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

Ladies and gentlemen, the program is about to begin. At this time, it is my pleasure to turn the program over to Jason.

Good day, everybody, and thanks for joining us at the next company presenter at the BofA CNS Day event. And I'm pleased to be introducing Catalyst Pharma and CEO, Richard Daly; and Chief Operating Officer and Chief Scientific Officer, Steve Miller. So gentlemen, thanks for joining us. And I imagine we'll have a pretty lively discussion on things ranging from BD to the AGAMREE launch to all things with your core business for LEMS as well. So maybe as a starting point, I think strategy BD is a good place to start. Since I've been following catalyst, BD's always been kind of a critical component of the story. Assets that you've brought on board, you've been able to do it and do it in a way that hasn't put leverage on the company. And so that's -- I guess then the question becomes the ability to scale that model and to continue to bring in assets that could accelerate the growth profile, diversify the business and all those things. So maybe for starters, why neurological disorders and neuromuscular disorders as a therapy area of focus? Is this an area you feel like, hey, we've got the in-house expertise, and so we really want to leverage that? Is it just an attractive category for therapeutic opportunities and you see just an opportunity to scale there. Maybe if you could just sort of level set on first your TA focus and then we can go drill down into that.

Well, Jason, thanks very much for having us. We really appreciate the opportunity to be with you today. So thanks. Yes, the CNS area is very attractive. And when we entered it with FIRDAPSE, we're very excited to be in it, and we have internal expertise on it. As you know, we purchased the drug. We got the drug in-house. We are a buy-and-build company, and we developed a drug. We brought it in-house, developed a drug, took to the FDA and got it on the market. It was a very, very successful launch and continues to be a very successful product. We like the CNS space. Drug has been on the market for 5 years. And in that time, the CNS space has changed pretty significantly. If you look at a lot of the forecast about what's happening in the CNS space, a lot of the opportunity in CNS has got to come from movement disorders. And a lot of larger companies are really looking at that opportunity to play in that space. And that's great for, I think, for patients. For us, we think we need to actually look a little bit more broadly to be able to compete for a company our size to stay in the orphan space and look for opportunities and continue to build our company. We like CNS. We have internal expertise, but we believe our infrastructure and the way we go to market and the execution story that we have, we believe we compete across the board in the orphan space. And so we continue to look for opportunities, not only in CNS, but also in areas that are adjacent to CNS in the orphan space.

Got it. Okay. How about the deal landscape right now? Do you feel like it's asset-rich? Do you think that there's -- how is the temperature on seller willingness to part ways with assets? When we just did a recent M&A analysis and some of the trends seem to be that we're seeing more privates getting sold. Maybe that's a function of a more challenging IPO market for some of those companies. So just kind of curious what you're seeing and if it's a healthy environment for somebody that's on the prowl for quality assets.

We think -- we believe it is a healthy environment, especially as we increase our aperture for these opportunities. At any point in time, we're engaged in a number of discussions, multiple discussions with folks whether or not the seller has a realistic view of the value of their asset and whether it fits with us, those are things that we always gauge and we're looking for those opportunities all the time. And so having a discussion about where it fits, what's the appropriate price point, those kinds of things, that's always ongoing. And quite frankly, that's resident in any market at any point in time. But we are seeing opportunities out there, and we're going to continue to -- we're going to continue to discriminate and make sure that these opportunities fit us and we can do the best for our partner when we go forward.

And how important is it to do another deal in, say, the next 12 months or so?

We look at our success with FIRDAPSE and the success we've had in bringing that product to market into the 15% to 20% growth year-over-year, continuing 5 years in, we're really happy with that execution. We look at FYCOMPA. FYCOMPA was essentially a transaction, a financial transaction for us in the epilepsy space. It gave us diversity of income. We like that. We integrated that very quickly. We digested that deal very quickly. We brought a lot of good talent with it as well from the sales side and the execution side. And then we look at the AGAMREE launch, and we see that, again, execution. So we believe we've digested these opportunities and integrated them into the organization in a really solid way, in a very, very quick way. And so we believe we can bring another product on, but I think it gets down to fit. How well it could fit and does it help us get where we want to go? Is it immediately accretive? Is it nearly immediately accretive? And does it fit where we want to go?

Okay. And I guess for investors thinking about the business model, I know at different times, maybe it was past management regime talking about like Horizon Therapeutics as a company that maybe is a template to look at. Do you feel like deal activity is a source of synergies for you as a company? Or is it just more a mechanism for growth feeding the pipeline than it is necessarily like a synergy play?

I think it's a growth opportunity. We run a really lean shop. Steve can speak to this as the Chief Operating Officer as well. We run a really lean shop, and we think that we can bring value to these new opportunities and not necessarily from an acquisition standpoint, but from a partnership standpoint, but open to acquisitions as well, looking for that best opportunity that fits right now. We want to work our way and thinking about the Horizon opportunity or the Horizon model work our way back in that pipeline. We want to give you the opportunity to value the future and be able to put a PTS on our future as well. And so that we can really get that multiple that really makes a lot of sense for our business. And essentially what Horizon did as well. So we really think that we can do that going forward. So we're really confident in our future.

Okay. In terms of the next step in the evolution of the company and the ability to source in drugs with even larger peak sales potential. I don't know if you think that, that may involve leverage and thinking just about the company's just dry powder and capacity to do the deal, how would you frame that for investors?

So we -- you know we have no debt right now. We're bringing in close to $40 million a quarter on the bottom line. We feel really comfortable. We have almost $400 million on the balance sheet to put to work. So combination of the opportunity to look at deal size, we think we're really comfortable doing one deal or multiple deals to really bring balance to our income statement and strength to the company to go forward to do incremental deals as we go forward. We could do upwards of $600 million, $700 million, $800 million in total deal size with multiple deals as well. So we feel really comfortable in that range right now. And then obviously, as we bring more income in, we'd be looking for even greater opportunity going forward.

Maybe shifting gears to the AGAMREE launch, which is a big area of focus, I think, with investors. And anything you can share as it pertains to early launch observations, how it's gone relative to expectations? Is EMFLAZA still is a good launch comp when you think about patient accruals and just sort of our revenue trajectory. So I'll leave that with you guys.

Yes. So Steve can speak to the product profile and how it's playing out in the marketplace. But I think EMFLAZA is a good launch surrogate for us. The key difference between our launch and the EMFLAZA's launch besides product profile is when EMFLAZA launch, there was no countervailing voice in the market. EMFLAZA launched into essentially a greenfield. They launched with prednisone as the only competitor, and there was no voice going against them. We're launching into a market where we not only have prednisone EMFLAZA, but also generic EMFLAZA. And when we frame it up that way, this launch is going extremely well. And to your point, I think from a patient accretion or patient accrual standpoint, I think the EMFLAZA launch is a very good surrogate for us going forward.

You used the term counter voice. So is PTC active still in sort of promoting EMFLAZA even though this is the generic available? I know that there's some -- you hear some things about stickiness of the brand and maybe that market is not genericizing that efficiently. So I was just curious if there's something going on that's unique there? Or are you really the only brand and the only voice in the steroid space?

Our understanding is they're out there and they're promoting the product yes. So they're there.

Got it. And the current mix of patients, I think with -- I guess it sounds like there's a pretty healthy mix of both, right, EMFLAZA and prednisone. And if you can maybe speak to that dynamic and yes, maybe we'll go from there.

So we have a proprietary pharmacy where we source all of our patients through a single point. And so we have a great deal with insight into the patients. Obviously, it's in a HIPAA-compliant way, which is fantastic. So we get this great data-rich environment. And so we've seen since we started enrolling patients 3 months prior to the launch of the product. We launched -- we started rolling December 1 of last year, launched on March 13. We started seeing a split on how the patient mix coming in, where the patient is sourcing from. And when we launched or are to launch, we thought we would source most of our patients from EMFLAZA, which we believe has about 30%, 35% of the market. Turns out, we're getting about half of our patients from EMFLAZA and half of our patients from prednisone. So instead of playing in that 35% of the market, we're actually playing in 100% of the market, which is tremendous. I think that speaks to a tremendous upside opportunity in the long run. So that not only happened prior to the launch as we were loading the patients into the queue, but it continues today. So we're really excited that this is an ongoing opportunity for the brand.

Okay. And I know since we last spoke on 2Q update, it sounded like the payer landscape was largely single generic step edit. Here we are in the fall when companies typically have a better line of sight into 2025. Is it still the operating assumption that most plans will be more of a single generic step edit for AGAMREE?

Great question. So when you look at the shape of this market, 11,000, 13,000 boys and young men had this condition and 90% of them have been treated at some point in time. So they've experienced prednisone. They've likely experienced EMFLAZA. They're not going to go back and experience generic EMFLAZA. So by the time they get to us, they've already stepped through 2 things. So we're not experiencing any significant pushback because these young boys and men have experienced the drugs that are available for them already. So we don't have any significant change going forward.

And so the way that these policies -- I haven't looked at a specific policy, but it's more of a lifetime thing, right? Like you've been on prednisone 2 years ago, 3 years ago, that constitutes a step through it's not in the calendar year such that like when everything resets GEN-1 hit to trial, a specific generic option?

I think it can vary by plan, but it would be unusual that a physician would allow that to happen in my experience that they would say that this young man has been on this product before it didn't work for him. We're going to go to seep through. Remember, there are about 100 centers of excellence and about 250 physicians. And generally, these young men stay with their physician for a long, long time. So the physician knows that they're intimate with these young men and their treatment history. So it's really good, easy for them to defend their decision to the insurance carrier.

And I guess, the recent broadening of the label for gene therapy, just curious at all, I mean, typically, when we talk to doctors, they say that the availability of gene therapy is not really going to impact how they use steroids at all, but figured I would just ask, given that you guys are out there, you're monitoring the space a lot more closely.

Steve, do you want to take that one?

Sure. Thank you, Jason. The comment you just made about what the doctors are saying, that's exactly what we hear in the field. Also, that steroids remain the backbone of therapy for these patients. And our expectation is that with the use of the gene therapy that they'll be using whatever the background of steroids that they continue to need. These gene therapies also require immunosuppressive dose of steroids. And typically, if the patient is [indiscernible] what a physician would do is need them on a [indiscernible] would do is need them on a GAR and additional prednisone to take them up to an immunosuppressive dose for a period of time.

Okay. In terms of where we're at year 1 of the launch story and sort of how that evolves in time, is there additional data generation that's critical to the adoption story? Or do you feel like you have the information largely on hand to educate providers? And so really, it's just about familiarity, blocking and tackling, getting in front of doctors, making them aware of the AGAMREE value proposition at this point?

We believe that the product is significantly differentiated from competitors. And there are 4 essential things that will differentiate the product. One is behavior, and the physician can see that right away. So there's a certain tenancy of these young men to get -- develop aggressive tendencies on steroids. And you can see behavior improvement of these young men almost immediately according to what we're getting back from the physician. But Steve can speak to the other 3 benefits that will take time in the SUMMIT study that we put into place put in place to track the benefits here that we expect to see over time. Steve?

Yes. As Rich mentioned, we have this long-term study going on. It's targeted for about 5 years, could actually go longer. We'll be analyzing that data approximately once a year, but we'll be looking at it on a blinded basis continuously. Obviously, you give up Alpha every time you do an analysis, you want to limit how many times you do the analysis. But having said that, we'll be looking at the data periodically hoping at the very least to publish additional beneficial data about the drug and perhaps update the label for the product as well. With regard to the other benefits that are seen, there's already information in the literature about bone growth improvement using vamorolone to treat DMD relative to prednisone. And we expect to see burn density improvements and cardiovascular improvements as well. And there's a number of endpoints that are being monitored in the SUMMIT study where we will gather that data and over a period of time, have something more material to say about the cardiovascular safety relative to other strains for gaming.

Yes. Ultimately, how those data play into the launch? I imagine that there -- even if you look at the EMFLAZA launch like there just are always going to be, I guess, legacy doctors who hold out and use prednisone for really long time and maybe have prescribing tendencies that are more difficult to shake or change, if you will. So is this something that you feel like helps with some of those doctors who may be a little bit more "stuck" in their ways? Or how would you think about the data potentially being leveraged?

Well, I would think that the data would be very helpful for the more traditional doctors who decide I'm going to use prednisone. That's what I've always used. Our medical science liaisons will be out there actively informing the doctors about what's [indiscernible]. One of the nice things that is -- are the benefits of these patients is that it's a very small community of physicians who treat those patients and a number of them participating in the clinical trial and those doctors talk to other doctors or they are in institutions where there's other DMD doctors, and they talk to each other about the treatment of patients. The bottom line is during the clinical trial and the safety follow-up phase that followed it, doctors actually have the opportunity to ensure clearly the improvement in behavior because that shows up right away. But there was even some patients who on the AGAMREE long enough for doctors to see a notable difference in birth relative to what they normally see for corticosteroid treatment. So there's already a number of doctors that are enthused about using the product.

On that point, Jason, by the end of the second quarter, 80% of other centers of excellence had written a prescription at 140 of the 250 target physicians had written a prescription. So we're seeing tremendous depth here and breadth. So we're really excited about the uptake. And there are going to be some physicians who say, "Hey, listen, I'm not really that interested or let me see more data. But our focus right now is on increasing the branding, expanding and then going deeper into these institutions. But we're having tremendous success so far. So we're really excited about the success of the product.

Yes. Within that 80%, because I know leading into your second quarter update, I think you'd mentioned that a certain proportion had written at least one script. Can you share anything more as it pertains to sort of the depth that you're seeing? Is it clustered in a smaller subset? Or is it pretty evenly distributed? And it's more about just sort of broadening the impact within that 80%? Or is there -- like in any disease area, right? There tends to be a top 20% that really can drive a lot of the business.

Yes. Right now, it's more along the lines of a Pareto, if you think, you're getting the early adopters, which is classic in my experience in the launch side done. You're getting the classic rapid adopters, early adopters in and they're having influence over the other physicians with whom they work. And we're seeing that the spread, and it continues over time. So we're really happy with where we're going with this.

Got it. Okay. So what else -- can you maybe just discuss your peak sales outlook and some of the assumptions that are embedded in that for AGAMREE?

Well, so we haven't given any guidance on peak. But one of the things that we -- I think is really important to talk about is right now, we're getting generally older young men or patients at this point in time. And so we expect over time, and this is a good thing. And so I just want to phrase it and position as such that the -- we expect over time as physicians get more comfortable and we get earlier -- get the later adopters in here into the queue, we'll expect that we'll get younger patients, and this is a product that's dosed by weight. So we'll get more patients, they'll be lighter and the average price of the product will likely come down. But that's good because those patients will generally be on for a longer period of time. So we're seeing a higher price at this point in time, but it will come down over time, not by much, but it will come down slightly, but we'll have a greater pool of patients on for a longer period of time. So we're excited about this, and we're getting great insurance coverage, almost 89%, almost 90% of the patients are paid for at this point in time, and they're getting their insurance approved in less than 30 days. So they're getting -- we're getting a really rapid turnaround. So we're excited about where we're going with the product.

You make an interesting point about, I guess, younger, maybe patients with less -- way less but staying on drug for a long period of time. One trend that's happened in the DMD space, I believe, is that doctors have kept patients on steroid longer than they might have otherwise, right? So I think maybe historically, if the patient had become nonambulatory, it might have been a decision point to maybe take the patient off. But now I think the realization that like that you can derive improvements on upper limbs and things like that even if the patient is nonambulatory. So I guess thinking about just the space more broadly and how maybe treatment rates have evolved? And maybe how you think about like durations of therapy. These are concepts I imagine that are fluid that you're still monitoring data to better understand. But it does seem like there are some moving parts that maybe are worth of discussion that like could be beneficial to the revenue story of AGAMREE?

And I think this is another great point. So 90% of patients in this -- in DMD have been on a steroid at some point in time, but only 70% are on today, which says there's a gap. And so what is that gap? And so the gap is that generally, we call it the problem of the TOOs, T-O-O. Physicians start too late, they dosed too low and they stop too soon because of the behavior the bone growth and the bone density and some of the cardiovascular issues. Those are all the things that Steve talked about. If you can address those issues, there's an opportunity for the patient to start sooner, get the right dose and stay out longer. And especially when a patient, as you pointed out, Jason, if a patient becomes nonambulatory, the patients and the physicians and the caregivers we talk to talk about the window that the patient has, this young man has as he becomes nonambulatory. It's the ability to control the wheelchair and the ability to control the mouse because the view of the world then becomes, how do I move about the world and how do we interact with the world. And the ability to use your hands becomes critical to success. And so keeping that patient on steroids and maintaining as much movement capability as possible is foundational to success for that young man. So we see this as a great opportunity to use Summit the SUMMIT study to bear out that the drug is making a difference. And you can start earlier, keep them on the right dose and keep them on longer.

Right. And I guess, mindful that you haven't guided to peak sales, and I should have known that or recall that. But I believe that there was some commentary that maybe a peak penetration at levels of EMFLAZA, which were 30% to 40%, maybe as a reasonable base case. I don't know if that's something that's evolving or something that has the potential for upside, you see a greater ability to play in both the prednisone segment and the EMFLAZA segment?

So when you think about the situation where I think AGAMREE has the opportunity to foundationally change the marketplace. So only 70% of patients are treated. So I think there's upside there. I think we have a better profile. So I think when we say what's the market share in an expanded space, we could end up with less market share, but bigger opportunity. We could end up with more market share because we have a better drug. We haven't guided even on market share, but I do think that the uptake in the first couple of years of launch, I think the uptake is probably pretty good. I think the EMFLAZA model is probably a pretty good one for us.

To the point about weight and weight base and perhaps on a revenue per patient basis, your point is, maybe that's a little lighter in the early years of the launch. If over time as these boys grow, I'm trying to get a sense of like what perhaps revenue per patient could look like on your therapy, say, versus EMFLAZA during pregeneric levels? And if there's a benefit, right, in terms of kind of overall net pricing per patient? And how you'd sort of frame -- I realize it's probably a complicated question with a lot of moving parts. But if you were, say, today where you sit versus perhaps or broadly penetrated into the market, does that change in a meaningful way?

I think in the first couple of years, I think it's probably pretty similar because I think that the benefit that EMFLAZA brought to the market, the perceived benefit they brought to the market versus prednisone. I think they had a good uptake, a solid uptake, and you got those patients that were looking for something different. Those patients who were frustrated. And so you probably got the patients who are older and thus heavier who experienced a lot of prednisone challenges. And then it works its way backwards. I think that's a natural order and the natural cadence of the market, if you will. And I think we'll probably -- you can, again, probably look at EMFLAZA as a good surrogate for this.

Okay. With EMFLAZA, I believe that, that was a drug that effectively saw a lot of discounting and rebating a gross to net spread that widened later in the product life cycle. Is there something inherent in this marketplace with sort of the payer mix as you get bigger and more successful that where there's a greater toll, if you will, that drives that gross to net expansion? Or do you feel like sort of where you operate in years one through 3 is a good operating assumption for like the long run? .

I don't know of anything at this point in time that would change -- the patient population is very stable. It's about a 50-50 split between Medicaid and commercial. I think you'd have to make a choice based on the competitive set to want to do that. I don't see it changing all that much in years 1 to 3 and then beyond.

Okay. And then maybe last question on AGAMREE unless there's anything else that we feel like we've missed and you want to touch on. But one of the assumptions I feel in the Catalyst Pharma valuation model that there's a lot of sensitivity around is how you model different exclusivity runways, right? So -- and we can get to that with FIRDAPSE, but with the AGAMREE, you have at a minimum 7-year orphan exclusivity. And so that's great. Maybe how you think about this asset and its runway and sort of what you'd say is your anchor patent and where that gets you?