TEVA - Catalyst Pharmaceuticals: The Firdapse Complexity Does Not End

Summary

• Catalyst Pharmaceuticals, Inc. has been hit with an ANDA notice from Teva Pharmaceutical Industries Limited.
• Firdapse, at the heart of the ANDA, has had problems before.
• Catalyst Pharmaceuticals, Inc. is, however, set for cash.

Catalyst Pharmaceuticals, Inc. ( CPRX ) has been hit with a notice of an ANDA filing over its drug Firdapse, approved for Lambert-Eaton myasthenic syndrome ((LEMS)), by generic drugmaker Teva Pharmaceutical Industries Limited ( TEVA ). Teva plans to market its generic version before the expiry of the following Orange Book listed patents:

• 10,626,088 (expiring February 2037);

• 10,793,893 (expiring May 2034);

• 11,060,128 (expiring June 2032);

• 11,268,128 (expiring June 2032);

• 11,274,331 (expiring June 2032); and

• 11,274,332 (expiring June 2032).

TEVA alleges that “these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of the proposed product described in Teva’s ANDA submission.”

Of all calamities that can befall a small biopharma, an ANDA challenge is, by all accounts, the worst. Firdapse was approved in 2018, and there was a further label expansion to include a younger population last year. In the September quarter, firdapse made $57mn in revenue. A successful ANDA will still take until 2026 or so to have an impact on the bottom line. However, the impact on Catalyst Pharmaceuticals, Inc. stock price will be immediate.

2026 is also the date till which a patent infringement lawsuit against Teva will force the FDA to not approve the ANDA. If Catalyst wins, then, of course, there’s no ANDA, and firdapse lasts till the patents expire.

Firdapse has a lot of history. I covered it in quite some detail way back in 2018. First, there was a good deal of problem with the approval process itself. Then there was the challenge from Jacobus. The story was, a drug called 3,4-DAP, discovered by Scottish scientists in the 1970s, had been used for years by LEMS patients for a very small price. It just needed a compounding pharmacy to constitute the drug, and the compounds were for three decades made available by a small, family-run pharmacy, Jacobus. Somebody added a phosphate salt to 3,4-DAP and made it 3,4-DAPP, which was not stable without needing refrigeration. BioMarin owned rights to 3,4-DAPP, which they sold to Catalyst in the U.S. Catalyst ran some trials, got it approved with a 7-year orphan drug exclusivity, and promptly hiked up the price to $375,000. The price hike was so egregious that Senator Bernie Sanders actually wrote a scathing letter to the FDA asking to reconsider approval.

The FDA, in its turn, hated firdapse. It did everything it could to block approval, and then, it approved ruzurgi from Jacobus for pediatric LEMS. Catalyst sued, was turned down in district court, but got a reversal on appeal, and won. The FDA was forced to cancel ruzurgi’s approval, and Jacobus and Catalyst agreed to make ruzurgi a part of Catalyst’s portfolio. Thus, Catalyst won the long battle.

However, essentially the same problem has cropped up again in the form of Teva’s ANDA notice. Teva is going to challenge the phosphate version of 3,4-DAP, and it only depends on a sufficiently amenable judge to approve the ANDA. This is the reason the stock is suffering now. Nobody knows if Catalyst’s luck has run out now. But many people - including physicians and patients - think that there was something morally wrong in how Catalyst took a well-known, previously discovered, inexpensive drug used by a population of seriously ill patients, added a phosphate linker to it, and sold it for $375,000. No wonder some countries, notably the NHS of the UK, declined to approve coverage for the drug.

Last month, Catalyst acquired rights to Eisai’s catalepsy drug fycompa, which some analysts peg at $136mn in revenue per year. However, that is a long way ahead, and the loss of firdapse will be substantial for CPRX.

Financials

Catalyst Pharmaceuticals, Inc. has a market cap of $1.6bn and a cash reserve of $256mn. Research and development expenses in the third quarter of 2022 were $8.3 million, while selling, general, and administrative expenses for the third quarter of 2022 were $14.2 million. Thus, given the low R&D effort, CPRX has a cash runway for 8-10 quarters.

Last quarter, it made $57mn in firdapse revenue. For the current year, it has guided for a revenue range of between $205M and $210M, representing a 46% - 49% increase in total revenues compared to 2021.

Bottom Line

Since my 2018 coverage, Catalyst Pharmaceuticals, Inc. stock is up 600%. Catalyst Pharmaceuticals, Inc. stock has taken a sudden 30% plunge since the Teva news. This could be an opportunity. On the other hand, there is something to not like about the whole firdapse story. I will leave it at that.

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