Catalyst Pharmaceuticals(CPRX) - 2020 Q4 - Annual Report

PART I Forward-Looking Statements The report contains forward-looking statements, subject to risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements, and actual results may differ significantly due to various risks and uncertainties[11][12] - Key uncertainties affecting success include the impact of the COVID-19 pandemic, ability to successfully market Firdapse® while complying with regulations, accuracy of LEMS market size estimates, patient diagnosis and retention rates, daily dose effects, and profitability[12] - Other critical factors include reimbursement policies, supplier compliance, intellectual property scope and challenges, legal proceedings against competitors (Jacobus/Ruzurgi®), and the potential for Firdapse® approval for additional indications[12][13] Item 1. Business Catalyst Pharmaceuticals focuses on rare neuromuscular and neurological diseases, with Firdapse® as its core product - Catalyst Pharmaceuticals is a biopharmaceutical company focused on rare, debilitating, chronic diseases, with a strategic expansion into acquiring or in-licensing innovative technology platforms and earlier stage programs in other rare disease therapeutic categories[20][25] - The COVID-19 pandemic has caused significant economic disruption, delaying diagnosis of new LEMS patients and potentially impacting clinical trial timelines and costs, though the Firdapse® supply chain remains robust[21][22][23][24] - The company is actively searching for a key executive (M.D. or Ph.D. with 15-20 years of experience) to lead the expanded R&D strategy, focusing on portfolio expansion and drug development from discovery to marketing authorization[26] Firdapse® Product Overview Firdapse® (amifampridine phosphate) is Catalyst's first-line LEMS treatment, approved in Europe in 2009 with good tolerability - Firdapse® is the trade name for amifampridine phosphate, recommended as first-line symptomatic treatment for LEMS by the European Federation of Neurological Societies[54][55] - It received European marketing approval in December 2009 and has demonstrated good tolerability at doses up to 80 mg/day, with common mild/moderate side effects like paresthesias and GI disorders[55] Lambert-Eaton Myasthenic Syndrome (LEMS) LEMS is a rare autoimmune disorder causing muscle weakness, with Firdapse® as the only FDA-approved adult treatment - LEMS is a rare autoimmune neuromuscular disorder characterized by muscle weakness, caused by antibodies against voltage-gated calcium channels, often associated with small-cell lung cancer[56] - Firdapse® is the only FDA-approved, evidence-based symptomatic treatment for adult LEMS, functioning as a voltage-gated potassium blocker to enhance acetylcholine release and restore muscle strength[58][61] - The company estimates approximately 3,000 LEMS patients in the U.S., with about 1,500 diagnosed and 1,500 undiagnosed or misdiagnosed, due to lack of awareness and underutilization of antibody testing[59][60] Anti-MuSK antibody positive myasthenia gravis (MuSK-MG) MuSK-MG is a severe myasthenia gravis form affecting 3,000-4,800 US patients, lacking FDA-approved drug therapy - MuSK-MG is a more severe form of Myasthenia Gravis, characterized by prominent weakness in the neck, oro-bulbar, and sometimes respiratory musculature[64] - An estimated 3,000 to 4,800 MuSK-MG patients are in the United States, with no FDA-approved drug therapy currently available[65] Hereditary Neuropathy with Liability to Pressure Palsies (HNPP) HNPP is a peripheral nerve disorder causing pressure-induced weakness, with Firdapse® proof-of-concept planned - HNPP is a peripheral nerve disorder causing recurrent episodes of numbness, tingling, and muscle weakness due to pressure sensitivity, affecting an estimated 2,300 to 5,200 patients in the U.S[66][67][69] - There is no standard medical treatment for HNPP; management involves avoiding pressure and symptomatic relief. Catalyst plans a proof-of-concept study for Firdapse® as a potassium channel blocker to mitigate pathological effects[70][40] License Agreement for Firdapse® Catalyst licensed Firdapse® from BioMarin, expanding to Japan, with BioMarin transferring rights to SERB SA - Catalyst licensed exclusive North American rights to Firdapse® from BioMarin in October 2012, with a royalty structure based on net sales (7% up to $100 million, 10% above $100 million)[71] - In May 2019, the license agreement was amended to expand the commercial territory to include Japan, with an option for further expansion into Asia, Central, and South America, with similar royalty percentages[72][44] - BioMarin transferred certain rights under the license agreement to SERB SA in January 2020[73] Clinical trials supporting our NDA for Firdapse® for LEMS and approval of our NDA Firdapse® received FDA approval for adult LEMS on November 28, 2018, following two successful Phase 3 clinical trials - Two successful Phase 3 clinical trials for Firdapse® in LEMS were conducted, with results published in Muscle & Nerve (2016) and Journal of Clinical Neuromuscular Disease (2019)[75] - Firdapse® received FDA approval for the treatment of adult LEMS patients (ages 17 and above) on November 28, 2018, following NDA submission in March 2018[28][76] Required Post-Approval Studies FDA requires post-approval studies for Firdapse®, including hepatic impairment, pregnancy surveillance, and carcinogenicity - FDA requires a clinical trial on hepatic impairment's effect on amifampridine exposure[77] - A 10-year pregnancy surveillance program for Firdapse® is mandated[77] - A second carcinogenicity study of amifampridine phosphate in mice is required[77] Expanded access program Catalyst's EAP provides Firdapse® to previously enrolled CMS/DN patients, with LEMS patients transitioned to commercial access - EAP provides Firdapse® to previously enrolled CMS or Downbeat Nystagmus (DN) patients; new enrollment for these indications is closed[78] - Adult LEMS patients from the EAP have transitioned to commercial Firdapse® through Catalyst Pathways™[79] Sales, Marketing and Distribution Firdapse® launched in the US in 2019, supported by a sales force, patient programs, and digital marketing - Firdapse® launched in the U.S. in January 2019 with a field force of ~20 personnel, expanding in early 2020 to target ~9,000 neurology and neuromuscular healthcare providers[28][29][80][81] - Distribution is supported by "Catalyst Pathways"™, a personalized treatment support program utilizing exclusive specialty pharmacies (primarily AnovoRx)[30][82] - The company offers a no-cost LEMS voltage-gated calcium channel (VGCC) antibody testing program and expands digital/social media activities to reach potential patients and providers[29][81] Access to Firdapse® Catalyst ensures Firdapse® access through co-pay assistance and charitable donations, achieving wide payor coverage - Co-pay assistance program limits out-of-pocket costs to $10 or less per month for eligible commercially insured LEMS patients[31][85] - Donations are made to independent charitable foundations to assist LEMS patients in financial need, aiming to prevent denial of access for financial reasons[31][85] - Firdapse® has been widely covered and reimbursed by private and public payors for adult LEMS patients[86] FDA approval of Ruzurgi® for pediatric LEMS patients (ages 6 to under 17) FDA approved Ruzurgi® for pediatric LEMS in 2019, leading Catalyst to sue the FDA over alleged off-label use - FDA approved Ruzurgi® for pediatric LEMS patients (ages 6 to under 17) in May 2019[32][87] - Catalyst believes Ruzurgi® is being prescribed off-label to adult LEMS patients, which could materially adversely affect its business[32][87] - Catalyst sued the FDA in June 2019, alleging Ruzurgi®'s approval violated its statutory rights and the Orphan Drug Act. The District Court dismissed the case in September 2020, a decision Catalyst has appealed[33][34][35][88][89][90] Third-Party Reimbursement Firdapse® sales depend on third-party reimbursement, with Catalyst ensuring patient access amidst coverage uncertainties - Sales of Firdapse® are significantly dependent on coverage and adequate reimbursement from third-party payors (government, managed care, private insurers)[91] - Catalyst uses a dedicated team of market access managers and reimbursement experts, plus a patient service center, to secure coverage and reimbursement for Firdapse®[91] - The company offers free medication for titration support and during coverage decision periods to ensure patient access[92] Our efforts to develop Firdapse® as a treatment for additional neuromuscular indications Catalyst pursues Firdapse® for new indications like HNPP, plans a redesigned MuSK-MG study, and develops a long-acting formulation - Phase 3 clinical trial (MSK-002) for MuSK-MG did not achieve statistical significance on primary or secondary endpoints, despite observed clinical improvement. Catalyst plans to present a redesigned protocol to the FDA in H1 2021[37][38][96][97] - The SMA-001 study for SMA Type 3 met its primary endpoint (HFMSE) with modest clinical effect, leading to the decision not to pursue this indication further, especially given three approved disease-modifying medications[39][99] - Catalyst will conduct a proof-of-concept study for Hereditary Neuropathy with Liability to Pressure Palsies (HNPP) and is developing a long-acting formulation of amifampridine phosphate, with initial PK study results completed in Q4 2020[36][40][100][103] - The company has decided not to pursue the Kennedy's disease indication due to SMA Type 3 study results and lack of a targeted mechanism of action[102] Intellectual property and regulatory exclusivity protections for Firdapse® Catalyst's Firdapse® patent rights, including the '893 patent, face infringement lawsuits and challenges to regulatory exclusivity - U.S. Patent No. 10,798,893 ('893 patent) was issued in October 2020, directed to amifampridine dosing for slow metabolizers, expiring April 7, 2034[46][105] - Catalyst filed patent infringement lawsuits in October 2020 against Jacobus and PantherRx for Ruzurgi®'s alleged infringement of the '893 patent[47][106] - Firdapse® received five-year 'new chemical entity' exclusivity and seven-year orphan drug exclusivity for LEMS, but the scope of these protections is unclear due to Ruzurgi®'s approval[110][111] Generic Sabril® Catalyst partnered with Endo Ventures for generic Sabril® development, with success and profitability not assured - Catalyst partnered with Endo Ventures Limited (Par Pharmaceutical) in December 2018 for the development and commercialization of generic Sabril® tablets[50][115] Generic Sabril® Collaboration Payments | Payment Type | Amount | | :------------- | :----- | | Up-front payment | $500,000 | | Milestone payment (on commercial launch) | $2.0 million | | Net profits | Shared upon commercialization | - The success and profitability of the generic Sabril® collaboration are not assured[51][116] Capital Resources As of December 31, 2020, Catalyst held $140.3 million in cash and investments, sufficient for 12 months, but future funding is not assured Cash and Investments (as of Dec 31, 2020) | Metric | Amount | | :----- | :----- | | Cash and Investments | ~$140.3 million | - The company believes it has sufficient funds for at least the next 12 months, but continued profitability and future funding availability are not assured[52] Our Strategy Catalyst's strategy focuses on developing and commercializing novel drugs for rare neuromuscular diseases and seeking new acquisitions - Goal: Develop and commercialize novel prescription drugs for rare (orphan) neuromuscular and neurological diseases, with a patient-first approach[53] - Key strategic intentions[53] - Commercialize Firdapse® for LEMS and other potential neuromuscular diseases, improving disease awareness and patient access programs - Develop a long-acting formulation for Firdapse® to provide meaningful patient benefits - Acquire or in-license innovative technology platforms and earlier stage programs in other therapeutic categories beyond neuromuscular diseases, investing more heavily in R&D for diversification - Seek approval for Firdapse® in Japan Manufacturing and Supply Catalyst operates as a virtual drug manufacturer, relying on third-party contract manufacturers for Firdapse® - Catalyst is a virtual drug manufacturer, relying entirely on third-party contract manufacturers and packagers for all research materials and commercial products, including Firdapse®[117][119] - Contract manufacturers must comply with current Good Manufacturing Practices (cGMP) and other federal regulations; failure to do so could delay product launches or adversely affect the business[117][120] - Significant changes to Firdapse® manufacturing require FDA approval via a supplemental new drug application (sNDA)[120] Competition The pharmaceutical industry is highly competitive, with Firdapse® facing competition from unapproved treatments and Ruzurgi® - The pharmaceutical industry is intensely competitive, with many competitors possessing greater financial, technical, marketing, and manufacturing resources[122] - Firdapse® competes with unapproved LEMS treatments (e.g., steroids, azathioprine, pyridostigmine) and guanidine HCl tablets[123] - The FDA approval of Ruzurgi® for pediatric LEMS, and its off-label use in adults, is a significant competitive factor. Compounded amifampridine, which is substantially less expensive, also poses a threat[124][125] Regulatory Matters Drug development and commercialization are subject to extensive government regulation, including FDA approval and compliance with anti-kickback laws - Drug development and commercialization are extensively regulated by government authorities (e.g., FDA in the U.S.) covering research, testing, manufacturing, labeling, promotion, and distribution[132][133] - The U.S. drug development process involves pre-clinical testing, IND submission, multi-phase clinical trials (Phase 1, 2, 3, 4), and NDA submission and approval, which is lengthy, difficult, and resource-intensive[136][139][140][144] - Regulatory exclusivities (New Chemical Entity, Orphan Drug, Pediatric) provide market protection, but their scope can be challenged. Special programs like Special Protocol Assessments (SPA), Breakthrough Therapy, Fast Track, and Priority Review aim to expedite development for serious conditions[158][177][180][182][183][187] - Compliance with anti-kickback, false claims, and transparency laws (e.g., Physician Payments Sunshine Act, PDMA, DSCSA) is critical, as violations can lead to significant penalties, enforcement actions, and reputational harm[189][190][191][194] Our Employees As of March 11, 2021, Catalyst Pharmaceuticals had 74 employees across commercial, R&D, and G&A, supplemented by consultants Employee Distribution (as of March 11, 2021) | Department | Number of Employees | | :--------- | :------------------ | | Total Employees | 74 | | Commercial | ~35 | | R&D | ~25 | | G&A | Remainder | | Consultants | Several | - The company seeks high-quality personnel who support its mission to develop and commercialize innovative therapies for rare, debilitating, chronic neuromuscular and neurological diseases[196] Available Information Company reports (10-K, 10-Q, 8-K) and amendments are available free on www.catalystpharma.com after SEC filing - Company reports (10-K, 10-Q, 8-K) and amendments are available free on www.catalystpharma.com after SEC filing[197] Item 1A. Risk Factors This section outlines significant risks, including dependence on Firdapse®, capital needs, competition, and regulatory hurdles - The business involves a high degree of risk, and stockholders should carefully consider the risks and uncertainties described[209] - Key risk categories include commercialization of Firdapse®, development of additional indications, government regulation, intellectual property, and general risks related to common stock[199][202][204][207][208] Risk Factors Summary Key risks include Firdapse® commercial success, capital needs, competition, drug development, regulation, and intellectual property - The company is substantially dependent on the commercial success of Firdapse®[199] - Risks include the need for additional capital, limited commercial experience, substantial competition, and the potential failure of new strategic initiatives (e.g., acquiring new platforms)[199][200] - Development risks include potential failure at any stage of drug development, reliance on third parties for clinical trials, manufacturing scale-up difficulties, and pressure on drug pricing and reimbursement[202][203] - Regulatory risks involve lengthy approval processes, potential delays in clinical trials, non-compliance by manufacturers, and the impact of future legislation or judicial actions on commercialization and pricing[204][206] - Intellectual property risks include dependence on license agreements, potential infringement of third-party rights, and substantial costs from patent litigation[207] Risks related to the commercialization of Firdapse® Firdapse® commercialization faces high uncertainty due to competition, market acceptance, regulatory compliance, and supply chain risks - The company's success is substantially dependent on Firdapse®'s commercial success, as it is primarily a single-product company with limited commercial experience[210][214] - Risks to Firdapse® commercialization include competition from Ruzurgi® and compounded amifampridine, challenges in patient/physician acceptance, regulatory compliance, securing formulary approvals, and ensuring manufacturing and supply chain efficiency[215][224] - The recently adopted strategy to acquire or in-license innovative platforms outside neuromuscular diseases is risky, facing intense competition, potential failure to identify promising candidates, and operational/financial challenges of integration[226][227][228][229][231] Risks Related to the Development of Additional Indications for Firdapse® Developing additional Firdapse® indications carries high failure risks from clinical trials, third-party reliance, and pricing pressures - Development of additional Firdapse® indications is subject to failure risks, including ineffectiveness, unsafety, or economic non-viability, as demonstrated by past failures in CMS and SMA Type 3 trials[238][239][240] - Clinical trials face numerous challenges: regulatory/IRB authorization, patient recruitment/retention (especially for rare diseases), unforeseen health risks, third-party contractor non-compliance, and higher-than-anticipated costs[242][243][245][271] - Manufacturing risks include reliance on sole suppliers, inability to scale up production, and quality issues during scale-up, which could lead to supply shortages or delays[248][249][250] - Commercial success for small patient populations requires significant market share and high per-patient prices, which are vulnerable to payor pressures and competition from less expensive alternatives like compounded drugs[253][255][262] Risks Related to Government Regulation Government regulation poses risks including uncertain approval, post-approval compliance, legislative pricing impacts, and orphan drug exclusivity challenges - The regulatory approval process is lengthy and uncertain; there's no guarantee of approval for Firdapse®'s additional indications or for products in other countries[265][267][270] - Post-approval, Firdapse® is subject to ongoing regulatory review, including post-marketing studies and strict rules on product promotion and advertising. Non-compliance can lead to fines, withdrawal of approvals, or criminal prosecution[277][278] - Legislation like the Affordable Care Act and proposals to control drug pricing (e.g., Most Favored Nation Model) could increase commercialization costs and negatively impact product prices and reimbursement[279][280][281][283][258] - Orphan drug exclusivity, vital for the company's products, is subject to potential future modifications, challenges, and loss if criteria are not met or if a clinically superior drug is approved[285][287][288][289] - Operations are subject to anti-bribery, anti-kickback, fraud and abuse, and transparency laws (e.g., Federal Anti-Kickback Statute, False Claims Act, HIPAA, Sunshine Act, FCPA), with non-compliance risking enforcement actions, penalties, and reputational harm[291][292][293][295] Risks Related to our Intellectual Property Catalyst's Firdapse® intellectual property, derived from licenses, faces risks of patent invalidation, infringement, and costly litigation - All Firdapse® patent rights are derived from license agreements, making the company dependent on maintaining these relationships; breach could lead to loss of rights[296][297] - The '893 patent, issued in October 2020, covers amifampridine dosing for slow metabolizers until April 2034. Catalyst has filed patent infringement lawsuits against Jacobus and PantherRx[296][306] - Success depends on operating without infringing third-party patents, which is uncertain. Litigation risks include substantial costs, potential injunctions, damages (possibly tripled for willful infringement), and the need to redesign products or obtain licenses[300][301][302][305][307] General Risk Factors Relating to our Common Stock Common stock trading price is highly volatile, influenced by clinical, regulatory, and market factors, with no future cash dividends planned - The trading price of common stock is highly volatile, influenced by clinical trial outcomes, regulatory approvals, competition, financial estimates, and economic conditions[309][310][311][312] - Delaware law and company documents (e.g., certificate of incorporation, by-laws, stockholder rights plan) contain provisions that could delay or discourage takeover attempts, potentially reducing stock price and entrenching management[313][314][315][317][318][319] - Future sales of common stock, especially by officers, directors, and significant stockholders, or the perception of such sales, may cause the stock price to decline[320] - The company does not intend to pay cash dividends on its common stock in the foreseeable future, meaning investor returns depend solely on stock price appreciation[321] Item 1B. Unresolved Staff Comments No unresolved staff comments to report - No unresolved staff comments[322] Item 2. Properties Catalyst Pharmaceuticals operates from leased office space in Coral Gables, Florida, with an expanded lease effective Q1 2021 - The company operates from leased office space in Coral Gables, Florida[323] Office Lease Details (2020) | Metric | Value | | :----- | :---- | | Leased Space (2020) | ~7,800 sq ft | | Annual Rent (2020) | ~$330,000 | | Amended Lease Space (effective Q1 2021) | ~10,700 sq ft | Item 3. Legal Proceedings Catalyst is involved in legal proceedings against the FDA and competitors regarding Ruzurgi® approval and Firdapse® patent infringement - Catalyst filed a lawsuit against the FDA in June 2019, challenging the approval of Ruzurgi® for pediatric LEMS, alleging violations of statutory rights and the Orphan Drug Act[324] - The District Court dismissed Catalyst's case in September 2020, a decision that Catalyst has appealed to the Eleventh Circuit Court of Appeals[326][327] - Catalyst initiated legal proceedings in Canada seeking judicial review of Health Canada's approval of Ruzurgi® for LEMS, citing data protection regulations[328] - In October 2020, Catalyst filed patent infringement lawsuits against Jacobus and PantherRx in the U.S. District Court for New Jersey, alleging Ruzurgi® infringes the '893 patent[329][330] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section covers common stock performance, market information, shareholder details, dividend policy, and equity compensation plans 5-Year Cumulative Total Return (12/31/2015 - 12/31/2020) | Index | 12/15 | 12/16 | 12/17 | 12/18 | 12/19 | 12/20 | | :----------------------- | :---- | :---- | :---- | :---- | :---- | :---- | | Catalyst Pharmaceuticals, Inc. | 100.00 | 42.86 | 159.59 | 78.37 | 153.06 | 136.33 | | NASDAQ Composite | 100.00 | 108.87 | 141.13 | 137.12 | 187.44 | 271.64 | | Russell MicroCap | 100.00 | 120.37 | 136.22 | 118.40 | 144.96 | 175.34 | | NASDAQ Biotechnology | 100.00 | 78.65 | 95.67 | 87.19 | 109.08 | 137.90 | - Common stock trades on the Nasdaq Capital Market under the symbol "CPRX". As of March 11, 2021, the closing sale price was $3.77, with 31 holders of record[339] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, retaining funds for operations and business growth[340] Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Number of Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Number of Securities Remaining Available | | :-------------------------------------- | :-------------------------------------------- | :------------------------------ | :--------------------------------------- | | Equity compensation plans approved by security holders | 13,393,669 | $3.10 | 1,856,008 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 13,393,669 | $3.10 | 1,856,008 | Item 6. Selected Financial Data Selected financial data is not applicable for this report - Item 6, Selected Financial Data, is not applicable[344] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, COVID-19 impact, and critical accounting policies for fiscal years 2018-2020 - The MD&A provides an understanding of the company's financial condition, changes, and results of operations, including an overview of the business, key accounting estimates, and analysis of financial performance[346] - The company is a biopharmaceutical company focused on rare, debilitating, chronic diseases, with a strategic expansion into acquiring or in-licensing innovative technology platforms outside neuromuscular diseases[347][352] - The COVID-19 pandemic has adversely affected the business, causing delays in LEMS patient diagnosis and potentially impacting clinical trial timelines, though the Firdapse® supply chain remains robust[348][349][350][351] Basis of Presentation This section outlines key accounting estimates and policies for revenue, cost of sales, R&D, SG&A, stock-based compensation, and income taxes - Revenues are generated from Firdapse® product sales in the U.S. and Canada, and from collaborative arrangements (Endo, KYE Pharmaceuticals)[381] - Cost of sales includes third-party manufacturing, freight, royalties, and indirect overhead. Costs for Firdapse® manufactured prior to FDA approval were expensed, leading to artificially low cost of sales until that inventory is depleted[382] - Research and development expenses cover preclinical studies, clinical manufacturing, clinical trials, and related third-party costs, primarily for Firdapse® development[383] - Selling, general and administrative expenses include commercialization costs for Firdapse®, salaries, administrative facility costs, regulatory fees, and professional fees[385][386] - The company uses non-GAAP financial measures, excluding stock-based compensation, to enhance understanding of ongoing operations[392][393] Critical Accounting Policies and Estimates Critical accounting policies involve significant judgment for revenue recognition, stock-based compensation, and deferred tax asset valuation allowance - Critical accounting policies involve significant judgment and estimates, including revenue recognition, stock-based compensation, and valuation allowance for deferred tax assets[396][397] - Revenue from product sales is recorded net of variable consideration estimates (trade discounts, returns, chargebacks, government rebates, patient assistance), which are probability-weighted[398][399] - Stock-based compensation fair value is determined using the Black-Scholes model, with assumptions for volatility, option life, risk-free rate, and dividend yield[400] - A valuation allowance for deferred tax assets is assessed quarterly based on positive and negative evidence, including historical and projected taxable income[402] Results of Operations Catalyst reported significant financial improvements, with net income increasing to $75.0 million in 2020, driven by Firdapse® revenue and deferred tax asset release Key Financial Results (Years Ended December 31) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | | Product Revenue, Net | $118.7 million | $102.3 million | $0 | | Revenues from Collaborative Arrangements | $0.33 million | $0 | $0.5 million | | Total Revenues | $119.1 million | $102.3 million | $0.5 million | | Cost of Sales | $17.0 million | $14.8 million | $0 | | Research and Development Expenses | $16.5 million | $18.8 million | $19.9 million | | Selling, General and Administrative Expenses | $44.2 million | $36.9 million | $15.9 million | | Operating Income (Loss) | $41.3 million | $31.8 million | $(35.3) million | | Other Income, Net | $0.6 million | $1.6 million | $1.3 million | | Net Income (Loss) Before Income Taxes | $41.9 million | $33.4 million | $(34.0) million | | Income Tax Provision (Benefit) | $(33.1) million | $1.5 million | $0 | | Net Income (Loss) | $75.0 million | $31.9 million | $(34.0) million | | Basic EPS | $0.72 | $0.31 | $(0.33) | | Diluted EPS | $0.71 | $0.30 | $(0.33) | - Net revenue from Firdapse® increased by approximately $16.4 million (16.0%) in 2020 compared to 2019, driven by net price increases and a 9.6% increase in sales volumes[403] - Research and development expenses decreased by $2.3 million (12.5%) in 2020, primarily due to closing out MuSK-MG and SMA Type 3 trials, partially offset by increased stock-based compensation[405][406] - Selling, general and administrative expenses increased by $7.4 million (19.9%) in 2020, mainly due to sales force expansion, increased legal costs, and higher stock-based compensation[408][412] - A net valuation release of $41.6 million for deferred tax assets was recorded in 2020, contributing significantly to net income[415] Liquidity and Capital Resources Catalyst's liquidity is strong with $140.3 million in cash and investments as of 2020, but future funding may be required for operations and development - Operations are financed primarily through securities offerings and Firdapse® product sales[429] Liquidity Metrics (as of Dec 31) | Metric | 2020 | 2019 | | :----------------------- | :----------- | :----------- | | Cash and Cash Equivalents and Investments | $140.3 million | $94.5 million | | Working Capital | $136.5 million | $87.3 million | - The company believes it has sufficient resources for at least the next 12 months but may require additional funding for future operations and product development, with no assurance of availability or favorable terms[429] Cash Flow Summary (Years Ended Dec 31) | Activity | 2020 | 2019 | 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | | Net cash provided by operating activities | $45.0 million | $34.6 million | $(26.1) million | | Net cash used in investing activities | $(5.0) million | $37.2 million | $(15.1) million | | Net cash provided by financing activities | $0.7 million | $1.1 million | $0.3 million | - Contractual obligations include royalty payments under license agreements (approx. $16.3 million in 2020), CEO employment agreement (approx. $600,000 in 2020), a $500,000 annual purchase commitment with a CMO, and an operating lease for office space[434] Caution Concerning Forward-Looking Statements The report contains forward-looking statements, subject to risks from COVID-19, Firdapse® commercialization, market estimates, and intellectual property disputes - The report contains forward-looking statements, which are inherently uncertain and subject to risks that could cause actual results to differ materially[437][439] - Key factors affecting future success include the COVID-19 pandemic's impact, ability to market Firdapse® profitably and compliantly, accuracy of LEMS market estimates, patient adherence, reimbursement policies, intellectual property outcomes, and legal challenges against competitors (Ruzurgi®)[437][438] - Other uncertainties involve the success of Firdapse® for additional indications, commercialization in Canada and Japan, development of a long-acting amifampridine, and the success of business expansion through acquisitions or in-licensing[438] - The company undertakes no obligation to publicly update or revise any forward-looking statements[439] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk exposure is limited to cash and short-term investments, with a strategy focused on capital preservation and liquidity, avoiding derivatives - Market risk is confined to cash and short-term investments (money market funds, U.S. Treasuries, short-term bond funds)[441] - Investment objective is capital preservation and liquidity; derivative financial instruments are not used[441] Item 8. Financial Statements and Supplementary Data Financial statements and supplementary data are included under Item 15, comprising audit reports, balance sheets, statements of operations, equity, cash flows, and notes - Financial statements and supplementary data are included under Item 15[442] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[443] Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes in Q4 - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2020[444][445] - Management's assessment concluded that internal control over financial reporting was effective as of December 31, 2020, based on the 2013 COSO framework[446][449] - No material changes in internal control over financial reporting occurred during the fourth quarter of 2020[450] Item 9B. Other Information No other information to report - No other information to report[451] PART III Item 10. Directors and Executive Officers of the Registrant Director and executive officer information is incorporated by reference from the 2021 Proxy Statement, with a code of ethics available online - Information on directors and executive officers is incorporated by reference from the 2021 Proxy Statement[454] - A code of ethics, applicable to all officers, directors, employees, and agents, has been adopted and is available on the company's website[455] Item 11. Executive Compensation Executive compensation information is incorporated by reference from the Proxy Statement - Executive compensation information is incorporated by reference from the Proxy Statement[456] Item 12. Security Ownership of Certain Beneficial Owners and Management Security ownership information for beneficial owners and management is incorporated by reference from the Proxy Statement - Security ownership information is incorporated by reference from the Proxy Statement[457] Item 13. Certain Relationships and Related Transactions Information on certain relationships and related transactions is incorporated by reference from the Proxy Statement - Information on certain relationships and related transactions is incorporated by reference from the Proxy Statement[458] Item 14. Principal Accounting Fees and Services Principal accounting fees and services information is incorporated by reference from the Proxy Statement - Principal accounting fees and services information is incorporated by reference from the Proxy Statement[458] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements, audit reports, and a comprehensive list of exhibits, including corporate and regulatory documents - The report includes financial statements and reports from Grant Thornton LLP, the independent registered public accounting firm[461] - Financial statements comprise Consolidated Balance Sheets, Statements of Operations and Comprehensive Income (Loss), Statements of Changes in Stockholders' Equity, and Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018, along with Notes to Consolidated Financial Statements[461] - A list of exhibits is provided, detailing various agreements (merger, license, employment), corporate documents (certificate of incorporation, by-laws, rights agreement), and regulatory certifications (Section 302, Section 906)[464][466][469][470] Financial Statements Report of Independent Registered Public Accounting Firm Grant Thornton LLP issued unqualified opinions on internal control and financial statements, with deferred tax asset realizability as a critical audit matter - Grant Thornton LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting as of December 31, 2020[481] - An unqualified opinion was also expressed on the consolidated financial statements for the year ended December 31, 2020[482][490] - The evaluation of the realizability of deferred tax assets was identified as a critical audit matter due to significant management judgment and auditor effort[495][496] Consolidated Balance Sheets Consolidated balance sheets show total assets increased to $192.4 million in 2020, driven by cash and deferred tax assets, with equity more than doubling Consolidated Balance Sheet Summary (as of Dec 31) | Metric | 2020 | 2019 | | :-------------------------------- | :----------- | :----------- | | ASSETS | | | | Cash and cash equivalents | $130,237,109 | $89,511,710 | | Short-term investments | $10,041,068 | $5,007,050 | | Accounts receivable, net | $5,987,426 | $10,536,997 | | Inventory | $4,650,600 | $1,956,792 | | Prepaid expenses and other current assets | $8,327,771 | $4,351,074 | | Total current assets | $159,243,974 | $111,363,623 | | Deferred tax assets | $32,971,264 | $0 | | Total assets | $192,353,926 | $112,376,230 | | LIABILITIES | | | | Total current liabilities | $22,756,287 | $24,098,742 | | Total liabilities | $22,756,287 | $24,746,274 | | STOCKHOLDERS' EQUITY | | | | Total stockholders' equity | $169,597,639 | $87,629,956 | | Total liabilities and stockholders' equity | $192,353,926 | $112,376,230 | - Total assets increased by approximately $80 million (71.1%) from 2019 to 2020, primarily due to a $40.7 million increase in cash and cash equivalents and the recognition of $33.0 million in deferred tax assets[503] - Total stockholders' equity increased by approximately $81.9 million (93.5%) from 2019 to 2020, reflecting the net income and the release of the valuation allowance on deferred tax assets[503] Consolidated Statements of Operations and Comprehensive Income (Loss) Consolidated statements of operations show net income increased to $75.0 million in 2020, driven by Firdapse® revenue and a significant income tax benefit Consolidated Statements of Operations Summary (Years Ended Dec 31) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | | Product revenue, net | $118,740,617 | $102,306,337 | $0 | | Total revenues | $119,072,803 | $102,306,337 | $500,000 | | Total operating costs and expenses | $77,769,626 | $70,483,078 | $35,795,165 | | Operating income (loss) | $41,303,177 | $31,823,259 | $(35,295,165) | | Net income (loss) before income taxes | $41,890,074 | $33,409,033 | $(34,003,514) | | Income tax provision (benefit) | $(33,092,926) | $1,533,696 | $0 | | Net income (loss) | $74,983,000 | $31,875,337 | $(34,003,514) | | Basic EPS | $0.72 | $0.31 | $(0.33) | | Diluted EPS | $0.71 | $0.30 | $(0.33) | - Net income increased by approximately $43.1 million (135.2%) from 2019 to 2020, primarily due to higher product revenue and a significant income tax benefit[506] - Product revenue, net, from Firdapse® increased by $16.4 million (16.0%) in 2020, reaching $118.7 million[506] - The company transitioned from an operating loss in 2018 to operating income in 2019 and 2020, driven by the commercial launch of Firdapse®[506] Consolidated Statements of Changes in Stockholders' Equity Consolidated statements of changes in stockholders' equity show a significant increase to $169.6 million in 2020, driven by net income and stock-based compensation Consolidated Statements of Changes in Stockholders' Equity Summary (Years Ended Dec 31) | Metric | 2020 | 2019 | 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | | Balance at beginning of year | $87,629,956 | $50,783,809 | $80,963,812 | | Issuance of stock options for services | $5,694,120 | $3,780,086 | $3,535,647 | | Exercise of stock options for common stock | $758,130 | $1,116,242 | $297,563 | | Amortization of restricted stock for services | $566,803 | $44,729 | $0 | | Net income (loss) | $74,983,000 | $31,875,337 | $(34,003,514) | | Balance at end of year | $169,597,639 | $87,629,956 | $50,783,809 | - Total stockholders' equity increased by $81.9 million (93.5%) in 2020, primarily due to net income of $75.0 million and stock-based compensation[508] - Issuance of stock options for services contributed $5.7 million in 2020, $3.8 million in 2019, and $3.5 million in 2018[508] - The company reported a significant turnaround from a net loss in 2018 to net income in 2019 and 2020, positively impacting accumulated deficit[508] Consolidated Statements of Cash Flows Consolidated statements of cash flows show net cash from operations increased to $45.0 million in 2020, with a shift to net cash outflow from investing activities Consolidated Statements of Cash Flows Summary (Years Ended Dec 31) | Activity | 2020 | 2019 | 2018 | | :-------------------------------- | :----------- | :----------- | :----------- | | Net cash provided by (used in) operating activities | $45,034,864 | $34,611,473 | $(26,147,545) | | Net cash provided by (used in) investing activities | $(5,011,398) | $37,224,595 | $(15,082,872) | | Net cash provided by (used in) financing activities | $701,933 | $1,116,242 | $293,115 | | Net increase (decrease) in cash and cash equivalents | $40,725,399 | $72,952,310 | $(40,937,302) | | Cash and cash equivalents – end of period | $130,237,109 | $89,511,710 | $16,559,400 | - Net cash from operating activities increased by $10.4 million (30.1%) in 2020, primarily due to net income and a decrease in accounts receivable[431][513] - Investing activities shifted from a net inflow of $37.2 million in 2019 to a net outflow of $5.0 million in 2020, driven by increased purchases of investments[432][513] - Cash and cash equivalents at period-end increased by $40.7 million in 2020, reaching $130.2 million[513] Notes to Consolidated Financial Statements Notes provide detailed disclosures on organization, significant accounting policies, revenue recognition, investments, leases, and income taxes - The notes provide detailed information on the company's organization, business, and significant accounting policies, including principles of consolidation, use of estimates, and fair value measurements[516][523][524][537] - Key accounting policies cover cash and investments, accounts receivable, inventory, prepaid expenses, property and equipment, operating leases, and revenue recognition from product sales and collaborative arrangements[525][526][529][530][534][535][540][541][544][559] - Detailed disclosures are provided for research and development expenses, stock-based compensation, concentration of risk, royalties, income taxes (including deferred tax assets and valuation allowance), comprehensive income, and net income per common share[566][567][568][572][573][577][578] - Specific notes address investments, prepaid expenses, operating leases, accrued expenses, collaborative arrangements (Endo, KYE), commitments and contingencies (Ruzurgi® litigation), agreements, income taxes, stockholders' equity (including the Stockholder Rights Plan), stock compensation, and the employee benefit plan[588][589][590][593][594][600][604][605][609][611][614][616][624][627][633][646]