EDGAR 10-K Filing

Company CIK: 1369568
Filing Year: 2023
Filename: 1369568_10-K_2023_0001193125-23-071299.json

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ITEM 1. BUSINESS
Item 1.
Business

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ITEM 1A. RISK FACTORS
Item 1A.
Risk Factors

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B.
Unresolved Staff Comments

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ITEM 2. PROPERTIES
Item 2. Properties
We currently operate our business in 10,700 square feet of leased office space in Coral Gables, Florida. Our current annual rent in the new space is approximately $0.5 million.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
Paragraph IV Patent Litigation
In January 2023, we received Paragraph IV Certification Notice Letters from three generic drug manufacturers advising us that they had each submitted an Abbreviated New Drug Application (ANDA) to the FDA seeking authorization from the FDA to manufacture, use or sell a generic version of FIRDAPSE® in the United States. The notice letters each allege that our six patents listed in the FDA Orange Book covering FIRDAPSE® are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the proposed product described in these ANDA submissions. Under the Federal Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, we had 45 days from receipt of the notice letters to commence patent infringement lawsuits against these generic drug manufacturers in a federal district court to trigger a stay precluding FDA from approving any ANDA until May 2026 or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first, and in that regard, after conducting the necessary due diligence, we filed lawsuits on March 1, 2023 in the U.S. Federal District Court for the District of New Jersey against each of the three generic drug manufacturers who notified us of their ANDA filings.
We intend to vigorously protect and defend our intellectual property for FIRDAPSE® and, although there can be no assurance, we believe that our patents will protect FIRDAPSE® from generic competition for the life of our patents.
Canadian Litigation
On March 11, 2022, we announced that we had received a favorable decision from the Canadian court setting aside, for the second time, the decision of Health Canada approving RUZURGI® for the treatment of LEMS patients. In its ruling, the court determined that the Minister of Health’s approach to evaluating whether FIRDAPSE®’s data deserved protection based on FIRDAPSE®’s status as an innovative drug, which protects by regulation the use of such data as part of a submission seeking an NOC for eight years from approval of the innovative drug, was legally flawed and not supported by the evidence. The Minister of Health appealed that decision, and, in January 2023, the Canadian Appellate Court overturned the trial court’s decision. Thereafter, the Minister of Health reissued an NOC for RUZURGI® in Canada and, as a result, RUZURGI® is once again available for sale in Canada.
While there can be no assurance, we do not believe that the reissuance of an NOC for RUZURGI® in Canada will have a material adverse effect on our results of operations.
Index to Financial Statements
Other Litigation
From time to time we may become involved in legal proceedings arising in the ordinary course of business. Other than as set forth above, we believe that there is no litigation pending at this time that could have, individually or in the aggregate, a material adverse effect on our results of operations, financial condition or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosure
Not applicable.
Index to Financial Statements
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Performance Graph
The graph below matches Catalyst Pharmaceuticals, Inc.’s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index, the Russell MicroCap index, and the NASDAQ Biotechnology index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2017 to 12/31/2022.
12/17
12/18
12/19
12/20
12/21
12/22
Catalyst Pharmaceuticals, Inc.
100.00
49.10
95.91
85.42
173.15
475.70
NASDAQ Composite
100.00
97.16
132.81
192.47
235.15
158.65
Russell MicroCap
100.00
86.92
106.42
128.72
153.61
119.88
NASDAQ Biotechnology
100.00
91.14
114.02
144.15
144.18
129.59
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Index to Financial Statements
Market Information
Our common stock trades on the Nasdaq Capital Market under the symbol “CPRX.” The closing sale price for the common stock on March 13, 2023 was $14.63. As of March 13, 2023, there were 32 holders of record of our common stock, which includes custodians who hold our securities for the benefit of others.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support operations, finance the growth and development of our business, and repurchase up to $21 million of our common stock. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
The following table presents information as of December 31, 2022 with respect to compensation plans under which shares of our common stock may be issued.
Equity Compensation Plan Information
Plan Category
Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants, and rights
Number of securities
remaining available
for equity
compensation plans
Equity compensation plans approved by security holders (1)
12,309,108
$ 4.93
2,691,791 (2)
Equity compensation plans not approved by security holders
-
-
-
Total
12,309,108
$ 4.93
2,691,791
(1) Includes our 2014 Stock Incentive Plan and our 2018 Stock Incentive Plan
(2) Remaining shares are only under our 2018 Stock Incentive Plan
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
In March 2021, our Board of Directors approved a share repurchase program that authorizes the repurchase of up to $40 million of our common stock, pursuant to a repurchase program under Rule 10b-18 of the Securities Act (the “Share Repurchase Program”). The Share Repurchase Program commenced on March 22, 2021.
At present, we are not purchasing shares under our share repurchase program, but rather we are retaining cash for use in our business development activities.
The following table presents information regarding repurchases by us of our common stock under the Share Repurchase Program during the three months ended December 31, 2022:
Period
Total
Number
of Shares
Purchased
Average
Price
Paid Per
Share
Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Program
Dollar Value
of Shares that
May Yet Be
Purchased
(in thousands)
October 1 - October 31, 2022
-
$ -
-
$ 21,003
November 1 - November 30, 2022
-
$ -
-
$ 21,003
December 1 - December 31, 2022
-
$ -
-
$ 21,003
Total
-
-
Index to Financial Statements

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction our consolidated financial statements and related notes appearing elsewhere in this report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Risk Factors” in Item 1A of this report.
Introduction
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide an understanding of our financial condition, changes in financial condition and results of operations. The discussion and analysis is organized as follows:
• Overview. This section provides a general description of our business and information about our business that we believe is important in understanding our financial condition and results of operations.
• Basis of Presentation. This section provides information about key accounting estimates and policies that we followed in preparing our consolidated financial statements for the 2022 fiscal year.
• Critical Accounting Policies and Estimates. This section discusses those accounting policies that are both considered important to our financial condition and results of operations and require significant judgment and estimates on the part of management in their application. All of our significant accounting policies, including the critical accounting policies, are also summarized in the notes to our accompanying consolidated financial statements.
• Results of Operations. This section provides an analysis of our results of operations for the three fiscal years presented in the accompanying consolidated statements of operations and comprehensive income.
• Liquidity and Capital Resources. This section provides an analysis of our cash flows, capital resources, off-balance sheet arrangements and our outstanding commitments, if any.
• Caution Concerning Forward-Looking Statements. This section discusses how certain forward-looking statements made throughout this MD&A and in other sections of this report are based on management’s present expectations about future events and are inherently susceptible to uncertainty and changes in circumstance.
Index to Financial Statements
Overview
We are a commercial-stage patient centric biopharmaceutical company focused on in-licensing, developing and commercializing novel high-quality medicines for patients living with rare diseases and diseases that are difficult to treat. With exceptional patient focus, we are committed to developing a robust pipeline of cutting-edge, best-in-class medicines for treating rare and difficult to treat diseases. We are dedicated to making a meaningful impact on the lives of those suffering from rare and difficult to treat diseases, and we believe in putting patients first in everything we do.
Our flagship U.S. commercial product is FIRDAPSE® (amifampridine) Tablets 10 mg. approved for the treatment of Lambert-Eaton myasthenic syndrome, or LEMS, for adults and for children ages six and up. On December 17, 2022, we entered into an agreement with Eisai Inc. (“Eisai”) for the acquisition of the United States rights to FYCOMPA®(perampanel) CIII, a prescription medication used alone or with other medicines to treat focal onset seizures with or without secondarily generalized seizures in people with epilepsy aged four and older and with other medicines to treat primary generalized tonic-clonic seizures in people with epilepsy aged 12 and older. We closed that acquisition on January 24, 2023 and we are now marketing FYCOMPA® in the United States.
Impact of the COVID-19 pandemic on our business
The COVID-19 pandemic affected our business operations in numerous ways. At various times during the pandemic, we had to make modifications to our normal operations, including allowing our employees to work remotely. Further, during the pandemic, national, state and local governments in affected regions implemented varying safety precautions, such as quarantines, border closures, increased border controls, travel restrictions, shelter-in-place orders and shutdowns, business closures, cancellations of public gatherings, mask mandates, and other measures. While most of these measures have since been relaxed or removed, a resurgence in cases as a result of one or more new variants could lead to some or all of these precautions being put back into place. At present, our operations have returned to mostly being in-person, with some contact with physicians by our commercial sales force still being done remotely. However, there can be no assurance that the COVID-19 pandemic will not in the future disrupt once again our normal business operations.
FIRDAPSE®
On November 28, 2018, we received approval from the FDA for our new drug application, or NDA, for FIRDAPSE® Tablets 10 mg for the treatment of adult patients (ages 17 and above) with Lambert-Eaton myasthenic syndrome, or LEMS, and in January 2019, we launched FIRDAPSE® in the United States. Further, on September 29, 2022, the FDA approved our supplemental NDA (sNDA) to expand the indicated age range for FIRDAPSE® Tablets 10 mg to include pediatric patients, six years of age and older for the treatment of LEMS.
We sell FIRDAPSE® through a field force experienced in neurologic, central nervous system or rare disease products consisting at this time of approximately 27 field personnel, including sales (Regional Account Managers), thought leader liaisons, patient assistance and insurance navigation support (Patient Access Liaisons), and payor reimbursement (National Account Managers). We also have a field-based force of six medical science liaisons who are helping educate the medical communities and patients about LEMS and our programs supporting patients and access to FIRDAPSE®.
Additionally, we have contracted with an experienced inside sales agency that works to generate leads through telemarketing to targeted physicians. This inside sales agency allows our sales efforts to not only reach the neuromuscular specialists who regularly treat LEMS patients, but also the roughly 9,000 neurology and neuromuscular healthcare providers that may be treating a LEMS patient who can benefit from FIRDAPSE®. We also use non-personal promotion to reach the 20,000 neurologists who are potential LEMS treaters and the 16,000 oncologists who might be treating a LEMS patient with small cell lung cancer. Further, we continue to make available at no-cost a LEMS voltage gated calcium channel antibody testing program for use by physicians who suspect that one of their patients may have LEMS and wish to reach a definitive diagnosis.
Finally, we are continuing to expand our digital and social media activities to introduce our product and services to potential patients and their healthcare providers. We also work with several rare disease advocacy organizations (including Global Genes and the National Organization for Rare Disorders) to help increase awareness and level of support for patients living with LEMS and to provide education for the physicians who treat these rare diseases and the patients they treat.
We are supporting the distribution of FIRDAPSE® through Catalyst Pathways®, our personalized treatment support program for patients who enroll in it. Catalyst Pathways® is a single source for personalized treatment support, education and guidance through the challenging dosing and titration regimen required to reach an effective therapeutic dose. It also includes distributing the drug through a very small group of exclusive specialty pharmacies (primarily AnovoRx), which is consistent with the way that most drug products for ultra-orphan diseases are distributed and dispensed to patients. We believe that by using specialty pharmacies in this way, the difficult task of navigating the health care system is far better for the patient needing treatment for their rare disease and the health care community in general.
Index to Financial Statements
In order to help LEMS patients afford their medication, we, like other pharmaceutical companies which are marketing drugs for ultra-orphan conditions, have developed an array of financial assistance programs that are available to reduce patient co-pays and deductibles to a nominal affordable amount. A co-pay assistance program designed to keep out-of-pocket costs to not more than $10.00 per month (currently less than $2.00 per month) is available for all LEMS patients with commercial coverage who are prescribed FIRDAPSE®. Our FIRDAPSE® co-pay assistance program is not available to patients enrolled in state or federal healthcare programs, including Medicare, Medicaid, VA, DoD, or TRICARE. However, we are donating, and committing to continue to donate, money to qualified, independent charitable foundations dedicated to providing assistance to any U.S. LEMS patients in financial need. Subject to compliance with regulatory requirements, our goal is that no LEMS patient is ever denied access to their medication for financial reasons.
In January 2023, we received three Paragraph IV Certification Notice Letters from three generic drug manufacturers advising us that they had each submitted an Abbreviated New Drug Application (ANDA) to the FDA seeking authorization from the FDA to manufacture, use or sell a generic version of FIRDAPSE® in the United States. The notice letters each allege that our six patents listed in the FDA Orange Book covering FIRDAPSE® are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the proposed product described in these ANDA submissions. Under the Federal Food, Drug, and Cosmetic Act (FDCA), as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, we had 45 days from receipt of the notice letters to commence patent infringement lawsuits against these generic drug manufacturers in a federal district court to trigger a stay precluding FDA from approving any ANDA until May 2026 or entry of judgment holding the patents invalid, unenforceable, or not infringed, whichever occurs first, and in that regard, after conducting the necessary due diligence, we filed lawsuits on March 1, 2023 in the U.S. District Court for the District of New Jersey against each of the three generic drug manufacturers who notified us of their ANDA submissions.
We intend to vigorously protect and defend our intellectual property for FIRDAPSE® and, although there can be no assurance, we believe that our patent estate will protect FIRDAPSE® from generic competition for the life of our patents.
FYCOMPA®
On December 17, 2022, we entered into an agreement with Eisai for the acquisition of the U.S. rights to FYCOMPA® (perampanel) CIII. FYCOMPA® is a selective non-competitive antagonist of AMPA receptors, the major subtype of ionotropic glutamate receptors. It was the first, and still the only, drug of its class to be approved for epilepsy. Studies suggest that AMPA receptor antagonism can lead to reduced overstimulation and anticonvulsant effects, as well as inhibiting seizure generation and spread. FYCOMPA® is a controlled substance and is approved with a box warning label.
FYCOMPA® is used to treat certain types of focal onset seizures (seizures that involve only one part of the brain) in adults and children 4 years of age and older. It is also used in combination with other medications to treat certain types of primary generalized tonic-clonic seizures (also known as a “grand mal” seizure, a seizure that involves the entire body) in adults and children 12 years of age or older. Perampanel is in a class of medications called anticonvulsants. It works by decreasing abnormal electrical activity in the brain.
Pursuant to the Asset Purchase Agreement, which closed on January 24, 2023, we purchased Eisai’s regulatory approvals and documentation, product records, intellectual property, inventory, and other matters relating to the U.S. rights for FYCOMPA®, in exchange for an upfront payment of $160 million in cash. We also agreed to pay Eisai an additional cash payment of $25 million if a requested patent extension for FYCOMPA® is approved by the U.S. Patent and Trademark Office (USPTO). Finally, we agreed to pay Eisai royalty payments after patent protection for FYCOMPA® expires, which royalty payments will be reduced upon generic equivalents to FYCOMPA® entering the market.
In conjunction with the closing of the asset purchase, we entered into two additional agreements with Eisai; a Transition Services Agreement and a Supply Agreement. Under the Transition Services Agreement, a U.S. subsidiary of Eisai is providing us with certain transitional services, and under the Supply Agreement, Eisai has agreed to manufacture FYCOMPA® for us for at least seven years at prices listed in the Supply Agreement (to be updated on a yearly basis). Following the closing of the acquisition, we are currently marketing FYCOMPA® in the U.S. through Eisai under the Transition Services Agreement as we build our FYCOMPA® marketing and sales team, and we expect to take over the marketing program in May 2023. In that regard, we currently expect to hire approximately 34 sales and marketing personnel to support FYCOMPA®, many of whom previously worked in Eisai’s U.S. sales division marketing FYCOMPA®. We also are planning on hiring up to six medical science liaisons to help us educate the medical community who treat epilepsy and the patients who have epilepsy about their disease and the benefits of FYCOMPA®.
Catalyst is supporting patients using FYCOMPA® through an Instant Savings Card Program. Through the program, eligible commercially insured patients could pay as little as $10 for their FYCOMPA® co-pay (with a maximum savings of $1,300 per year). Eligible cash-paying patients receive up to $60 towards each prescription, up to a maximum of $720 per year. The FYCOMPA® instant
Index to Financial Statements
savings card program is not available to patients enrolled in state or federal healthcare programs, including Medicare, Medicaid, VA, DoD, or TRICARE.
Patent protection for FYCOMPA will expire no earlier than May 23, 2025, the current expiration date of U.S. patent no. 6,949,571 including the USPTO’s patent term extension calculation. A request for reconsideration of the agency’s patent term extension calculation is currently pending. If successful, we would be entitled to patent term extension that would extend U.S. patent no. 6,949,571 until June 8, 2026. There can be no assurance that our request for reconsideration will be granted by the U.S. Patent and Trademark Office.
Business Development
We are continuing our efforts to broaden and diversify our product portfolio through acquisitions of early and/or late-stage products or companies or technology platforms in rare disease and CNS therapeutic categories. To accomplish these priorities, we are continuing to employ a disciplined approach to evaluating assets, and we believe that this strategic expansion will better position our company long term to build out a broader more diversified portfolio of drug candidates (which should add greater value to our company over the near and long-term). In that regard, we are currently exploring several additional potential opportunities to acquire companies with commercial drug products and/or drug products in development or to in-license or acquire commercialized drug products or drug products in development. However, no additional definitive agreements have been entered into to date and there can be no assurance that our efforts to continue to broaden and diversify our product portfolio will be successful.
Capital Resources
At December 31, 2022, we had cash and investments of approximately $298 million. Subsequent to the end of 2022, on January 24, 2023 we used $162 million of our available cash and cash equivalents to fund our acquisition of FYCOMPA® and to reimburse Eisai for certain prepaid expenses. Based on our current financial condition and forecasts of available cash, we believe that we have sufficient funds to support our operations for at least the next 12 months. There can be no assurance that we will continue to be successful in commercializing FIRDAPSE®, that our commercialization of FYCOMPA® will be successful, or that we will continue to be profitable and cash flow positive. Further, there can be no assurance that if we need additional funding in the future, whether such funding will be available to us on acceptable terms. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” below for further information on our liquidity and cash flow.
Basis of Presentation
Revenues.
During the fiscal year ended December 31, 2022, we continued to generate revenues from product sales of FIRDAPSE® in the U.S. We expect these revenues to fluctuate in future periods based on our sales of FIRDAPSE®. We received approval from Health Canada on July 31, 2020, for FIRDAPSE® for the symptomatic treatment of LEMS and as of December 31, 2020, we had launched FIRDAPSE® in Canada. During the fiscal year ended December 31, 2022, revenues generated under our collaboration agreement with KYE Pharmaceuticals were immaterial. We expect our revenues from the KYE collaboration agreement to fluctuate in future periods based on our collaborator’s ability to sell FIRDAPSE® in Canada.
For the fiscal year ended December 31, 2022, we did not generate revenues under our collaborative agreement with Endo. We expect our revenues from the Endo collaborative agreement to fluctuate in future periods based on our collaborator’s ability to meet various regulatory milestones set forth in such agreement.
For the fiscal year ended December 31, 2022, we generated revenues of approximately $0.5 million from our agreement with DyDo Pharma. We expect our revenue from the DyDo license agreement to fluctuate in future periods based on DyDo’s ability to meet various regulatory milestones set forth in such agreement.
Cost of Sales.
Cost of sales consists of third-party manufacturing costs, freight, royalties, and indirect overhead costs associated with sales of FIRDAPSE®. Cost of sales may also include period costs related to certain inventory manufacturing services, inventory adjustments charges, unabsorbed manufacturing and overhead costs, and manufacturing variances.
Index to Financial Statements
Research and Development Expenses.
Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, consulting, and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials, and allocations of various overhead costs related to our product development efforts. To date, all of our research and development resources have been devoted to the development of FIRDAPSE®, CPP-109 (our version of vigabatrin), and formerly CPP-115, and until we acquire or license new products we currently expect that our future development costs will be attributable principally to the continued development of FIRDAPSE®.
Our cost accruals for clinical studies and trials are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical study and trial sites and clinical research organizations (CROs). In the normal course of our business we contract with third parties to perform various clinical study and trial activities in the on-going development of potential products. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. The objective of our accrual policy is to match the recording of expenses in our consolidated financial statements to the actual services received and efforts expended. As such, expense accruals related to preclinical and clinical studies or trials are recognized based on our estimate of the degree of completion of the event or events specified in the specific study or trial contract. We monitor service provider activities to the extent possible; however, if we underestimate activity levels associated with various studies or trials at a given point in time, we could be required to record significant additional research and development expenses in future periods. Preclinical and clinical study and trial activities require significant up-front expenditures. We anticipate paying significant portions of a study or trial’s cost before they begin and incurring additional expenditures as the study or trial progresses and reaches certain milestones.
Selling, General and Administrative Expenses.
During 2019, we actively committed funds to developing our commercialization program for FIRDAPSE® and we have continued to incur substantial commercialization expenses, including sales, marketing, patient services, patient advocacy and other commercialization related expenses as we have continued our sales program for FIRDAPSE®.
Our general and administrative expenses consist primarily of salaries and personnel expenses for accounting, corporate, compliance, and administrative functions. Other costs include administrative facility costs, regulatory fees, insurance, and professional fees for legal including litigation cost, information technology, accounting, and consulting services.
Stock-Based Compensation.
We recognize expense for the fair value of all stock-based awards to employees, directors, and consultants in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). For stock options, we use the Black-Scholes option valuation model in calculating the fair value of the awards.
Income Taxes.
Our effective income tax rate is the ratio of income tax expense (benefit) over our income before income taxes.
We incurred operating losses from inception through the three-month period ended March 31, 2019. As of December 31, 2022, 2021 and 2020, respectively, we had federal net operating loss carry-forwards of approximately $0, $0 and $3 million. Additionally, we had state net operating loss carry-forwards of approximately $0, $28 million and $42 million, respectively, available to reduce future Florida taxable income for the years ended December 31, 2022, 2021 and 2020.
In the third quarter of 2020, we determined that there was sufficient positive evidence to conclude that it is more likely than not that our additional deferred taxes of approximately $33 million are realizable. As a result, we reduced the valuation allowance accordingly.
Recently Issued Accounting Standards.
For discussion of recently issued accounting standards, please see Note 2, “Basis of Presentation and Significant Accounting Policies,” in the consolidated financial statements included in this report.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue and expenses during the reporting periods. We
Index to Financial Statements
continually evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical experience and other factors we believe are reasonable based on the circumstances, the results of which form our management’s basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The amounts of assets and liabilities reported in our consolidated balance sheets and the amounts reported in our consolidated statements of comprehensive income are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, valuation of intangible assets, leases, preclinical study and clinical trial expenses, stock-based compensation and valuation allowance for deferred tax assets. The accounting policies described below are not intended to be a comprehensive list of all of our accounting policies but represent the accounting estimates which involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP. There are also areas in which our management’s judgment in selecting any available alternative would not produce a materially different result. Our consolidated financial statements and the notes thereto included elsewhere in this report contain accounting policies and other disclosures as required by U.S. GAAP.
Revenue Recognition.
Revenue from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, provider chargebacks and discounts, government rebates, and other incentives, such as voluntary patient assistance, and other allowances that are offered within contracts with our customer, payors, and other indirect customers relating to the sale of our products. These reserves are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.
The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period. Our analyses also contemplated application of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates as of December 31, 2022 and 2021 and, therefore, the transaction price was not reduced further during the years ended December 31, 2022 and 2021. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” in the consolidated financial statements included in this report for further details on revenue recognition.
Valuation of Intangible Assets.
We have acquired and continue to acquire significant intangible assets that we record at fair value at the acquisition date. Transactions involving the purchase or sale of intangible assets are usually based on a discounted cash flow analysis. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, risk, cost of capital and market participants. Each of these factors can significantly affect the value of the intangible asset. We engage independent valuation experts who review our critical assumptions and calculations for acquisitions of significant intangibles. We review intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment exist, an impairment test is performed to assess the recoverability of the affected assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows. If the affected assets are deemed not recoverable, we would estimate the fair value of the assets and record an impairment loss. Where cash flows cannot be identified for an individual asset, the review is applied at the lowest group level for which cash flows are identifiable.
Stock-Based Compensation.
We recognize stock-based compensation for the fair value of all share-based payments, including grants of stock options and restricted stock units. For stock options, we use the Black-Scholes option valuation model to determine the fair value of stock options on the date of grant. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield. Expected volatility is based on reviews of historical volatility of our common stock. The estimated expected option life is based upon the simplified method. Under this method, the expected option life is presumed to be the mid-point between the vesting date and the end of the contractual term. We will continue to use the simplified method until we have sufficient historical exercise data to estimate the expected life of the options. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the expected life of our stock option awards. For the years ended December 31, 2022 and 2021, the assumptions used were an estimated annual volatility of 69.2% and 70.0%, expected holding periods of primarily four and a half years, and risk-free interest rates of 1.27% to 4.07% and 0.34% to 1.18%, respectively.
Index to Financial Statements
Valuation Allowance for Deferred Tax Assets.
We assess the need for a valuation allowance against our deferred tax asset each quarter through the review of all available positive and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Management’s analysis depends on historical and projected taxable income. Projected taxable income includes significant assumptions related to revenue, commercial expenses and research and development activities. In the third quarter of 2020, we determined that there was sufficient positive evidence to conclude that it is more likely than not that our additional deferred taxes are realizable. As a result, we reduced the valuation allowance accordingly.
Results of Operations
Years Ended December 31, 2022 and 2021
Revenues.
For the year ended December 31, 2022, we recognized $213.9 million in net revenue from product sales of FIRDAPSE® primarily in the U.S. compared to $138.0 million for the year ended December 31, 2021. The increase of approximately $75.9 million was due to increases in sales volumes of approximately 49% (which included patients who were transferred to FIRDAPSE® in the first and second quarter of 2022 when RUZURGI® was removed from the market) and net price increases. For the year ended December 31, 2022, we also recognized $0.3 million in license and other revenue, as compared to $2.8 million during the year ended December 31, 2021. The decrease was primarily due to our license agreement with DyDo Pharma for the commercialization of FIRDAPSE® in Japan that was signed in 2021.
Cost of Sales.
Cost of sales was approximately $34.4 million for the year ended December 31, 2022, compared to $21.9 million for the year ended December 31, 2021. Cost of sales in both periods consisted principally of royalty payments, which are based on net revenue as defined in the applicable license agreement. Royalties are payable on the terms set forth below in Liquidity and Capital Resources -Contractual Obligations and Arrangements, and increase by 3% when net sales (as defined in the applicable license agreement) exceed $100 million in any calendar year.
Research and Development Expenses.
Research and development expenses for the years ended December 31, 2022 and 2021 were approximately $19.8 million and $16.9 million, respectively, and represented approximately 18% and 19% of total operating costs and expenses, respectively. Research and development expenses for the years ended December 31, 2022 and 2021 were as follows (in thousands):
For the year ended December 31,
Change
$
%
Research and development expenses
$ 18,060
$ 15,325
2,735
17.8
Employee stock-based compensation
1,729
1,611
7.3
Total research and development expenses
$ 19,789
$ 16,936
2,853
16.8
Research and development expenses increased approximately $2.9 million during year ended December 31, 2022 when compared to the same period in 2021. The increase is primarily due to the acquisition of RUZURGI® inventory previously manufactured by Jacobus on July 11, 2022 of approximately $4.1 million, which was expensed in full in the third quarter of 2022 and is not a recurring expense. This was partially offset by an overall decrease in research and development activity. Further, for the year ended December 31, 2022, research and development expenses included costs relating to closing out sites for both the MuSK-MG clinical trial and our previously operated expanded access program. Research and development costs in the 2021 period included expenses relating to medical and regulatory affairs, our previously operated expanded access program, and our efforts to develop a long-acting formulation of amifampridine phosphate (which efforts have been discontinued).
We expect that research and development expenses will continue to be substantial in 2023 and beyond as we execute on our strategic initiative to acquire or in-license innovative technology platforms and/or earlier stage programs in rare disease categories outside of neuromuscular diseases.
Index to Financial Statements
Selling, General and Administrative Expenses.
Selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were approximately $58.2 million and $49.6 million, respectively, and represented approximately 52% and 56% of total operating costs and expenses for the years ended December 31, 2022, and 2021, respectively. Selling, general and administrative expenses for the years ended December 31, 2022 and 2021 were as follows (in thousands):
For the year ended December 31,
Change
$
%
Selling
$ 29,469
$ 26,151
3,318
12.7
General and administrative
22,536
19,015
3,521
18.5
Employee stock-based compensation
6,178
4,462
1,716
38.5
Total selling, general and administrative expenses
$ 58,183
$ 49,628
8,555
17.2
For the year ended December 31, 2022, selling, general and administrative expenses increased approximately $8.6 million when compared to the same period in 2021. The increase for the year ended December 31, 2022 was primarily attributable to the timing of our commitments to make contributions to 501(c)(3) organizations supporting LEMS patients of approximately $1.8 million, increases of sales commissions due to higher sales volume of approximately $2.1 million, approximately $3.1 million increase in employee compensation related to annual merit increases, approximately $1.1 million increase in amortization expense related to intangibles acquired in connection with the acquisition of RUZURGI® and an increase in stock-based compensation expense due to an increase in the average share price.
We expect that selling, general and administrative expenses will continue to be substantial in future periods as we continue our efforts to increase our revenues from FIRDAPSE®, begin our efforts to market FYCOMPA®, and take steps to continue to expand our business.
Stock-Based Compensation.
Total stock-based compensation for the years ended December 31, 2022 and 2021 was $7.9 million and $6.1 million, respectively. In 2022 and 2021, grants were principally for stock options relating to year-end bonus awards and grants to new employees.
Other Income, Net.
We reported other income, net in all periods, primarily relating to our investment of our cash and cash equivalents and investments of $2.9 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively, which includes realized losses from the sale of available-for-sale securities of $0.8 million and $0 million, respectively. The increase in other income, net for the year ended December 31, 2022 of approximately $2.6 million when compared to the same period in 2021 is primarily due to higher yields on investments as well as higher invested balances. Other income, net, consists primarily of interest and dividend income.
Income Taxes.
As of December 31, 2022 and 2021, respectively, we had state net operating loss carryforwards of approximately $0 million and $28 million, respectively, available to reduce future Florida taxable income. We had no uncertain tax positions as of December 31, 2022 and December 31, 2021.
Our effective income tax rate was 20.7% and 25.0%, respectively, for fiscal year 2022 and fiscal year 2021. The difference in the effective rates between periods is driven by the stock compensation windfall tax benefit due to an increase in the number of awards exercised in the current period. Differences in the effective tax and the statutory federal income tax rate of 21% are driven by state income taxes and anticipated annual permanent differences, and offset by the orphan drug credit claimed. The effective tax rate is affected by many factors, including the number of stock options exercised in any period, and our effective tax rate is likely to fluctuate in future periods (and may be higher in future periods than it was in 2022).
Net Income.
Our net income was approximately $83.1 million in the year ended December 31, 2022 ($0.80 per basic and $0.75 per diluted share) as compared to $39.5 million in the year ended December 31, 2021 ($0.38 per basic and $0.37 per diluted share).
Years Ended December 31, 2021 and 2020
The information comparing results of operations for the year ended 2021 compared to 2020 was included in our Annual Report on Form 10-K for 2021.
Index to Financial Statements
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through multiple offerings of our securities and, since January 2019, from revenues from product sales of FIRDAPSE®. At December 31, 2022 we had cash and cash equivalents aggregating $298.4 million and working capital of $263.2 million. At December 31, 2021, we had cash and cash equivalents and investments aggregating $191.3 million and working capital of $183.0 million. At December 31, 2022, substantially all of our cash and cash equivalents were deposited with one financial institution, and such balances were in excess of federally insured limits. Further, as of such date, substantially all such funds were invested in money market accounts, short-term interest bearing obligations and U.S. Treasuries.
Based on forecasts of available cash, we believe that we have sufficient resources to support our currently anticipated operations for at least the next 12 months from the date of this report. There can be no assurance that we will remain profitable or that we will be able to obtain any additional funding that we may require in the future.
In the future, we may require additional working capital to support our operations depending on our future success with FIRDAPSE® sales, or the products we acquire and continue to develop and whether our results continue to be profitable and cash flow positive. There can be no assurance as to the amount of any such funding that will be required for these purposes or whether any such funding will be available to us when it is required.
In that regard, our future funding requirements will depend on many factors, including:
• the scope, rate of progress and cost of our clinical trials and other product development activities;
• the cost of diligence in seeking a potential acquisition and of the completion of such acquisition, if an acquisition so occurs;
• future clinical trial results;
• the terms and timing of any collaborative, licensing and other arrangements that we may establish;
• the cost and timing of regulatory approvals;
• the cost and delays in product development as a result of any changes in regulatory oversight applicable to our products;
• the level of revenues that we report from sales of FIRDAPSE® and FYCOMPA®;
• the effect of competition and market developments;
• the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
• the extent to which we acquire or invest in other products.
We may raise additional funds through public or private equity offerings, debt financings, corporate collaborations or other means. We also may seek governmental grants for a portion of the required funding for our clinical trials and preclinical trials. We may further seek to raise capital to fund additional product development efforts or product acquisitions, even if we have sufficient funds for our planned operations. Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders. There can be no assurance that any such required additional funding will be available to us at all or available on terms acceptable to us. Further, to the extent that we raise additional funds through collaborative arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs, which could have an adverse effect on our business.
On July 23, 2020, we filed a shelf registration statement with the SEC to sell up to $200 million of common stock, preferred stock, warrants to purchase common stock, debt securities and units consisting of one or more of such securities (the “2020 Shelf Registration Statement”). The 2020 Shelf Registration Statement (file no. 333-240052) was declared effective by the SEC on July 31, 2020. As of the date of this report, no offerings have been completed under the 2020 Shelf Registration Statement.
Cash Flows.
Net cash provided by operating activities was $116.0 million and $60.4 million, respectively, for the years ended December 31, 2022 and 2021. During the year ended December 31, 2022, net cash provided by operating activities was primarily attributable to our net income of $83.1 million, a decrease of $1.1 million in inventory, increases of $1.2 million in accounts payable and $16.4 million in accrued expenses and other liabilities, $4.9 million in deferred taxes, $4.1 million in acquired research and development inventory expensed from asset acquisition and of $10.2 million of non-cash expenses. This was partially offset by increases of $3.8 million in
Index to Financial Statements
accounts receivable, net and $0.8 million in prepaid expenses and other current assets and deposits and a decrease of $0.3 million in operating lease liability. During the year ended December 31, 2021, net cash provided by operating activities was primarily attributable to our net income of $39.5 million, a decrease of $4.0 million in prepaid expenses and other current assets and deposits, increases of $5.5 million in accrued expenses and other liabilities, $0.9 million in operating lease liability, $9.3 million in deferred taxes and of $6.6 million of non-cash expenses. This was partially offset by increases of $0.6 million in accounts receivable, net and $3.2 million in inventory and a decrease of $1.5 million in accounts payable.
Net cash provided by investing activities during the year ended December 31, 2022 was $9.2 million and consisted primarily of proceeds from the sale of available-for-sale securities of $19.2 million, offset partially by payment in connection with license agreement of $10.0 million. Net cash used in investing activities was $11.0 million for the year ended December 31, 2021, consisting primarily of purchases of investments.
Net cash provided by financing activities during the year ended December 31, 2022 was $1.7 million, consisting primarily of proceeds from the exercise of options to purchase shares of common stock, partially offset by repurchases of common stock. Net cash used in financing activities during the year ended December 31, 2021 was $8.1 million, consisting primarily of repurchases of common stock, partially offset by proceeds from the exercise of options to purchase shares of common stock.
Contractual Obligations and Arrangements.
We have entered into the following contractual arrangements with respect to sales of FIRDAPSE®:
• Payments due under our license agreement for FIRDAPSE®. We currently pay the following royalties under our license agreement:
• Royalties to our licensor for seven years from the first commercial sale of FIRDAPSE® equal to 7% of net sales (as defined in the License Agreement) in North America for any calendar year for sales up to $100 million, and 10% of net sales in North America in any calendar year in excess of $100 million; and
• Royalties to the third-party licensor of the rights sublicensed to us from the first commercial sale of FIRDAPSE® equal to 7% of net sales (as defined in the License Agreement between BioMarin and the third-party licensor) in any calendar year for the duration of regulatory exclusivity within a territory and 3.5% for territories in any calendar year in territories without regulatory exclusivity.
For the year ended December 31, 2022, we recognized an aggregate of approximately $32.1 million of royalties payable under these license agreements, which is included in cost of sales in the accompanying consolidated statements of operations and comprehensive income.
Further, if DyDo is successful in obtaining the right to commercialize FIRDAPSE® in Japan, we will pay royalties to our licensor on net sales in Japan equal to a similar percentage to the royalties that we are currently paying under our original license agreement for North America.
• Payments due to Jacobus. In connection with its recent settlement with Jacobus, Catalyst has agreed to pay the following consideration to Jacobus:
• $30 million of cash, of which $10 million was paid at the closing of the settlement on July 11, 2022 and the balance of which will be paid over the next two years, on the first and second anniversary of closing;
• An annual royalty on Catalyst’s net sales (as defined in the License and Asset Purchase Agreement between Catalyst and Jacobus) of amifampridine products in the United States equal to: (a) for calendar years 2022 through 2025, 1.5% (with a minimum annual royalty of $3.0 million per year), and (b) for calendar years 2026 through the expiration of the last to expire of Catalyst’s FIRDAPSE® patents in the United States, 2.5% (with a minimum annual royalty of $5 million per year); provided, however, that the royalty rate may be reduced and the minimum annual royalty may be eliminated under certain circumstances; and
• If Catalyst were to receive a priority review voucher for FIRDAPSE® or RUZURGI® in the future, 50% of the consideration paid by a third party to acquire that voucher will be paid to Jacobus.
Royalties will be trued up at the end of the year to the extent that royalties on net sales are below the minimum royalty.
For the year ended December 31, 2022, we recognized an aggregate of approximately $1.6 million of royalties payable to Jacobus.
We also have entered into the following contractual arrangements:
• Employment agreements. We have entered into an employment agreement with our Chief Executive Officer that required us to make base salary payments of approximately $0.7 million in 2022. The agreement expires in November 2024.
Index to Financial Statements
• Purchase commitment. We have entered into a purchase commitment with a contract manufacturing organization for approximately $0.5 million per year. The agreement expires in December 2023.
• Lease for office space. We operate our business in leased office space in Coral Gables, Florida. We entered into an agreement in May 2020 that amended our lease for office facilities. Under the amended lease, our leased space increased from approximately 7,800 square feet of office space to approximately 10,700 square feet of office space. We moved into the new space around March 1, 2021 when the space became available for use. We pay annual rent of approximately $0.5 million.
Off-Balance Sheet Arrangements.
We do not have any off-balance sheet arrangements as such term is defined in rules promulgated by the SEC.
Caution Concerning Forward-Looking Statements
This report contains “forward-looking statements”, as that term is defined in the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, plans or objectives for future operations and anticipated results of operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, “believes”, “anticipates”, “proposes”, “plans”, “expects”, “intends”, “may”, and other similar expressions are intended to identify forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or other achievements to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the section entitled “Item 1A - Risk Factors.”
The continued successful commercialization of FIRDAPSE® and FYCOMPA® are highly uncertain. Factors that will affect our success include the uncertainty of:
●
The impact of the COVID-19 pandemic on our business or on the economy generally;
●
Whether we will be able to continue to successfully market FIRDAPSE® and now successfully market FYCOMPA® while maintaining full compliance with applicable federal and state laws, rules and regulations;
●
Whether our estimates of the size of the market for FIRDAPSE® for the treatment of Lambert-Eaton Myasthenic Syndrome (LEMS) will prove to be accurate;
●
Whether we will be able to locate LEMS patients who are undiagnosed or are misdiagnosed with other diseases;
●
Whether patients will discontinue from the use of FIRDAPSE® and FYCOMPA® at rates that are higher than historically experienced or are higher than we project;
●
Whether the daily dose of FIRDAPSE® taken by patients changes over time and affects our results of operations;
●
Whether new FIRDAPSE® patients and FYCOMPA® patients can be successfully titrated to stable therapy;
●
Whether we can continue to market FIRDAPSE® and now market FYCOMPA® on a profitable and cash flow positive basis;
●
Whether we can successfully integrate the team that we are hiring to market FYCOMPA® into our current business structure;
●
Whether the acquisition of FYCOMPA® will prove to be accretive to EBITDA and EPS in 2023;
●
Whether any revenue or earnings guidance that we provide to the public market will turn out to be accurate;
●
Whether payors will reimburse for our products at the price that we charge for our products;
●
The ability of our third-party suppliers and contract manufacturers to maintain compliance with current Good Manufacturing Practices (cGMP);
●
The ability of those third parties that distribute our products to maintain compliance with applicable law;
●
Our ability to maintain compliance with applicable rules relating to our patient assistance programs for FIRDAPSE® and FYCOMPA®;
●
Our ability to maintain compliance with the applicable rules that relate to our contributions to 501(c)(3) organizations that support LEMS patients;
●
The scope of our intellectual property and the outcome of any challenges to our intellectual property, and, conversely, whether any third-party intellectual property presents unanticipated obstacles for FIRDAPSE® or FYCOMPA®;
Index to Financial Statements
●
Our ability to obtain a favorable decision on our pending request for reconsideration for an extension of the expiration date of patent protection for one of our patents listed in the Orange Book for FYCOMPA®;
●
Whether there will be a post-closing review by antitrust regulators of our previous acquisition transactions, and the outcome of any such reviews if they occur;
●
Whether we will be able to acquire additional drug products under development, complete the research and development required to commercialize such products, and thereafter, if such products are approved for commercialization, successfully market such products;
●
Whether our patents will be sufficient to prevent generic competition for FIRDAPSE® after our orphan drug exclusivity for FIRDAPSE® expires;
●
Whether we will be successful in our litigation to enforce our patents against the Paragraph IV challengers who have filed relating to FIRDAPSE®;
●
The impact on our profits and cash flow of adverse changes in reimbursement and coverage policies from government and private payors such as Medicare, Medicaid, insurance companies, health maintenance organizations and other plan administrators, or the impact of pricing pressures enacted by industry organizations, the federal government or the government of any state, including as a result of increased scrutiny over pharmaceutical pricing or otherwise;
●
Changes in the healthcare industry and the effect of political pressure from and actions by the President, Congress and/or medical professionals seeking to reduce prescription drug costs, and changes to the healthcare industry occasioned by any future changes in laws relating to the pricing of drug products, including changes made in the Inflation Reduction Act of 2022, or changes in the healthcare industry generally;
●
The state of the economy generally and its impact on our business;
●
The potential impact of future healthcare reform in the United States, including the Inflation Reduction Act of 2022, and measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures, including the impact of pricing actions and reduced reimbursement for our product;
●
The scope, rate of progress and expense of our clinical trials and studies, pre-clinical studies, proof-of-concept studies, and our other drug development activities, and whether our trials and studies will be successful;
●
Our ability to complete any clinical trials and studies that we may undertake on a timely basis and within the budgets we establish for such trials and studies;
●
Whether FIRDAPSE® can be successfully commercialized in Canada on a profitable basis through KYE Pharmaceuticals, our collaboration partner in Canada;
●
The impact on sales of FIRDAPSE® in the United States if an amifampridine product is purchased in Canada for use in the United States;
●
Whether our collaboration partner in Japan, DyDo, will successfully complete the clinical trial in Japan that will be required to seek approval to commercialize FIRDAPSE® in Japan;
●
Whether DyDo will be able to obtain approval to commercialize FIRDAPSE® in Japan; and
●
Whether our version of vigabatrin tablets will ever be approved by the FDA and successfully marketed by Endo, whether we will earn milestone payments or royalties on sales of our version of generic vigabatrin tablets, and whether Endo’s bankruptcy filing will impact these issues.
Our current plans and objectives are based on assumptions relating to the continued commercialization of FIRDAPSE® and FYCOMPA® and on our plans to seek to acquire or in-license additional products. Although we believe that our assumptions are reasonable, any of our assumptions could prove inaccurate. Considering the significant uncertainties inherent in the forward-looking statements we have made herein, which reflect our views only as of the date of this report, you should not place undue reliance upon such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Index to Financial Statements

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of changes in the value of market risk-sensitive instruments caused by fluctuations in interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in our results of operations and cash flows.
Our exposure to interest rate risk is currently confined to our cash and short-term investments that are from time to time invested in highly liquid money market funds and U.S. Treasuries. The primary objective of our investment activities is to preserve our capital to fund operations. We also seek to maximize income from our investments without assuming significant risk. We do not use derivative financial instruments in our investment portfolio. Our cash and investments policy emphasizes liquidity and preservation of principal over other portfolio considerations.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
See the list of financial statements filed with this report under Item 15 below.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2022, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, was recorded, processed, summarized or reported within the time periods specified in the rules and regulations of the SEC, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.
Management’s Annual Assessment of Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements.
Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Index to Financial Statements
Under the supervision and with the participation of our principal executive officer and our principal financial officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the 2013 framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and in accordance with the interpretive guidance issued by the SEC in Release No. 34-55929. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
During the fourth quarter of 2022, there were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our independent registered public accounting firm, Grant Thornton LLP, has issued a report on our internal control over financial reporting, which is included in Item 15 of this Annual Report on Form 10-K.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not applicable.
Index to Financial Statements
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors and Executive Officers of the Registrant
The information required by this item will be contained in our definitive proxy statement, or Proxy Statement, to be filed with the SEC in connection with our 2023 Annual Meeting of Stockholders. Our Proxy Statement for the 2023 Annual Meeting of Stockholders is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2022 and is incorporated into this report by this reference.
We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, and to all of our other officers, directors, employees and agents. The code of ethics is available on our website at www.catalystpharma.com. We intend to disclose future amendments to, or waivers from, certain provisions of our code of ethics on the above website within five business days following the date of such amendment or waiver.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by this reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by this reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions
The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by this reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
The information required by this item will be set forth in the Proxy Statement and is incorporated into this report by this reference.
Index to Financial Statements
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
Documents filed as part of this report.
The following financial statements of Catalyst Pharmaceuticals, Inc. and Reports of Grant Thornton LLP, independent registered public accounting firm, are included in this report:
Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm.
Consolidated Balance Sheets as of December 31, 2022 and 2021.
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2022, 2021 and 2020.
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020.
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020.
Notes to Consolidated Financial Statements.
List of financial statement schedules. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
List of exhibits required by Item 601 of Regulation S-K. See part (b) below.
Exhibits.
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File Number
Date of
Filing
Exhibit
Number
Filed
Herewith
2.1
Agreement and Plan of Merger, dated August 14, 2006, between the Company and Catalyst Pharmaceutical Partners, Inc., a Florida corporation
S-1
333-136039
9/1/2006
10.9
2.2
Asset Purchase Agreement by and between Eisai Co., Ltd. and the Company, dated as of December 17, 2022
8-K
001-33057
12/22/2022
2.1
3.1
Certificate of Incorporation
S-1
333-136039
7/25/2006
3.1
3.2
Amendment to Certificate of Incorporation
S-1
333-136039
7/25/2006
3.2
3.3
Amendment to Certificate of Incorporation
DEF 14A
001-33057
3/30/2015
Annex A
3.4
Amendment to Certificate of Incorporation
8-K
001-33057
8/21/2020
3.1
3.5
By-Laws
S-1
333-136039
9/1/2006
3.3
3.6
Amendment to By-Laws
8-K
001-33057
11/27/2019
3.1
4.1
Specimen Stock Certificate for Common Stock
S-1
333-136039
9/1/2006
4.1
4.2
Description of the Company’s Capital Stock
10-K
001-33057
3/16/2022
4.5
10.1(a)+
Employment Agreement between the Company and Patrick J. McEnany
10-Q
001-33057
12/15/2006
10.1
10.1(b)+
First Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
12/23/2008
10.1
10.1(c)+
Second Amendment to Employment Agreement between the Company and Patrick J. McEnany
10-Q
001-33057
11/12/2009
10.1
10.1(d)+
Third Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
9/15/2011
10.1
10.1(e)+
Fourth Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
8/29/2013
10.1
Index to Financial Statements
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File
Number
Date of
Filing
Exhibit
Number
Filed
Herewith
10.1(f)+
Fifth Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
6/24/2016
10.1
10.1(g)+
Sixth Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
5/31/2018
10.1
10.1(h)+
Seventh Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
9/11/2020
10.1
10.1(i)+
Eighth Amendment to Employment Agreement between the Company and Patrick J. McEnany
8-K
001-33057
9/9/2022
10.1
10.2(a)+
2014 Stock Incentive Plan
DEF 14A
001-33057
3/19/2014
Annex A
10.2(b)+
Amendment No. 1 to 2014 Stock Incentive Plan
DEF 14A
001-33057
4/29/2016
Annex A
10.2(c)+
Amendment No. 2 to 2014 Stock Incentive Plan
DEF 14A
001-33057
4/14/2017
Annex A
10.3(a)+
2018 Stock Incentive Plan
DEF 14A
001-33057
4/17/2018
Annex A
10.3(b)+
Amendment No. 1 to 2018 Stock Incentive Plan
DEF 14A
001-33057
7/7/2020
Annex A
10.3(c)+
Amendment No. 2 to 2018 Stock Incentive Plan
DEF 14A
001-33057
10/25/2021
Annex A
10.4(a)
Lease Agreement between the Company and 355 Alhambra Plaza, Ltd.
10-Q
001-33057
5/14/2007
10.1
10.4(b)
First Amendment to Lease Agreement between the Company and CPT 355 Alhambra Circle, LLC
10-Q
001-33057
8/15/2011
10.1
10.4(c)
Second Amendment to Lease Agreement between the Company and CPT 355 Alhambra Circle, LLC
8-K
001-33057
2/20/2014
10.1
10.4(d)
Third Amendment to Lease Agreement between the Company and CPT 355 Alhambra Circle, LLC
8-K
001-33057
3/27/2015
10.1
10.4(e)
Fourth Amendment to Lease Agreement between the Company and PRII 355 Alhambra Circle, LLC
8-K
001-33057
8/17/2018
10.1
10.4(f)
Fifth Amendment to Lease Agreement between the Company and PRII 355 Alhambra Circle, LLC
8-K
001-33057
5/13/2020
10.1
10.5
License Agreement, dated as of December 13, 2011, among New York University, the Feinstein Institute for Medical Research, and the Company
10-K
001-33057
3/30/2012
10.15
10.6(a)
License Agreement, dated as of October 26, 2012, between the Company and BioMarin
8-K
001-33057
10/31/2012
10.2
10.6(b)
Amendment No. 1 to License Agreement, dated as of April 8, 2014, between the Company and BioMarin
8-K
001-33057
4/17/2014
10.1
Index to Financial Statements
Incorporated by Reference
Exhibit
Number
Description of Exhibit
Form
File
Number
Date of
Filing
Exhibit
Number
Filed
Herewith
10.6(c)
Settlement Agreement, dated effective as of July 26, 2018, by and among (i) Aceras BioMedical, LLC, in its capacity as Stockholder Representative for the Former stockholders of Huxley Pharmaceuticals, Inc., (ii) BioMarin, and (iii) the Company
10-Q
001-33057
8/17/2018
10.1
10.6(d)
Second Amendment to License Agreement, dated May 29, 2019, between the Company and BioMarin
8-K
001-33057
5/30/2019
10.1
10.7
Development, License and Commercialization Agreement, dated effective as of December 18, 2018, by and between Endo Ventures Limited and the Company
8-K
001-33057
12/26/2018
10.1
10.8
License and Supply Agreement, dated as of August 14, 2020, by and between KYE Pharmaceuticals, Inc. and the Company
8-K
001-33057
8/20/2020
10.1
10.9
License and Supply Agreement, dated as of June 28, 2021, by and between DyDo Pharma, Inc. and the Company
8-K
001-33057
6/28/2021
10.1
10.10(a)
Settlement Agreement, dated July 11, 2022, by and between the Company and SERB SA, on the one hand, and Jacobus Pharmaceutical Company, Inc., PantherRx Specialty LLC, and Panther Specialty Holding Co., on the other hand
8-K
001-33057
7/12/2022
10.1
10.10(b)
License and Asset Purchase Agreement, dated as of July 11, 2022, by and between Jacobus Pharmaceutical Company, Inc. and the Company
8-K
001-33057
7/12/2022
10.2
10.11(a)
Transition Services Agreement between Eisai, Inc. and the Company
8-K
001-33057
12/22/2022
10.1
10.11(b)
Supply Agreement between Eisai Co., Ltd. and the Company
8-K
001-33057
12/22/2022
10.2
21.1
Subsidiaries of the Registrant
10-K
001-33057
3/16/2020
21.1
23.1
Consent of Independent Registered Public Accounting Firm
X
31.1
Section 302 CEO Certification
X
31.2
Section 302 CFO Certification
X
32.1
Section 906 CEO Certification
X
32.2
Section 906 CFO Certification
X
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Definition Linkbase
101.LAB
XBRL Taxonomy Extension Label Linkbase
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Index to Financial Statements