quickly as possible. We've experienced a fair amount of success there. Obviously, we think for the betterment of the patient, we would want that to happen as quickly as possible, and we'll continue to work on the education there.

Got it. And maybe shifting gears towards the IP side. Clearly, the orphan drug exclusivity expires next year. And you've commented that you expect IP, that other IP that you have to take it up to 2037. How solid is this IP defense for the product?

Great, great question. So Steve, our expert on IP, so I'll turn it to him.

Thank you, Rich. Yes. We feel that the patents are very solid patents. They actually span 2 different invention classes. There's a total of 6 patents listed in the Orange Book and 3 additional patents that can be enforced as needed. And so currently, there are a number of ANDA filers who have filed Paragraph IV applications. They were sued in March of 2023, and I really can't comment on the specifics of the litigation because it's just a bad practice to do so. I can tell you generally what goes on in the business with regard to patent cases like this. Typically, 80% of all patent suits are settled within 12 to 18 months. Of the 20% that are not settled, they go to court. And ultimately, the brand wins half the time and the generic wins the other half of the time. So what that means is that the brand will have a very favorable outcome 90% of the time, where they get to keep most or all of their exclusivity conferred by the patents. And 80% of the time, there will be a settlement that occurs in 12 to 18 months.

Got it. Probably hypothetical, but I would imagine that you would expect to have a similar kind of outcome on this. But if there's a settlement. what would...

Yes. Interestingly, these patent suits are very cookie cutter, the way they go on. There's so many of them in the industry. And so as a result of that, it's a fairly tight distribution. And so statistically, most of the people have settlements in the range that I just described.

Got it. Maybe shifting gear towards the other lever that you mentioned of international expansion into Japan and Canada. Speak to us a bit more about how the expansion will play out and the impact on medium-term growth.

Sure. So we're -- actually, FIRDAPSE is approved in Canada, so we work with our partner there, KYE. And we're selling actively there. And we have a submission, which has been accepted for review in Japan for FIRDAPSE with our partner, DyDo. And so Steve is working with that organization -- with that company to accelerate -- not accelerate, but to facilitate that approval. So Steve?

Yes. They actually filed an NDA in December of last year. The priority review cycle time in Japan for an orphan drug application is 9 months. So in late fall of this year, we expect that to be approved. And we expect to launch in Japan in very late '24 or the beginning of '25.

And the thing that's really interesting about the acceptance of that filing for us is the acceptance. It expands our rights in LatAm and APAC. So now we begin the opportunity. We have the opportunity to expand our business through partnerships in China, South Korea, Asia, Colombia, et cetera. So we're beginning those discussions as well.

Fantastic. We'll look forward to updates on that. Shifting to AGAMREE. Can you speak to us a bit more about the product, entire dynamics with the DMD market and the competitive landscape there?

Sure. Absolutely. So this is a very exciting opportunity. So steroids are the backbone of therapy for patients with Duchenne's Muscular Dystrophy, and we are really excited about this opportunity. As everybody knows, this is not a prospecting market. These patients, the 11,000 to 13,000 patients are -- 95% of whom are diagnosed, 90% had been on a steroid at some point in time, 70% are currently on a steroid. The market breaks down that of those 70%, 60% are on a generic prednisone and 40% are on EMFLAZA. So we have a great opportunity here with the target product profile that we have for this product to really come in and, I think, make a difference in this community. And we're excited to be launching this product. We will be launching this product this month, and we're excited to bring that to market. The patient community is highly aware of this. The caregiver community, parents are highly aware, and the health care practitioner community is aware as well. So it's a great opportunity for patients. It's a great opportunity for the company and the caregivers as well.

Got it. And while there clearly is a CNS overlap between both of these products, again, very different market dynamics, being prospecting and going after a larger group of patients. So help us understand the commercial overlap and the advantage or otherwise that you would have with selling this product.

So there's actually a 40% overlap. The thing that's really interesting about the DMD community is you can look at 100 centers in the -- where the -- where DMD patients get their meds, and 250 physicians represent 95% of all prescriptions in this market. Highly concentrated. So we actually use the same organization, the same sales organization of 16 sales representatives that sell FIRDAPSE to sell AGAMREE. So we can be a highly efficient, highly effective organization. So we're really excited here to be bringing this to market.

Got it. And I think I have a similar question on the IP landscape, while the orphan drug exclusivity goes up to 2032 or 2031.

2030.

Yes. So speak to us about the IP beyond 2030 on those.

Sure. AGAMREE has 6 patents listed in the Orange Book, and there are other patents that are under development. The current patents listed in the Orange Book are 3 patents for the primary indication, the treatment of DMD, 1 patent for cardiac safety and 2 patents for the polymorph, API polymorph. Those patents currently span from 2029 until 2040. However, I want to point out that the 2029 patents are eligible for 5 years of extension under the Patent Term Restoration Act, and we've applied for that. And so one of them will be extended to 2034.

Got it. Great. So it looks like there's a fairly long commercial life for the product.

Correct.

So as I think about the near-term launch in terms of key commercial milestones, how do you think the ramp of this launch curve is going to look like?

I think the ramp will probably -- I think a good surrogate for this would be EMFLAZA. I think that's a good ramp. So I think if you think about how this will be uptake of the product, I think that's a good starting point. And we're very focused on the successful launch of the product. But we're also, simultaneously, while the commercial team is looking at that and focused on that, a broader team is looking at one of the life cycle management opportunities for the product. How can we make this product a broader use product for the orphan community? How can we make this product the steroid of choice in the orphan disease? Is that possible? And we're investigating it now. So we're looking at that. So hopefully, taking that curve and actually losing that curve over time.

Got it. Shifting from AGAMREE, you want to focus on your epilepsy franchise, the third pillar that you have. So I think, again, a much larger market. I mean, really scaling up from your indication, 3-plus million patients. So how would the market opportunity and the competitive dynamics differ here and what you'll see for the ramp again?

Yes. So epilepsy market is a retail market. And the purchase of FYCOMPA was one that was done when the company was really looking at FIRDAPSE as its only commercial asset. And so we gained access to a couple of things with the purchase of FYCOMPA. Number one, we broadened our inputs, our opportunities in the CNS landscape, which we thought was really good. Number two, we got access to incredible talent pool of marketers and salespeople. So highly competitive market, highly complex market. It doesn't get any tougher than being in the epilepsy market. We all know how competitive this market is. It's incredibly competitive. But also we were looking for diversity and stability of income. And here's a product that's 10 years old and delivers consistently. And we're looking to build our balance sheet for future acquisitions. I said at the beginning, we are a buy-and-build company. And relying solely on one asset, FIRDAPSE, for stability of income, it's not going to -- you just can't do that. You need to be building it out. And we feel like we've delivered on that promise with the delivery -- with the acquisition of FYCOMPA, but also the acquisition of AGAMREE. So we're looking to continue to build out those kinds of opportunities again. And we believe not only it was a good transaction from a talent viewpoint, but from a financial viewpoint as well.

Got it. And so as I think about building this franchise further into adjacent areas, can you maybe speak a bit more about your plans to expand into the rare disease side of epilepsy or adjacencies that you see?

Sure. So we are an orphan company, first and foremost, that's in the CNS space. And we look at the epilepsy opportunity. If there's opportunity there, we will pursue it. We will pursue CNS as well. But one of the things the company in our position has to do is we have to take a broad stance, and we have taken a very broad stance in the orphan space. And when we increase the aperture, we see lots of opportunity that we can go for. So we're looking at CNS, we're looking at epilepsy, but we're looking at orphan. We believe our infrastructure is what makes us a successful company. We have the ability to get patients on therapy and help them stay on therapy. That structure is really important to our success, and that's applicable across the universe of orphan conditions. And so we can work just as effectively in orphan metabolic, orphan cardio, orphan -- you name it, we can have a highly effective and efficient sales force out there and support -- back office support as well. So we're looking at orphan CNS and orphan adjacent as well. So we see ourselves in that manner.

Got it. Finally, I have a similar question again. Do you have to -- another LOE coming up on May 2025 for this product. I'm sure you'll get lots of questions around life beyond this. So how -- again, IP, durability, moat around this product, how do you position this?

Sure. Basically, that's correct. The composition of matter patent expires in May of 2025. And in addition to that, we have a polymorph patent that expires in July of 2026. We are evaluating whether or not to sue the ANDA applicants who filed many years ago and determining whether or not it actually makes sense to do that. There is the potential to increase the exclusivity beyond the May of 2025. But at this point, it's only a potential and it's under evaluation. Did you want to speak to the tail? Or should I?

No. You tell.

In addition to that, I wanted to point out something about epilepsy drugs in general. They have a tendency to have very good patient loyalty for medical reasons. And so when generics actually come on the market, patients are usually reluctant to switch because generic drugs are allowed to be generics if their pharmacokinetics is anywhere from 80% to 125%. And as a result of that, a patient who's well controlled with no side effects on FYCOMPA could potentially take a product that has 80% bioavailability and suddenly have seizures or could take a generic that suddenly has side effects when they had no side effects before. And so as a result of that, in the long history of epilepsy drugs in this specific problem I just described being a problem in the past for other drugs, patients have a -- and physicians have a tremendous reticence to switch patients even off of a branded pharmaceutical to a generic. And as a result of that, the genericization of epilepsy medications is a fairly gentle tail. They lose their market exclusivity relatively slowly relative to other products that go generic.

We believe we'll lose share, clearly, but it won't be a traditional retail share loss. It's a more gentle slope. There's a stickiness to it, if you will.

Got it. Understood. In the interest of time, the last question probably, again, something that you alluded to a couple of times in terms of building the portfolio further. I mean, today, you're sitting on the cash position of around $140 million, so help us understand your BD prospects, both partnerships or licensing.

Sure. We finished the year with $137 million on the balance sheet, and we did a capital raise at the beginning of the year of $140.1 million. And then we -- every quarter, we add about $40 million in profit to the balance sheet. And we do this solely for the purpose of obviously buying more products, so we can help more patients. That's what we do. We did the capital raise because business development is episodic, and we wanted to make sure that we were ready. We had dry powder, and this is what we're doing. And so we have a slate of opportunities we constantly look at, and we are evaluating because we believe that we have a great structure that can add more value as we take on more products. So we are constantly looking, and we are doing so now.

Great. So Richard, Steve, thank you so much for your time. It's pleasure hosting you here and also wish you a very productive conference. Thank you for joining us again.

Thank you. Thanks for the opportunity.

Thank you.