Greetings, and welcome to the Catalyst Pharmaceuticals Fourth Quarter and Full Year 2021 Results 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. I would now like to turn the conference over to your host, Ali Grande, Chief Financial Officer for Catalyst Pharmaceuticals. Thank you. You may begin.

Good morning everyone and thank you for joining our conference call to discuss Catalyst's fourth quarter and full year 2021 financial results and corporate highlights. Leading the call today, we have Patrick McEnany, Chairman and Chief Executive Officer. We are also joined by Mr. Steven Miller, Chief Operating Officer and Chief Scientific Officer; and Jeffrey Del Carmen, Chief Commercial Officer. For the Q&A session, we'll also have Dr. Gary Ingenito, Chief Medical and Regulatory Officer. Before we begin, I would like to remind you that in the following comments and in the Q&A session, we will make statements about expected future results which may be forward-looking statements for purposes of federal securities laws. 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, especially in light of the effects of COVID-19. Actual results may vary from the expectations contained in our forward-looking. These forward-looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in our 2021 Annual Report on Form 10-K. At this time, I'll turn the call over to Pat.

Thanks, Ali. Good morning everyone and thank you for joining us today for Catalyst's fourth quarter and full year 2021 financial results and update call. 2021 was an extraordinary year for Catalyst as we attained several significant milestones and achieved strong financial performance, creating a substantial foundation to sustain our growth plans as we diligently pursue opportunities to diversify our commercial and development portfolio. To date in 2022, we have continued to execute our business plan and operate the budget. Let's start with our commercial performance in the fourth quarter of 2021, where we achieved FIRDAPSE net product revenues of $38 million, a 24% revenue increase versus the fourth quarter of 2020. Growth during the fourth quarter was driven by continued strong FIRDAPSE performance, despite not yet getting back to optimal pre-pandemic conditions. Our full year 2021 total revenues were $141 million, representing an 18% increase year-over-year compared to $119 million in total revenues for 2020. Net income before income taxes for Q4 of 2021 was $12.8 million, a 47% increase compared to $8.7 million for Q4 of 2020. We reported GAAP net income of $9 million for Q4 of 2021, or $0.09 per basic and diluted share. We ended the year 2021 with $191 million in cash and short-term investments. We continue to judiciously repurchase shares of our common stock from the open market. During 2021, we repurchased 2.2 million shares at an average price of $5.47 per share for a total purchase price of $12.1 million. We have guided full year 2022 total revenues to be between 195 million and 205 million, representing a 38% to 45% increase in total revenues compared to 2021. We also anticipate our cash OpEx to be between $65 million and $70 million for the full year. Ali will provide you with more…

Thanks, Pat, and good morning, everyone. The Catalyst commercial team performed extremely well over the course of 2021. We are very pleased with a full year of FIRDAPSE's net sales of 138 million, representing a 16% growth year-over-year. In Q4 2021, net FIRDAPSE sales were 38.3 million, a 7% growth versus Q3 2021, despite challenges presented by the continued resurgence of the pandemic. I want to take this opportunity to thank the entire Catalyst team for their flawless execution in 2021, a true testament to our ability to remain agile, while maintaining our commitment to the LEMS community. The foundation of the FIRDAPSE business continues to be solid. Operational excellence drove new patient starts, maintained favorable access, continued high compliance and lower discontinuations. Naive new enrollments in 2021 were 15% greater year-over-year, while discontinuations were 20% less year-over-year. Q4 discontinuations were only 5%, which is the lowest discontinuation rate since the commercial launch in 2019 and 37% fewer than Q4 2020. We expect considerable growth in 2022 and beyond. The current FIRDAPSE market penetration is approximately 25% of the total adult LEMS population. Organically, growth will be driven from new patient enrollments of already diagnosed adult LEMS patients not yet on FIRDAPSE as well as the significant number of LEMS patients who are unfortunately misdiagnosed or undiagnosed. Additionally, we expect our non-personal promotion in other educational efforts to small cell lung cancer treaters about LEMS and FIRDAPSE will yield more adult patients with a proper diagnosis of LEMS and accelerate the opportunity to receive treatment for this disease. Early indicators thus far in Q1 show that we are building upon the momentum for 2021. Q1 growth in patients on therapy is on pace to exceed the entire year of 2021. Reimbursed patient discontinuation rates are also tracking to match the…

Thanks for the commercial update, Jeff. I'll now provide an update on the important progress we are making on our clinical and product development efforts. Catalyst continues to work on improvements to FIRDAPSE franchise to address the needs of all patients. Our Medical Affairs Department continues to make valuable progress in increasing healthcare provider awareness of LEMS through our Medical Affairs programs, and a credited Continuing Medical Education, or CME, course about LEMS is available through Medscape. To date, over 5,000 mostly healthcare provider workers have viewed the course and as of February 17, 1,700 licensed healthcare providers have obtained CME credit. We have also provided a grant to physician education resource to host a LEMS session at a live tumor board of oncologists to expand our support for CME programs. This live program will be recorded and provided as an enduring adult LEMS CME course, intended primarily for oncologists for one year. Physician education resources will make this program available to all oncologists in their database along with posting ads for it in several neurology and oncology publications. CME courses provide a nonbiased educational opportunity for doctors that support gaining knowledge and clinical updates in particular therapeutic areas. And Catalyst-sponsored CME courses have been a very successful method of educating physicians about LEMS. In alignment with our commitment to provide treatment for all LEMS patients, we are now completing a supplementary NDA submission package for the treatment of pediatric LEMS with FIRDAPSE. We anticipate filing this supplement with the FDA this quarter. Catalyst has all the required data, including all necessary safety data to finally complete submission for this label expansion. The preparation of this supplement is a high priority for Catalyst as we remain committed to advancing our efforts to expand the use of FIRDAPSE so that we…

Thank you, Steve. We are very pleased with our financial results for the fourth quarter and full year 2021. As reported, we ended the year with cash and investments of slightly more than 191 million and no funded debt. We believe this allows us the financial flexibility to advance our existing R&D programs and to support our strategic initiatives by acquiring earlier stage opportunities and innovative technologies, leading to future growth and value creation. Our total net revenues for 2021 were 141 million, an 18% increase when compared to total revenues of 180 million for 2020. Further, despite the continued challenges of COVID-19, total FIRDAPSE product revenue net was 138 million for 2021, a 60% increase over the net product revenue of 119 million for 2020. Net income before income taxes for 2021 was 53 million, an almost 26% increase over net income before income taxes for 2020 of 32 million. We reported GAAP net income for 2021 of 39 million, or $0.38 per basic and $0.37 per diluted share. For the year 2020, we reported GAAP net income of 75 million, or $0.72 for basic and $0.71 per diluted share. It is important to remember that these figures are not comparative. 2020 benefited from approximately 33 million of income tax benefit, principally from the reporting of a one-time non-cash deferred tax assets of almost 32 million upon the reversal of our valuation allowance in the third quarter of 2020. Our effective tax rate for 2021 on an annualized basis was 25%, while in 2020 we benefited from the use of our federal net operating losses and the related valuation allowance. In 2021 and future periods, we expect that we will benefit from the use of our deferred tax assets primarily relating to Florida state net operating losses and the…

Thanks, Ali. We believe that we are well positioned to build upon our success and are optimistic about the company's future, as we diligently pursue opportunities to diversify our commercial and development portfolio that aligns with our core mission to deliver value to patients, healthcare providers and shareholders. Finally, I'd like to thank all of our employees for their continued dedication and commitment to positively impacting patients' lives. Operator, we would now like to open the call for questions.

Thank you. At this time, we'll be conducting a question-and-answer session. . Our first question comes from the line of Joe Catanzaro with Piper Sandler. Please proceed with your question.

Hi, guys. Thanks for taking my question and congrats on all the progress here. Pat, I think you mentioned that a significant amount of Ruzurgi patients have already transitioned to FIRDAPSE. I'm just wondering if you'd be able to maybe more specifically say how many of the estimated 125 have done so. And is it fair to say that the growth observed in 1Q that I think Jeff mentioned is being driven by this transition? Thanks. And I have a follow up or two.

Sure. Joe, we really don't want to be specific. But I can tell you that many of those patients have already transitioned. And we expect the transition to be completed by the end of April. And so we're very pleased with how seamless this process has been. And I think we owe a lot to our specialty pharmacy AnovoRx, who's really done a great job and was ready and willing and able to take on this task. As far as growth going forward, Jeff, do you want to take that?

Sure. I can just tell you the transitions did account for a significant part of that growth. But I will also say that in March, what we've observed the truly naive patients, so those patients that have never been on FIRDAPSE or Ruzurgi that have been enrolled and then prescribed, that number is tracking to be our best month ever. So that's what we've seen in March. So we are excited about our organic growth as well.

Okay, got it. That's really helpful. Maybe as a follow up, I'm wondering what data points inform your estimated number of patients that were on Ruzurgi and how you've gone about identifying them, and whether it's possible that maybe there's more patients than you've estimated.

Yes. Joe, you might be right. We don't know for a fact. We know the number of patients that were on FIRDAPSE that went to Ruzurgi once it was approved, based on some of the docs who had been involved with the company for quite some time. So we know what we lost. And we assume that there was some growth on the Ruzurgi side over the last couple of years. So we've got some pretty good data points that I think supports 125 plus or minus 10%. But I think that's as specific as we can be on that subject.

Okay, got it. And maybe if I could just squeeze one last one in. I'm wondering if there would be a point where in the absence of any business development, you would consider alternative ways to return capital to shareholders, like potentially a special dividend. Thanks.

Yes, good question. I don't think that's on the plate of special dividend. We've continued to buy our shares back judiciously, as we can be. We spent $12 million last year buying shares back. We continue the program. So that's our way of I guess returning money to shareholders without paying a special dividend. So I do believe strongly that we will have a transaction completed sometime this year.

Okay, great. Thanks for taking my questions.

Great. Thank you.

Thank you. Our next question comes from the line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

Yes. Good morning, Pat and team. Let me add my congratulations on the commercial progress this last year. Had a few questions for you. Wanted to ask you or Jeff a little bit more about the market dynamics? I guess I'm wondering, as you think about the switch patients versus new patient adds, where would you think the bulk of the growth could come from this year? And then also, if you go beyond, I think it was 647 prescribers, what is your goal in terms of the number of prescribers by year end just kind of roughly? Would you grow that by 5%, 10%? What do you think about that?

Charles, I think the number of prescribers is difficult to predict. If you look at the numbers, it's easy to see that a lot of those prescribers only have one patient or maybe two or three patients. And so we do believe that our educational programs are very important in helping get to a proper diagnosis and a prescription for a LEMS patient. And so we have a strong effort to increase that number. But to use that, that's not really an internal metric or goal that we look at. We really look at patient counts and things like that. So it's a good question, but we don't have an answer to that. And I can't give you a number that is a target for this year for prescribers. That number is growing nicely, and it seems to correlate to our spend for education to HCPs. And as you know, we've got a CME program that educates docs and we've had I think 1,500 docs avail themselves of that program and actually earn their credit, and over 5,000 folks that have actually been to the program and study the program itself. So I think there's a correlation there between our education and the number of docs that we will see as prescribers for FIRDAPSE.

Okay, that's helpful. I'm sorry.

Just to address your other question there about patients organic versus transition. We've demonstrated the ability to grow organically about 10% to 15% every year organically, and we expect to do the same this year. But I also will say that we do see some tailwinds that will be helping with the -- hopefully the opening of the country back up again, because of the pandemic. Like we've seen in March, we're seeing some good new enrollments of these truly naive patients. We expect to see strong enrollments of these patients for the rest of the year. So we do anticipate significant growth from those patients too.

Okay, that's helpful. A quick question on asset acquisitions that could occur perhaps this year, I guess I'm wondering if you can provide some additional color on how you think that would leverage your existing infrastructure, either sales or back office. And if you can provide some color on really the focus areas, maybe therapeutic focus areas for those asset acquisitions that you can anticipate being able to complete this year? And then I had one follow up for Ali.

Okay. So we would -- initially we were looking and hoping to leverage our sales force with finding a product that would fit into the bag of our neuromuscular sales call point previously, and that was just a two-year-old focus, Charles. Again, I think we've repeated this previously, but we made a couple of offers over the last 18 months which were fair offers. And the counteroffers at that time were really egregious. And we looked around and really couldn't find anything else in neuro or neuromuscular that made sense. So we decided to expand our focus to a much broader therapeutic spectrum, including any therapeutic class outside of oncology. And so that continues to be our focus. We are looking for projects that are obviously rare disease that are beyond proof of concept and frankly, hopefully an approved product or a marketed product that we could acquire. So I'm not sure that on the sales, the commercial side, from the reps point of view, there's a lot of leverage there. I think from the back office point of view, market access, patient access, advocacy, I think that we're in good shape to take on other projects which can be levered. And also, there are operational levers as well, including our financing and accounting and as well as our MSL's of medical affairs. So I think that there are synergies that would be available to us on most acquisitions.

Okay, that's helpful. One last question for Ali. I guess I'm kind of wondering how you're thinking -- first of all, thank you for the guidance on revenue and OpEx. But I'm wondering how you're thinking about OpEx this year, especially given some of the reduced legal costs? And if you can provide a little bit of color, especially as that drops to the bottom line, how do you feel about last year? Was this likeness I think a couple of pennies? But then going into this year, what would you project for bottom line?

Charles, I'll take that and Ali can certainly chime in. So for last year, we had a couple of areas where there were a few issues. OpEx was up slightly over budget. And a lot of that had to do with higher litigation costs related to our actions against the FDA, Health Canada, as well as our patent litigation with Jacobus. And that litigation was very costly, far more than we had budgeted. And part of that was there were a few appeals in there that we didn't count on. And so we think those over budget is a good ROI based on the outcome. So we're pleased with that spend, those certainly not budgeted. We saw higher charitable contributions, the 501(c)(3) foundations that assist Medicare out of pocket expenses related to all LEMS patients, not just FIRDAPSE LEMS patients, and that amounted to about $1.3 million over budget. And we think we've absorbed -- to the best of our knowledge, we were the only one with foundation assistance for LEMS patients, which meant that those donations went to all patients that have LEMS that might require assistance, no matter which drug they were taking, or which therapy that they needed. So, again, about $1 million in higher litigation expense, about $1.3 million in higher charitable contributions. And then, on the other side, if you will, the cost of goods sold as a percentage was higher as a result of some inflationary pressure that we saw on the supply side, especially in the third and fourth quarter, which we hope are transitory as well as some cost associated with some scale up work that we did to increase the batch size for commercial lots. And that total was about $2 million. And remember, in our cost of goods sold, our royalties are in there. And that royalty, up to $100 million in each year is 14%; for sales, over 100 million, there's an additional 3% royalty. So as a result of those three items that I just mentioned, that took our cost of goods up actually about 1.7% over 2020, 15.9% versus 14.2%. And I think those combined, total over $4 million, which account for the miss on EPS for the year. So going forward, this year, we've stated that cash OpEx, which is our operating expenses less non-cash comp and depreciation, will be somewhere between $65 million and $70 million.

It sounds like some of those drivers to the expenses last year may abate this year. Of course, forgetting about the inflationary pressures, you can't really perhaps guide that. But the other drivers --?

Yes. I think we will find out by the end of this year that those investments that we made last year, they got us over budget, had a great ROI for the year.

Okay, very good. Thanks for the thorough answer and for taking our questions. Congrats on a good year progress.

Thanks, Charles.

Thank you. Our next question comes from the line of Scott Henry with ROTH Capital Partners. Please proceed with your question.

Thank you and good morning. And let me start with a Happy St. Patrick's Day. Pat, it sounds like you may be one that celebrates that holiday.

Thank you, Scott.

And also before I dig into the questions, let me just say I thought the on-hold music has certainly turned it up a notch. So moving forward now, a couple of follow-up questions there. First, on the cost of goods sold percentage, that 15.9, how would you -- so when we think about 2022, should we be thinking of a number north somewhere between 16% and 17%? Is that kind of the way those trends should play out, or maybe some of those one-time costs may offset that? Just trying to get a sense, because I know there are those step ups in revenue numbers.

In the royalties, yes. Charles, I think that -- I'm sorry, Scott, I'm not sure that we want to give any guidance on that. But I think if that 15.9% were at the high end and from a conservative point of view, it's probably not a bad place to be.

Okay, fair enough. And then the other thing that sort of jumped out at me when you looked through the 10-K and you separate selling costs versus G&A. It looked like the selling costs were higher in Q4. Any driver to that? Should I think about that going forward?

Jeff, do you want to take that? So there were areas that we thought that we could make further investments in Q4, Scott, that some of the new programs that we've initiated. You want to take that, Jeff?

Sure. So to add to what Pat was saying, what we like to do is, we look at ROI on some of the initiatives that we're doing. And if there are some initiatives that just are not playing out the way we thought, then we'll reallocate. What we also did in Q4 was we initiated the non-personal promotion to oncologists. And that also ramped up some of the selling expenses there. So in anticipation of the new year coming, we like to put some of these new resources in place so that we can get traction early in the year. So that's why we saw the increase in selling expenses.

Okay, great. And then thinking about 2022 and kind of the quarterly progression throughout the year, should we sort of expect a bolus in the beginning of that step up in patients and then gradual growth thereafter, or will it be more steady growth quarter-to-quarter?

Well, I think it's a fair question. And we're hoping that the pandemic is subsiding here and the countries opening up. So what we're seeing is that we're seeing a strong March because of the countries opening up again. And we do anticipate from there steady new enrollments similar to what we're seeing in March.

Okay.

So, Scott, you may be referring to the bolus of patients that are transitioning to FIRDAPSE. And we've stated we expect that transition to be completed by the end of April. So you will see a step up I think in Q1. You'll continue to see what we're calling referred to as organic growth. Those are -- as Jeff had mentioned earlier, those are the naive patients that are -- when I say naive, naive to any form of 3,4-DAP, meaning they haven't been on FIRDAPSE or Ruzurgi before. And remember, it takes a little time to get these folks that are transitioning on to reimbursed drug. So I think that you'll see sequential growth quarter-to-quarter this year from our commercial team.

Okay, great. And then a final bigger picture, more strategic question, Pat. You had mentioned as you look to acquire other technologies that perhaps some of the prices out there are not favorable for what you'd want to pay. Sometimes when prices are high, sometimes it's better to be a seller than a buyer. Is that something you think about in your equation, perhaps being a seller as opposed to being acquirer?

Scott, no, we don't think about that often. But as a public company, obviously, if there was incoming interest on the buy side, we as a public company and the Board of Directors have to consider what would be a fair offer. But it is not one of our initiatives for this year.

Okay, fair enough. Well, thank you again for taking all the questions.

Thank you, Scott.

Thank you. Our next question comes from the line of Joon Lee with Truist Securities. Please proceed with your question.

Hi. Thanks for taking our questions and congrats on the accolades from Forbes.

Thank you, Joon.

What has been the experience for FIRDAPSE among small cell lung cancer patients so far? It's an aggressive disease with survival of about two years or less from the time of diagnosis. So curious if your rate of patient identification is keeping up or able to exceed patient loss. And also can paraneoplastic syndrome such as LEMS be part of small cell lung cancer or other cancer diagnostic group to facilitate diagnosis and reimbursement? Thanks. And have a quick follow up after that.

I'll take the first question there. We are seeing significant uptake in the percent of our new enrollments that are tumor LEMS or paraneoplastic LEMS patients. Currently, about 20% of our new enrollments are tumor LEMS patients. So part of our goal is to increase that percentage. And the other part of this is, as you mentioned, the survival rate of those patients about two years or so, we're hopeful that we can accelerate the diagnosis of LEMS in those patients so we can help those patients sooner. So that's the other part of the education process that we're putting out there.

I just have one additional thing to add to what Jeff just said. By making efforts to help diagnose these patients sooner, hopefully their small cell lung cancer will be diagnosed earlier giving these patients a better prognosis and a longer lifespan than one or two years that you mentioned in your question.

What are the chances of them being part of the DRG for small cell lung cancer? Is that something that's reasonable, or am I not thinking about this correctly?

Yes, I don't think that's on the radar at this point, Joon.

Great. And we're really interested in the opportunity in Japan. I know that DyDo is running the trial. But assuming they're running similar trials as what you did in the U.S., are you able to disclose what they're looking at day 14 or day 4? Because based on the two trials you ran successfully, the day 4 had a much more drastic effect size in terms of QMT ? I'm just curious, if that's also their strategy? And can you tell us a little bit about DyDo? We know that it's a big Japanese conglomerate with bigger exposure in the consumer segment, but curious what their experience is in the pharma development? Thank you.

Okay. Well, let me answer the first part of your question with regard to the trial. It is a different design than we ran in the United States. But it's also a single arm design. And so it basically is really just to verify that Japanese patients will respond to therapy similar to what we're seeing in the double blind controlled studies response for patients that were studied in the U.S. As we have previously announced, it is a very small study. And DyDo has confirmed with PMDA that the small study will be sufficient for that market. And they anticipate completing it relatively quickly. With regard to DyDo's experience, they have actually recently entered the pharmaceutical space and has built an entire pharmaceutical division. They have hired a large number of very experienced pharmaceutical executives across all areas; pharmaceuticals, including research and development, regulatory affairs, sales and marketing, manufacturing, and they have all the necessary experience and talent to successfully market the product in Japan. And they are pursuing other products, although this is one product that they really were happy to get, because they feel it will be very successful in Japan.

I might add that being one of their first couple of products, it's a very important product to them.

No, I think I got that sense based on their Web site. That's great, Pat, that the single arm will be sufficient. Sometimes it sounds like a very surmountable bar. Then you recently announced an agreement with BioMarin to extend the agreement to most of Asia. Does that include China, or does that not include China? Because it sounds like, especially given the small cell lung cancer population, there could be an opportunity. But can you elaborate on that?

Yes. So our agreement that we negotiated with BioMarin basically requires us to file an NDA in Japan before we are allowed to pursue marketing of the products in the remainder of the Asia-Pacific region. Obviously, as we just spoke about, we are going as quickly as we can to get that NDA filed in Japan so that we can open the remainder of our market expansion. You're correct. The Chinese population is large, close to 1 billion people, and they're heavy smokers. And so there is a lot of small cell lung cancer in China. And then just simply because of the sheer number of people, there should be a large number of laboratories there as well. And so it is one of the nations among the several nations that are of interest to us in the Asia-Pacific region.

Thank you.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. McEnany for any final comments.

Thank you. Thanks everyone for joining our call. We look forward to our next corporate update. Have a great day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.