Catalyst Pharmaceuticals Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 9 speakers on the call.

Operator

Hello, and welcome to the Catalyst Pharmaceuticals Third Quarter 2023 Financial Results Conference Call and Webcast. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Chief Financial Officer, Ali Grande. Please go ahead, Ali.

Speaker 1

Good morning, everyone, And thank you for joining our conference call to discuss Catalyst's 3rd quarter 2023 financial results and corporate highlights. Leading the call today is Patrick McEnany, Chairman and Chief Executive Officer. We are also joined on today's call by Doctor. Stephen Miller, our Chief Operating Officer and Chief Scientific Officer and Jeffrey Del Carmen, our Chief Commercial Officer. Before we begin, I would like to remind you that in our remarks this morning and in the Q and A session, we will make statements about expected future results, which may be forward looking statements for purposes of federal securities laws.

Speaker 1

These statements relate to our current expectations, estimates and projections and are not guarantees of future performance. They involve risks, uncertainties and assumptions that are difficult to predict and may prove not to be accurate. Actual results may vary from the expectations contained in our forward looking statements. These forward looking statements should be considered only in conjunction with the detailed At this time, I'll turn the call over to Pat.

Speaker 2

Thanks, Ali. Good morning, and welcome, everyone, to our Q3 2023 Financial Results Conference Call. We are pleased to report another quarter marked by exceptional financial results and the completion of another significant acquisition further shaping the future of the company. First, I'd like to review key financial highlights from the Q3 of 2023. We achieved total product revenues of $102,600,000 representing a year over year increase of 79.5%, driven by continued revenue growth for our Firdapse and Fycompa franchises.

Speaker 2

We reported yet another new all time high net Revenue of Firdapse were up $66,200,000 reflecting an increase of 15.8% Year over year and year to date through the Q3 Firdapse revenues increased by 23.1% over the same period last year. This strong performance underscores another quarter of outstanding organic growth for Firdapse. Our overall revenue performance was fortified by PYCOMPA net product revenues of $36,400,000 Establishing a favorable 5.3 percent 3rd quarter increase compared to the Q2 of this year, underscoring an important contribution to our growing revenue base. This should serve as a testament to our exceptional execution across all business fronts and our ability to successfully integrate the acquisition of strategic products. As a result of our year to date progress, we are raising our 2023 total revenue guidance to between $390,000,000 $395,000,000 from our previous guidance of 380 to $390,000,000 Non GAAP net income for the Q3 was $55,900,000 were $0.49 per share diluted.

Speaker 2

This excludes from GAAP net income, non cash, Stock based compensation, depreciation, a non recurring one time in process R and D expense $81,500,000 associated with the acquisition of the North American license for a Gamry, better known also chemically known as remora loan and the amortization of intangible assets. GAAP net loss was $30,800,000 or $0.29 per diluted share, which again includes the non recurring one time expense of $81,500,000 associated with the acquisition of the Agamri license. While these previously disclosed non recurring in process R and D expenses impacted on our overall GAAP earnings per share, Our performance underscores our fiscal discipline and operational execution. We ended the quarter with cash or cash equivalents of $121,000,000 and continue to have no funded debt on our balance sheet. Ally will provide you with more financial details during her presentation.

Speaker 2

Our recent acquisitions reinforce our confidence That we are on the right path towards realizing our near and longer term strategic and financial goals. Early in the Q3, we acquired from Xanthera Pharmaceuticals to license for the North American rights to Vermuralone, again brand name, Agamri, which was pending an FDA approval for the treatment of Duchenne Muscular dystrophy or DMD. On October 26 this year, we announced the FDA approval of AGAMRI Oral solution, a novel corticosteroid for the treatment of DMD. We believe that a gamma ray may offer the potential to also providing a more favorable side effect profile compared to other traditional steroid treatments. Steve will have more to say about the AGAM re approval and the potential benefits to DMD patients during his presentation.

Speaker 2

As most of you know, the current standard of care treatment for DME involves corticosteroids, which often come with significant side effects. It is estimated that between 11,013,000 children in the U. S. Are affected by DMD, with approximately 70% of the patients currently receiving corticosteroid treatment. We strongly believe that agammarie has the transformational potential to reshape the treatment period for this debilitating rare disease and holds the prospect for future possibilities for other chronic inflammatory conditions.

Speaker 2

A Gamri has orphan drug and rare pediatric disease designations Status for DMD, qualifying it for 7 years of U. S. Market exclusivity, as well as a number of issued and pending patents that extend to 2,040. Per our licensing agreement with Synthira, the approval of the Gamry triggered A $36,000,000 milestone payment that when paid this Q4 of this year will be recorded as an intangible asset and amortized over its useful life of 10.5 years. We are excited about the commercial launch of AGAMRI, a highly synergistic product to our existing neuromuscular franchise, which is planned to occur in the Q1 of 2024.

Speaker 2

At that time, we will introduce our comprehensive financial assistance program aimed at helping to ensure access and affordability for all DMD patients through our white glove Catalyst Pathways platform. Jeff will address some of the questions that many of you are asking about the opportunity that a gamma ray represents for Catalyst. You will note in the Q4, we anticipate incurring an additional $6,000,000 to $7,000,000 in commercial and other expenses related to the Agamri launch preparations. In the Q3, we announced that the sNDA seeking to increase the daily maximum dose of Firdapse 200 milligrams had been accepted for filing. We have been provided a PDUFA action date of June 4, 2024.

Speaker 2

This represents a meaningful milestone as we estimate that about 40% of patients Currently on treatment are already at or approaching the current maximum daily dose of 80 milligrams. We also just recently announced the allowance of 2 new patents to further strengthen the Firdapse intellectual property estate, which currently has patent protection until 2,037. Plans are underway to list these patents in the FDA's orange book as soon as they are issued, bringing the total number of listed patents of preferred apps to 8. With the 2nd consecutive full quarter of Fi Compa under our belt, we are pleased with its positive growth trend. We attribute this success to our dedicated epilepsy franchise teams who are actively engaged with healthcare providers in the efficacy communities.

Speaker 2

We expect a continued tailwind for VYCOMPA due to its unique status as the only non competitive As we enter the 4th quarter, We expect an NDA submission for Firdapse to the PMDA in Japan by our partner Daido Pharma before the end of this year, which will trigger a $2,000,000 regulatory milestone payment by Gaido to Catalyst. Acceptance of the submission in Japan Also triggers an expansion of our territorial rights for Firdapse under our amended license agreement with CERB. We are developing plans to pursue opportunities to expand our global footprint through strategic partnerships with our current focus on the Asia Pacific and LatAm regions. Looking at the business Development side of the company, where we are focused on pursuing adequately de risked and value added transaction opportunities. We continue to demonstrate progress with the recent closing of the acquisition of the North American rights to a gamma ray from Panthera.

Speaker 2

We've advanced our portfolio expansion strategy, search and evaluation efforts around 2 key pillars. First, focusing on broadening and diversifying our rare neuromuscular and epilepsy product portfolios with sufficiently derisked Innovative therapies that address critical unmet medical needs and second, expanding the geographic footprint of our existing products. Overall, during this quarter, we have gained significant ground in We are currently in the advanced stages of due diligence on additional commercial stage opportunities that could come to fruition over the next few quarters. After a robust and comprehensive search, I was very pleased to announce that Rich Daley was our candidate of choice as my successor as CEO. As reported, Rich has over 3 decades of biopharma experience with large multinationals as well as smaller, more entrepreneurial companies.

Speaker 2

Rich's background and core strength is on the commercial side of the business, an attribute that is key to our near term and mid term strategic plan. He has been on our Board of Directors for almost 9 years and has been an integral part of the team that has helped design our current strategic plan and focus. Rich and I have been working together closely since the announcement to ensure a smooth transition come January 1 next year. Looking ahead to next year, we are fully prepared for sustained progress fueled by our ability to execute, Paving the path for further growth. With the collective capabilities of our Catalyst team, there is no doubt that we will continue to achieve noteworthy accomplishments and making a lasting impact on the lives of the patients that we serve.

Speaker 2

I'll now turn the call over to Jeff Del Carmen, our Chief Commercial Officer, who will update us on our commercial activities.

Speaker 3

Thanks, Pat, and good morning, everyone. In the last quarter, our commercial team has achieved outstanding results across the board. I would like to draw your attention to our exceptional performance in this record breaking quarter and our continued strategic efforts, which are paving the way for future successes. We are delighted to report Q3 combined net revenues of $102,600,000 showcasing a substantial year over year growth of 79.4%. This remarkable performance was fueled by Firdapse reaching an all Catalyst is strategically positioned to meet the revised revenue guidance range of $390,000,000 to $395,000,000 First, let's discuss our progress with Firdapse, which has emerged as a pivotal therapeutic option $66,200,000 represents a year over year increase of 15.8% versus the Q3 last year.

Speaker 3

In year to date through the Q3, Firdapse revenues increased by 23.1% over the same period last year, a direct result of steady new patient starts and an annual discontinuation rate trending below 20%. Net new patients in Q3 were the highest quarterly total this year. Prescription approval rates exceeded 90% for all types of payers, including government and private commercial insurers. Patients enrolled in Catalyst Pathways, including those with Medicare coverage and accessing foundation assistance experienced an average monthly co pay of less than $2 We have a strong belief in Firdapse' long term organic growth prospects. First, We have a robust pipeline with over 500 patient leads diagnosed with LEMS who have not yet started Firdapse treatment.

Speaker 3

Additionally, we have identified new sources for potential LEMS patients, ensuring a continuous influx of high quality leads in the foreseeable future. Next, we recently presented an abstract at the World Conference on Lung Cancer in September that estimated the LEMS prevalence in the United States could be as large as 5,600 individuals, a significant increase from the previously estimated prevalence of 3,000. This estimate is derived from a detailed real world data analysis, specifically focusing on the prevalence of LEMS diagnosis among patients with small cell lung cancer. Currently, we assess that greater than 80% of small cell lung cancer LEMS patients are undiagnosed, representing a significant opportunity for growth. In the last year, our LEMS education initiatives have demonstrated their effectiveness.

Speaker 3

This is evident for LEMS patients and consequently expand the pool of eligible candidates for Firdapse treatment. Furthermore, our targeted educational campaigns aimed at thoracic oncologists have successfully contributed to the identification of a higher number of diagnosed small cell lung cancer LEMS patients. Additionally, FDA approval of the company's sNDA to increase the indicated maximum daily dose of Firdapse from 80 to 100 milligrams may offer significant benefits to some patients. As Pat mentioned earlier, we anticipate that it could provide a notable improvement and the daily dosage of Firdapse for a significant portion of our patient population. Now, I would like to provide some highlights of our progress with VYCOMPA.

Speaker 3

VYCOMPA commercialization is surpassing our expectations. We have actively collaborated with healthcare providers, expanding our outreach and forming valuable relationships that has significantly contributed to Fycompa's success. In Q3, Fycompa Additionally, we are fostering crucial partnerships with patient advocacy groups to enhance awareness and promote our mission. Let's turn to AGAMRI, a promising novel anti inflammatory corticosteroid that addresses a significant unmet need for more tolerable steroids for patients living with Duchenne muscular dystrophy or DMD. The U.

Speaker 3

S. Prevalence for DMD is estimated to be between 11,000 Of patients currently being treated for DMD, approximately 70% of these patients received concomitant steroid treatment. However, steroid treatment is associated with significant side effects. We believe that agamory will offer an advancement to the current treatment paradigm, addressing an important unmet need for DMD patients and caregivers. As we have disclosed before, we expect the commercial launch in the Q1 2024.

Speaker 3

We will integrate a gamma ray into our neuromuscular franchise, where we can leverage the team's demonstrated capabilities, Commercial expertise and experience. We are in the final stages of hiring 10 commercial personnel to support the pending launch, mostly in marketing and patient services. Our existing neuromuscular sales force of 16 regional account managers and 2 Area Business Directors will have responsibility for both Firdapse and Agamri. In addition, Agamri will be supported by our best in class Catalyst Pathways program to help ensure that all eligible patients can access the product. Catalyst intends to price a gamma ray responsibly to ensure access for all appropriate patients living with DMD.

Speaker 3

We have done considerable outreach to key stakeholders since the acquisition was completed in July. Panthera had conducted 1 round of market and pricing research for a gamma ray, which was refreshed by Catalyst in October of this year. In addition, we've had several meetings with DMD community members and key advocates, where we received feedback regarding pricing and access. Lastly, Catalyst held an advisory board meeting with approximately ten Key opinion leaders, in October, based on the feedback from our constituents and analysis of the DMD market, The wholesale acquisition cost of a gamma ray will be at a slight discount to Enflaza. We will implement the same financial programs as we have for Firdapse to ensure the average patient out of pocket cost will be less than $2 per month.

Speaker 3

More details on the commercial launch will be available in the coming months. In summary, we are extremely satisfied with our performance in Q3 and remain highly confident in achieving Our adjusted 2023 revenue forecast of $390,000,000 to $395,000,000 Furthermore, as we gear up for the launch of AGAMRI, we will capitalize on our proven commercial expertise. I extend my heartfelt gratitude to the entire team at Catalyst for their dedicated commitment to patients, and I am eagerly anticipating a successful Q4 ahead. I will now turn the call over to Doctor. Stephen Miller, our Chief Operating Officer and Chief Scientific Officer for an update on R and D activities.

Speaker 4

Thank you, Jeff. Our clinical development and regulatory strategy for Firdapse continues to focus on Expanding access to all LEMS patients, enhancing the Firdapse patent estate to maximize its commercial potential and integrating the newly acquired First, I would like to discuss our development efforts to increase the indicated maximum dose of Firdapse from 80 milligrams per day to 100 milligrams per day. Catalyst submitted a supplementary NDA to the FDA for this change to the maximum daily dose in the Q2. And October 13, Catalyst announced the FDA's acceptance of this sNDA for review with an FDA PDUFA action date of June 4, 2024. Other patients on the current indicated maximum dose of 80 milligrams per day and their physicians have expressed a desire And this supplement, if approved, will help those patients.

Speaker 4

Based on our Type C meeting with the FDA in May of this year And the recent acceptance of the sNDA, we believe that our submission strategy constitutes an acceptable basis for seeking approval of a 100 milligram maximum daily dosage Regarding our global expansion, we continue to anticipate that Daidopharma, our partner in Japan, will submit their NDA for Firdapse to the Pharmaceuticals and Medical Devices Agency or PMDA by the end of this year. Submission of this type typically take about 10 months to review by at the end of the year. But there can be no assurance that such a submission will be found approvable within this 10 month period. We previously estimated there are about to 1300 LEMS patients in Japan. Under our license agreement for Firdapse and upon acceptance of the filing Of this NDA in Japan, Catalyst will gain the right to pursue other territories in the Asia Pacific and South American regions.

Speaker 4

Catalyst recently announced that the company had received notification by the United States Patent and Trademark Office or USPTO The 2 additional patents covering Firdapse were allowed. These new patents are for claims associated with the unique and novel previously unknown bioavailability of Firdapse under fasting and fed conditions of dosing. These 2 new patents with expiry dates out to mid-two thousand and thirty two further strengthen our NAT2 family of patents. We expect these patents to be granted within 2 months and preparations are already In motion to include these additional Firdapse patents in the FDA Orange Book post grant, bringing the total list of patent count to 8. The addition of this new intellectual property to the Firdapse product highlights one of our core objectives, which is to reinforce and Safeguard the sustained commercial viability of Firdapse, which currently benefits from patent exclusivity protection in the United States until 2,030 7.

Speaker 4

Next, I would like to discuss our recent in licensing of Gagamri for the treatment of Duchenne muscular dystrophy or DMD from Sunferra for the North American territory and also its recent FDA approval on October 26. Agamri is a promising novel steroid with a unique chemical structure that may confirm improved long term safety for this drug. In clinical studies, vomerolone or agamarin demonstrated efficacy with improved muscle function Similar to that of prednisone, but with a reduction of steroid associated side effects over the 48 month duration of the trial that showed benefits in bone health, growth and behavioral symptoms, offering the potential to address an important unmet medical need. To further characterize A gamma ray has received FDA orphan drug exclusivity. DMD is a rare X linked genetic disorder resulting in Progressive muscle degeneration occurring in about 600 male newborns each year.

Speaker 4

The prevalence is about 11,000 13,000 patients and is gradually increasing as advancements and available treatments are expected to continue to increase the survival of patients with this devastating disease. DMD, the most common form of muscular dystrophy is a condition that makes the skeletal and heart muscles weaker with time, reducing the lifespan of the affected male The genetic defect lies in the dystrophin gene and like virtually all X linked genetic diseases almost exclusively affects males. Steroids remain the standard of care for DMD patients and as Jeff pointed out, 75% of DMD patients receive steroid treatment. In addition, approximately 30% of these patients are amenable to 1 of the approved exon skipping therapies and a minority of patients Gene therapy continued to require corticosteroids at some level both during treatment and beyond. It is anticipated that a gamma ray may be a safer and routine long term clinical use and may lead to earlier initiation of therapy closer to the time of diagnosis and potentially to continue therapy even after Overall, AGAMRI has the potential to be a differentiated treatment for DMD with a desirable profile in comparison to the current The pivotal clinical trial provided data on treatment efficacy and safety associated with the Gammury treatment for up to 48 months, which will be augmented by DMD patient registry in the U.

Speaker 4

S. For patients that are initiated on AGAMRI. As previously reported, Catalyst acquired the U. S. Rights to Fykappa or Parapanel, which is the 1st and only approved APA receptor antagonist or inhibitor.

Speaker 4

FYCOMPA is approved as an anti seizure medication for treatment to treat partial onset seizures with or without Secondarily, generalized seizures in patients with epilepsy who are 4 years of age or older and in conjunction with other medicines as an add on therapy to treat primarily generalized tonic clonic seizures in patients with epilepsy who are 12 years of age or older. While Fycompa is a mature epilepsy product, it continues to offer physicians and patients a unique therapeutic option for the management of epilepsy. As I discussed in previous quarterly calls, VYCOMPA's unique mechanisms of action has been a source of great interest to epilepsy researchers They continue to study it for the management of a number of types of epilepsies, including several rare epilepsies of genetic origin and published papers period of market exclusivity. Catalyst is also continuing to evaluate potential legal options for extending the exclusivity of Fycaba beyond May of 2025. Moving on to our medical information function, Catalyst neuromuscular medical science liaisons or MSLs are continuing to reach out to traditional Firdapse prescribers and oncology healthcare providers to build relationships and provide education about the importance of testing their patients oncologists that already treat LEMS in their practices have found that patients treated with Firdapse maintained muscle strength and have an improved quality of life.

Speaker 4

With the in licensing of the Gamry and its planned launch in the Q1 of next year, Catalyst is adding 4 new MSLs specializing in Duchenne muscular dystrophy to the neuromuscular MSL team. Due to the unique mechanistic features of the gamma ray, it has and continues to be an active area of research that has And will continue to result in an ongoing stream of useful medical information that should be disseminated to doctors so that they can continue to optimize the treatment for their DMD patients. Dissemination of the existing data and publications demonstrating the comparative safety of the gamma ray relative traditional cortical steroids will be the top focus of the neuromuscular MSL team in 2024 and beyond. These efforts should provide clinicians with the information they need to choose the best steroid options for their patients. Catalyst also has plans for advisory board activities to educate BMD treating physicians that were not part of the clinical trials about AGAMRI.

Speaker 4

Future updates will be provided as medical information programs are developed and implemented for AGAMRI. Next, Fycompa is a mature product for which extensive published information and real world data is available, including numerous publications and abstracts. The Fycompa MSL team will continue to disseminate information to epilepsy treaters And we'll also address any questions that these physicians may have about using Fycompa. Catalyst Fycompa MSL team also attends epilepsy conferences like AES and IEC in order to keep the to keep Fycampa in the minds of epilepsy treaters as a potential treatment option for epilepsy patients. As a service to the physician community, Catalyst provides support for the development of continuing medical education or CME programs that are part of the formal ongoing education of healthcare providers.

Speaker 4

Catalyst has over the past 3 years provided support for We anticipate providing support for more programs, including new programs for Agamli. Over this period of time, thousands of healthcare providers have utilized CME programs and learning modules, hundreds of them are taking the CME test each quarter in order to be granted CME credit toward the maintenance of their medical licenses. In short, these programs are popular with treaters that use Catalyst products and based on the CME test taking frequency appear to be a valuable part of their ongoing medical education. At this time, I would like to turn the call over to Alisa Grande, our CFO.

Speaker 1

Thanks, Steve. Results from Catalyst Q3 of 2023 kept us on pace for another year of exceptional financial performance and strong execution. In addition to our outstanding results, I would also like to highlight the excellent job done by the strategy and business development team at Catalyst, which were pivotal to continuing the momentum of our portfolio expansion efforts. As a result, we successfully closed the transaction to acquire the North American commercial rights to a gamma ray from Sunterra during this quarter. This acquisition, in addition to offering an expansion of our portfolio with a promising asset, will also allow us to continue to deliver incremental Net positive cash flow for the company and incremental value to our shareholders.

Speaker 1

While on the topic of Agambri, I would like to take a moment to discuss Some of the key accounting applications and accounting treatment of this transaction. During July 2023, at the time transaction closed, a Gamri was not yet approved for sale by the U. S. FDA. Consequently, The upfront payment as well as related transaction costs were expensed in the Q3 as in process research and development or IPRD.

Speaker 1

Next, I would like to shift to the regulatory milestone payment. As a result of the FDA approval of Agambri on October 26, 2023, We will make a $36,000,000 milestone payment to Centerra in the Q4 of 2023, which will be capitalized on the balance sheet as an intangible asset and amortized over the estimated use for life of 10.5 years or 42 quarters. I would like to reinforce that the approval will occur at the end of October 2023 and as such amortization expense will be prorated in the for the Q1 of 2023 and then will be consistent going forward. Lastly, in connection with the At Gamri Transaction, Catalyst made a strategic equity investment in Sunterra as part of the acquisition terms. The equity investment has a book value of approximately $13,500,000 and will be marked to market value on a quarterly basis using the observable market price for the ticker SANN as quarter on the Swiss Exchange.

Speaker 1

Now on to Q3 results. Our total revenues for the Q3 of 2023 were $102,700,000 79.4 percent increase when compared to total revenues of $57,200,000 for the Q3 of 2022. Product revenue net for the Q3 of 2023 from our lead product Firdapse was 66,200,000 a 15.8% increase year over year compared to $57,200,000 for the Q3 of 2022. FERC revenue net for Firdapse was $36,400,000 for the Q3 of 2023, which was a $5,200,000 increase from $34,600,000 for the Q2 of 2023. As per my report, we acquired by Compa during January 2023.

Speaker 1

Net loss before income taxes for Q3 2023 was $38,000,000 246.2 percent decrease year over year compared to net income before income taxes of $26,000,000 for the Q3 of 2022. We reported GAAP net loss for the Q3 of 2023 of $30,800,000 or $0.29 per Basic and diluted share, a decrease to 135.2 percent year over year compared to GAAP net income for the 3rd quarter of 2022 of $22,700,000 or $0.22 earnings per basic and $0.20 per diluted share. The decrease from net income to net loss is largely attributed to the one time, a gambling related 81,500,000 IPR and D expense charged during the Q3 of 2023. Non GAAP net income for the Q3 of 2023 was $55,900,000 or $0.52 per basic and $0.49 per diluted share, which excludes from GAAP net loss $81,500,000 of iPR and D expense, the income tax benefit of $7,300,000 This compares to non GAAP net income for the Q3 of 2022, $28,600,000 or $0.28 per basic and $0.26 per diluted share, which excludes from GAAP net income, the income tax provision of $3,300,000 stock based compensation of $2,100,000 amortization of intangible assets of 500 of $18,000 and depreciation of $35,000 The above represents an approximately 95.2% increase of non GAAP net come year over year.

Speaker 1

Amortization of intangibles acquired in connection with both the 5 Compa and the Resurgi products was approximately $8,500,000 for the Q3 of 2023. As previously mentioned, beginning in the Q4 of 2023 on a quarterly basis, We expect to recognize an additional $857,000 of amortization expense relating to regulatory milestone payments to be made to Sunsera due to the timing of approval and thus the recognition of the intangible asset amortization in the Q4 of 2023 will be less as it will be prorated. We expect amortization for our acquired licenses and intangible assets To be approximately $9,100,000 for the 4th quarter and $9,300,000 beginning with the Q1 of 2024 and beyond. Our effective tax rate for the Q3 of 2023 on an annualized basis was 23.5% compared to 19.6% for the Q3 of 2022. For 2023, the difference to the statutory federal income tax rate of 21% was primarily driven by state income taxes and anticipated annual permanent differences offset by equity compensation deductions.

Speaker 1

The effective tax rate is affected by many factors, including the number of stock options exercised in any given period and is likely to fluctuate in future periods. Cost of sale expenses were approximately $14,200,000 in the Q3 of 2023 compared to $9,700,000 in the Q3 of 2022 and consisted principally of royalties. As As a reminder, royalties of Firdapse increased by 3% when net product sales exceed $100,000,000 in any calendar year. In 2023, this threshold was met during the Q2, making related royalties trend up for the 3rd quarter. Firdapse net product sales for the remaining of the year will be subject to the higher royalty rate.

Speaker 1

Cost of sales for Fi Compa in 2023 is exclusive of amortization of intangible assets. Research and development expenses were $83,700,000 in the Q3 of 2023. This compares to $8,300,000 in the Q3 of 2022. As previously mentioned, the driver behind the increase in research and development expenses is relating to the one time Agambri IPR and D charge recorded during the Q3. SG and A expenses for the Q3 of 2023 totaled $33,600,000 compared to $13,700,000 in Q3 2022.

Speaker 1

The increase in SG and A expenses year over year is principally due to costs related to Fi Compa, such as commercial expenses under the transition services agreement, Selling expenses and an increase in headcount principally for the sales and marketing force hired during May 2023, but also includes some back office headcount. In addition, there were selling and marketing expenses incurred in the 3rd order in anticipation of the Agamri approval and subsequent plans. Finally, we anticipate spending an additional $6,000,000 to $7,000,000 In commercial and other expenses related to the Agamben launch preparations during the Q4 of 2023. As reported, we ended the quarter with cash and cash equivalents of 121,000,000 As a reminder, in the Q4 of 2023, we will make a $36,000,000 payment to Sunterra in connection to the regulatory milestone on our existing R and D programs, meet our potential contractual obligations and support our strategic initiatives, business development and portfolio expansion efforts linked to long term growth and value creation. More detailed information and analysis of our Q3 today, November 8, and can be found on the Investor Relations page of our website at www.catalystpharma.com.

Speaker 1

With that, I'll turn the call over to Pat.

Speaker 2

Thanks, Ali. Operator, we can now open the line for questions.

Operator

Thank you. One moment please while we poll for questions. Our first question is coming from Joon Lee from Truist Securities. Your line is now live.

Speaker 5

Good morning. This is Les on for June. Thank you for taking my questions. First on the Firdapse front, can you just talk about any partnership developments on Asia And then second part to that, what are the 2 new patents that will be included on the orange book? What impact does that have to the ongoing situation with your Paragraph IV filers?

Speaker 5

And I have a few follow ups.

Speaker 2

Your first question was about pursuing other territories once We trigger the submission in Japan. Yes. So we think that Based on our preliminary research, there appears to be a great opportunity in China, South Korea, A few smaller markets in the Asia Pacific region And also Brazil represents what we think is probably a fairly robust opportunity. So that's where Our initial thoughts are? With regard Steve, you want to take that with regard to the patents?

Speaker 4

Sure. Les, the 2 new patents that were just allowed have claim language directed toward the pharmacokinetics of amifampridine and slow and fast metabolizers of amifampridine. They represent a significant addition to our family of patents related to adacityltransferase Metabolism of the drug and we believe it will significantly strengthen that family of patents against challenge and will improve the ability to enforce our intellectual property.

Speaker 5

Got it. That is helpful. And in regards to 5 comp outperformance, what are some of the driving metrics behind that? And how do you see

Speaker 3

that as the year progresses next year? Kia, do

Speaker 5

you want to take that Next year?

Speaker 2

Kiat, do you want to take that?

Speaker 3

Sure. So Les, what we're looking at is Market share is around 14.9% for Fycompa versus the branded anti seizure medications. We think that our strategy to focus on the existing prescribers of Fycompa, those physicians that have prescribed it over the last year or 2 years. So just focusing on those physicians and getting those physicians to prescribe for more of their patients and earlier in their treatment protocol. That's been our focus and we feel that's the biggest contributor to our exceeding our expectations.

Speaker 2

So Les, let me add that as a fairly mature product, we continue to expect that we can grow it by single digit, high single digit from year to year. So I hope that helps answer your question.

Speaker 5

It does. Thank you, Pat. One, I guess last one for me then on the acquisition front potentiality there. It sounds like you're in advanced due diligence process. It appears to be in an epilepsy asset.

Speaker 5

Maybe give some more color around that. If it is, How would that fit into the current sales force with Vycompa? And is a potential acquisition essentially covered by the recurring cash balance? Thank you.

Speaker 2

Yes. And so, we've made it clear that From a strategic plan that our emphasis on our next acquisition really we'd like it something to be compatible with our epilepsy franchise. And we think It's a growing opportunity and clearly we've made that point. There I would not say that there's anything imminent. We're in deep diligence on a couple of opportunities.

Speaker 2

We want to be careful about doing too many acquisitions too quickly. We want to make sure that we Integrate and we execute with each of these opportunities that we bring in most importantly. And certainly, With as stated our 9 month cash position of $121,000,000 which continues to grow quarter by quarter. We think we're in a fairly good position to do another tuck in or 2. But I would not say that anything is imminent today.

Speaker 2

We hope over the next Couple of quarters that we can announce another acquisition.

Speaker 5

Great. Thank you, guys. Congrats on the performance.

Speaker 2

Thank you.

Operator

Thank you. Next question today is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.

Speaker 6

Hey, good morning, Pat and team. Congratulations on Great Q3. And Pat, frankly, congratulations and good luck with your career milestone and transition.

Speaker 2

Thank you, Charles.

Speaker 6

Yes. So thanks for taking our questions. I had a couple of questions, The Mora loan or a gamma ray and then one on the sNDA for Firdapse. For the Mora loan, I guess I'm wondering if Steve or even Jeff could speak to the current market dynamics. I guess, Any impact of the recent Embark results on what you think going to be the demand for a gamma ray?

Speaker 6

And what do you anticipate in terms of the pace of adoption? Will there be switching of patients from current standard of care? Or will it be primarily targeting new patients? Thank you.

Speaker 2

Yes. Thanks Charles for the question. I'll pass this to Steve. Steve, you want to pick this up?

Speaker 4

Okay. Well, let me answer your first question about the Embark results and it really Speaks to a more general question regarding overall gene therapies and exon skipping therapies. The bottom line is that with the use of those therapies, patients still have a need for taking some kind of corticosteroid both during the treatment with those alternate treatments as well as afterwards. There's variability in how well the patients respond to And the Embark results, I don't want to comment on on other company's products. So there's not much I can say about those.

Speaker 4

But the bottom line is that we anticipate that there will continue to be healthy demand for steroid treatments for DMD patients. And now I apologize, can you repeat the other question, Charles? Steve,

Speaker 2

I'll pass that to Jeff. Your question was about switching patient switching and some of the dynamics.

Speaker 4

Okay.

Speaker 3

Yes. Hi, Charles. Here are the market dynamics for corticosteroids for DMD right now. As we mentioned, 11000 to 13000 patients living with DMD in the U. S.

Speaker 3

Of that, those 11000 to 13000, About 70% are on steroids. Now when you look at the market share breakdown there, it's about 60% prednisone market share and about 35% to 40% are on Emflaza. And when you look at the potential patients for a Gammri, they will be the switch patients, primarily from Emflaza, but also based on feedback that we're hearing are some of these patients that are on prednisone. You will see some patients that are naive to steroids, But that will be a smaller percentage and over time that may happen. But I think for the initial launch, the patients that are currently on steroids will be looking to switch over.

Speaker 6

Okay. That's helpful. And then a quick question on the ASCEND AEA for the 100 milligram

Speaker 4

Sure. Well, that's an interesting question, Charles. The short answer to your question is, if they have any further questions beyond what we've already submitted them and we think that their Questions will be relatively spaced based on our Type C meeting. But with regard to efficacy, they would want to know is the drug efficacious At the 100 milligram dose and we have plenty of data that was submitted in the sNDA that demonstrates efficacy at the 100 milligram dose. The second thing that they would want to know is, will the drug be safe at a higher dose, that's 20% higher than the currently labeled dose of 80 Milligrams per day.

Speaker 4

And again, we submitted a significant body of evidence that showed that there are no safety concerns at a dose of 100 milligrams per day. And as a result of that, it's unlikely they'll have any really hard questions about that, but you can never predict the future. I also want to point something out. Reserge, which was previously approved by the FDA, was approved for a 100 milligram dose. And so as a result, it's some of that data is actually in our sNDA and it's for that reason that we also believe that the FDA will be receptive a 100 milligram dosage application.

Speaker 6

That's helpful.

Speaker 2

Steve, just to put a fine point on that, And that label was pediatric label?

Speaker 4

Yes.

Speaker 6

Okay, got it. That highlights safety. Last quick question. Do you plan to have a presence at the upcoming AES meeting In Orlando, I believe it's early December, a big one for epilepsy. Thanks.

Speaker 3

Jeff? Hi, Charles. We will definitely be there. We are going to have a huge presence with our Medifairs team as well as our commercial team.

Speaker 6

Okay. Thanks for taking the questions. Congrats on the quarter.

Speaker 2

Thank you.

Operator

Thank you. Next question is coming from Joe Catanzaro from Piper Sandler, your line is now live.

Speaker 7

Hey, guys. Thanks for taking my questions. Maybe two quick ones for me. First one, maybe Similar to an earlier question, but wanted to ask about the strategy to price Adamaria at a slight discount to Emflaza. Just wanted to see if you could elaborate around The potential benefits you see from that and whether you think that could actually drive more active switching from Emflaza On to Agamri, that's my first one.

Speaker 7

I have one follow-up. Thanks.

Speaker 2

Sure. Jeff, you want to speak to some of the work that was done to Help us arrive at our pricing.

Speaker 3

Sure. So, Joe, we'll provide a lot more details as we get closer to launch. But specific to the pricing and the considerations that we took. We did significant payer outreach as well as speaking with advocacy in patients and then also like KOLs. So that helped us form our decision to price it Very similar at a slight discount to Emflaza.

Speaker 3

So those are that's the specifics behind that. But do you have a did I answer your question or?

Speaker 7

Yes, that's helpful. I guess I was primarily interested on whether that you could see that as a key factor in the sort of switching dynamic?

Speaker 3

We do anticipate at that price point or a slight discount that there is potential benefits from a payer landscape and not necessitating a further step through Emflaza. And that was all part of the research too.

Speaker 7

Okay. Got it. My second question, I wanted to ask around the 2 key pillars you mentioned, Pat, and the potential to expand the geographic I know you mentioned the opportunity for Firdapse in Asia Pacific and Latin America, but wondering based on license agreements If there are any potential opportunities you might see for Fycompa and DeGomery outside of the U. S? Thanks.

Speaker 2

We not for FiCapa, Joe, but For our Gammre Gammre rather, we our license does allow some market expansion. I can't be specific at the moment about that, but there are some opportunities. As Centerra, we know is going to market a gamma ray in The 5 key European markets and so there are opportunities outside of that for us. They do have A partner already in China. So we have a good working relationship with Santander.

Speaker 2

In fact, Next week, they'll be here for a joint development committee meeting and those are topics that are right on the agenda.

Speaker 7

Okay, great. Appreciate you guys taking my questions. Thanks again.

Speaker 2

Thanks, Joe.

Operator

Thank you. Next question is coming from Scott Henry from ROTH Capital Partners. Your line is now live.

Speaker 8

Thank you and good morning. A core competency of Catalyst has really been the access program, excellent job with Catalyst Pathways. The question is when you compare the LEMS market to the Duchenne's market, How similar do you think that will be? Will it what are the differences when bringing about access Those markets, I know there seems a little more competitive than the Duchenne's market. Just any color you would have on that?

Speaker 8

Thank you.

Speaker 2

Yes. Good, great question, Scott. I'll let Jeff take this.

Speaker 3

Scott, I mean the biggest difference between the 2 therapeutic areas, When you look at DMD, not only the competitive landscape that you mentioned, but really it's Medicaid Patients, it's about 50% or so Medicaid and then the balance for the most part is commercial, whereas the LEMS side, Yes, the significant part of those the population is Medicare, you have 45% with Medicare and 35% is commercial. So that's the biggest part there. But the biggest thing for us is that we want to ensure that there's access for all patients that physicians And families think the patient should be on a Gammara. We want to make sure that there's access for these patients. So we are committed to ensuring that all those patients have an average co pay of $2 per month.

Speaker 3

So, we've done a lot of research, we've done a lot of strategy planning And that's what our focus will be when we launch.

Speaker 8

Okay, great. Thank you for that color. And then final question, And I don't know how much you really want to talk about this now, but when you compare Emflaza to a Gamry, Are there any key differences that will make up your marketing message as far as to promote a switch there? Just trying to think about the key levers that one would compare the 2 on.

Speaker 2

Scott, we continue to do a lot of work. We have primary research and secondary market research And we're not quite ready to open the kimono entirely With regard to marketing strategies and how we'll position ourselves against Other programs, Jeff, you want to add to that?

Speaker 3

Sure. So, Scott, the thing about the DMD space is it's a very defined market And there are about 90 plus, I think we've calculated now 103 we profiled centers of excellence or accounts Primarily in about 250 prescribers, key prescribers for these boys living with Duchenne. And the data has been out there for a long time. And all the stakeholders are pretty much aware of this Data and some of the benefits of a Gamry versus what's on the market. So we stand behind that data And it will be a collaboration really between commercial and meta fairs to ensure that that data is received by the appropriate stakeholders.

Speaker 3

But that's been our approach and like Pat mentioned, we'll share more specifics about the commercialization here in the next month or 2.

Speaker 8

Okay, great. That's helpful. I completely understand. And congratulations again, Pat, great career, but I think you got a couple More chapters to write, but it's been great

Speaker 7

to watch.

Speaker 2

Thanks, Scott. Thank you.

Operator

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Pat for any further or closing comments.

Speaker 2

Thank you. In conclusion, our dedication to pioneering solutions for rare diseases remains unwavering. As we approach 2024 with eagerness, we are well poised to leverage our strengths, Maximize the potential of our promising product portfolio and enhance the lives of patients grappling with rare diseases. I want to thank you for your steadfast support over the years and here's to a future brimming with boundless potential under the stewardship of Rich Daley. Thank you.

Operator

Thank you. That does

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Earnings Conference Call
Catalyst Pharmaceuticals Q3 2023
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