Catalyst Pharmaceuticals, Inc.
Q2 2019 Earnings Call Transcript

Published: 8 Aug 2019

[Operator:]

Greetings and welcome to the Catalyst Pharmaceuticals Second Quarter 2019 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ali Grande, Chief Financial Officer. Thank you. You may begin.

[Alicia Grande:]

Good morning, everyone, and thanks for joining today’s conference call. On today’s call, we have Pat McEnany, Chairman and Chief Executive Officer; Dr. Steve Miller, Chief Operating Officer and Chief Scientific Officer; Dr. Gary Ingenito, Chief Medical Officer and Head of Regulatory Affairs; and Dan Brennan, Chief Commercial Officer.

[Pat McEnany:]

Thank you, Ali. Good morning everyone and thank you for joining us on our second quarter 2019 financial results call. As you probably saw on our press release issued yesterday afternoon, we continue to see strong progress in our commercial launch of Firdapse for LEMS this part quarter. Our management team as well as all facets of our commercial, medical affairs, patient services, and accounting and financial teams have been rock solid in the execution of our Firdapse launch plan. I’m heartened by the support that we continue to receive from the LEMS community and healthcare providers who are proud to assess patients with access to Firdapse. The support that we have received has enabled us to work within the LEMS community to deliver a meaningful impact on patients’ lives through not only treatment, but support and education systems as well. I’m especially humbled by the kind word that we continue to receive from patients and caregivers who are previously in a compassionate use program and have now transitioned to Firdapse, an evidenced based FDA approved therapy. Also, of the feedback that we have received from adult LEMS patients who were previously naïve to any form of 3,4-DAP are now being treated with Firdapse has been encouraging. Remember, as previously reported, only a few hundred patients in the U.S. had access to an investigational medicine prior to the FDA’s approval of Firdapse. Our efforts and ability to meet the treatment needs of all the adult patients suffering from LEMS has been motivational for us. We continually monitor patient’s satisfaction through surveys. They measure how pleased patients are with Catalyst Pathways programs and services, as well as the ease and efficiency in getting insurance coverage and receive their monthly shipments of Firdapse. As of the end of July, we’ve had 223 completed survey responses from Firdapse patients in Catalyst Pathways with an average score of 4.8 on a scale of 1 to 5. Further, 96% of patients rated our programs a 4 or a 5, and 88% of patients responded with a 5.

[Dan Brennan:]

Thank you, Pat and good morning everyone. As Pat had mentioned, we have had another strong quarter and we are enthusiastic about the launch progress thus far. Our teams in the field and the office across sales, patient services, medical, patient advocacy, marketing are all working well together and it’s a great team effort. Our main goal is to reach and help as many adult LEMS patients as possible as they navigate and live this debilitating disease. I would like to emphasis how truly debilitating this disease is. Patients find it hard to stand up, lift their arms, they encounter extreme fatigue in leg, arm, and neck muscle, experience severe bouts of blurred or double vision, all too often forcing them to leave the workforce or an enjoyable retirement and require the support of a caregiver to help them with even the most mundane daily activities. In some of the worst cases, people affected by LEMS speak of having to spend their days in the hospital trying to determine the cause and proper diagnosis for their illness. At Catalyst, it is our mission to change this, so that all patients suffering with LEMS and their doctors are better able to identify and treat the disease and we believe we are making good progress.

[Steve Miller:]

Thank you, Dan. As both Dan and Pat have mentioned, while we are focused on the commercial launch of Firdapse for adult patients with LEMS, we also continue to be committed to investing in and developing Firdapse for additional neuromuscular indications. I will briefly summarize our additional programs with Firdapse for other indications. First, we have an ongoing Phase 3 multi-site international trial ongoing in MuSK-myasthenia gravis or MuSK-MG and Catalyst remains optimistic that this trial would confirm the favorable outcomes from the previous investigator sponsored proof-of-concept trial for this indication. This trial is being conducted under an FDA approved special protocol assessment. Catalyst expects to complete enrollment of the approximately 60 MuSK-MG and 10 generalized MG subjects by the end of 2019. However, due to the complexity of this international trial and the importance of exactly abiding by our agreement with the agency in the special protocol assessment. We now expect to report topline results in the first half of 2020. Pending positive results of this trial, we intend to submit a supplemental NDA to the FDA to potentially add MuSK-MG to our already approved label for Firdapse. The current standard of care for myasthenia gravis is generally ineffective in MuSK-MG patients, so we look forward to the potential of providing these patients with an effective and approved therapeutic alternative. Additional details on this trial can be found on clinicaltrials.gov. As part of Catalyst commitment to patients, all patients that participate in the clinical trial for MuSK-MG are offered the opportunity to continue treatment with Firdapse to treat the condition if the patient and their physician feels the patient is benefitting from treatment and we expect to continue such extended treatment until this indication for Firdapse is approved. Second, we are currently conducting a Phase 3 clinical trial to evaluate Firdapse for the treatment of certain types of CMS. This trial, which includes adult and pediatric subjects is being conducted at trial sites around the United States and Canada. We continue to expect topline results from this trial in the second half of this year. This has been an important project for Catalyst for several years because there are currently no approved therapies for CMS, and very few off label alternatives that unfortunately provide limited symptomatic relief and for a small portion of the known CMS types. Additional details of this trial are available on clinicaltrials.gov. Pending the outcome of this trial and further discussions with the agency, we intend to submit a supplemental NDA to the FDA to potentially add CMS to our already approved label for Firdapse. We also continue to support all eligible CMS patients in our expanded access program for Firdapse, if the patient and their physician feel that treatment with Firdapse is beneficial. Finally, we are also conducting a proof-of-concept clinical study evaluating Firdapse, as a symptomatic treatment for patients with spinal muscular atrophy Type 3 in ambulatory subjects. The study is designed as a randomized 1

[Alicia Grande:]

Thanks Steve. On Wednesday, August 7, we filed our quarterly report on Form 10-Q for the second quarter ending June 30, 2019 in which we reported net income of 11 million or $0.11 per basic share and $0.10 per diluted share for the second quarter of 2019, as compared to a net loss of 6 million or $0.06 per basic and diluted share for the second quarter of 2018. For the quarter ended June 30, 2019, net product revenue from the launch of Firdapse was 28.8 million. Related cost of sales for the same quarter was 4.3 million. Research and development expenses were 4.6 million for the second quarter of 2019, as compared with 3.7 million in the second quarter of 2018. Research and development expenses for the second quarter of 2019 primarily consisted of expenses for medical, regulatory affairs, and quality assurance programs, as well as expenses from our ongoing Firdapse clinical trials and studies, and our Expanded Access Program. Research and development expenses in the comparable period in 2018 primarily consisted of consulting expenses as we prepare to submit our NDA for Firdapse for the treatment of LEMS, as well as expenses of our Firdapse clinical trials and studies and our Expanded Access Program. The company expects that the costs related to research and development activities will continue to be substantial throughout 2019 as we continue our ongoing clinical trials and studies in MuSK-MG, CMS, and SMA Type 3, and our Expanded Access Program for Firdapse. Selling, general and administrative expenses for the second quarter of 2019 totaled $9 million as compared to $2.6 million in the second quarter of 2018. The increase when compared to the same period in 2018 is primarily due to increased selling expenses, including costs of commercial system implementation, of our sales force and supporting personnel, product launch expenses, market access and market research expenses, and professional fees associated with our law suit against the FDA. The company expects selling, general and administrative expenses to increase in 2019, as we continue to build our infrastructure and commercial and patient programs in support of Firdapse sales activities in 2019, and prosecute our lawsuit against the FDA. On June 30, 2019, Catalyst had cash and investments of 64.9 million and no funded debt. Although there can be no assurance based on current available information’s, we believe that these resources will be sufficient to support our planned operations for at least the next 12 months. More detailed financial information and analysis may be found in the company's Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on Wednesday, August 7, 2019 and can be found on the Investor Relations page of our website at www.catalystpharma.com. I will now turn the call back to Pat.

[Pat McEnany:]

Thanks, Ali. We are very pleased with this quarter’s results and would like to thank everyone involved in making this happen, including our patients, physicians, employees, and other catalyst stakeholders. Together we are changing the lives every day of patients with rare neuromuscular diseases. We look forward to building on this strong launch foundation and providing you additional updates from our ongoing trials later this year. This ends our formal presentation. I’ll now turn the call over to the operator for questions.

[Operator:]

Thank you. Our first question is coming from Charles Duncan of Cantor Fitzgerald. Please go ahead.

[Charles Duncan:]

Hi, Pat and team. Thanks for taking my questions and congrats to a nice quarter and the progress. I had a quick question regarding the naïve patient starts, I’m wondering if you could characterize better that source of demand, how it’s coming to you or and or, you know did this make a contribution in the second quarter in terms of revenue or would that be the naïve patients perhaps make an impact in terms of revenue going forward.

[Pat McEnany:]

Dan do you want to take that?

[Dan Brennan:]

Sure. So, I think this was a question on last call as well. The naïve patients, again this is a group of what we see from the claims data primarily 1,500 patients that have already been diagnosed with LEMS, and so there are many patients out there that perhaps have already been trying to get 3,4-DAP and just weren't able to get into a study and such. So, there was any initial pent-up demand and we saw a good number of those patients reaching out to us, actually, but then also same with their physicians and many new physicians were prescribing for these patients. And so there was a pent-up demand and now we're starting to see that get into as I mentioned what looks like to be somewhere around the 15 patients per month that will come in, again either from patients that are hearing about it or reading about it online from the physicians and our efforts in the field with our sales reps, and some of our digital efforts. In Q2, as I mentioned earlier, there were 55 of these patients in Q1. By the end of Q2 that grew to 115 and right now we are at 138. So, in Q2, it had some meaningful impact as far as revenues are concerned. We are seeing in Q2 a relatively quick turnaround on the patient enrolment forms to getting through PAs and benefits being delivered. In Q2, actually that was under 10 days. So, I think that there was some revenue recognition from those patients even in Q2, and certainly as we move forward.

[Charles Duncan:]

Okay. That’s helpful. And regarding, you mentioned feedback encouraging, you know not a surprise for patients experienced on the drugs, but with regards to the naïve patients, if you could provide some more color and the feedback that you’re getting that would be great, so the it initial response in terms of efficacy is a tolerability or overall impact and quality of life?

[Pat McEnany:]

Gary, do you want to take that?

[Gary Ingenito:]

Sure. I think the feedback, again for the naïve patients has been positive with high levels of satisfaction and of the attention that they are receiving personally from the catalyst patient access liaisons to help them when navigate the system, as well as to get appropriately titrated on their medication. And that’s something that I think patients have been reporting that they’re not used to having with other medications or companies.

[Dan Brennan:]

So, if I can add to that Charles, it’s important for the physician to work with the patients, especially during this initial phase, the titration period where patient might be experiencing some of the side effects that are typical of this drug like there are some minor GI issues, as well as some tingling for paresthesia. And so, there is some handholding and consulting that’s required with these patients. These naive patients initially. And I think that between the Docs and our MSLs and our PLs, I think that they’ve done a wonderful job helping the patient get through this initial titration period.

[Charles Duncan:]

Thanks. That's helpful. That's a positive. Dan, thanks for the color. Last question for Steve, perhaps multipart, wanted to ask you about the upcoming CMS data, would you see a win there being just statistical significance or are you looking for some effect size to transition into the next stage, those conversations with the agents seem possibly found in sNDA. And then the second part of the question is regarding the MuSK-MG program, it seems like that’s making progress, you said that you were offering continued treatment on an extended treatment for certain patients, could you characterize approximately the percentage that have decided to go on to the drug after the trial?

[Steve Miller:]

Sure. Thank you, Charles. Hopefully, I will remember all your questions. First, with regards to CMS, that’s a relatively small trial. In a perfect world, we’d like to see statistical significance, but remember there’s also multiple gene types for CMS. I think a win there is simply to see some signal data from one or more of the genetic groups that are captured in our CMS trial. As I mentioned in the call, one of the things that we have to do after the completion of the trials, have a discussion with the FDA about the results and that discussion would be the very subject that you asked about, which is what is a trial? Tell us, and what does that mean for moving forward with the indication and which genetic subtypes are hopefully all will be allowed on the label. So, hopefully, that answers your question. With regard to the MuSK trial, let me answer your second question first and that is about the number of patients that seek the extended treatment, the short answer is virtually all the patients have agreed to continue on therapy after completion of the randomized portion of the trial. So, clearly those patients feel that the drug is benefiting them in some way and if they decided to continue on the treatment. Could you do me a favor and repeat the first part of your question with regard to MuSK, just to make sure I answer it appropriately.

[Charles Duncan:]

Yes, that was really it. I guess I would add, what is kind of the gating factor in terms of the timing the MuSK-MG trial?

[Steve Miller:]

Well, as I mentioned on the call, it’s just a very large complex trial with many sites both in the United States and internationally and at the conclusion of the enrollment, which we expect in this half we will be cycling through all of the sites to clean up all the data, clean up all the records, and properly close the sites and make sure that all the data is pristine as it should be for any trial, and simply because of the large number of sites and the international locations it will carry us into the first half of next year.

[Charles Duncan:]

Okay, thanks for that added information.

[Steve Miller:]

Okay, thank you.

[Operator:]

Thank you. Our next question is coming from Joe Catanzaro with Piper Jaffray. Please go ahead.

[Joe Catanzaro:]

Hi guys, thanks for taking the questions and congrats on the nice quarter. I guess my first question, you provided a bunch of metrics that provided some insight, but I’m wondering if you could provide a little bit more color in terms of the refill rate, maybe the exact percentage of refills you’re seeing and then along those lines, by the numbers you’ve provided, it sounds like there were about 25 patients or so who initiated treatment, but subsequently discontinued, I’m wondering if you could provide some detail around why those patients discontinued treatment.

[Dan Brennan:]

Sure, this is Dan. I can give some insight to the refill rate. The refill rate is very strong. As you would imagine in a highly symptomatic disease where the medicine provides immediate benefit to the patient. So, actually for our active patients, the refill rate per month is at about 98% to 100%. So, the active patients are refilling on a regular basis. The second question on some discontinuation, and I think this goes in a little bit with the question with Charles asked as well. We did see in the study for naïve patients coming on board, approximately in the neighborhood of 15% discontinuation or the drug didn’t work well in patients, and so we were expecting for naïve patient somewhere in the neighborhood of a 15% to 20% discontinuation rate and as you would imagine that Pat mentioned, in some cases it’s the side effects being intolerable and we try to help patients with that. There is a narrow therapeutic window for the drugs, we help the patient understand that concept, we help the physicians, but in some cases, it is just truly intolerable for the patient. In other cases the patient feels more benefit, and again we have to wonder whether or not they are just not going to be a responder or if it’s an element of the dosing and the titration and so that’s why we spend so much time and effort there, but the long-story short is, we do see somewhere in the neighborhood of the 15% to 20% discontinuation from new patient. And this is one of the reasons why we do provide the first 30 to 60 days is actually a bridge free product so that patients and payers know that they can look for the response before the payers will start paying.

[Joe Catanzaro:]

Okay, got it. That’s helpful. I guess my next question, maybe at a high level, can you just provide any detail or insight in terms of what you’re seeing in the market players with regards to Ruzurgi, are you hearing anything from physicians and patients? Have you seen any physicians’ transition your patients offer Firdapse on to Ruzurgi, just wondering if you have any color around that?

[Dan Brennan:]

We have heard very little and seem very little discontinuation from patients in our Catalyst Pathways or from physicians thus far. There are some, but it actually is very minimal and very little from what we are hearing and seeing both at the field level with our sales representative, as well as from our Catalyst Pathways and our ongoing patients?

[Joe Catanzaro:]

Okay, got it. That’s helpful. And then maybe just one last question just following up on the MuSK-MG timing. I just wanted to make sure it's clear that the change in timing around topline data is more due to just your expectations of the time it’s going to take to clean up the data and do the analysis? And then maybe speculating, you know, if the trial completes enrollment in 2019 and the primary endpoint is, you know, a day-10 time point, could we expect the data earlier in the first half of 2020 rather than later?

[Dan Brennan:]

Steve?

[Steve Miller:]

It’s conceivable that the data could be earlier in the first half of next year. Once the enrollment is complete, and as you said, the exposure period is relatively short. Once all the patients have completed, the next stage is to make sure that all the data has been entered in the electronic data collection system and that all queries get answered. Some investigators are quicker about it than others. And if all the investigators are very responsive to getting data entered, and also making for all queries are closed and all the sites have been checked, it could be fairly early in the first half of next year. If we have delinquent investigators, it can take longer. And so, it’s somewhat of an unknown as to how fast investigators can get it done. Many of the investigators have other trials going on as well and competing resources. And so, we have to make sure that we’re out there all the time talking to them and keeping them interested in our trial.

[Joe Catanzaro:]

Got it. Thanks for taking the questions.

[Dan Brennan:]

Thank you.

[Operator:]

Thank you. Our next question is coming from Joon Lee of SunTrust Robinson Humphrey. Please go ahead.

[Unidentified Analyst:]

Hi, thank you talking our question. This is for Joon. A quick question on the – so you mentioned that there is about 15 new patients coming in per month, and with this some calculation that’s about 90 patients come in for the second half of 2019 and then about 180 patients coming for the whole year. So, based on the calculations, end up is 500 patients at the end of 2019 and then 680 patients by the end of 2020. Is that calculation reasonable or fair? Or they are too conservative in terms of calculating how many patients are going to be ?

[Pat McEnany:]

Dan?

[Dan Brennan:]

Yes. I think directionally that you can be comfortable on that. It's always difficult to predict on such an ultra-rate disease where there are 1,500 diagnosed patients, and then, we estimate another 1,500 that are under-diagnosed. It's hard to determine what the steady-state number of new prescriptions and patients coming in. But I think that that is what we see right now, and from my experience in working with rare diseases, this seems to be following that trend.

[Unidentified Analyst:]

Great. thank you. And then, my second question is on the CMS, so basically in the CMS trial as well as the MuSK-MG trail, does they all have a dose findings and treatment running phase, so just was wondering that in the CMS trial, what’s the screening rate? If patients are eligible what’s the screening success rate so that it can be randomized in the subsequent treatment which we can study?

[Steve Miller:]

We haven’t commented on the screening success rate, in other words, how many patients are screened versus how many ultimately get randomized. I can – but just in general, I can say that it's somewhere to what we’ve seen in the past in other neuromuscular trials.

[Unidentified Analyst:]

Okay, great. Thank you, guys, and congrats on the strong quarter.

[Dan Brennan:]

Thank you, Joon.

[Operator:]

Thank you. Our next question is coming from Leland Gershell of Oppenheimer. Please go ahead.

[Leland Gershell:]

Hi, good morning. Wanted to ask a bit more about the LEMS patients out there who are currently not on therapy. With regard to accessibility of those patients in terms of, you know, them being perhaps in outlying areas seeing general neurologists, obviously a much perhaps larger population than a more focused group of the specialists, and how you see getting to those patients in terms of what strategies you’re going to use and what expense you might incur as you have to perhaps deploy more effort to get to those patients? And then I have a follow-up.

[Pat McEnany:]

Dan.

[Dan Brennan:]

Sure. So, we are continually purchasing claims data that updates us on the prescriptions. Well, we buy prescription data as well, but the procedures and the diagnosis codes of physicians across the country, and we still see, even on the quarterly update, new physicians and oftentimes general neurologists using diagnosis codes for these lump patients and that’s when we hand those leads in essence over to our sales representatives, and we have inside sales folks that are calling of these offices as well. So, we have, you know, kind of the traditional purchase and understand the data from a physician level, and then, hand that off to our sales force. And whether that’s in urban or rural, we do see the same where there is a good mix. You would think that many of the patients are in the large urban centers, but actually there are quite a few, and in fact, you know, oftentimes 50

[Pat McEnany:]

And Dan, let me add to that. I think longer-term, the Ambassador’s program that we have for fellows, that’s an investment that we’re making and fairly hefty investment over the next couple of years reaching out to fellows from various institutions and holding meetings around the country to educate them about the disease and about the clinical benefits of Firdapse, and they go back to their institutions and they educate some of their associates. And we had one in Dallas in May, with 14 fellows, I believe. They went back to their various institutions, and I think, 13 of those have already had meetings at their various institutions with the other fellows. So, part of it is longer-term educational effort that we’re doing that will pay dividends not immediately probably, but longer-term to augment what Dan has just said, the other reference that we’re doing.

[Leland Gershell:]

Okay. That’s very helpful. And then just on the sustained release formulation, I know you’re not giving much of an update here, but just wondering when we might hear and when that might be moving forward in position to perhaps run a clinical study? Could that be sometime in 2020?

[Dan Brennan:]

Steve?

[Steve Miller:]

I believe at this time that’s a reasonable assumption about when we might start some clinical work. Obviously, there’s formulation work that’s continuing that need to be completed and then manufacturing of clinical batches.

[Leland Gershell:]

Okay great. Thanks very much for taking the questions.

[Dan Brennan:]

Thanks, Leland.

[Operator:]

Thank you. Our next question is coming from Scott Henry of ROTH Capital. Please go ahead.

[Scott Henry:]

Thank you. Good morning, and really strong results Pat.

[Pat McEnany:]

Thanks, Scott.

[Scott Henry:]

Just a couple of questions. First a modeling question, it looks like the cost of goods sold is running around 15%. That would seem a little bit low given that – I think there's about 14% in total royalties being paid. Any clarity what’s going on there?

[Alicia Grande:]

Yes. So, most of our launch supply, we, the manufacturer before the FDA approval, so as per accounting guidance we expense that to R&D on prior years. So, the cost that we were able to capitalize from most of the launched supplies was only labeling and packaging. As we plead that product and start manufacturing a new product for sales. You will see a more realistic cost of sales. So, we expect the cost of sales to increase as time passes by.

[Dan Brennan:]

Scott in the past, we’ve talked about from modelling purposes, including the royalties to use on a conservative basis about 20%.

[Scott Henry:]

Okay. Great. Thank you.

[Dan Brennan:]

Knowing that 14% of that is the royalties.

[Scott Henry:]

Perfect. Thank you for that clarity. And then, with regards to the FDA lawsuit, are there any events we should be looking for? Are there any clocks ticking or just trying to get a sense of anything we should look for from a time line or an event structure there?

[Dan Brennan:]

Yes. We believe that federal agencies and suits like this have about 60 days to respond. There was a clerical glitch that delay, will probably delay that by 10 days, so we think that our response will be filed probably sometime around Labor Day. So, that’s really all the color we can give at the moment Scott.

[Scott Henry:]

Okay great. That’s helpful. And then, the Japan indication, I don't know, have you given any color as to kind of the size of that market and what sort of timeline we should be thinking about to reach that market?

[Dan Brennan:]

Yes. We’re a little guarded right now. Our team was there last week in Japan working with regulatory – Japanese regulatory group and our CRO, and so we're going to be a little bit guarded until we can be more precise about timing. We believe the prevalence based on literature and some of the reports that we’ve seen and some of the work that had actually been conducted by BioMarin indicates that it is somewhere between 800 to maybe 1,300 1,400 LEMS patients and that would sort of match up as a percentage on a prevalence basis as it relates to the U.S., about 40% of patients. So, 1,200 or so. So, that’s all we have at this point Scott on Japan, although we are…

[Scott Henry:]

Okay. And then timeline wise?

[Dan Brennan:]

Pardon me?

[Scott Henry:]

Any comments on how long it could take to get that to filing or on the market?

[Dan Brennan:]

No, we should have more information on that later in the year. We have several more meetings scheduled in Japan between now and the end of the year. And I would say, as we get more clarity, we will be in a position to provide some guidance and timelines.

[Scott Henry:]

Okay great. That should do it from me. Thank you for taking the questions.

[Dan Brennan:]

Thanks Scott.

[Operator:]

Thank you. At this time, I’d like to turn the floor back over to management for closing comments.

[Dan Brennan:]

Thank you, operator. I want to close today by saying how excited we are about the progress that we have made so far in 2019. We thank you for joining today's call and look forward to providing further updates as the year progresses. Have a nice day.

[Operator:]

Ladies and gentlemen, thank you for your participation. This concludes today's conference. You may disconnect your lines at this time and have a wonderful day.