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Edited Transcript of CPRX earnings conference call or presentation 13-Nov-19 1:30pm GMT

Q3 2019 Catalyst Pharmaceuticals Inc Earnings Call

Coral Gables Dec 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Catalyst Pharmaceuticals Inc earnings conference call or presentation Wednesday, November 13, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alicia Grande

Catalyst Pharmaceuticals, Inc. - VP, Treasurer & CFO

* Daniel J. Brennan

Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer

* Patrick J. McEnany

Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO

* Steven R. Miller

Catalyst Pharmaceuticals, Inc. - COO & Chief Scientific Officer

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Conference Call Participants

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* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Joseph Michael Catanzaro

Piper Jaffray Companies, Research Division - VP & Senior Biotech Analyst

* Leland James Gershell

Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst

* Scott Robert Henry

Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research

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Presentation

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Operator [1]

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Greetings. Welcome to the Catalyst Pharmaceuticals CPRX Third Quarter 2019 Results Conference Call. (Operator Instructions) Please note this conference is being recorded. I will now turn the conference over to your host, Alicia Grande, Chief Financial Officer. Please go ahead.

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Alicia Grande, Catalyst Pharmaceuticals, Inc. - VP, Treasurer & CFO [2]

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Good morning, everyone, and thanks for joining today's conference call. Joining me on today's call are members of the Catalyst management team, including Pat McEnany, Chairman and Chief Executive Officer; Dr. Steven Miller, Chief Operating Officer and Chief Scientific Officer; and Dan Brennan, our Chief Commercial 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 the 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, which may prove not to be accurate. Actual results may vary. 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 annual report on Form 10-K.

At this time, I'll turn the call over to Pat.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [3]

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Thank you, Ali, and good morning, everyone, and thank you for joining us today. Well, it's been an exciting third quarter and 9 months of 2016 for Catalyst, and we have a lot of progress to update you on across our various work streams.

Let me start by making some comments about our commercial launch of Firdapse. We remain quite enthused about the strong progress of our launch through the third quarter of 2019. We continue to see encouraging trends across a variety of metrics as well as very positive reaction from treating physicians, payers and, most importantly, patients.

As we discussed in the early days of our launch, the breadth and depth of prescribing have continued to exceed our expectations, underscoring the significant previously unmet need for Firdapse in this largely underserved patient population. With 3 full quarters of performance now completed, we grow increasingly confident in the long-term potential of Firdapse. Patient starts and discontinuations are trending positively, and Dan will go into the key performance metrics that we measure daily in greater detail.

Overall, we are off to a great start, and our optimism is growing for potential for Firdapse to help patients with not only [leveraging] myasthenic syndrome, or LEMS, but other ultra-rare neuromuscular conditions.

At this stage into the launch, we are now comfortable with providing, for the first time, revenue guidance of approximately $100 million for the full year of 2019 and a range of revenue guidance of $135 million to $155 million for calendar year 2020. As we continue to gain more experience next year, we look to tighten the range of forecast for 2020.

As we budget for next year's anticipated growth, we will be making further investments to add commercial resources to achieve our stated goal for 2020. To that end, we expect to hire up to an additional 10 regional account managers to complement our current 10 regional account managers, and we expect to add a team of 7 to 10 inside contract sales representatives that will be targeting the roughly 9,000 neurology and neuromuscular health care providers that might be treating an adult LEMS patient that could benefit from Firdapse.

As the number of patients being treated with Firdapse grows, I am pleased to announce that in 2020, we will be expanding our contributions to independent qualified 501(c)(3) charitable foundations that provide support to LEMS patients. We are increasing this both in dollar amount of contributions and in the number of charitable foundations that we support going from 3 to 4. While we do everything we can to support the adult LEMS patients enrolled in our Catalyst Pathways programs, these contributions are intended to address needs and patients who cannot support to -- who we cannot support directly. It is one of the many things that we work to support the LEMS community.

Last month, we attended and exhibited at the Annual American Association of Neuromuscular & Electrodiagnostic Medicine Meeting in Austin, Texas, which is always an important venue for us to engage with physicians, scientific and efficacy communities. As this was our first year attending as a commercial stage company, it was most important to get our very positive messages out to neuromuscular physicians about the clinical benefits of Firdapse for adult LEMS patients, Catalyst Pathways, our patient assistance program and our various educational programs for physicians in neuromuscular fellows.

At this meeting, we hosted a lunch in symposium. It was attended by more than 170 physicians. I might add that we're standing room only. Dr. Perry Shieh, a noted neuromuscular specialist from UCLA, presented a program titled: Why LEMS in Adults Warrants a Closer Clinical Insight and Common Misdiagnoses (sic) [Why LEMS in Adults Warrants a Closer Look: Clinical Insights and Common Misdiagnoses]. It was during the symposium that we introduced our new free LEMS antibody testing program for patients suspected to have LEMS. This program will allow physicians to order LEMS antibody testing without concern about insurance covering the cost as Catalyst will ensure that no patient is out-of-pocket for this test. We hope that this will help to shorten the otherwise lengthy journey to an accurate diagnosis for LEMS patients and quickly eliminate LEMS as hospital diagnosis for others.

As you know, we recently announced the top line results from our CMS-001 clinical study, and we are disappointed that we did not achieve statistical significance in the primary or the secondary end points in this small 16-patient study. We did observe, however, that several patients shared noticeable signs of improvement.

Congenital myasthenic syndromes, or CMS, is a very complicated ultra-rare neuromuscular disease afflicting an estimated 1,000 to 1,500 patients in the U.S. We are scheduled to meet with the FDA before the end of this year to discuss our findings from the study as well as our next steps. We have been commended by a number of neuromuscular specialists for even attempting a study in this very small complicated patient population while attempting to provide an FDA-approved therapy to treat CMS patients.

Our MuSK-MG study continues to enroll, and we anticipate completing enrollment by the end of this year and reporting top line results from this trial in the first half of 2020. Over the past quarter, we have initiated several new sites for this trial in 2 European countries. Also, we are on target to complete and announce top line results of the small proof-of-concept study for spinal muscular atrophy Type 3 in the first half of 2020. Steve will provide you with more information shortly regarding these programs.

One of our strategic priorities, as previously stated to start, is to expand our commercial footprint globally. Within the past few weeks, we have filed our new drug submission, or NDS, with Health Canada and have been granted a Priority Review. Assuming our submission is accepted, this means 6-month review of our application. We are also in the process of evaluating our commercial plan for Canada with options to partner with the Canadian firm or to launch with an effective and efficient Catalyst team.

Additionally, over the past several months, we've met with the Japanese regulatory authorities including the Ministry of Health, Labor and Welfare as well as the Pharmaceuticals and Medical Device Agency, or PMDA, to discuss our existing data and understand what additional data may be required to submit a new drug application for Firdapse in Japan.

We have also recently applied for orphan drug designation, which if granted, would give us a 9-month Priority Review, 10 years of market exclusivity against generics and certain tax credits. We anticipate meeting with PMDA in the first quarter of next year to hopefully finalize a plan to register Firdapse in Japan. We've been conducting market research there and it's the second largest economy in the free world. We believe that Japan can be very strategic for us and offers a very promising opportunity to expand our global footprint. We've begun the process for assessing and evaluating external drug development programs that are late-stage as well as potential drug acquisitions that we believe may have a clear path to value creation through their impact on unmet medical needs for patients suffering from rare debilitating disease.

As reported yesterday, we ended the third quarter with approximately $81.6 million in cash and investments and no funded debt. Our cash continues to build quarterly, and near term, we see no need for a sale of our common stock. Further, we believe that we have access to alternative forms of nondilutive financing, such as the term loan from conventional bank lenders in the event that we source a promising acquisition or product opportunity.

Lastly, a few words about our lawsuit against the FDA. We filed that suit in June and it challenges the FDA's decision to approve Ruzurgi for pediatric LEMS patients on 4 different grounds, which I won't state here in great detail. The suit is progressing as we expected, and the current briefing schedule calls for all filings to be made by late January.

As you can understand, we are eager to get this case before the judge and get a decision, but at this time, this is the best time table that I can provide to you. And as more than likely, always there's a chance of additional delays. We will keep you posted on this front.

This has been another very solid quarter and 9 months of execution and performance from the Catalyst team. We're extremely pleased by the number of naive patients that we continue to enroll in Catalyst Pathways, which again further illustrates the need for Catalyst to have made the necessary investments required to bring an FDA-approved, evidence-based medicine to the LEMS community. I'll now turn the call over to Dan Brennan, our Chief Commercial Officer, to provide you with further specifics on our launch of Firdapse.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [4]

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Thanks, Pat, and good morning, everyone. We remain very excited about the launch of Firdapse here in the United States for adults suffering from LEMS. All metrics continue to depict a strong, successful execution of an ultra-orphan drug launch. We have now completed 3 quarters with commercial availability having started on January 15. And whether the metric is total number of patients, percent of diagnosed patients treated with Firdapse, physician and patient satisfaction, insurance coverage or patient affordability, this is a product launch that is successfully helping many patients in a very rare, very debilitating disease condition.

In the first 9 months of launch, nearly 30% of the diagnosed adult LEMS patient population has now received a Firdapse prescription, which is a very high hurdle and a rare result for a new medication. This is also a great indication that the broad availability of Firdapse is improving the standard of care for treatment in LEMS and that physicians, patients and payers recognize it as such. If we continue with this level of use and adoption to help LEMS patients, we will continue to rise to the ranks as one of the more successful orphan drug launches.

Some key highlights I'd like to share. Through the end of Q3, over 490 patients have now been prescribed Firdapse since launch, over 50 of whom initiated therapy in Q3 alone. Over 170 of these patients had never before been treated with 3,4-DAP and were what we call, naive to therapy. When you consider patients who initially transitioned over from the Catalyst expanded access program, there are now more than 250 patients on Firdapse who never would have had access to 3,4-DAP if it were not for Catalyst Pharmaceuticals and our efforts.

Over 275 unique writers have prescribed Firdapse and over 370 patients were on insurer-reimbursed therapy at the end of Q3. And we understand that there may be some concerns about the recent and unforeseen added entry into the LEMS market space, and many have been asking about the potential use of another amifampridine product, Ruzurgi, with adult LEMS patients, I'd like to point out a few key differentiated points to consider.

First, Ruzurgi is not indicated or approved for use in adult LEMS patients. Second, Ruzurgi requires refrigeration in the supply chain to prevent spoilage, and Firdapse doesn't require any refrigeration. Third, patient support programs for Ruzurgi are limited by comparison with Firdapse. And finally, as a company, we believe that any interest in a rare disease category, and especially in this LEMS market, needs to be thoughtful and fully committed to education and patient support for a product like this where there are important safety and dose education considerations.

Insurers and physicians should be careful about having patients use a drug off label, and we believe that insurers and physicians are generally not inclined to do so. That is why we are taking good care with insurers and physicians to ensure they understand Firdapse and its proper and safe use.

That said, we have seen some patients, mainly ones we believe run the Jacobus compassionate use study, who have left Firdapse to try the Jacobus commercially available product.

In August and early September, we saw a small group of commercially insured patients leave and then another small group of Medicare-insured patients switch over in September and October. However, it is important to note, we have seen this slowdown quite a bit in the last 3 weeks.

We believe that most patients and physicians are fully satisfied with the support that they have been receiving here at Catalyst with Firdapse. As I mentioned earlier, we continue to see high levels of patient satisfaction now with over 280 customer satisfaction surveys completed, and our average rating remains at 4.8 out of 5 stars.

Our insurance approval rates and -- I'm sorry, our insurance approval rate for commercial- and government-insured patients is over 95% with most prior authorizations being approved within 7 to 14 days. In addition, the average co-pay across all patients in September stood at $1.66 per month per patient.

For all of these reasons, we believe this is why only a relatively small group of the over 490 Firdapse patients have left to try the pediatric LEMS-approved product. I should also point out that there are other discontinuations for normal and expected reasons like the lack of response, experiencing side effects and some patients who have unfortunately succumbed to cancer. But discontinuation rates for these reasons remain in line with what we saw in the clinical studies, about 20% to 25% of patients.

Having met our initial launch goals by the end of Q3, which included bringing on over 200 adult LEMS patients from the Jacobus 3,4-DAP study, also transitioning patients from our expanded access program and receiving enrollments from all naive patients who had been awaiting the approval of Firdapse while doing this with a high level of satisfaction, we are now turning to the next phase, our commercial launch by executing and initiating several new commercial strategies and activities to sustain our momentum including: A continued focus on raising awareness; the availability; extensive patient support; and patient affordability of Firdapse for adult LEMS patients, which includes raising awareness to general neurologists beyond the neuromuscular expert population. We have had very productive discussions at recent medical meetings including the AANEM Meeting, the Fall AAN Conference, the American Autonomic Society Meeting and various other regional and local meetings of neuromuscular experts and general neurology physicians.

In addition, as Pat mentioned, we launched our no-cost LEMS antibody test program for physicians who suspect that their patient may have LEMS so that there is no need to hesitate or submit and wait for insurance approval to perform this diagnostic test. We are readying a find-a-physician web tool where we can help patients who are looking for physicians that have experienced treating LEMS, identifying those physicians located near them. This includes an increase in our levels of nonpersonal promotion and advertising, mainly digital communications to physicians and patients.

We are also preparing and working in earnest to help patients through the upcoming insurance reauthorization process that comes at the end and turn of each calendar year. Lastly, our largest and most complex commercial addition includes expanding and retargeting our sales force and inside sales contract group on over 9,000 neurologists that we know treat LEMS or LEMS-like symptoms, and this is up from our current target list of about 2,500 neurologists. We believe that all of these efforts will help continue the success in identifying and treating new adult LEMS patients with a high level of patient and physician satisfaction.

To conclude, I'm happy to say that just a few weeks ago, we crossed that important milestone of 500 patients prescribed Firdapse, which is an impressive 33% of the diagnosed adult LEMS population. I'm very excited about the idea of helping that next 500 adult LEMS patients. I'm also excited about what lies ahead for our company as we get ready for the prospect of helping adult LEMS patients in Canada and Japan and potentially helping additional patients with MuSK-antibody positive myasthenia gravis, CMS and SMA Type 3 in the years to come.

And with that, I'll hand the call over to our Chief Scientific Officer; Steve Miller, who will report on the progress in our clinical activities. Steve?

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Steven R. Miller, Catalyst Pharmaceuticals, Inc. - COO & Chief Scientific Officer [5]

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Thanks for the commercial update, Dan. And now I'll provide an update on our clinical pipeline to develop Firdapse for additional neuromuscular indications. First, I would like to touch on the news regarding our Phase III trial for congenital myasthenic syndromes, or CMS. This Phase III trial called, CMS-001, was the first ever double-blind, placebo-controlled clinical trial for the symptomatic treatment of genetically confirmed CMS that are currently estimated to be about 1,000 to 1,500 U.S. CMS patients, representing a spectrum of over 50 different possible genetic defects. This wide range of genetic defects produces a broad spectrum of clinical presentations of the disease and variations in response to therapy.

We treated 16 patients in this 2 period to treatment crossover Phase III trial. And given the sample size, the trial did not achieve overall statistical significance for the primary end point of subject global impression score or the secondary end point of muscle function measure. Because this trial was a crossover design, each subject received both placebo and amifampridine. So each patient has their own control, enabling individual responses to treatment to be assessed, and some of the patients showed a positive response to treatment in the trial.

This clinical trial took almost 4 years to recruit for a variety of reasons. First, CMS is a very rare disease with only a few hundred patients diagnosed at this time. In order to aid with diagnosis over the past 4 years, Catalyst has provided genetic testing, free of charge, for any patient that needed it within our EAP and clinical trial network of physicians. And despite the outcome of this trial, Catalyst will continue to provide this service to patients for the foreseeable future.

Second, many of the patients are children and many parents are reluctant to allow their child to participate in the clinical trial, where the possibility exists that their child may be treated with placebo.

Third, due to the pediatric nature of the disease and its complexity, patients and their doctors were often understandably reluctant to be referred to a new physician at one of the existing clinical trial sites. And it is unfortunate that more doctors treating CMS were not willing to be at the clinical trial sites so their patients could be included in the CMS-001 trial.

Finally, clinical trials require a commitment of time that many families cannot make given the existing burden of already carrying for a patient with this disease. Catalyst thanks all the families who agreed to have their child participate in this trial.

While we were disappointed in the clinical trial's statistical outcome, we remain encouraged by the response of some individual patients to treatment. We are continuing to conduct analyses of the full data set and are scheduled to meet with the FDA by the end of the year to discuss the results, the observed responses to treatment and potential next steps. We will provide updates as they become available.

While the outcome of the trial was complex, we believe the data provides valuable clinical information for this patient population and their physicians. We are also conducting an 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 continues following our successful proof-of-concept trial for this indication. We expect to report top line results from this trial in the first half of 2020.

As described previously, the CMS trial had a lot of variability due to the many genetic defects involved, resulting in a very heterogeneous patient population and the variation in response to treatment. However, MuSK-MG, like LEMS, is caused by a single antibody to a single protein in the neuromuscular junction, resulting in a more homogeneous patient population that should exhibit consistency of response to treatment between patients, sites and across multiple trials. Due in no small part to the success of our previous proof-of-concept trial, we remain cautiously optimistic about the outcome of this ongoing Phase III trial for MuSK-MG.

MuSK-MG is an autoimmune disease for which there is currently no approved treatment, and we believe there are about 3,000 to 4,800 U.S. patients with MuSK-MG. Assuming this trial is successful, we look forward to one day potentially being able to provide an FDA-approved treatment option for these patients.

Lastly, we have a proof-of-concept study ongoing in spinal muscular atrophy or SMA Type 3. This trial is ongoing in Italy and Eastern Europe and is evaluating the safety, tolerability and potential efficacy of amifampridine in ambulatory patients diagnosed with SMA Type 3. We plan to enroll approximately 12 patients in this study and look forward to announcing top line results from this study in the first half of 2020.

SMA is caused by related genetic defects to the SMN protein in motor neurons, which should result in a relatively homogeneous disease differing mainly in severity.

Moving on to market expansion plans for Firdapse. Catalyst has now submitted a New Drug Submission, or NDS, in Canada, seeking approval of Firdapse for the symptomatic treatment of LEMS. Catalyst has also been granted the Priority Review for this NDS, which should reduce the review cycle time to 6 months.

With the Priority Review cycle time plus the required acceptance review time of 35 days, Catalyst expects to receive a response to Health Canada's review over NDS in about 7 months, provided the NDS is accepted for filing and review this month. Catalyst has not yet started commercialization activities in Canada, and when those activities commence, we will provide an update regarding our commercial plans in Canada.

Catalyst also recently announced an expansion to the marketing territories to include Japan. Recently, we have been in discussions with the Japanese Ministry of Health, Labor and Welfare, or MHLW, regarding the regulatory pathway to seek approval of Firdapse in Japan. Approximately 2 years ago, the Japanese government designated the approval of Firdapse as a priority drug for the MHLW, and they have been actively soliciting companies to develop and file an NDA for this drug. An update on the regulatory pathway for filing an NDA in Japan will be provided once Catalyst and the MHLW come to an agreement on what will be required to file that NDA in Japan.

Catalyst continues to provide access to Firdapse for CMS patients in our expanded access program, or EAP. We also provide assistance to EAP patients and their physicians, if needed, to obtain genetic testing in order to obtain an accurate CMS diagnosis. This accurate diagnosis and genetic subtype confirmation helps physicians tailor the treatment strategy to optimize the treatment of each CMS patient.

We also plan, assuming a successful outcome of MuSK-MG Phase III clinical trial, to begin including the symptomatic treatment of MuSK-MG and our EAP, and we'll work diligently with the many IRBs involved in the EAP to add this new treatment protocol.

Finally, patients have requested a long-acting version of Firdapse in order to eliminate the need to plan their daily activities around multiple doses of Firdapse. We are now actively developing this new product and provide updates in the future when the product characteristics have been finalized. At this stage of the development program, candidate formulations are being developed and their drug release properties are being studied in order to optimize the long-acting symptomatic treatment of LEMS.

Overall, we are excited about the opportunities to expand the current Firdapse label into additional indications as well as in additional countries to developing a better product for all these patients. We will provide any updates on these clinical and regulatory path as they become available. I will now turn the call over to Ali Grande, our Chief Financial Officer, to review our financial results.

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Alicia Grande, Catalyst Pharmaceuticals, Inc. - VP, Treasurer & CFO [6]

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Thanks, Steve. Yesterday, November 12, we filed our quarterly report on Form 10-Q for the third quarter ending September 30, 2019, in which we reported net income of $13.6 million or $0.13 per basic and diluted share for the third quarter of 2019. This compares to a net loss of $7.8 million or $0.08 per basic and diluted share for the third quarter of 2018.

For the quarter ended September 30, 2019, net product revenue from the launch of Firdapse is $30.9 million with related cost of sales for the same quarter at $4.4 million. Research and development expenses were $4.6 million for the third quarter of 2019 compared with $4.5 million in the third quarter of 2018. Research and development expenses for the third 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 prepared to submit our NDA for Firdapse with the treatment of LEMS as well as expenses of our Firdapse clinical trials and studies of our expanded access program.

The company expects that the costs related to research and development activities will continue to be substantial throughout 2019 and into 2020 as we continue our ongoing clinical trials and studies in MuSK-MG, SMA Type 3 and our expanded access program for Firdapse.

The general and administrative expenses for the third quarter of 2019 totaled $8.1 million as compared to $3.6 million in the third 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 lawsuit against the FDA. The company expects selling, general and administrative expenses to increase in 2019 and into 2020 as we continue to build our infrastructure and commercial and patient programs in support of Firdapse sales activities and pursue our lawsuit against the FDA.

On September 30, 2019, Catalyst had cash and investments of $81.6 million and no funded debt. Although there can be no assurance based on current and available information, 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 Tuesday, November 12, 2019, and can be found on the Investor Relations page of our website at www.catalystpharma.com. I'll now turn the call back to Pat.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [7]

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Thank you, Ali. As always, I'd like to extend our thanks to everyone who has made the success for LEMS community possible including our patients, physicians, employees and other Catalyst stakeholders. Our mission remains to better the lives of people with neuromuscular disease, and we look forward to providing you updates on each of our clinical and commercial programs in the near future. This ends our formal presentation. I'll now turn the call over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Charles Duncan of Cantor Fitzgerald.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [2]

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Pat and team, congrats on the progress in the quarter and the performance. And I really appreciate all the granularity on the launch metrics, that's helpful to understand this market. I had a couple of questions that are kind of commercial-oriented and then one that is related to the pipeline. And so I'll really start with the commercial question, and that is that when you consider the guidance, what really are some of the drivers or key inputs for the guidance? And then if you could touch on the LEMS market dynamics, you said a few things in your prepared remarks, but I'm wondering if you could provide a little bit more color on maybe the competitive front and new patient identification.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [3]

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Thank you, Charles, for your question. Dan, do you want to address the commercial metrics and our guidance with Charles?

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [4]

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Yes. I mean as far as the guidance for the remainder of this year, for next year, in general, Charles, where are you going?

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [5]

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Yes. Really, it's next year because that's the nice surprise to see. I'm a little bit surprised that you're able to provide that at this time.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [6]

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Yes. I think -- I mean the key elements and there's a couple of elements going on. One is, I mean we had a fantastic launch and really transitioned patients over. I think we've been describing this in Q1 and Q2 calls that when you have such a good launch of new enrollments, it becomes harder to get into that next phase. And so we do see that the new enrollments are going to be in the more moderate 15. And I think with these additional programs that we're putting in place with our expansion in the sales force, and a new target list of additional physicians that we can call on with inside sales and folks in the field, that it will probably be in the 15 to 20 patients per month.

And then the thing that we kind of got a little spoiled about in the first and second quarter is when you have a rapid launch of all these transitioning patients, none of them discontinue. And it's not until you start getting the patients that are naive to treatment that you start seeing these things, like I mentioned, about -- there are some patients -- not all patients respond. Some patients have intolerable or experienced intolerable side effects, and so you get somewhere in the neighborhood of 20% to 25% discontinuations.

And then as I mentioned, a small trickle of patients that are going over to the pediatric LEMS-approved product. You have to subtract out patients that have those discontinuations. So you get into a more moderate growth rate versus what you see in quarters 1, 2 and 3. I hope that helps.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [7]

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Yes.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [8]

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Charles, your other question about a little more color around the competition, I think Dan addressed it head-on. We anticipated that we would lose some small amount of patients, which we've seen. And typically, they've been when your commercial insurance kicked in or when they were able to get Medicare coverage. And there were 2, what I'll call, small boluses for each of those. And those patients, for the most part, we believe, have converted and they launched their product in July. I suspect anybody who wanted to go back to the product that they were taking under the Jacobus compassionate use program, have for the most part, made that transition already.

And so we're feeling more comfortable as we move ahead, and we think that with our broad offerings of patient support and services, it's -- we're in a better position to -- going forward to retain these patients.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [9]

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Okay. That seems like it should be the case. And then with regard to adding the sales reps, I wasn't clear, were you adding 10? And then what is the 7 to 10 additional folks that you're adding? What -- can you just give us a sense of the expansion?

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [10]

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Yes. I'll let Dan take that question, Charles.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [11]

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So we've purchased some additional prescribing data on physicians that use medications that are often used with LEMS patients or patients that are experiencing and displaying LEMS symptoms. And by doing that, we've been able to find 9,000 neurologists, which is much higher than this existing list of 2,500 that we've seen, that have seen a diagnosed LEMS patient. So they're using a medication that is often used when this physician is seeing these types of patients.

So we are going to, in essence, reach into -- with our sales force, field face-to-face interactions with patients that go all the way up to about 2,500 to 3,000 of them with the field force. And then we're going to supplement that with an inside sales group that we train, and they make phone calls to these offices to understand, "Hey, has one of these types of patients come by the office?" And once we get, in essence, a lead, a confirmed lead from the inside sales, they will then hand that over to the regional account manager who will go out and visit that area.

It's just a more effective and efficient way of covering more ground including these patients who will go to some of these lower decile physicians more infrequently, but they still go there and this is the type of work you need to do when you're in a -- an orphan and especially in ultra-orphan disease area to catch the right timing of when that patient is in, for example, a general neurologist office in Peoria, Illinois when you don't have a regional account manager right near there.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [12]

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Okay. That's helpful. A lot of groundwork on that to be done, it seems. But then perhaps, if I could transition to the pipeline question that I had for Steve. I appreciate all the commentary on MuSK-MG relative to CMS in terms of the patient heterogeneity as well as symptom presentation. But I'm wondering if you could provide actual information regarding number or kind of general trends in terms of enrollment in that MuSK-MG.

And then in the second half of next year, if the data are positive out of the MuSK-MG study, would you anticipate an sNDA? Or would you anticipate perhaps a second Phase III would be kicked off by year-end next year?

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Steven R. Miller, Catalyst Pharmaceuticals, Inc. - COO & Chief Scientific Officer [13]

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Okay, Charles. With regard to your first question, I can't provide any specific guidance on the number of patients currently enrolled in the trial. I will say that the enrollment is going well if we're scheduled to complete enrollment by the end of the year. With regard to the plans upon successful completion of the current ongoing trial, keep in mind that this is, for all practical purposes, our second trial.

And in the prior meeting with the agency, they have indicated that the 2 trials, the proof-of-concept trial, combined with a successful Phase III trial, would be sufficient to file an sNDA for the indication. And therefore, we anticipate assembling and filing an sNDA after the successful completion of this clinical trial to seek approval for the MuSK-MG indication.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [14]

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Okay. And just remind me, maybe, of the number of patients targeted to be enrolled in that trial and whether they all have to pass an antibody test.

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Steven R. Miller, Catalyst Pharmaceuticals, Inc. - COO & Chief Scientific Officer [15]

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The patients do have to pass an antibody test to be eligible for enrollment, and we are targeting 60 MuSK-MG patients. Also as a reminder, this patient is enrolling 10 to 20 acetylcholine receptor patients as well, but there is no hypothesis testing for that group. The FDA simply requested that we enroll some acetylcholine receptor MG patients and tabulate the data so that they can determine whether or not there's any effect on those patients as well.

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Operator [16]

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The next question is from Joe Catanzaro of Piper Jaffray.

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Joseph Michael Catanzaro, Piper Jaffray Companies, Research Division - VP & Senior Biotech Analyst [17]

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Just a couple of quick ones for me, maybe the first around guidance, more so the 2019 guidance. If we look at that, it suggests that 4Q is going to be a down quarter. What's driving that? Is that simply patients transitioning off of Firdapse to Ruzurgi? And what gives you confidence that, that trend is going to reverse heading into 2020?

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [18]

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Well, I'll let Dan get into a little bit of the details on that, Joe. But really, we put the guidance out at approximately $100 million to be a conservative guidance and without giving a range. And maybe we should have given a range for this, that would have illustrated that we're not so certain that, that assumption is correct, that our revenues for the quarter are going to be down. But Dan, maybe you want to address that as well.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [19]

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Yes. No, I think it's partially just -- again, that great and rapid success we had in the first 3 quarters may get into and start settling into a more stable -- once we get the enrollments past this transition plus the discontinuations. I mean you mentioned that you also have to subtract out any discontinuations for normal reasons as well as we still do see a trickle of continued discontinuations going to the pediatric LEMS-approved product. And so when you have a quick ramp in a small market, there's going to be a period of adjustment in the early launch period, and this is what we're seeing. So it's going to flatten out.

And quite honestly, the better success you have in that initial ramp, the more severe the flattening is. And so that's what we see in Q4. And we do think that some of the discontinuations that we had with the early naive patients, we studied to try to understand what was happening, and it was initially much higher and we got it now with understanding better messaging and setting better expectations with physicians and patients and providing very good guidance on the initial dosing period.

What was originally a 40% discontinuation has now gotten down to lower than 30%, which is more in line with what we saw in our study. So that's continuing, and we believe that by next year, we'll have that honed where both on the discontinuation end, that will be into a normal cadence. And then on the enrollments, with all those programs that we mentioned and the expansion, we see that stabilizing and growing.

And the last point I'll just say is that, and Pat mentioned this, there still is a range around that $100 million number. We want to make sure that we don't surprise anyone on the low side, and Q4 is always challenging. There's less selling days with the holidays and such, and the weather actually is getting a bit colder. And there's a bit of a seasonal effect with patients in the symptoms of LEMS. And so we dial all these things and to try to make sure that we're giving you the best guidance with no surprises on the low side.

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Joseph Michael Catanzaro, Piper Jaffray Companies, Research Division - VP & Senior Biotech Analyst [20]

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Okay. Got it. And forgive me, you may have said this in your prepared remarks. But previously, you've provided numbers on patients on Firdapse at the end of the quarter. I think it was 337 at the end of 1Q and 409 at the end of 2Q. Can you say what it was at the end of 3Q?

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [21]

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Yes. So at the end of the second quarter, we had 409 patients on active therapy, and that includes all patients getting free drug, so in our Patient Assistance Program, our Bridge Program. And actually, overall, that had flattened out. And at the end of the third quarter, it's at about the same rate, above 410 or so patients.

And so we saw a growth in the number of our patients getting reimbursed, which reflects just really good work by our payer team and our team at Catalyst Pathways helping patients that were previously -- kind of just bridge and waiting for an insurance coverage transitioned over and on to paid therapy. But that also reflects, again, the -- not only the addition, new enrollments, but the subtracting out of anyone that had discontinued.

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Joseph Michael Catanzaro, Piper Jaffray Companies, Research Division - VP & Senior Biotech Analyst [22]

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Okay. Got it. And then maybe just last one for me here. So you mentioned the small group of patients that transitioned off of Firdapse on to Ruzurgi. Can you provide some numbers around that? And maybe in general, what's the percentage you're seeing of patients doing that? And do you expect that to continue to slow down? What's the driver of that?

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [23]

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Yes. Well, it's really hard to know exactly how many patients have switched to Ruzurgi because they really don't call up and just say, "I'm going to switch to another drug". But because we have such good communication with many and most of these patients and their physicians, we do try to capture that information and understand the different reasons why a patient is discontinuing. So we believe that at the end of Q3, there were about 20 patients that had made this transition to the other drug. And as we mentioned, or as I mentioned, most of them seem to be the patients that were on the Jacobus compassionate use study, originally. And then right now, currently, we see that about 30 but very few in the past 2 to 3 weeks.

And so we continue to work with these patients as best we can, all patients throughout the journey. And if they're ever showing any signs of discontent for any reason, we're addressing that. And if they say that they're going to leave to another medication, we just make sure that they know that they can return to Catalyst Pathways and Firdapse at any time and they will be able to pick up where they left off. And we do expect that some of these patients will come back when they realize that it's no better or actually worse without Firdapse and Catalyst working on their behalf.

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Operator [24]

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The next question is from Leland Gershell of Oppenheimer.

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Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [25]

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And also congratulations on the great progress and for sharing all the detail. Question on the commercial for Firdapse. Pat, you had previously declined kind of a 1,500 who were diagnosed or somehow in the system versus another 1,500 who may not be. Would it be fair to say that the additional 10 reps you would bringing on into the new year will be focusing on that second 1,500 group? And kind of as a part of that, if you could characterize any patients you brought into Firdapse who were in that second group as the launch has proceeded so far. And then I have a follow-up.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [26]

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I'm happy to take that again, Pat.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [27]

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Yes. Yes, Dan.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [28]

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So the additional representatives that come on board, all representatives still have basically a couple of different areas of opportunity. With 500 patients or so now being prescribed Firdapse, we do believe that there are still about 1,000 patients that are already diagnosed with LEMS that are not yet treated and are talking with physicians or they're not -- the physician hasn't yet found the urgency to ask those patients to come back in and to try Firdapse. And so there still is some work to be done.

But that said, once you get past 30%, 33% of a diagnosed market, it does become challenging. But we do see that, that still is a target. In addition, there are about what we believe is 1,500 undiagnosed patients or misdiagnosed. And the additional head count, both in the field and inside sales, are going to be asking questions of those offices: do you see patients experiencing these types of symptoms? Have you considered loans? Here, we have this no-cost antibody test, why not test to see if you're -- if this hunch is correct? Rather than, in some cases, physicians are just thinking to themselves, "Well, it's probably not LEMS. That's so rare, I'm sure it's not LEMS". We're trying to take some of those barriers or those hesitations off the table, both with our field force, our programs like the antibody test as well as the inside sales people calling up the offices, asking them if they're seeing patients like this.

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Leland James Gershell, Oppenheimer & Co. Inc., Research Division - MD & Senior Analyst [29]

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Okay. That's helpful. And also a commercial question. With regard to the dosing of Firdapse, wondering if you can comment if you've seen -- I know there's a standard dose that the drug is to be taken, but if you've seen any variability or flexibility that's been used by patients kind of on a one-off basis to manage their symptoms as effectively as possible with Firdapse.

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [30]

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Yes. There's quite a bit of variability overall, but the initial expectations of the average dose across all patients being around 60 milligrams has held pretty firm. And it's moved around a little bit where the initial patients that came on board were on the higher end of that transitioning over from kind of longer-term maintenance. And as we brought in some of the new patients, the new naive patients, they were at the lower dose, obviously, as they started titration.

But the drug itself has a narrow therapeutic window, and I'm not quite sure that many of the patients previously on the Jacobus study, or even Jacobus, realized how there is metabolism difference between some patients that are fast metabolizers and slow metabolizers, and some patients do very well at 30, 40, 50 milligrams a day whereas others, the fast metabolizers, will require at the high end of the range at 80 milligrams. And that's where, again, you have to be very careful with patients and some of the side effects and dosing. You have to explain that to physicians and such.

But overall, the population of patients that have come over with a prescription for us and that have stayed on, the average dose across all is about 60 milligrams, slightly, slightly less.

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Operator [31]

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The next question is from Scott Henry of Roth Capital.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [32]

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Just got a couple of questions. Has the price -- pricing environment changed at all since Ruzurgi made it to the market? Or are you seeing general stability in net pricing?

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [33]

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The pricing hasn't changed at all, Scott. We price this at what we thought was a fair value. And we did a lot of work, as you know, to decide on where it should be priced based on all the patient services we provide and all the additional studies that we're conducting for other indications. And so the pricing, despite the entry of the other company, has been very stable for us.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [34]

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Okay. Great. Another question with regards to Ruzurgi. Do you have any sense of what kind of market share that product is getting? I know you -- there was talk about 20 switches in Q3. But how do you think it's doing among new patients? Just -- and you may not know, but I thought I would see if you rather have any color on that.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [35]

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Well, I'll give you my thoughts, and then Dan probably has some as well. The, I think for the most part, naive patients or those that are not 3,4-DAP experienced, are really not aware of the work that we're doing in physician offices, in our patient education as well as physician education. So there's a lot of work going on. And so I think with regard to naive patients, it's like Dan pointed out, they're a little more difficult to find. There's more work that's required by the field sales force or the regional account managers to find the docs who are treating patients with rare neuromuscular disease to find out if, in fact, they have any LEMS patients.

So I don't think that we can tell you their impact as a percentage of market share. I think as Dan pointed out, and we've talked about previously, that the number of patients is not large, and it's been somewhat of a trickle, if you will. And again, the product by the end of the year, will have been out there for about 6 months. So I think anybody that was already experienced on 3,4-DAP and wanted to go back, if they were in the compassionate use program, would have done so by the end of the year. So I think maybe as we go forward, we'll be in a better position as we gain more experience to be able to talk in terms of market share. But I think for the most part, that's all I can provide at this point. Dan, do you have any color on that?

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Daniel J. Brennan, Catalyst Pharmaceuticals, Inc. - Chief Commercial Officer [36]

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Yes. I mean I think there's a couple of other elements. I mean it's interesting. We do hear from many of these patients that were on the Jacobus 3,4-DAP that they actually say, "Well, I actually think the drug is working much better for me with Firdapse." And then vice versa. Obviously, the people that have left are thinking, "Well, I kind of remember that my old 3,4-DAP was working a bit better". And that's why I think that we'll see some of those patients come back ultimately because it seems to be all over the place.

And the reason why I bring that up is that the physicians that are treating a new patient, and we don't have data on this, I mean you kind of alluded to this. It's hard for us to tell. We don't have data. But these physicians that are treating the new patients, they don't necessarily like writing something off label. It makes it a little bit easier for them when they have a patient who's in their office saying, "But it was working for me for 1.5 years". And they're like, "Okay. Well, this actually makes some sense". But on new patients, I don't think that they're getting many new patients, and I think that's appropriate. And I think that that's in line with what the payers and the physicians are most comfortable with, which is prescribing a drug that's on label that's been studied, that's been reviewed by the FDA and such.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [37]

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Okay. Great. Another question, just with regards to the CMS data, do you expect to present that anytime in the near future? Or how can we get a closer look at that data.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [38]

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Steve?

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Steven R. Miller, Catalyst Pharmaceuticals, Inc. - COO & Chief Scientific Officer [39]

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Well, basically, we'll have to speak to the principal investigator. I would anticipate that we would present the data at an appropriate forum at some time. We also plan on publishing the data. And so we certainly wouldn't want to impact the ability to publish in a high-impact journal as well. So all of those factors will have to be taken into account. But I would anticipate that sometime next year that the data will be made publicly available.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [40]

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Okay. Great. Final question, just an accounting question. As you continue to be profitable on a quarterly basis, at some point, you'll fully tax the number. When would you expect us to see a more fully taxed EPS number, just for modeling purposes?

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [41]

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Scott, we have hired a separate firm to do an analysis of our NOLs and to look at our tax credits and orphan credits. And so that's hard for us to say right now. Certainly, it's not going to impact this year. Perhaps, sometime next year. And as we get our arms around the work that's being conducted right now to analyze our NOLs and our R&D expenditures, as soon as we have that, we'll provide that to The Street.

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Operator [42]

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We have reached the end of the question-and-answer session, and I will now turn the call over to Patrick McEnany, Chairman and CEO, for closing remarks.

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Patrick J. McEnany, Catalyst Pharmaceuticals, Inc. - Co-Founder, Chairman, President & CEO [43]

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Thank you. Again, thanks for joining us on today's call. We look forward to providing you with further updates as they occur.

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Operator [44]

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