Greetings and welcome to the Catalyst Pharmaceuticals Fourth Quarter 2019 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. As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Ali Grande. Please go ahead.

Good morning, everyone, and welcome to today's conference call. Joining me on today's call are members of the Catalyst management team, including Patrick McEnany, Chairman and Chief Executive Officer; Dr. Steven Miller, Chief Operating Officer and Chief Scientific Officer; and Dan Brennan, our Chief Commercial Officer.

Thank you, Ali, and thank you, everyone for joining us this morning. 2019 was truly a transformative year for Catalyst as we transition from what was an R&D company into a U.S. commercial stage pharmaceutical company. We are pleased that in 2019, we exceeded our Firdapse launch expectations and are delighted to have helped more than 190 patients prior to our FDA approval, never had access to any form of 3,4-DAP or Amifampridine. As you know, Firdapse is an FDA-approved, evidence-based therapy that is now available to treat adult LEMS patients, and I can now report the patients’ monthly out-of-pocket expenses currently averaging $1.08 per month. Our Catalyst team has executed across all functional areas of our business during 2019 and we've begun 2020 with great momentum. Recently, we announced the completion of enrollment in our Phase III study for antibody positive MuSK-MG. And we expect to announce topline results from this very important study during the second quarter of this year. Since the launch of Firdapse in January of 2019, we have continued to see strong support and encouraging reactions from patients, physicians, and payers. Now that the initial phase of our launch is over, we look forward to introducing additional support programs in 2020 to assist both LEMS patients and their healthcare providers. As you may have seen from our press release yesterday, we reported Firdapse fourth quarter of 2019 net revenues of $30 million and full-year 2019 net revenues of $102 million. As previously announced in January, we continue to expect full-year 2020 Firdapse net product revenues to be in the range of $135 million to $155 million. On our call this morning, Dan will provide you with a report on commercial operations and further key performance indicators related to our ongoing launch of Firdapse.

Thanks, Pat and good morning, everyone. The first year of our commercial launch for Firdapse was a productive and successful one as our performance exceeded all expectations for the year. In addition to the launch execution, we are pleased with the feedback that we have received from both patients and their medical providers. Their support and utilization of Firdapse has validated the patient need that drove our efforts to complete all safety and efficacy studies, obtained the necessary regulatory approval and create widespread availability of the medicine for all adult LEMS patients. Since our launch in January, 2019, about 35% of the diagnosed adult LEMS patient population have received a Firdapse prescription. As this percentage continues to grow, we are pleased to see physicians viewing Firdapse as the standard of care and a life-changing medication for patients with LEMS a disease for which there were no prior approved therapies. I would like to run through our key performance metrics that we have highlighted on previous calls. At the end of the fourth quarter, 532 patients had been prescribed Firdapse compared to just over 490 patients at the end of the third quarter. Over 190 of these patients were adult LEMS patients and naive to any form of 3,4-DAP and we are pleased to offer these patients medicine for the treatment of this disease which can truly impact the lives of the patients and their families. At the end of the fourth quarter, 320 unique writers had prescribed Firdapse. In addition, there were 345 patients active and on insurer reimbursed therapy at the end of the fourth quarter. One of the key areas of importance to us through this commercial launch has been patient satisfaction, and as of the end of 2019, we had 345 customer satisfaction surveys completed, and our average rating remains at 4.8 out of 5 stars. In the fourth quarter of 2019, the average co-pay across all patients has gone down to just a $1.08 per month per patient for those who take advantage of our Assistance Programs. 94% of the time Firdapse patients monthly out-of-pocket was zero. Patients have been consistently satisfied with the service they have received while being prescribed Firdapse.

Thanks for the commercial update Dan, and now I'll provide an update on our clinical pipeline to develop Firdapse for additional neuromuscular indications. Catalyst recently announced that we exceeded the enrollment goals for our ongoing Phase III multi-site international trial in MuSK-MG, which is being conducted under an FDA Special Protocol Assessment, or SPA. This Phase III trial follows our successful proof-of-concept trial for this indication. In the FDA-approved SPA, Catalyst committed to the FDA that we would enroll at least 60 MuSK-MG patients and would attempt to enroll at least 10 acetylcholine receptor MG patients, sometimes called generalized MG, which were requested by the agency to determine if this other type of MG exhibits any response to treatment with amifampridine. Catalyst exceeded the enrollment goals for both of these types, myasthenia gravis. The over enrollment was primarily due to patients that were screened and eligible for treatment after our enrollment goals were met and they wished to participate and which Catalyst chose to include for ethical reasons. At this time, the last activities of the clinical trial close-out are being completed and Catalyst anticipates reporting topline results in the second quarter of this year. Catalyst remains cautiously optimistic about the outcome of this Phase III trial for the symptomatic treatment of MuSK Myasthenia Gravis with amifampridine. Like LEMS, MuSK-MG is an autoimmune disease caused by a single type of antibodies that damages a single protein in the neuromuscular junction and is therefore a relatively homogeneous disease which is in contrast to the difficulty in treating the heterogeneous CMS population. Catalyst believes that homogeneity should result in a response to treatment similar to the previous proof-of-concept trial in much the same way all of the reported LEMS trial outcomes were very similar. MuSK-MG is an autoimmune disease for which there…

Thanks, Steve. As you've heard from our team, with revenue from the launch of Firdapse, our first product and continued disciplined expense management. In 2019, we achieved our first full-year of operating profitability. Yesterday, we filed our 2019 Annual Report on Form 10-K and reported GAAP net income of $32 million or $0.31 per basic and $0.30 per diluted share for the fiscal year 2019, compared to a GAAP net loss of $34 million or $0.33 per basic and diluted share for 2018. For 2019, non-GAAP net income excluding $3.8 million of expenses related to non-cash stock-based compensation was $35.7 million or $0.35 per basic and $0.34 per diluted share. In comparison, 2018 non-GAAP net loss excluding $3.6 million of expenses related to non-cash stock-based compensation was $30.5 million or $0.30 per diluted and basic share. For the fourth quarter of 2019, we reported GAAP net income of $7.9 million or $0.08 per basic and $0.07 per diluted share compared to a GAAP net loss of $14.5 million or $0.14 per basic and diluted share for the same period in 2018. Net product revenue from the launch of Firdapse in January, 2019 was $102.3 million for the fiscal 2019 year with related cost of sales of $14.8 million. For the fourth quarter of 2019, net product revenue from Firdapse was $30.1 million with related cost of sales in the quarter of $4.4 million. It is important to remember that our gross margin benefited in 2019 from the inventory expense prior to the FDA approval of Firdapse, and this will not continue at the same rates during 2020. During the fourth quarter and year-end and year 2018, Catalyst had revenues of $500,000 from our collaboration with Endo for generic Sabril that began during December, 2018. Research and development expenses were $6.3…

Thank you, Ali. Once again, I am very proud of what the Catalyst team has delivered across all functional areas in 2019. We are well positioned to build on this momentum in 2020 and there is a great deal to look forward to this year. I believe that we have laid out a clear strategy to deliver near-term and longer-term shareholder value by further establishing Firdapse, a standard of care for adult LEMS patients, expanding the Firdapse label to include other indications, global expansion for Firdapse, lifecycle management for Firdapse, including a longer acting formulation, and continue to look for opportunities to diversify our business beyond Firdapse. Most importantly, we remain extremely focused on patients and our commitment to advance our mission to deliver life-changing medications to people living with rare diseases. This concludes our prepared remarks today. With that, I'd like to open the call to questions. Operator, can we take the first question, please?

Certainly. We will now be conducting a question-and-answer session. Our first question today is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.

Good morning, Pat and team. First of all, thanks for taking our question. And secondly, congratulations on a successful transition from the development stage to the commercial stage, that's something that doesn't always happen and not all companies execute that this well. Let me ask you Pat or Dan, a question about current – I guess, the current tone of business and the guidance, $135 million to $155 million. I'd like to get some additional information on what are the key drivers in that range? Is it new patients? Is it persistence for current patients or geographic expansion? And I'm wondering if you could just touch on your field teams' deployment over the course of, say, the next couple of weeks or months, should there be continued challenges with COVID-19?

Yes. Thank you, Charles for the question. Yesterday, we issued a travel ban for – a 30-day travel ban for all employees, including our field force, and I'll let Dan address that for you. So it's – as I think most companies will tell you, this is obviously an evolving situation, something that we're monitoring daily. The most important thing again is the safety of our employees. And so we are employing a teller working program, doing remote meetings, virtual meetings, and so our IT department is really on top of keeping the community line of communication open with the docs, the patients, and of course, the payers. So to that extent, I think that you'll see as this evolves the situation with the coranavirus evolves, I think, we will be a little smarter and we will have more to talk about with regard to how we are reaching all of our constituencies. So with regard to our guidance of $135 million to $155 million for this year, that does not include any global expansion. But I'll let Dan address the metrics and the things that we are monitoring to make sure that we do get to those levels, Charles.

Thanks.

Thanks, Pat. And thanks for the question Charles. Yes, I mean, you've pretty much hit it. The key drivers are really on new patient starts and those are still the patients that are out there diagnosed with LEMS and unfortunately not on this fantastic medication. So we still have some work. We have about – as I mentioned in my remarks, about 35% of the patients who are diagnosed that have tried Firdapse, we need to continue on with that. So new patient starts is a key metric, and then, of course, maintaining the patients that we have on board, and that's why it was so important for us to be able to manage that initial 90-day discontinuation that we saw early on at above 35% and get it back under 25%, which is more in line with what we know from the studies and which is more manageable, especially as new patients starts are starting to rise with the expansion of our salesforce and increase in our non-personal promotion and other programs like the inside sales. So really those are the two main metrics that are going to be driving. Everything else seems to be remaining stable with gross to net’s and average milligrams per prescription and such. So really it comes down to those elements.

No. I'm assuming that current roughly 90 – or 25% discontinuations really for the most part applies only to new patients?

Correct. That's our metric in looking at new enrollments within 90 days. What level of persistence and ultimately what level of discontinuation occurs.

Got it. And then in Canada, it would seem to me – well, I guess, I'm wondering why do you need a partner. You've doubled the size of the salesforce, and I'm just wondering why – is there some legal or regulatory reason you can't market in Canada?

Charles it would require a significant investment. We really don't want to reinvent the wheel of our sales and marketing team in Canada. So we'd ideally like to find a Canadian partner that's already marketing rare disease drugs and ideally, even to the neuromuscular community. As you can imagine, the rule of thumb is, 10% proportionate. And we believe that based on prevalence in the U.S., we think that they're probably 250 to 300 patients in Canada. So we're really not prepared to make a substantial investment to bring this to market ourselves in Canada.

Okay. That's helpful. And one last question for Steve, perhaps on the MuSK-MG trial. You mentioned that one being cautiously optimistic. If you could help us understand the cautiously part that would be useful. I think that that's a randomized withdrawal study. And I'm just wondering if you could provide us any clarity on the number of patients that responded versus enrolled at least on a blinded basis? What is the basis of your cautious?

The basis of my cautious is simply would be presumptuous of me to tell everyone that it's definitely going to pass when it's still blinded.

Okay.

But the reality is that we're optimistic because the proof-of-concept trial had a very good outcome. It's a homogeneous patient population and we expect to see a similar outcome in the current Phase III trial. And so we remain optimistic about the potential outcome of the trial.

Similar age in enrolled patients in the two – in the Phase II versus Phase I?

Yes. So basically it's a very similar patient population. And the main reason for that is because the disease again is homogeneous. It affects people primarily of about the same age and the same gender. And so the patient populations look very similar between the proof-of-concept trial in this...

Okay. Thank you. I'll hop back in the queue. Congrats.

Thank you.

Thank you. Our next question is coming from Joe Catanzaro from Piper Sandler. Your line is now live.

Hey guys. Thanks for taking the questions. So maybe I'll ask it from the opposite side of the spectrum here with regards to COVID and see if whether you guys have seen or expect any impact from COBIV on LEMS, follow-up with patients, follow-up visit there, opportunity to get their prescriptions refilled. And along those lines, I guess, what percent of prescriptions currently are delivered by mail directly to the patient?

Dan, would you take that please?

Sure. So all of our prescriptions are delivered directly to patients by mail, by our specialty pharmacy system, and we've had a lot of focusing on that. And in fact, we just sent out communications to all patients today through a variety of different means, letting them know, and give them comfort and ease that there is product available and it can be shipped and it can even be shipped out. Earlier than normal, we can work with insurers to do that. So that end of COVID doesn't seem to be disrupted and we are very worried about that for our patients because we know that patients really can't – and don't want to handle one-day without therapy. It's that important to them. So the area that is still TBD is on the new patient starts and office visits, on patients going in and being able to see their physician for a new prescription and for new enrollments. And we have ramped up our non-personal promotion for awareness, and alerting to physicians. We're still able to take enrollment forms. We can take enrollment forms on electronically and obtain patient signatures appropriately. So we're assuring that everything is still a go, but it's just – we've seen very good results from our expansion efforts all the way through to last week. And then just like everyone else, we just have to kind of see how things happen in the coming weeks. But our eyes are on the new patient starts.

Okay. Got it. And then just another follow-up here. So if you look at some of the metrics and numbers you've provided, it seems about net-net, there's about 25 less patients receiving an insurance-reimbursed prescription at the end of 4Q compared to 3Q. Can you just give us a sense maybe how that breaks out between discontinuation due to adverse events, no benefits, switches to the other drugs? And whether there's any other reasons that are popping up for this?

Yes. I mean, it came to two different things in Q3 versus Q4 as far as the number of reimbursed patients on drug. And it's primarily that discontinuations. And as I've mentioned before, we had a kind of a bolus of discontinuations from Ruzurgi patients or from our patients to the Jacobus drug that occurred at the end of September, October, and November. And so we also did have – at the beginning of the quarter, we’re still fighting that initial naive new patient discontinuation that has gotten more under hand. So both of those elements impacted Q4 and have moderated. And at the same time in Q4, we had a much reduced number of new patient starts. So we actually ended up having more discontinuations for those other reasons than we had new patient starts. All of these have started seeing trends in a much better direction from the Ruzurgi discontinuations to the new patients start discontinuations as well as new patients starts in Q1. So we're optimistic that our expansion efforts on the commercial side are helping that new patient enrollments at the same time, the discontinuations are going down.

Okay. And maybe one quick one for Steve. And I think this is what maybe Charles was asking, but I'll ask it in a slightly different way. Would you be able to say what percent of patients for MuSK-MG trial were treated during the open-label run-in and ultimately entered the double-blind randomized portion of the study?

We haven't given any specific details about the number that were enrolled, participated in run-in and then subsequently dropped out rather than being randomized. All I'll say right now is just a large majority continued through the randomization and completion.

Okay. Got it. Thanks for taking the questions.

Thanks, Joe.

Thank you. Your next question is coming from Leland Gershell from Oppenheimer. You line is now live.

Hey, good morning. Thanks for taking my questions.

Good morning, Leland.

Hey, good morning. With regard to MuSK-MG versus LEMS, presumably those patients are all cared for by the same types of physicians. In other words, you would not have to redouble your marketing efforts, but you get approval in MuSK-MG, but therefore you could leverage your current salesforce for that indication?

Dan?

Yes, definitely the MuSK-MG is a nice fit with our existing salesforce and relationships and in targeting. In fact, most of our targeting with physicians right now are on the use of Mestinon, which is a medication that's often used in both LEMS patients as well as MuSK patients. So we feel very good that this is very much a fit-handed glove with the new indication.

Okay. And so we should not expect any need for any material field force expansion, should you get that approval…

We don't see any material increase in salesforce. Obviously, we need to create materials and information that would share the key benefits and differentiation of our medication, and there's cost there, but not right now as we see in salesforce expansion.

Okay, great. And then just a second question on your business development initiatives, as you look outside for opportunities. Just wanted to ask, does your focus there live squarely within neuromuscular rare disease? Is it broader than that? Could there be pediatric? Just curious kind of what the scope is as you look for potential licensing or for other deals for interesting assets? Thanks.

Yes. So Leland, we definitely want to stay in the rare disease space, ideally in the ultra-rare space, which is sort of defined as 5,000 or 6,000 patient prevalence that maybe difficult. Also ideally, we'd like to remain in neuromuscular or certainly in neuro and we really don't want to be too early. We really are looking for assets that are companies that are beyond proof-of-concept. So having said that that's sort of our initial criteria, but anything interesting that crosses our plate that looks like it might be a fit for us from a company's perspective with our salesforce or something that we would be able to successfully market. So I would say to you that's our initial criteria, that may change, that maybe a little too tight. But certainly, we're starting to get very busy on that front and looking at a lot of opportunities.

Okay. Terrific. Thanks very much for taking the questions.

Thank you.

Thank you. Your next question is coming from Scott Henry with ROTH Capital. Your line is now live.

Thank you, and good morning. A couple of questions. First, if you get a sense of what kind of share Jacobus has out there right now and should that be kind of reaching a steady state, or might that share be climbing or decreasing in the near-term? Just trying to get a sense of the market dynamics?

Dan, would you take that?

Sure. We see the – we don't have perfect insight to even people that will discontinue from Firdapse, although we try to get a good handle on why they would be discontinuing as they leave. And with that, we think that has leveled off. It's down to a very low trickle. And so that, I think – that element may continue at a small one to two to three patients per month perhaps, but that will stay stable. What we don't have any insight to is the number of new patients. And so we still think that there's somewhere around 50, 55 patients, perhaps total. Most of those patients were on the initial Jacobus investigational drug program. And so our strong efforts have been all about supporting – strong support of existing patients. And then communicating and generating awareness among patients and their physicians that either haven't had been treated before or haven't even been diagnosed and quickly getting them into all of our programs, which have been shown to have great response and great result and satisfaction.

Okay, great. And then looking at the metrics, it would seem like insured patients would be a pretty good leading indicator. So a little concern that that declined in fourth quarter 2019. 2.5 months through with the first quarter of 2020, would you expect that number to jump up?

Yes. We definitely need and want that to jump up. As I mentioned earlier, in Q4 and it was mainly due to those discontinuations. Our discontinuations outpaced our new enrollments. What we do see in Q1 is that the discontinuations have decreased. Our new enrollments are increasing. And so as Pat mentioned, we are reiterating our guidance and we think that we have what is a good balance. And all these new programs and our new salesforce just getting underfoot in this inside sales partnership, which is already showing good results, we look for that to continue and to grow.

Okay. Thank you for that color. Just shifting over to the income statement, just a couple of questions as we model this out. First that, should we expect COGS to pick up? I believe you had some early cost of goods sold while it was in development and when that runs out we might see a tick up in cost of goods sold. Any nuances to that in 2020?

Ali, would you take that?

Yes. So as I mentioned during the call, during 2019, we used the product that had been manufactured previous to our FDA approval and hence had been expensed in prior years, that will not continue at the same rate in 2020. So we believe that the cost of goods sold will increase, but we don't believe that that increase will be substantial.

Scott, recall that in our cost of goods, we included our 14% royalty payments to BioMarin and to Jazz. So as Ali pointed out, that was minimal incremental to the 14%, and so later this year, we'll start to reflect really the truer cost of goods, which again is not going to be significant compared to – a significant change compared to last year's costs of good.

Yes. And that will increase as we deplete not only the talent that we have manufactured, but also the API that we have manufactured previous to FDA approval.

Okay. Thank you. And staying on the income statement, would you expect to be a fully taxed entity at least for accounting purposes in 2020?

In 2020, so we expect to use our NOL for our federal taxes in 2019 and we also expect to use our NOLs for our firms – at least our firms, NOLs for our taxes during 2020. Does that answer your question?

Well, typically when a company gets sustainably profitable, they'll take a gain for those NOLs and then they'll report on a fully tax basis. I'm not sure if that will happen for you just yet, but it would seem like you're moving into that.

Yes. So as you know the accounting for deferred tax asset is very specific in the analysis for the reversal of the allowances is different than just looking at operations. ASC 740 requires that positive evidence and negative evidence, we waited before making a decision to reverse evaluation allowance. The guidance gives more weight to factual evidence, such as previous losses and positive evidence, such as forecast for net income in future years. And as you might know, while we said, is the three-year pretax income tax. And while we didn't meet that three-year income tax at 12/31/19 and felt that the positive evidence it not always the negative evidence. For purposes of the ASC 740 analysis, we will continue to monitor the situation on a quarterly basis and do feel that it will.

So Ali, if we’re to meet our projections of this year, most of that income from this year would be sheltered. Would you agree with that?

Correct.

Okay.

Okay. Thank you for that color. That's very helpful. Final question, when we think about expenses for 2020, do you think – is fourth quarter 2019 somewhat representative of spending levels we should think about in the following year?

I don't think so, Scott. We had a number of things hit us in the fourth quarter. We had an accrual for charitable contributions that actually are going to be utilized in 2020 that we didn't expect to hit us. Also we had litigation expenses that were fairly significant in our lawsuit versus FDA. And we also took a hit on the state taxes that we don't expect to have going forward. So I don't think that the expenses in Q4 representative of what you're going to see going forward for 2020.

Okay, great. Thank you. That's helpful and congratulations again on a strong year. Thanks for taking the question.

Thank you.

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

Thank you very much for joining us today. We look forward to future calls. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.