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

I'm here with our next company presenter at the BofA Annual Healthcare Conference. I'm pleased to be introducing our next company presenter, Catalyst Pharmaceuticals; and Richard Daly, President and Chief Executive Officer; and Steve Miller, COO and CSO. My name is Jason Gerberry. I cover Smid cap Biotech and Specialty Pharma at BofA. And -- so Catalyst, commercial-stage, rare orphan-focused company in growth mode and as a sort of a license and acquisition model. So we can kind of jump into the discussion of the existing assets and where you're headed in terms of ramping and where those products can take you and what the future looks like in terms of strategy and capital deployment as well.

So maybe Richard coming out of 1Q. I don't know if there's any kind of high points you'd want to flag as it pertains to where the company has come. You've been with the company a little over a year now, right? And kind of where you see the company having come in that time frame and where you see it evolving to?

Yes. And thank you, Jason, for having us here. We really appreciate it. So we had a really successful quarter, building on a very successful year in 2024. Record sales, record earnings, FIRDAPSE did a phenomenal job in the quarter. We had our -- that's for Lambert-Eaton myasthenic syndrome. And then we had AGAMREE for Duchenne muscular dystrophy, which is first full first quarter on the market with $22 million in sales. So we continue to source patients from the entire market, the generic market and the branded market. And then FYCOMPA, which actually is an epilepsy product will go generic actually -- could see generic incursion as early as next week, the end of next week, actually had a very, very strong quarter. So the things that I think were most interesting about the quarter was FIRDAPSE grew 25% over first quarter last year. We forecasted about 15% to 20% growth, but the 25% growth was not actually that surprising. What we saw in the first quarter of last year was the change health issue and that actually depressed sales a little bit. But when you back out the issue of change health, we saw about a 15% to 20% growth quarter-over-quarter, which is what we expected. We had about $1.2 million in sales last year for AGAMREE. We launched on March 13, and we see $22 million this year, which there's a little bit of seasonality around the first quarter. So we had a little bit of an increase in the fourth quarter. So good performance on the product. And we do see a little bit of what we call a [Lividus] queuing. So as patients get ready for a [Lividus], they don't want to switch they're steroid, but we are seeing good switching of steroids, as I said. So we are seeing some delay in the switching. But we did -- we are seeing, as Jeff mentioned, Jeff Del Carmen, our Chief Commercial Officer, mentioned on our call, we are seeing some pretty good performance in April. So we're seeing some really solid performance. And then the most surprising thing actually was the performance of FYCOMPA, the prescriptions for FYCOMPA are right on trend. It's growing about 1% or 2%. So it's not a prescription issue. The product overperformed by about $5 million -- but that's actually because the wholesalers change their fees, and we got a favorable fee structure from the wholesalers. So not an enduring thing. So we just see the product continue to perform very, very well.

Okay. So FIRDAPSE and AGAMREE are sort of your growth anchors. Looking forward for FYCOMPA, we'll have some natural erosion, as you mentioned, with the generics, and so we'll focus on FIRDAPSE and AGAMREE. I guess, interestingly, with FIRDAPSE, as you said, kind of this mid-teens growth that you're achieving product has been on the market for a decent amount of time, north of $300 million in sales. You've talked about this being a $1 billion market opportunity. I'm wondering if you could sort of frame where we're at in terms of the life cycle of this product, a lot of rare orphan drugs do take time to patient find to build these markets. Oftentimes, we see a lot of rare orphan drugs eventually get to 50% to 60% penetration rates. So do you feel like the patients are out there, they're diagnosed or there needs to be more effort to get more patients into the treatment pool. What are some of the battles and some of the key levers that will make this truly a $1 billion market opportunity to keep that mid-teens growth sustainable?

Great question. So think of it as 2 separate markets. We think of it as 1 molecule but 2 different brands. So there's an idiopathic or noncancer side, and then there's a cancer side. A lot of our focus in the first 6 years was on the idiopathic side. You have to find these patients as a prospecting market. You look for the patient, you build that patient. The average physician see 1 patient in their entire career. So there's a lot of education that has to happen. The treatment journey is 6 years from first symptom to the actual getting on FIRDAPSE. The cancer side of the business is quite different. It's highly concentrated. And we went back and restructured our thinking about how to approach this market over the last 18 months and looked at it and said, "Hey, if we focused as 2 different brands, same molecule, different brands and approach the market in unique ways, these 2 markets in unique ways. And what we saw was testing. So VGCC testing is available, but it was very difficult. And so now we have frictionless testing. We were not in contracted with the national lab. Prior to that contract, a patient would have to leave the office, get the test and maybe a month or 6 weeks later, the test would come back. Now the patient gets the test in the office and the test comes back in the oncology office before they come back for the next oncology treatment. So we're looking at this as a way to actually accelerate growth in the oncology space because instead of just 1 patient in their entire career, the oncologist sees multiple patients, because it's associated with small cell lung cancer, about 3% of small cell lung cancer patients are diagnosed with LEMS. That's 900 patients per year. So we see this as a great opportunity if we can make a frictionless testing, and we can supply the drug through the office, through the pharmacy in the office. So that's really what our accelerator is for that. And so we see this 15% to 20% growth. So getting to the $1 billion we think we can do it on both sides of the business for LEMS.

So what does that look like on the idiopathic side? Does it look like those doctors who see 1 patient in their life now start to see 2 and that more patients maybe kind of funnel in maybe patients incorrectly diagnosed with myasthenia gravis, for example, and that might constitute half of your incremental growth to that $1 billion target and the other half may come from the cancer LEMS side?

So we think we can accelerate the growth on the cancer side. We also think we can use the myasthenia gravis opportunity. There's a lot of potential of myasthenia gravis. As more patients get diagnosed with myasthenia gravis, more patients will be misdiagnosed with myasthenia gravis. They will fail myasthenia gravis therapy and then move on to the next therapy, which eventually they'll get to, we think, FIRDAPSE. But we can also use artificial intelligence and machine learning to seek those patients out and get them on. So we're really looking at those opportunities as well to shorten the patient journey and bring that. So we're really focused on those -- on both sides of the business do that to accelerate it.

Okay. So share of growth is maybe split between the 2 opportunities. Is that a fair way to summarize it? Okay. So let's see. So -- is there a meaningful difference in, say, the cancer LEMS versus idiopathic I would imagine there is in terms of the duration of treatment with idio. Imagine you may get a patient for life, whereas with cancer LEMS, you get a patient that is more of an incidence-based market.

It is. So you do get a patient for life. This is a highly symptomatic, if I can say that highly symptomatic condition, the patients persistence of a patient to stay on therapy. We have about 90%. The patients get on the drug, they stay on the drug if you're idiopathic. So you're going to have that patient on for a long time. On the cancer side of the business, a patient with small cell lung cancer on average those between 7 and 9 months, the patient with small cell lung cancer associated with LEMS lives 17 months. Nobody knows why. It's not understood. But they live twice as long. And the physicians that we've encountered as we've restructured this market and our understanding of the market, they just assume that the patient is not going to live that long. When we say to them, when we talk to them about how long they're going to live, they say, well, I have to think about that patient differently. I have to think about -- well, I need to think about their quality of life. So yes, so we can see this opportunity. And then you have these 900 patients entering the market every year. These 2 segments of the market are the same size, higher turnover, if you will, because patients don't live as long on the cancer side, but you can expect that they'll -- just more of a churn in the marketplace.

You said roughly 18 months for the cancer LEMS.

Yes, 17 to 18 if you have cancer-associated LEMS, yes.

Okay. And then thinking about the time getting maybe to grow this to $1 billion market if you continue this kind of mid-teens growth over an 8- or 9-year period, you could get there, but do you see kind of eventually as you get to bigger numbers, maybe a growth slowdown and with the IP settlements to 2035, that may play a key role in just giving you a longer runway to get to that number?

So getting -- so being alone in marketplace. So we still have 2 other litigants in play. And we're working -- obviously, we want to settle those cases as well. But when you take Teva out of the mix, which is what we did in January, that's a really, I think, a good signal here. But it is, Jason, what you I think you're referring to is the law of decreasing increases over time. We have a bigger base. And you would expect as growth -- as you have a bigger base, your growth is going to slow, but you have a bigger base. And so right now, to continue to experience 15% to 20% growth every quarter over the years previous quarter on a bigger base, that's pretty impressive. And so we see that continuing. But yes, I would expect it to slow, but on a much bigger base.

Okay. And so you have this current like queue of patients that you guys have characterized as 500 or so patients that you've identified, they're not on treatment. Can you just remind us where are those patients at in terms of their diagnostic workup and identification and probability of getting treated. And my understanding is I think they're more heavily skewed to idio, right? And so the cancer LEMS rollout story, it sounds like more of a 2026 plus opportunity?

Great point. So we have, as you mentioned, about 500 patients -- at least 500 patients in the pool of patients we have identified that may have LEMS. About 75% of those patients, we think, are idiopathic. So 50% of our patients -- in any given quarter, in any given year come from this pool of patients. So we've done a really good job of identifying who these patients are and helping the physician better identify the patient and get the patient on therapy. We then even further delineate those patients into higher likelihood patients by working with the physician. Again, we don't know the name of the patient. We just can see some market data and some prescription data based on myasthenia gravis and other therapies that the patient might be on or other treatment modalities. And so we work with the physicians to say, have you considered or educational materials again because the physician only sees 1 patient in their career, there's a lot of education that has to happen. So we further delineate those patients into higher likelihood patients, usually 50 to 75 patients, and we work with those physicians more closely to bring in those patients and get them on therapy.

Okay. And maybe for Steve, just the litigation, I think you guys have an estimate 4Q or 1Q 2026 for when the FIRDAPSE litigation with the other 2 challengers could make it to mitigation, just a status update there?

Yes. So far, the judge has not actually scheduled the trial for this case. The dates you gave are actually the latest that we would expect it happen because the stay ends in May of 2026. And the judge is going to try to make sure that this case is resolved one way or the other by May of 2026, which means the trial has to be toward the end of the year or beginning of next year.

Okay.

And I'll point out also that we have settled with 2 of the litigants. We do have conversations with the others from time to time. And certainly, if they have something that's of value to the shareholders, we're going to act on it.

Understood. Okay. Maybe shifting to AGAMREE and off to a good launch. Maybe just talk about the closest launch comp that we can look to is PTC's EMFLAZA. And so how you think early trajectory compares there, how you're -- where you're sourcing your patients from, how maybe that compares? I imagine when EMFLAZA launched, the only source of patients could have been prednisone, right -- so it's probably a higher percentage wise. But has anything surprised you so far in terms of the early launch and how maybe you're looking at yourself relative to sort of the early EMFLAZA performance in the market?

So I guess the most surprising thing in the launch is that we -- when we launched, we expected we would source from EMFLAZA almost exclusively. And then we actually had an early enrollment program. We got approved in October. We started enrolling patients early before the launch in December. And so we watched them through the launch in March, and we were sourcing patients 50%, roughly 45% from EMFLAZA in this early enrollment program. Patients were signing up before they could actually get the drug 45% from EMFLAZA, 45% from prednisone. So now you're saying yourself, we're participating in the 100% of the market, which is tremendous. So the first big surprise is that this continues to today, which we think is amazing. And realize that there's a generic EMFLAZA on the market. There's more than 1 generic EMFLAZA on the market, and we're still sourcing from both parts of the market. And we don't see a significant incursion of generic EMFLAZA in the market, which is the second big surprise. But when you think about this -- the support services that a company like ours provides the patients, probably not that big a surprise. The patients get a lot of support. And the average patient pays only -- pays less than $2 for it. And when you think about the first tier co-pay for a generic without support, it's going to be higher than that. So -- we're really pleased with the performance of the product and the patients, obviously, and their retention rate is in the 85% rate as well. So we're really pleased with all of that performance.

And so when you launched, there was obviously at the time or when you got the asset, EMFLAZA generics hadn't been commercially available. Now they are commercially available. And so one of the questions around payer access and step edits, would you have to step through 1 or 2 generics? And I believe you're at 1 generic step through, right, for most plans?

So we -- right now, most every patient, you can think about it that they've either been on a generic prednisone or a branded EMFLAZA. So logically, if a patient has been on those -- a plan is not going to make them go back and step through a generic as they want to try AGAMREE because they've already been on EMFLAZA.

So is the criteria then typically a lifetime have you ever been on a generic and thus, if you have and you check that box, then you can get AGAMREE.

Great point. I think over time, as newer patients enter the market, it's about 11,000 to 13,000 patients in the market you can expect about 700 to 800 patients enter the market each year. Those patients have never been on generic EMFLAZA or generic prednisone. You can expect those patients to do a step through. That's a reasonable assumption, I think..

Yes. But do we know at the moment, are the new starts stepping through? Or are they forced to step through or not?

I think the -- not forced to step through. I think the physicians are with the younger patients -- our average patient is 12 years old. So I think the younger patients typically are getting a generic prednisone. We're not moving -- we haven't moved into that part of the market. We want to move into that part of the market. So that's for us a longer-term play.

Yes. And what drives that? Is it things like the -- I'm sorry, the SUMMIT trial.

I think what drives our movement to the earlier part?

Yes, because it would seem like for long-term growth and getting patients who were on therapy for a long period of time, getting earlier is better.

Yes. And I think what would -- I think it's mostly haven't where physicians are there to speak to one issue. I think proving that the patients will have better behavior, will have better stature, better bone health and less cataracts and maybe better cardiovascular health, which is the purpose, the 5 -- fold purpose of the SUMMIT study, that, I think, will bear itself out over time. So I think physicians are going to wait for that. But the reason why the 12-year olds really -- a 12-year-old is average is because those patients, I think, are really frustrated. Everybody should be on a steroid. 95% of patients in the DMD market have been on steroid, but only 70% are currently on a steroid. That gap speaks to the frustration. So they're saying, "I want something. And those people who've been on a steroid for a long time are the ones we're getting. It's a frustration issue. So we're addressing that right now. We'll work our way back into the earlier patients over time.

Okay. You mentioned the potential queuing effect dynamic coming into the start of the year and you had the unfortunate patient death on gene therapy. How has that affected gene therapy adoption and the dynamic with steroid switching?

So we really -- there's not a lot of data available in the steroid market because we all have our own specialty pharmacies. There's not a lot of data available in the gene therapy -- on the gene therapy side of it. So we really can't see that. But what we can see is there are 100 centers of excellence in the marketplace for DMD. And there's a lot of unique protocols that are out there. And so we're seeing the response to the unfortunate incident in the marketplace and the death of the patient. We're seeing unique responses throughout these 100 centers. So it's -- we're -- it's hard to categorize universally what's happening. Each of the centers as they -- not each of them, but there are several protocols that are out there, but each of the centers is responding in their own way. So we're responding to the centers as it goes forward. And we're seeing, as Jeff said on the call last Thursday, we're seeing solid uptake into April, so we're excited about that.

Okay. And maybe for Steve, just thinking about SUMMIT and how important that ultimately will be to the use case for AGAMREE and talk about the cadence of data generation that will come out of this and when investors will get a line of sight on new data sets that are generated? And what are the important objectives here to inform clinicians?

Well, I'll start with the important objectives. The important objectives are to get additional safety information out to the treating physicians so that they know what the advantages of the AGAMREE are relative to other potential therapies for patients. And we're looking at cardiovascular safety bone health, stature, aggression and other psychological changes as well as just a number of other clinical characteristics of these patients. Now with regard to the cadence data. It is an open-label study. We have visibility to the data. It is a trial that's what's called a natural history controlled trial as well. And so we will -- as because we have access to the data, we will periodically put data in the public domain approximately about once a year. But remember, it's still recruiting now. So I would anticipate that the first data probably would be sometime in 2026. That would be data with descriptive statistics that would be released to conferences and things like that and perhaps published as well. The comparisons for -- against natural history will be done only when we think that there's a significant increase in a particular end point that we're watching because every time you do that comparison, you spend a little bit of alpha and decrease your chance of achieving statistical significance. But the important takeaway from doing that analysis is when you do that natural history comparison, that is of sufficient control to submit to the FDA to request changes to our insert sheet and get important safety information put on to the insert sheet for the product.

Okay. Maybe just a P&L question. When you look at consensus gross margins, I think they may be going down, but you lose the royalty to BioMarin, I believe, soon. And that's pretty material on your biggest product. So I was wondering if you have any commentary on?

I do. So this is actually public knowledge, and I'm not sure it's well understood. So the puts and takes on the royalties are quite complex, but I just want to really simplify it. So our royalties on -- and this is in our Q. And I think, Steve, I think it's footnote 13 -- 12 and 13, I think it's a combination. So I just want to be really clear. So to simplify it, in 2025, our royalty on FIRDAPSE is 17%. In 2016, it goes to 7% and in 2017, it goes to 6%. It's very complicated and you could look at it, but when you do the math, that's the math. And I don't think that's well understood. We -- that's significant. I mean that's -- this is our biggest product. It's -- we're forecasting $350 -- $360 million this year. And we look at that kind of a change in our royalty rate. We want to just be really clear about what we're seeing in the coming years. And we're really excited about that part of it. So that's meaningful for us, obviously, for any company.

Yes. Okay. Maybe just I realize it's difficult to answer one of your questions around the recent executive order pertaining to most favorite nations. And I guess like one way that investors are just looking at companies with high sales in U.S. and high government exposure in the absence of certainty as to exactly where it may pertain. So I guess, how would you kind of educate investors in terms of your -- I believe you got more higher Medicaid exposure on AGAMREE versus high Medicare exposure on FIRDAPSE, just dimensionalizing that? And I guess, the dynamics with OUS reference pricing points in OECD countries.

Sure. So in the absence of information, reading the EO, it's hard to say what's actually going to happen. But just to look at it, our exposure on Medicare for FIRDAPSE is about 40% our exposure on Medicaid for AGAMREE is about 55%, 56%. And then did you look at the external pricing. And again, it's -- this is a weight-based pricing. So you have to take this all into account. The price in Germany is of EUR 53,000. And then the pricing in the U.K. is about a little over 100,000 pounds. So -- but again, it's all weight based, so you have to be thinking about that. So the question is how can the government -- how will the government, what are the rules around this, and we don't know. So we're not sure how it's going to be rolled out. So is it going to be based on IRA? We don't -- we wouldn't be subject to IRA. Is it going to be based on Part B? We don't have any Part B medications. And if you go deeper than that, then you're really talking about things that would probably require legislation and is there a significant enough momentum in Congress to actually pass legislation. So I think there are so many questions at this point in time. And I think the market has responded to that uncertainty on Monday in a positive way.

Are there -- you outlined, I think the delta. Is it a delta U.S. versus that $50 to $100?

It is. The price for EMFLAZA as an example, is about $200,000. Our price is about $200,000 in the U.S. on an annual basis for AGAMREE.

And the German price point of 50% is subject to renegotiation, right? It's not like...

That's first year price, correct. So that would be subject to renegotiation.

So you control pricing of that?

We do not.

Okay. All right. And then maybe just thinking about BD in the last 2 minutes here. I know it's been historically something that the company has done a deal maybe once every couple of years, right? AGAMREE being the last one. Do you feel like the company is at a position to take on another asset, bring in absolutely.

Yes, absolutely. The nature of orphan and rare conditions is there are 2 elements to it. What faces the customer, and those are typically very focused organizations. You can see AGAMREE team is 12 that faces the customer with a very small MSL team and our FIRDAPSE is 16. And then we have an oncology team that's even smaller than that, that faces the GPOs. And then what's behind that and supports the patient getting on the drug, staying on the drug and getting on the appropriate dose can be applied to any condition or any therapy that's in the specialty pharmacy and all that. And that's applicable across the board and scale -- is easily scalable as is the sales organization. So can we take it on? Absolutely. We are ready to go.

Do you feel like a lot of what's going on in the macro will presage like a consolidating environment. There's a lot of biotech companies out there, right, that it's a challenge to subsist on a stand-alone basis and capital-intensive spaces and rates aren't dropping, like a rock, either. So...

If you were a company that is a commercial excellence organization, you had no debt and almost $600 million in cash, this is a great buying environment. And that is catalyst. So I think this is a great buying environment. So we're really excited. I mean it's unfortunate for companies that are not like catalysts, but I think we're in a great position to be purchasing assets and executing on those purchases.

In terms of like confidence in getting something done this year, I mean, do you feel like all the assets that maybe you're looking at. There are -- there's always a question of our sellers willing to sell, especially in these periods of macro uncertainty? Or is there a weighted out mentality, and we feel like we're being unfairly valued maybe because of what's going on in the market, which will pass. And so that maybe becomes a difficult environment for the bid-ask dynamic?

I think when we talk to companies, they want -- it's almost like it's their child. They want what's best for the asset, and they look at what the opportunities they have to bring it to market and they look at the opportunities that we have to bring it to market and they look at the success we've had and the conversations we have is they think we can do a great job for their product. It's not a question of, hey, we want to give this product away. So they look at that opportunity as we do what's best for the product.

Okay. Well, we're out of time. So gentlemen, thanks so much for joining.

Thank you.

Thanks, Jason.