Catalyst Pharmaceuticals(US:CPRX)2023-05-09 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Catalyst Pharmaceuticals, Inc. as of March 31, 2023, and for the three months ended March 31, 2023, and 2022 Consolidated Balance Sheets Total assets increased to $407.2 million, primarily due to the FYCOMPA® acquisition, with stockholders' equity rising to $333.7 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $148,247 | $298,395 | | Total current assets | $198,911 | $320,806 | | License and acquired intangibles, net | $184,083 | $32,471 | | Total assets | $407,227 | $375,630 | | Liabilities & Equity | | | | Total current liabilities | $56,709 | $57,588 | | Total liabilities | $73,566 | $75,209 | | Total stockholders' equity | $333,661 | $300,421 | Consolidated Statements of Operations and Comprehensive Income Revenues nearly doubled to $85.4 million, with net income more than doubling to $29.6 million, primarily due to the FYCOMPA® acquisition Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Q1 2023 (unaudited) | Q1 2022 (unaudited) | | :--- | :--- | :--- | | Product revenue, net | $85,304 | $43,033 | | Total revenues | $85,366 | $43,089 | | Total operating costs and expenses | $49,757 | $25,723 | | Operating income | $35,609 | $17,366 | | Net income | $29,568 | $13,241 | | Diluted EPS | $0.26 | $0.12 | Consolidated Statements of Cash Flows Operating cash flow was $12.1 million, with $162.4 million used for the FYCOMPA® acquisition, reducing cash to $148.2 million Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,070 | $8,478 | | Net cash used in investing activities | ($162,367) | $0 | | Net cash provided by (used in) financing activities | $149 | ($1,551) | | Net decrease in cash | ($150,148) | $6,927 | | Cash at end of period | $148,247 | $178,372 | Notes to Unaudited Consolidated Financial Statements Notes detail the FYCOMPA® acquisition, revenue recognition for FIRDAPSE® and FYCOMPA®, and contractual obligations - The company is a commercial-stage biopharmaceutical firm focused on rare neurological and epileptic diseases, with main products FIRDAPSE® and FYCOMPA®55 - On January 24, 2023, the company acquired the U.S. rights to FYCOMPA® from Eisai Co., Ltd. and is now marketing it in the United States29 - The company sells FIRDAPSE® through an exclusive U.S. distributor and sells FYCOMPA® directly to major wholesalers and distributors64 Net Product Revenue by Product (in thousands) | Product | For the Three Months Ended March 31, 2023 | For the Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | FIRDAPSE® | $57,526 | $43,033 | | FYCOMPA® | $27,778 | — | | Total product revenue, net | $85,304 | $43,033 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 financial performance, highlighting revenue and net income growth from the FYCOMPA® acquisition Overview Catalyst, a biopharmaceutical company, expanded its portfolio with the FYCOMPA® acquisition for rare neurological diseases - The company's flagship U.S. commercial product is FIRDAPSE® for LEMS, and it recently acquired the U.S. rights to FYCOMPA® for epilepsy from Eisai, closing the deal on January 24, 2023153 - The company is pursuing a strategy to broaden and diversify its drug portfolio through acquisitions of early or late-stage products, companies, or technology platforms in rare disease and CNS therapeutic categories203 Results of Operations Total revenues increased 98% to $85.4 million, driven by FIRDAPSE® and FYCOMPA® sales, leading to a 124% net income increase Q1 2023 vs Q1 2022 Revenue Breakdown (in millions) | Product | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | FIRDAPSE® Sales | $57.5 | $43.0 | | FYCOMPA® Sales | $27.8 | $0.0 | | Total Product Revenue | $85.3 | $43.0 | - The increase in net revenues was due to the acquisition of FYCOMPA® and a 21% increase in FIRDAPSE® sales volumes, which included patients transferred from RUZURGI® in 2022238 - Amortization of intangible assets was $6.5 million in Q1 2023, a new expense related to the FYCOMPA® and RUZURGI® rights acquisitions, compared to $0 in Q1 2022192 - Selling, general and administrative (SG&A) expenses increased by $13.3 million, primarily due to $8.5 million in transition service fees for FYCOMPA® and a $1.5 million increase in employee compensation219 Net Income Comparison (in millions, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $29.6 | $13.2 | | Diluted EPS | $0.26 | $0.12 | Liquidity and Capital Resources Cash decreased to $148.2 million due to the $162 million FYCOMPA® acquisition, but remains sufficient for future operations - Cash and cash equivalents decreased to $148.2 million at March 31, 2023, from $298.4 million at December 31, 2022, mainly because the company used approximately $162 million to acquire the U.S. rights to FYCOMPA®246 - Net cash from operating activities was $12.1 million for Q1 2023, with an increase in accounts receivable from FYCOMPA® sales partially offsetting cash generated from net income250 - Contractual obligations include royalties on FIRDAPSE® sales, deferred payments and future royalties for the RUZURGI® settlement, and potential milestone and royalty payments for the FYCOMPA® acquisition252268 Item 3. Quantitative and Qualitative Disclosure About Market Risk Market risk is limited to interest rate fluctuations on cash and equivalents, with a focus on capital preservation - The company's primary market risk is interest rate fluctuations affecting its cash and cash equivalents invested in money market funds and U.S. Treasuries273 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective274 - No material changes were made to the company's internal control over financial reporting during the first quarter of 2023274 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company initiated patent lawsuits against generic manufacturers for FIRDAPSE® and FYCOMPA®, triggering 30-month FDA approval stays - In January 2023, the company received Paragraph IV notice letters from three generic drug manufacturers seeking to market a generic version of FIRDAPSE®118174 - The company filed patent infringement lawsuits against the three generic manufacturers on March 1, 2023, triggering an automatic 30-month stay of FDA approval for the generic FIRDAPSE® products until May 2026 or a court decision118261 - In February 2023, the company received Paragraph IV notice letters for generic versions of FYCOMPA® tablets and oral suspension, and subsequently filed lawsuits on April 5, 2023, triggering a 30-month stay for those applications as well202262297 Item 1A. Risk Factors No material changes to risk factors were reported, referring readers to the 2022 Annual Report on Form 10-K for details - The company refers to its 2022 Annual Report on Form 10-K for a description of significant risk factors affecting the business280 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the $40 million program in Q1 2023, as cash is being retained for business development Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Dollar Value of Shares that May Yet Be Purchased (in thousands) | | :--- | :--- | :--- | :--- | | Jan 2023 | — | $ — | $21,003 | | Feb 2023 | — | $ — | $21,003 | | Mar 2023 | — | $ — | $21,003 | - The company is not currently purchasing shares under its repurchase program, instead opting to retain cash for business development281