Catalyst Pharmaceuticals, Inc. (CPRX) Q2 2016 Earnings Report, Transcript and Summary

Greetings and welcome to the Catalyst Pharmaceuticals Partners Second Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now pleasure to introduce your host Ms. Ali Grande, Chief Financial Officer. Thank you. You may begin.

Good morning and thank you for joining our conference call. To begin, on today's call, we have Pat McEnany, Chairman and Chief Executive Officer and Dr. Steven Miller, Chief Operating Officer and Chief Scientific Officer. On this call, we will be making forward-looking statements involving known and unknown risks and uncertainties, which may cause Catalyst's actual results in future periods to differ materially from forecasted results. A number of factors, including those described in Catalyst's annual report in Form 10-K for the fiscal year 2015 and its other filings with the U.S. Securities and Exchange Commission could adversely affect Catalyst. All forward-looking statements are qualified in their entirety by these cautionary statements and Catalyst undertakes no obligation to revise or update this presentation to reflect events or circumstances after the date hereof. At this time, it is my pleasure to turn the call over to Pat McEnany, our Chief Executive Officer.

Thanks, Ali. And good morning, everybody. Thank you for joining us today. I'd like to welcome everyone to our second quarter results and product development update call. On today's call, I will give you a report on our activities and progress so far this year, including the regulatory status of Firdapse, and rest of our development pipeline. Steve Miller will provide a more detailed status report on our pipeline and next steps for Firdapse. Following, Ali will give you a brief review of our financial results for the quarter. Lastly, we will take your questions. We are pleased to reach an agreement with the FDA during this last quarter on a confirmatory Phase 3 study protocol for Firdapse, which currently has breakthrough therapy and orphan drug designations for the treatment of Lambert-Eaton Myasthenic Syndrome. After discussions with the FDA, we agreed on the trial design and we expect to initiate a small study with Firdapse in the second half of this year. We have met with mist of our key opinion leaders who are fully supportive of our plan for conducting a second Phase 3 trial for Firdapse. And we are currently finalizing the logistics to launch this very efficient, short term confirmatory Phase 3 trial in the fourth quarter of this year. I'd like to say at a high level, while the delay is obviously frustrating to all of us at Catalyst, along with our other stakeholders, we are pleased that the FDA has shown great flexibility to work with us on this confirmatory Phase 3 trial. We all see the clear need for this patient population to have an FDA approved therapy and importantly we believe that we have the cash resources on hand to complete all of the planned clinical development and see our way to an accepted NDA submission without the need for an additional financing. Our efforts certainly stretched far beyond the LEMS indication and we are continuing the development of Firdapse for additional indications that have studies ongoing for both patients with Congenital Myasthenic Syndromes and MuSK antibody positive Myasthenia Gravis. Catalyst has been preparing to get CPP-115 Phase 2 ready, so that we can commence clinical trials for several different CMS indications. However, at present, our currently available resources are focused on successfully advancing Firdapse and we do not plan to spend our available resources on this project until we obtain additional financing or we find a suitable partner who will work with us to further develop this product. In that regard we are currently in discussions with several parties who may be interested in partnering with us to further development of CPP-115. We are also developing a generic version of Sabril and we hope to have one of the first ANDA's or abbreviated new drug application submitted for this product, which is currently marketed in the United States by Lundbeck, which is indicated for the treatment of treatment of refractory complex partial seizures and infantile spasms, all of Hatch-Waxman exclusivities for this product will be expired by April 2017 and the US Sabril sales in 2015 as reported were approximately $144 million in 2015, up 15% from 2014. And recently relaxed FDA requirements under the REMS program for physician prescriptions, we view this is a valuable product to develop. We think this is largely under appreciated asset that could potentially provide considerable value to the Catalyst pipeline in the future. The clinical data from our previous Phase 3 Firdapse study authored by Dr. Shin Oh, and many other investigators who had participated in our trial, it was published last quarter in Muscle & Nerve, a leading medical publication devoted to non-muscular disorders and treatments and we believe this further validates the strength our previous Phase 3 data that showed a significant benefit for LEMS patients being treated with Firdapse. Recently we completed our operating expense management plan design to align our resources so we can efficiently move forward with the continued development of Firdapse and the rest of our pipeline. I'll now turn the call over Dr. Steve Miller, who will provide updates on our pipeline and scientific developments.

Thanks, Pat and good morning, everyone. As Pat previously stated, we have reached an agreement with the FDA for our Phase 3 trial of Firdapse for the treatment Lambert-Eaton Myasthenic Syndrome or LEMS. LEMS is an ultra rare disease with a prevalence in the United States believed to be approximately 3,000 patients. We anticipate having two clinical trial sites, one on the east coast and other on the west coast of the US enrolling up to 24 subjects, and utilizing a cross-over design that we believe will maximize the statistical power in this small trial. The trial will have the same co-primary endpoints as our first Phase 3 trial and the FDA is permitting the use of subjects currently enrolled in our Expanded Access Program, as subjects in our new trial. We would expect top line data and an NDA resubmission assuming positive results in the second half of 2017 A Phase 3 trial is currently underway evaluating Firdapse for the treatment Congenital Myasthenic Syndromes or CMS. CMS is an ultra rare disease with a prevalence in the United States believed to be between a 1000 and1500 patients. We continue to identify and recruit patients into this study at four clinical sites. Based on discussions with the FDA, the study is being expanded to include adult CMS patients in addition to the pediatric population and to expand the total number of subjects in this trial to approximately 20 patients We have submitted to the FDA and the FDA is currently reviewing the amended protocol and statistical analysis plan for this trial. Based on presently available information, we expect to receive top-line data from this trial in the second half of 2017, and assuming the data is favorable, we plan to include CMS in the NDA resubmission or as a supplement to the NDA. As always, patients who participate in this trial will be eligible to enroll in our Expanded Access Program at the completion of the study Earlier this year, we announced the initiation of an investigator-sponsored study of Firdapse in patients with MuSK antibody positive Myasthenia Gravis. Approximately 5% to 8% of the Myasthenia Gravis patient population is estimated to be MuSK antibody positive. This small Phase 3 study is currently underway at the Carlo Besta Neurological Institute in Milan, Italy. We are anticipating that we see the top line data in early 2017 and assuming positive data from current study, we will then initiate a registration quality trial in the US where we have requested a Special Protocol Assessment from the FDA for a US based trial We will continue to work to make CPP-115 our next generation GABA-AT inhibitor Phase 2 ready. This will require dose optimization studies, long-term toxicology studies in two species; development and reproductive toxicology studies; and additional ADME studies While we are not currently allocating resources to this program as Pat previously stated, we are in discussions with other partners to assess the best way to progress with development of this product. I will now turn the call over Ali, to review our financial results.

Thanks, Steve. For both the quarter ended June 30, 2016 and June 30, 2015, Catalyst reported a GAAP net loss of $4.6 million or $0.06 per basic and diluted share, excluding non-cash gain of 153,000 attributable to the change in the fair value of liability-classified warrants. Non-GAAP1 net loss was $4.7 million or $0.06 per basic and diluted share for the second quarter of 2016. In comparison, Non-GAAP net loss for the second quarter of 2015 was 4.9 or $0.06 per basic and diluted share, which excludes the non-cash gain of 334,000 attributable to the change in fair value of liability-classified warrants. Research and development expenses for the second quarter of 2016 were $2.5 million compared to $2.6 million in the second quarter of 2015. Research and development expenses in first quarter decreased slightly when compared to the same period in 2015, as we decreased activities related to our completed initial Phase 3 trial for Firdapse. However, we expect that our research and development spend for the rest for the year 2016 and into 2017 will increase as we initiate our assessed in safety trials for Firdapse and increased activities in other ongoing studies and trials. General and administrative expenses totaled $2.3 million in both the second quarters of 2016 and 2015. We expect general and administrative expenses to decrease during the remainder of 2016, as we continue taking steps to conserve our available resources. As a development-stage biopharmaceutical company, Catalyst had no revenues in either the second quarter of 2016 or the second quarter of 2015. At June 30, 2016, Catalyst had cash and cash equivalents, CDs and short-term investments of $48 million and no debt. Although there can be no assurance, we continue to believe that these resources give us sufficient runway to complete the development of Firdapse and get to an accepted NDA submission for Firdapse without the need for additional financing. More detailed financial information and analysis may be found in the quarterly report on Form 10-Q, which we filed yesterday with the Securities and Exchange Commission and can be found on the Investor Relations page of our website at www.catalystpharma.com. Now, I would like to turn the call back to Pat.

Thanks, Ali. Again, we are encouraged by our discussions with the FDA and pleased to have reached agreement on an additional Phase 3 trial for Firdapse. We are working extensively to complete all required study sufficiently and swiftly in order to complete our Firdapse NDA resubmission in a timely manner. We expect to advance our pipeline and continue our work with rare disease organizations and facilitate awareness of LEMS and CMS and provide outreach support for the physicians and the patients that they treat. We will continue to analyze our operational plan to ensure as best as possible that we have sufficient financial resources to complete the additional studies required and to get an accepted NDA resubmission for Firdapse without the need for additional financing. With that, I'd like to thank all of you for participating today and open up the call for questions.

Thank you. [Operator Instructions] Our first question is coming from the line of Charles Duncan with Piper Jaffray. Please proceed with your question.

Good morning. This is Sara on for Charles. Thanks for taking the question.

Hi, good morning.

Good morning. The first one is just about the investigator-sponsored trial for Myasthenia Gravis, how many patients are going to be enrolled in that and is that a placebo-controlled study?

Steve?

That is a placebo-controlled study. It is an investigator-sponsored study at a single site Milan, Italy. The design - the study is up to 20 patients, but naturally it depends on how many patients he is ultimately able to recruit. The investigator in Italy is a center of excellence for treating that disease and has access to a significant number of patients.

Okay. Thanks. And are there any details that you can share at this time about the special protocol assessment that you have submitted?

Well, what we have submitted to the FDA, the special protocol assessment request regarding a MuSK trial for the United States. At this point there is nothing we could say about it.

Okay. And then just one other question, on the expanded CMS program, and it sounds like you maybe able add that to the NDA resubmission at the end of next year. But in addition to that trial are there any rate limiting steps or studies that you'd anticipate…

For resubmission? Are you asking if there is rate limiting items with regard to resubmitting the NDA?

No, in terms of adding CMS as a second indication, either at that time or later time?

At this time we do not believe there is any additional items that are rate limiting.

Okay. Thanks for taking my questions.

Thank you.

Thank you. The next question is coming from the line of Scott Henry with ROTH Capital. Please proceed with your question.

Thank you. And good morning.

Good morning, Scott.

Pat, for clarity I just wanted to make sure I have the timeline or expected timeline on Firdapse correct, would you expect to have the NDA complete in fourth quarter '17 and thus would you expect to launch perhaps second half '18?

Scott, we have said that we anticipate a resubmission, having data and a re-submission and hopefully in acceptance of the NDA in the second half of next year. And if that is the case, then I would expect that with an approval that it would be – there would be launch sometime in – towards summer of '18.

Okay. That would certainly make sense. And then second question - and I don’t know if you can…

By the way, Scott, let just further add, that’s assuming a priority review.

Okay. With regards to generic Sabril, can you give any color on when you would expect to have that program ready to go? I mean, would you – should we be thinking about 2018 or I know just you mentioned the April 2017 date in there as far as Hatch-Waxman, do you have any targets that you want to share? And I understand if you don’t.

We as a generic drug companies are obviously very quiet and confidential with regard to the status of their various projects. And I think that in the case of Sabril, for competitive reasons Scott, we need to stay fairly silent, at least at this point. As you know, we've done a lot of work on this drug over the last seven years. So we have a great deal of experience with it. And you know, as we've looked at it about a year ago sitting on the shelf, we decided to dust it off based on what we saw happening with the sales of Sabril over the last three or four years, which is – it’s not a huge product or a blockbuster by any sense. But it does have a lot of constraints that make it not so easy for generic drug companies to look at this and say, it’s a viable project, including our REMS program and the difficulty in getting the reference source to drug. And so we are far along with the project and I – all I can say is stay tuned and I think over the next couple of quarters we'll be able – we'll be in a position to talk better about the status of that project.

Okay. Fair enough. And then final question, on the model, the $2.3 million in SG&A in second quarter, are there still cost savings, I guess from removal of selling costs in that line or is $2.3 if it slows it will go?

Well, remember we had our workforce reduction about halfway through the second quarter. So we did see obviously some reduced expenses in the second quarter. And I think we'll see the full impact of the workforce reduction, as well as the other steps to streamline the operation, I think you'll see the effects of that in the third quarter. So I would expect to see our G&A slightly less than second quarter and certainly less than first quarter as we go through the year.

Okay. Great. Thank you for taking the questions.

Thank you.

Thank you. Our next question is coming from the line of Edward Nash with SunTrust. Please proceed with your question.

Hi, good morning. This is Mike Guo on for Edward. Thanks for taking my questions. The first on the site, if I am not mistaken previously you mentioned that you're going to have one site, so now you are expecting to have two clinical sites. So could you tell me what's the reason for that?

Yes. Mike, how are you today? Thanks for your question. It’s a good question. Obviously a single site simplifies the study for us. But the patient population, especially in our expanded access for REMS is spread all over the country. And we felt after a lot of meeting with our KOLs that patients may not from the west coast certainly want to come to the east coast to participate in a short study. So we decided that we needed a site on the east coast and west coast, which complicates it a little bit but not much. And at the same time, we think it offers us an opportunity to recruit faster having two sites.

Got it. That makes sense. The second question from is about the trial design, as you mentioned that you're going to have a cross-over design, now this is little bit different from our previous Phase 3 trial, which is with product design. Could you share a little bit detail as to the cross-over design and the reasons for cross-over design thing?

Well, I can't share many more details, other than just to clarify that it is a cross-over discontinuation design. So it will be the same kind of discontinuation design that we did in the first Phase 3 trial, it’s just that a cross over design would be used so that subjects will be exposed to both placebo and the active drug substance. The purpose of this was to increase the power of the study and this was specifically discussed with the agency and they did agree to allow us to use a cross-over design.

Got it. So the treatment duration will still be 14 days I assume?

We have not released any details as yet about the specific durations of each treatment period. We anticipate in the very new future that we will be listing additional details of the study design and clinical trials and that point we'll be able to speak more about the design.

Got it. That’s helpful. So last question from me is about – so FDAs permitting you to enroll patients, currently participating in your expanded access program, I know that you will not - you probably will not share the number of patients on the expanded access program. But could you just qualitatively let us know, like maybe a majority or just a small portion of the 24 subjects will be from the expanded access program?

Guo, I am sorry, I can't comment on that right now.

Okay, no problem. Thank you for taking my questions.

Thanks, Mike.

Thank you. We have a follow up question coming from the line of Charles Duncan with Piper Jaffray. Please proceed with your question.

Hi, guys. Thanks for taking the follow up question. This is Charles obviously, not Sara. I was wanting to ask you more about the plan forward. So for CMS is it possible that by the time you have the NDA prepared you might be able to you know, consider CMS for the label or for an application beyond LEMS, could you actually pursue a broader label than in the past?

Charles, as you probably recall, in our first submission we included CMS and our meetings that we've had with the FDA in the first half of this year there is a fair amount of discussion with regard to CMS. And the FDA has weighed in with regard to CMS. So we are making the study that was started last year. As we pointed out in the press release, we're expanding that to include a larger population and adult patients, as well as pediatric. And so the intention, at least for the moment our intention is to have that study dovetail with the completion of the LEMS study where we can include not only LEMS, but CMS in the resubmission, that’s our goal.

Okay. That makes sense. But we'll have to wait and see the results, but it sounds like at least you are preparing for that possibility.

Yes.

And then with regard to Myasthenia Gravis, I know Sara asked a question about – I didn’t really get a clear answer, or understand that answer. And that is what is the regulatory strategy around that, is that – is it possible that beyond the IST would initiate Myasthenia Gravis study or is it possible that you would consider the results of the IST, depending on whether or not they were clean as a label expansion strategy or would that be part of the primary submission?

Yes, we don’t believe that it will be part of the primary submission, not going to have data in time. We expect to have data on that investigator-sponsored study sometime early 2017. If we get positive results, Charles, then we see a signal, then we will go into the registration quality trial base here in the US. We have requested a special protocol assessment for that study which is under review now. And so assuming positive signal from the study of Milan, we will then go into a registration quality Phase 3 trial here in the US and we would look to eventually expand the label to include MuSK, antibody positive Myasthenia Gravis patients. But that would not happen, we don’t expect that to happen with the resubmission.

Okay. That’s helpful, Pat. And then with regard to - sorry for all these follow up questions. But with regard to the potential news flow over the course of the next year, it’s been challenged that this was delayed, but it sounds like its going to be more robust data package. Would you anticipate being able to give any updates in terms of enrollment or even a top line data release once you complete that cross-over. And also as you look at that cross-over design it seems like given that patients were serious, they were non-controlled, the noise in that cross-over design could be less, and therefore potentially even a cleaner result? Can you speak to that, give perspective comment?

Well, yes, Charles. This is Steve. You are completely correct, and obviously the noise does the down, when you do a cross-over the design, in a perfect world you would double the statistical power. You did point that there could be a little bit of carry over. So the reality is that the statistical power is approximately twice. So as you know from our previous study, we did achieve statistical significance with 38 patients and so conceivably we have 24 patients, we should adequate statistical power for this study to pass based on the effect size we put this in so.

Okay. Very good. That’s helpful. Thanks for taking the follow up question.

Sure. Thanks, Charles.

Thank you. We have reached the end of our question-and-answer session. I would now like to pass the floor back over to management for any additional concluding comments.

Thanks again for your participation on this call today. I'd once again, like to thank all our stakeholders for their support in helping Catalyst deliver on its promise to advanced treatments for patients suffering from rare unmet needs. We look forward to seeing some of you at upcoming investor conferences and hope to provide more guidance as additional facts become available. We certainly appreciate your patience and promise you we will work tirelessly to move forward with our shared vision. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Again we thank you for your participation. And you may disconnect your line at this time.