Introduction
Catalyst Pharmaceuticals Inc. (CPRX, Financial) focuses on developing innovative therapies for people with rare debilitating, chronic neuromuscular and neurological diseases. Its main compound is Firdapse (amifampridine phosphate).
Firdapse is being studied in Lambert-Eaton myasthenic syndrome, congenital myasthenic syndrome and myasthenia gravis patients with anti-MuSK antibodies. The company also plans to study Firdapse in spinal muscular atrophy. So the company has multiple shots at its goal with the use of Firdapse in rare diseases, where there is low competition and huge unmet medical need.
The stock dipped after the company announced the plan for its upcoming new drug application. However, the dip is unwarranted and provides a good entry point.Ă‚
About LEMS
LEMS is an autoimmune disease involving immune system attacks on the body's own tissues. The attack occurs at the connection between nerve and muscle (the neuromuscular junction) and interferes with the ability of nerve cells to send signals to muscle cells.
In 40% of patients with LEMS, cancer is present when the weakness begins or is diagnosed later. This cancer is usually a small cell lung cancer, but LEMS has also been associated with non-SCLC, lymphosarcoma, malignant thymoma or carcinoma of the breast. In addition, it also affects the stomach, colon, prostate, bladder, kidney or gallbladder.
The true incidence of LEMS is unknown. As a matter of fact, approximately 50% to 60% of LEMS patients have an underlying malignancy, typically small cell lung cancer. An estimated 3% of patients with SCLC have LEMS. The actual total prevalence of LEMS may be considerably higher as only 50% to 70% of patients with LEMS have an identifiable cancer, and it goes undiagnosed in many patients.
Catalyst did a phase three study with Firdapse in LEMS (called LEMS-002), which turned out positive. They further submitted a new drug application with the support of that study, but the Food and Drug Administration rejected the application and wanted a second clinical study. So the company did that and just announced the positive results of the second phase three study (called LEMS-003).
Below is a summary of the results of both studies:
- Quantitative myasthenia gravis score reached statistical significance in both studies. In LEMS-002 and LEMS-003 studies, the p-values were 0.045 and 0.0004 respectively.
- Subject global impression reached statistical significance, where the p-value achieved was 0.0003 in both LEMS-002 and LEMS-003.
- Clinical global impression of improvement also reached statistical significance. In the LEMS-002 and LEMS-003 studies, the p-values achieved were 0.027 and 0.0020 respectively.
It is very positive that the drug has two phase three studies with statistically significant clinical results. These increase its chances of gaining approval. The company plans to submit the NDA for Firdapse in LEMS by the end of the first quarter. Since there are very limited treatment options for patients with LEMS, it creates a great market opportunity for Catalyst.
Congenital myasthenic syndromeÂ
The second use for which the company is developing Firdapse is CMS, which is a group of conditions characterized by muscle weakness (myasthenia) that worsens with physical exertion. The muscle weakness typically begins in early childhood but can also appear in adolescence or adulthood.
The prevalence of congenital myasthenic syndrome is unknown, but at least 600 families with affected individuals have been described in the scientific literature. CMS affects approximately three per 1 million persons.
The company has an ongoing phase three study for Firdapse for the treatment of CMS. They expect to complete enrollment of this trial in the second half of 2018 and report the top-line results in the first quarter of 2019. This CMS study has both adults and young people.
Why the stock dipped
The company had considered including those limited types of CMS in its upcoming application for LEMS. Those types are generally regarded as mechanistically similar. Essentially, they tried to get a broad label with their first NDA. But after discussions with the FDA and internal evaluation, they decided to omit the CMS indication. The market took this as negative and an opportunity to sell the stock. But I think it was a wise decision by the company to not include CMS in its first application, which was for LEMS, for several reasons:
- They avoided overcomplicating the review of their NDA for LEMS with the addition of a second indication. Without the CMS indication, it becomes a “cleaner” application.
- They would have been pushing the envelope by including CMS indication in the application. They probably would not get approval for it since the FDA knows that they have an ongoing phase three study for CMS. The FDA would wait for its results before granting approval, so why bother with it now when the CMS study is not reported?
- They will be able to add the CMS indication to their label as soon as the LEMS NDA is approved and the CMS study has positive results.
More shots at the goal
In addition to LEMS and CMS, Catalyst has other irons in the fire and is looking to other indications for Firdapse.
- Myasthenia gravis with anti-MuSK antibodies: Catalyst has plans for a phase three study in patients with the MuSK antibody positive subtype of myasthenia gravis. The protocol for this study has a SPA agreement with the FDA. The company estimates that trial will take approximately 12 months before completion and expects to announce top-line results in the first half of 2019.
- Spinal muscular atrophy: The company has initiated a phase two proof-of-concept study to evaluate Firdapse in ambulatory patients with spinal muscular atrophy, or SMA Type 3. They expect to enroll approximately 12 patients in this study and target announcing the top-line results in the second half of 2019. The SMA study is in type III (ambulatory) patients.
Financials
Catalyst completed a public offering last November, raising almost $54 million in net proceeds. As a result of this offering, they ended 2017 with cash and investments of approximately $84 million without debt. Their cash burn was about $5.5 million in fourth-quarter 2017, which translates to $22 million per year. Their expenses will go up in 2018 due to costs associated with the NDA submission and commercial launch preparation. I don’t expect another secondary offering in 2018, however, if the NDA is submitted in first-quarter 2018 with approval expected in early 2019.
Conclusion
With a market cap of around $280 million and multiple shots at the goal, I think Catalyst has a very favorable risk-reward profile and the potential to be a great investment. In addition, do not forget its solid financials and upcoming new drug application, which will include two positive phase three studies in LEMS.
Disclosure: I own CPRX.Ă‚
