☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 76-0837053 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
355 Alhambra Circle Suite Coral Gables, Florida | 33134 | ||
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Ticker Symbol | Name of Exchange on Which Registered | ||
Common Stock, par value $0.001 per share | CPRX | NASDAQ Capital Market |
Large accelerated filer | ☐ | Accelerated Filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
PART I. FINANCIAL INFORMATION | |||||||
Item 1. | FINANCIAL STATEMENTS | ||||||
3 | |||||||
4 | |||||||
5 | |||||||
6 | |||||||
7 | |||||||
Item 2. | |||||||
Item 3. | |||||||
Item 4. | |||||||
PART II. OTHER INFORMATION | |||||||
Item 1. | |||||||
Item 1A. | |||||||
Item 2. | |||||||
Item 3. | |||||||
Item 4. | |||||||
Item 5. | |||||||
Item 6. | |||||||
September 30, 2020 | December 31, 2019 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 117,105,973 | $ | 89,511,710 | ||||
Short-term investments | 10,002,749 | 5,007,050 | ||||||
Accounts receivable, net | 5,871,893 | 10,536,997 | ||||||
Inventory | 4,747,538 | 1,956,792 | ||||||
Prepaid expenses and other current assets | 5,614,052 | 4,351,074 | ||||||
Total current assets | 143,342,205 | 111,363,623 | ||||||
Deferred tax assets | 31,347,442 | — | ||||||
Operating lease right-of-use | 12,167 | 793,252 | ||||||
Property and equipment, net | 149,119 | 210,467 | ||||||
Deposits | 8,888 | 8,888 | ||||||
Total assets | $ | 174,859,821 | $ | 112,376,230 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 2,005,340 | $ | 4,117,447 | ||||
Accrued expenses and other liabilities | 16,226,609 | 19,981,295 | ||||||
Total current liabilities | 18,231,949 | 24,098,742 | ||||||
Operating lease liability, net of current portion | — | 647,532 | ||||||
Total liabilities | 18,231,949 | 24,746,274 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized: NaN issued and outstanding at September 30, 2020 and December 31, 2019 | 0 | — | ||||||
Common stock, $0.001 par value, 200,000,000 and 150,000,000 shares authorized; 103,648,224 shares and 103,397,033 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 103,648 | 103,397 | ||||||
Additional paid-in capital | 221,673,450 | 216,205,678 | ||||||
Accumulated deficit | (65,142,755 | ) | (128,688,624 | ) | ||||
Accumulated other comprehensive income (loss) | (6,471 | ) | 9,505 | |||||
156,627,872 | 87,629,956 | |||||||
$ | 174,859,821 | $ | 112,376,230 | |||||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 127,328 | $ | 130,237 | ||||
Short-term investments | 15,971 | 10,041 | ||||||
Accounts receivable, net | 5,601 | 5,987 | ||||||
Inventory | 4,390 | 4,651 | ||||||
Prepaid expenses and other current assets | 8,243 | 8,328 | ||||||
Total current assets | 161,533 | 159,244 | ||||||
Operating lease right-of-use | 3,309 | — | ||||||
Property and equipment, net | 944 | 130 | ||||||
Deferred tax assets | 31,421 | 32,971 | ||||||
Deposits | 9 | 9 | ||||||
Total assets | $ | 197,216 | $ | 192,354 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 2,561 | $ | 4,256 | ||||
Accrued expenses and other liabilities | 11,875 | 18,500 | ||||||
Total current liabilities | 14,436 | 22,756 | ||||||
Operating lease liability, net of current portion | 4,129 | — | ||||||
Total liabilities | 18,565 | 22,756 | ||||||
Commitments and contingencies (Note 10) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized: NaN issued and outstanding at March 31, 2021 and December 31, 2020 | 0 | — | ||||||
Common stock, $0.001 par value, 200,000,000 shares authorized; 103,804,590 shares and 103,781,641 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 104 | 104 | ||||||
Additional paid-in capital | 224,927 | 223,168 | ||||||
Accumulated deficit | (46,335 | ) | (53,705 | ) | ||||
Accumulated other comprehensive income (loss) | (45 | ) | 31 | |||||
Total stockholders’ equity | 178,651 | 169,598 | ||||||
Total liabilities and stockholders’ equity | $ | 197,216 | $ | 192,354 | ||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | For the Three Months Ended March 31, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Product revenue, net | $ | 29,166,658 | $ | 30,897,444 | $ | 87,907,894 | $ | 72,183,782 | ||||||||||||||||
Revenues from collaborative arrangements | 150,000 | — | 150,000 | — | ||||||||||||||||||||
Total revenues | 29,316,658 | 30,897,444 | 88,057,894 | 72,183,782 | ||||||||||||||||||||
Product revenue, net | $ | 30,205 | $ | 29,137 | ||||||||||||||||||||
Operating costs and expenses: | ||||||||||||||||||||||||
Cost of sales | 3,878,760 | 4,387,461 | 12,169,499 | 10,360,874 | ||||||||||||||||||||
Cost of sales | 4,681 | 4,151 | ||||||||||||||||||||||
Research and development | 3,749,233 | 4,597,039 | 12,321,687 | 12,534,362 | 3,007 | 4,223 | ||||||||||||||||||
Selling, general and administrative | �� | 9,984,961 | 8,067,792 | 30,881,367 | 25,471,974 | 12,716 | 10,063 | |||||||||||||||||
Total operating costs and expenses | 17,612,954 | 17,052,292 | 55,372,553 | 48,367,210 | 20,404 | 18,437 | ||||||||||||||||||
Operating income (loss) | 11,703,704 | 13,845,152 | 32,685,341 | 23,816,572 | ||||||||||||||||||||
Operating income | 9,801 | 10,700 | ||||||||||||||||||||||
Other income, net | 33,567 | 393,415 | 481,069 | 1,187,091 | 81 | 336 | ||||||||||||||||||
Net income (loss) before income taxes | 11,737,271 | 14,238,567 | 33,166,410 | 25,003,663 | ||||||||||||||||||||
Income tax provision (benefit) | (31,602,596 | ) | 608,388 | (30,379,459 | ) | 1,058,039 | ||||||||||||||||||
Net income before income taxes | 9,882 | 11,036 | ||||||||||||||||||||||
Provision for income taxes | 2,219 | 610 | ||||||||||||||||||||||
Net income (loss) | $ | 43,339,867 | $ | 13,630,179 | $ | 63,545,869 | $ | 23,945,624 | ||||||||||||||||
Net income (loss) per share: | ||||||||||||||||||||||||
Net income | $ | 7,663 | $ | 10,426 | ||||||||||||||||||||
Net income per share: | ||||||||||||||||||||||||
Basic | $ | 0.42 | $ | 0.13 | $ | 0.61 | $ | 0.23 | $ | 0.07 | $ | 0.10 | ||||||||||||
Diluted | $ | 0.41 | $ | 0.13 | $ | 0.60 | $ | 0.23 | $ | 0.07 | $ | 0.10 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||
Basic | 103,535,431 | 102,974,105 | 103,452,025 | 102,864,571 | 103,814,725 | 103,407,347 | ||||||||||||||||||
Diluted | 106,316,241 | 107,045,234 | 106,386,617 | 105,821,609 | 106,680,344 | 106,534,600 | ||||||||||||||||||
Net income (loss) | $ | 43,339,867 | $ | 13,630,179 | $ | 63,545,869 | $ | 23,945,624 | ||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||
Net income | $ | 7,663 | $ | 10,426 | ||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||
Unrealized gain (loss) on available-for-sale | (5,280 | ) | (2,330 | ) | (15,976 | ) | 39,676 | (76 | ) | 74 | ||||||||||||||
Comprehensive income (loss) | $ | 43,334,587 | $ | 13,627,849 | $ | 63,529,893 | $ | 23,985,300 | ||||||||||||||||
Comprehensive income | $ | 7,587 | $ | 10,500 | ||||||||||||||||||||
Preferred | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Deficit | Gain (Loss) | Total | ||||||||||||||||||||||
Balance at December 31, 2019 | $ | — | 103,397,033 | $ | 103,397 | $ | 216,205,678 | $ | (128,688,624 | ) | $ | 9,505 | $ | 87,629,956 | ||||||||||||||
Issuance of stock options for services | — | — | — | 1,383,672 | — | — | 1,383,672 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 11,666 | 12 | 26,137 | — | — | 26,149 | |||||||||||||||||||||
Amortization of restricted stock for services | — | — | — | 135,679 | — | — | 135,679 | |||||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | 74,246 | 74,246 | |||||||||||||||||||||
Net income (loss) | — | — | — | — | 10,426,015 | — | 10,426,015 | |||||||||||||||||||||
Balance at March 31, 2020 | — | 103,408,699 | 103,409 | 217,751,166 | (118,262,609 | ) | 83,751 | 99,675,717 | ||||||||||||||||||||
Issuance of stock options for services | — | — | — | 1,627,105 | — | — | 1,627,105 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 13,333 | 13 | 36,188 | — | — | 36,201 | |||||||||||||||||||||
Amortization of restricted stock for services | — | — | — | 167,357 | — | — | 167,357 | |||||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | (84,942 | ) | (84,942 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | — | 9,779,987 | — | 9,779,987 | |||||||||||||||||||||
Balance at June 30, 2020 | — | 103,422,032 | 103,422 | 219,581,816 | (108,482,622 | ) | (1,191 | ) | 111,201,425 | |||||||||||||||||||
Issuance of stock options for services | — | — | — | 1,345,962 | — | — | 1,345,962 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 215,097 | 215 | 630,833 | — | — | 631,048 | |||||||||||||||||||||
Amortization of restricted stock for services | — | — | — | 131,884 | — | — | 131,884 | |||||||||||||||||||||
Issuance of common stock upon vesting of restricted stock | — | 11,095 | 11 | (17,045 | ) | — | — | (17,034 | ) | |||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | (5,280 | ) | (5,280 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | — | 43,339,867 | — | 43,339,867 | |||||||||||||||||||||
Balance at September 30, 2020 | $ | — | 103,648,224 | $ | 103,648 | $ | 221,673,450 | $ | (65,142,755 | ) | $ | (6,471 | ) | $ | 156,627,872 | |||||||||||||
Preferred | Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | ||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Deficit | Gain (Loss) | Total | ||||||||||||||||||||||
Balance at December 31, 2018 | $ | — | 102,739,257 | $ | 102,739 | $ | 211,265,279 | $ | (160,563,961 | ) | $ | (20,248 | ) | $ | 50,783,809 | |||||||||||||
Issuance of stock options for services | — | — | — | 933,411 | — | — | 933,411 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 65,000 | 65 | 89,285 | — | — | 89,350 | |||||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | 13,560 | 13,560 | |||||||||||||||||||||
Net income (loss) | — | — | — | — | (644,503 | ) | — | (644,503 | ) | |||||||||||||||||||
Balance at March 31, 2019 | — | 102,804,257 | 102,804 | 212,287,975 | (161,208,464 | ) | (6,688 | ) | 51,175,627 | |||||||||||||||||||
Issuance of stock options for services | — | — | — | 924,996 | — | — | 924,996 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 125,000 | 125 | 192,425 | — | — | 192,550 | |||||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | 28,446 | 28,446 | |||||||||||||||||||||
Net income (loss) | — | — | — | — | 10,959,948 | — | 10,959,948 | |||||||||||||||||||||
Balance at June 30, 2019 | — | 102,929,257 | 102,929 | 213,405,396 | (150,248,516 | ) | 21,758 | 63,281,567 | ||||||||||||||||||||
Issuance of stock options for services | — | — | — | 817,060 | — | — | 817,060 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 111,776 | 112 | 255,950 | — | — | 256,062 | |||||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | (2,330 | ) | (2,330 | ) | |||||||||||||||||||
Net income (loss) | — | — | — | — | 13,630,179 | — | 13,630,179 | |||||||||||||||||||||
Balance at September 30, 2019 | $ | — | 103,041,033 | $ | 103,041 | $ | 214,478,406 | $ | (136,618,337 | ) | $ | 19,428 | $ | 77,982,538 | ||||||||||||||
Common Stock | Additional | Accumulated Other | ||||||||||||||||||||||||||
Preferred Stock | Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Gain (Loss) | Total | ||||||||||||||||||||||
Balance at December 31, 2020 | $ | — | 103,782 | $ | 104 | $ | 223,168 | $ | (53,705 | ) | $ | 31 | $ | 169,598 | ||||||||||||||
Issuance of stock options for services | — | — | — | 1,442 | — | — | 1,442 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 90 | — | 188 | — | — | 188 | |||||||||||||||||||||
Amortization of restricted stock for services | — | — | — | 129 | — | — | 129 | |||||||||||||||||||||
Repurchase of common stock | — | (67 | ) | — | — | (293 | ) | — | (293 | ) | ||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | (76 | ) | (76 | ) | |||||||||||||||||||
Net income | — | — | — | — | 7,663 | — | 7,663 | |||||||||||||||||||||
Balance at March 31, 2021 | $ | — | 103,805 | $ | 104 | $ | 224,927 | $ | (46,335 | ) | $ | (45 | ) | $ | 178,651 | |||||||||||||
Common Stock | Additional | Accumulated Other | ||||||||||||||||||||||||||
Preferred Stock | Shares | Amount | Paid-in Capital | Accumulated Deficit | Comprehensive Gain (Loss) | Total | ||||||||||||||||||||||
Balance at December 31, 2019 | $ | — | 103,397 | $ | 103 | $ | 216,206 | $ | (128,689 | ) | $ | 10 | $ | 87,630 | ||||||||||||||
Issuance of stock options for services | — | — | — | 1,384 | — | — | 1,384 | |||||||||||||||||||||
Exercise of stock options for common stock | — | 12 | — | 26 | — | — | 26 | |||||||||||||||||||||
Amortization of restricted stock for services | — | — | — | 136 | �� | — | — | 136 | ||||||||||||||||||||
Other comprehensive gain (loss) | — | — | — | — | — | 74 | 74 | |||||||||||||||||||||
Net income | — | — | — | — | 10,426 | — | 10,426 | |||||||||||||||||||||
Balance at March 31, 2020 | $ | — | 103,409 | $ | 103 | $ | 217,752 | $ | (118,263 | ) | $ | 84 | $ | 99,676 | ||||||||||||||
For the Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Operating Activities: | ||||||||
Net income (loss) | $ | 63,545,869 | $ | 23,945,624 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 72,746 | 26,718 | ||||||
Amortization of right-of-use | 781,085 | 181,301 | ||||||
Stock-based compensation | 4,791,659 | 2,675,467 | ||||||
Deferred taxes | (31,347,442 | ) | — | |||||
Change in accrued interest and accretion of discount on investments | (11,675 | ) | (185,536 | ) | ||||
(Increase) decrease in: | ||||||||
Accounts receivable, net | 4,665,104 | (10,095,352 | ) | |||||
Inventory | (2,790,746 | ) | (543,789 | ) | ||||
Prepaid expenses and other current assets and deposits | (1,262,978 | ) | (1,689,618 | ) | ||||
Increase (decrease) in: | ||||||||
Accounts payable | (2,112,107 | ) | 1,809,662 | |||||
Accrued expenses and other liabilities | (3,568,729 | ) | 6,400,279 | |||||
Operating lease liability | (833,489 | ) | (204,724 | ) | ||||
Net cash provided by (used in) operating activities | 31,929,297 | 22,320,032 | ||||||
Investing Activities: | ||||||||
Purchases of property and equipment | (11,398 | ) | (19,370 | ) | ||||
Purchases of investments | (10,000,000 | ) | (34,725,401 | ) | ||||
Proceeds from maturities and sales of investments | 5,000,000 | 40,310,595 | ||||||
Net cash provided by (used in) investing activities | (5,011,398 | ) | 5,565,824 | |||||
Financing Activities: | ||||||||
Payment of employee withholding tax related to stock-based compensation | (17,034 | ) | — | |||||
Proceeds from exercise of stock options | 693,398 | 537,962 | ||||||
Net cash provided by (used in) financing activities | 676,364 | 537,962 | ||||||
Net increase (decrease) in cash and cash equivalents | 27,594,263 | 28,423,818 | ||||||
Cash and cash equivalents—beginning of period | 89,511,710 | 16,559,400 | ||||||
Cash and cash equivalents—end of period | $ | 117,105,973 | $ | 44,983,218 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for income taxes | $ | 2,195,000 | $ | — | ||||
Non-cash investing and financing activities: | ||||||||
Unrealized gain (loss) on available-for-sale | $ | (15,976 | ) | $ | 39,676 |
For the Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Operating Activities: | ||||||||
Net income | $ | 7,663 | $ | 10,426 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 97 | 14 | ||||||
Stock-based compensation | 1,571 | 1,519 | ||||||
Deferred taxes | 1,550 | — | ||||||
Change in accrued interest and accretion of discount on investments | (6 | ) | 81 | |||||
Amortization of right-of-use asset | — | 63 | ||||||
(Increase) decrease in: | ||||||||
Accounts receivable, net | 386 | 3,618 | ||||||
Inventory | 261 | (254 | ) | |||||
Prepaid expenses and other current assets and deposits | 85 | (1,711 | ) | |||||
Increase (decrease) in: | ||||||||
Accounts payable | (1,697 | ) | (2,770 | ) | ||||
Accrued expenses and other liabilities | (7,038 | ) | (3,700 | ) | ||||
Operating lease liability | 942 | (73 | ) | |||||
Net cash provided by (used in) operating activities | 3,814 | 7,213 | ||||||
Investing Activities: | ||||||||
Purchases of property and equipment | (911 | ) | — | |||||
Purchases of investments | (6,000 | ) | — | |||||
Proceeds from maturities and sales of investments | — | 5,000 | ||||||
Net cash provided by (used in) investing activities | (6,911 | ) | 5,000 | |||||
Financing Activities: | ||||||||
Proceeds from exercise of stock options | 188 | 26 | ||||||
Net cash provided by (used in) financing activities | 188 | 26 | ||||||
Net increase (decrease) in cash and cash equivalents | (2,909 | ) | 12,239 | |||||
Cash and cash equivalents—beginning of period | 130,237 | 89,512 | ||||||
Cash and cash equivalents—end of period | $ | 127,328 | $ | 101,751 | ||||
Non-cash investing and financing activities: | ||||||||
Unrealized gain (loss) on available-for-sale | $ | (76 | ) | $ | 74 | |||
Repurchase of common stock not yet settled at end of period | $ | 293 | $ | — | ||||
Operating lease liabilities arising from obtaining right-of-use assets | $ | 3,309 | $ | — |
1. | Organization and Description of Business. |
2. | Basis of Presentation and Significant Accounting Policies. |
a. | INTERIM FINANCIAL STATEMENTS. 10-Q was derived from the audited financial statements and does not include all disclosures required by U.S. GAAP. |
2. | Basis of Presentation and Significant Accounting Policies (continued). |
b. | PRINCIPLES OF CONSOLIDATION |
c. | USE OF ESTIMATES. |
d. | CASH AND CASH EQUIVALENTS. U.S. Treasuries. The Company has substantially all of its cash and cash equivalents deposited with one financial institution. These amounts |
e. | INVESTMENTS of short-term bond funds and |
f. | ACCOUNTS RECEIVABLE, NET. |
2. | Basis of Presentation and Significant Accounting Policies (continued). |
g. | INVENTORY. work-in-process first-in, first out (FIFO) flow of goods. The Company began capitalizing inventories post FDA approval of Firdapse® on November 28, 2018 as the related costs were expected to be recoverable through the commercialization of the product. Costs incurred prior to the FDA approval of Firdapse® were recorded as research and development expenses in prior years’ consolidated statements of operations and comprehensive work-in-process |
h. | PREPAID EXPENSES AND OTHER CURRENT ASSETS. pre-clinical studies, clinical trials and studies, regulatory affairs and consulting. Prepaid manufacturing consists of advances for the Company’s drug manufacturing activities. Such advances are recorded as expense as the related goods are received or the related services are performed. |
i. | FAIR VALUE OF FINANCIAL INSTRUMENTS. |
j. | FAIR VALUE MEASUREMENTS. |
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Balances as of September 30, 2020 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money market funds | $ | 12,635,927 | $ | 12,635,927 | $ | — | $ | — | ||||||||
U.S. Treasuries | $ | 94,992,100 | $ | — | $ | 94,992,100 | $ | — | ||||||||
Short-term investments: | ||||||||||||||||
Short-term bond funds | $ | 10,002,749 | $ | 10,002,749 | $ | — | $ | — | ||||||||
2. | Basis of Presentation and Significant Accounting Policies (continued). |
Balances as of December 31, 2019 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money market funds | $ | 23,963,617 | $ | 23,963,617 | $ | — | $ | — | ||||||||
U.S. Treasuries | $ | 59,932,200 | $ | — | $ | 59,932,200 | $ | — | ||||||||
Short-term investments: | ||||||||||||||||
U.S. Treasuries | $ | 5,007,050 | $ | — | $ | 5,007,050 | $ | — | ||||||||
Fair Value Measurements at Reporting Date Using (in thousands) | ||||||||||||||||
Balances as of March 31, 2021 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money market funds | $ | 42,707 | $ | 42,707 | $ | — | $ | — | ||||||||
U.S. Treasuries | $ | 69,999 | $ | 69,999 | $ | — | $ | — | ||||||||
Short-term investments: | ||||||||||||||||
Short-term bond funds | $ | 15,971 | $ | 15,971 | $ | — | $ | — | ||||||||
Balances as of December 31, 2020 | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Money market funds | $ | 15,674 | $ | 15,674 | $ | — | $ | — | ||||||||
U.S. Treasuries | $ | 104,994 | $ | — | $ | 104,994 | $ | — | ||||||||
Short-term investments: | ||||||||||||||||
Short-term bond funds | $ | 10,041 | $ | 10,041 | $ | — | $ | — | ||||||||
The Company accounts for share repurchases by charging the excess of repurchase price over the repurchased common stock’s par value entirely to accumulated deficit. All repurchased shares are retired and become authorized but unissued shares. The Company accrues for the shares purchased under the share repurchase plan based on the trade date. The Company may terminate or modify its share repurchase program at any time.
10
To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers (“Topic 606”), the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for product revenue, see Product Revenue, Net below. The Company also may generate revenues from payments received under a collaborative agreement. Collaborative agreement payments may include nonrefundable fees at the inception of the agreements, Product Revenue, Net: ® to the Customer (its exclusive distributor) who subsequently resells Firdapse® to both a small group of SPs who have exclusive contracts with the Company to distribute the Company’s products to patients and potentially to medical centers or hospitals on an emergency basis. In addition to the distribution agreement with its Customer, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which occurs at a point in time (upon Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are recorded in cost of sales. If taxes should be collected from the Customer relating to product sales and remitted to governmental authorities, they will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that the Company would have recognized is one year or less. However, no such costs were incurred during the During the ® in the United States were to its Customer.Reserves for Variable Consideration: 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 11
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. The Company’s analyses also Trade Discounts and Allowances: ® to the Customer, these payments are classified in selling, general and administrative expenses in the Company’s consolidated statement of operations and comprehensive Prompt Payment Discounts: Funded Co-pay Assistance Program:co-pay assistance program intended to provide financial assistance to qualified commercially-insured patients. The calculation of the accrual forco-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with Firdapse® that has been recognized as revenue, but remains in the distribution channel at the end of each reporting period. These payments are considered payable to the Product Returns: Provider Chargebacks and Discounts: 12
Government Rebates: m ade for product that has been recognized as revenue, but which remains in the distribution channel inventories at the end of each reporting period.Bridge and Patient Assistance Programs: ® free of charge to uninsured patients who satisfypre-established criteria for either the Bridge Program or the Patient Assistance Program. Patients who meet the Bridge Program eligibility criteria and are transitioning from investigational product while they are waiting for a coveragedetermination, or later, for patients whose access is threatened by the complications arising from a change of insurer may receive a temporary supply of free Firdapse ® while the Company is determining the patient’s third-party insurance, prescription drug benefit or other third-party coverage for Firdapse® . The Patient Assistance Program provides ® free of charge for longer periods of time for those who are uninsured or functionally uninsured with respect to Firdapse® because they are unable to obtain coverage from their payor despite having health insurance, to the extent allowed by applicable law. The Company does not recognize any revenue related to these free products and the associated costs are classified in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive Revenues from Collaborative Arrangements: For elements of collaboration arrangements that are not accounted for The Company evaluates the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determines whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract. Goods or services that meet these criteria are considered distinct performance obligations. The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or 13
The collaborative agreements provide for milestone payments upon achievement of development and regulatory events. The Company accounts for milestone payments as variable consideration in accordance with Topic 606. At the cumulative revenue recognized will not occur in a future period. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and, if so, these options are considered performance obligations.The Company Refer to Note
The Company sells its product in the United States through an exclusive distributor (its Customer) to specialty pharmacies. Therefore, its distributor and specialty pharmacies account for all of its trade receivables and net product revenues. The creditworthiness of its Customer is continuously monitored, and the Company has internal policies regarding customer credit limits. The Company estimates an allowance for expected credit loss primarily based on the credit worthiness of its Customer, historical payment patterns, aging of receivable balances and general economic conditions. The Company currently has a single product with limited commercial sales experience, which makes it difficult to evaluate its current business, predict its future prospects and forecast financial performance and growth. The Company has invested a significant portion of its efforts and financial resources in the development and commercialization of the lead product, Firdapse ® , and expects Firdapse® to constitute virtually all of product revenue for the foreseeable future. The Company’s success depends on its ability to effectively commercialize Firdapse® .14
The Company relies exclusively on third parties to formulate and manufacture Firdapse ® and its drug candidates. The commercialization of Firdapse® and any other drug candidates, if approved, could be stopped, delayed or made less profitable if those third parties fail to provide sufficient quantities of product or fail to do so at acceptable quality levels or prices. The Company does not intend to establish its own manufacturing facilities. The Company is using the same third-party contractors to manufacture, supply, store and distribute drug supplies for clinical trials and for the commercialization of Firdapse® . If the Company is unable to continue its relationships with one or more of these third-party contractors, it could experience delays in the development or commercialization efforts as it locates and qualifies new manufacturers. The Company intends to rely on one or more third-party contractors to manufacture the commercial supply of its drugs.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for years before
Diluted net income The following table reconciles basic and diluted weighted average common shares:
Outstanding common stock equivalents totaling approximately 15
Available-for-sale
Inventory, net consists of the following (in thousands):
16
Prepaid expenses and other current assets consist of the
The Company has an operating lease x tend the The Company entered into an agreement in May 2020 that amended its lease for its office facilities. Under the amended lease, the Company’s leased space The components of lease expense were as
Supplemental cash flow information related to leases was as follows:
Supplemental balance sheet information related to leases was as follows:
17
Remaining payments of lease liabilities as of March 31, 2021 were as follows (in thousands):
Rent expense was approximately $ 0.1 million for the three months ended March 31, 2021 and 2020.
Property and equipment, net consists of the following (in thousands):
Accrued expenses and other liabilities consist of the
18
Endo Collaboration In December 2018, the Company entered into a collaboration and license agreement (Collaboration) with Endo, for the further development and commercialization of generic Sabril ® (vigabatrin) tablets through Endo’s U.S. Generic Pharmaceuticals segment, doing business as Par Pharmaceutical.Under the Collaboration, Endo assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under the collaboration, while the Company is responsible for exercising commercially reasonable efforts to develop, or cause the development of, a final finished, stable dosage form of generic Sabril ® tablets.Under the terms of the Collaboration, the Company has received an ten yearsup-front payment, and will receive a milestone payment, and a sharing of defined net profits upon commercialization from Endo consisting of a® . The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its terms, the collaboration continues in effect until the date that isfollowing the commercial launch of the product. The Company evaluated the license agreement with Endo to determine whether it is a collaborative arrangement for purposes of ASC 808. As the Company shares in the significant risks and rewards, the Company has concluded that this is a collaborative arrangement. As developing a final fished dosage form of a generic product in exchange for consideration is not an output of the Company’s ongoing activities, Endo does not represent a contract with a customer. However, Topic 808 does not provide guidance on the recognition of consideration exchanged or accounting for the obligations that may arise between the parties. The Company concluded that ASC Topic 730, Research and Development for the milestone payment and sharing of defined net profits upon commercialization. The collaborative agreement included a nonrefundable upfront license fee that was recognized upon receipt following execution of the collaborative arrangement for vigabatrin tablets. The collaborative agreement provides for a $2.0 million milestone payment on the commercial launch of the product by Par. As of 0 milestone payments have been earned.There were 0 revenues from this collaborative arrangement for the three for three $5,700,and KYE Pharmaceuticals Collaboration In August 2020, the Company entered into a collaboration and license agreement with KYE Pharmaceuticals Inc (KYE), for the commercialization of Firdapse ® in Canada.Under the agreement, Catalyst granted KYE an exclusive license to commercialize and market Firdapse ® in Canada. KYE assumes all selling and marketing costs under the collaboration, while the Company is responsible for supply of Firdapse® based on the collaboration partner’s purchase orders.Under the terms of the agreement, the Company up-front payment, received payment upon transfer of Marketing Authorization and delivery of commercial product, received payment for supply of Firdapse® , will receive milestone payments, and a sharing of defined net profits upon commercialization from KYE consisting of amid-double-digit percent of net sales of Firdapse® . The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its terms, the collaboration continues in effect until the date that is ten years following the commercial launch of the product in Canada.Although this agreement is in form identified as a collaborative agreement, the Company has concluded for accounting purposes that it represents a contract with a customer. This is because the Company grants to KYE a license and provides supply of Firdapse ® The collaborative agreement included a nonrefundable upfront license fee that was recognized upon transfer of the license based on a determination that the right is provided as the intellectual property exists at the point in time in which the license is granted. 19
In May 2019, the FDA approved ® , their version of amifampridine(3,4-DAP), for the treatment of pediatric LEMS patients (ages 6 to under 17). The Company believes that Jacobus is offering Ruzurgi® at a lower price than the Company is offering Firdapse® . ® only covers pediatric patients, the Company believes that Ruzurgi® is being prescribed off label to adult LEMS patients. If Jacobus is able to successfully sell Ruzurgi® off-label to adult LEMS patients, it could have a material adverse effect on the Company’s business, financial condition and results of operations.The Company believes that the FDA’s approval of Ruzurgi ® violated its statutory rights and was in multiple other respects arbitrary, capricious and contrary to law. As a result, in June 2019 the Company filed suit against the FDA and several related parties challenging this approval and related drug ® violated multiple provisions of FDA regulations regarding labeling, resulting in misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated its statutory rights to Orphan Drug Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit sought an order vacating the FDA’s approval of Ruzurgi® .On July 30, 2020, the Magistrate Judge considering the Company’s lawsuit against the FDA filed a Report and Recommendation in which she recommended to the District Judge handling the case that she grant the FDA’s and Jacobus’ motions for summary The Company has appealed the District Court’s decision to the Eleventh Circuit Court of Appeals. There can be no assurance as to the outcome of the Company’s appeal.On August 10, 2020, Health Canada issued a Notice of Compliance (NOC) to Medunik for Ruzurgi ® for the treatment of LEMS. The Company has since initiated a legal proceeding in Canada seeking judicial review of Health Canada’s decision to issue the NOC for Ruzurgi® as incorrect and unreasonable under Canadian law. Data protection, per Health Canada regulations, is supposed to prevent Health Canada from issuing a NOC to a drug that directly or indirectly references an innovative drug’s data, for eight years from the date of the innovative drug’s approval. The Ruzurgi® Product Monograph clearly references pivotal nonclinical carcinogenicity and reproductive toxicity data for amifampridine phosphate developed by ® needed to meet the standards of the Canadian Food and Drugs Act. There can be no assurance of the Additionally, from time to time the Company may become involved in legal proceedings arising in the ordinary course of business. Except as set forth above, the Company believes that there is no other litigation pending at this time that could have, individually or in the aggregate, a material adverse effect on its results of operations, financial condition or cash flows.
On May 29, 2019, the Company entered into an amendment to its license agreement for Firdapse ® . Under the amendment, the Company has expanded its commercial territory for Firdapse® , which originally was comprised of North America, to include Japan. Additionally, the Company has an option to further expand its territory under the license agreement to include most of Asia, as well as Central and South America, upon the achievement of certain milestones in Japan. Under the amendment, the Company will pay royalties on net sales in Japan of a similar percentage to the royalties that the Company is currently paying under its original license agreement for North America.
The income tax rate was 22.5% and 5.4% for the are driven by state income taxes and anticipated annual permanent differences, including orphan drug credit expense limitations and other items. The effective tax tax assets.The Company had 0 uncertain tax positions as of March 31, 2021 and December 31,
Preferred Stock The Company has 5,000,000 shares of authorized preferred stock, $0.001 par value per share, at Common Stock 21
Share Repurchases In March 2021, the Company’s Board of Directors approved a share repurchase program that authorizes the repurchase of up to $40 million of the Company’s common stock, pursuant to a repurchase plan under Rule 10b-18 of the Securities Act. The share repurchase programcommenced on March 22, 2021 and, during the three months ended March 31, 2021, 67,049 shares were repurchased for an aggregate purchase price of approximately $0.3 million ($4.36 average price per share).2020 Shelf Registration Statement On July 23, 2020, the Company 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 Company’s 2020 Shelf Registration Statement.
For the
Stock Options As of During the During the As of non-vested stock option awards granted under the 2014 and 2018 Stock Incentive Plans. The cost is expected to be recognized over a weighted average period of approximately 22
Restricted Stock Units non-cash stock-based compensation expense related to restricted stock units totaling As of non-vested restricted stock units granted under the 2018 Stock Incentive Plan. The cost is expected to be recognized over a weighted average period of approximately
Subsequent to March 31, 2021, 440,506 shares of the Company’s common stock were repurchased under the Company’s stock repurchase plan. The shares were purchased at an average price of $4.53 per share for a total cost of $2.0 million. 23
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. Basis of Presentation. Critical Accounting Policies and Estimates. Results of Operations. Liquidity and Capital Resources. off-balance sheet arrangements and our outstanding commitments, if any.Caution Concerning Forward-Looking Statements.
We are a commercial stage biopharmaceutical company focused on in-licensing, developing and commercializing in-licensing innovative technology platforms and earlier stage programs in other rare disease therapeutic categories outside of neuromuscular diseases. To accomplish these new priorities, we are prepared to invest more heavily in research and development, including acquiring earlier stage opportunities and innovative technology. We believe that this strategic expansion will better position our company to build out a broader more diversified portfolio of drug candidates that we believe will add greater value to our company over the near and long-term. However, there can be no assurance that whatever product candidates or technology platforms we acquire, if any, will be successfully developed.To spearhead this investment, we have commenced a national search for a key executive to manage this more progressive strategy. This person will likely be an M.D. or Ph.D. with at least 15-20 years of relevant pharmaceutical experience and experience in developing innovative drug technology. This person will be responsible for portfolio expansion planning and developing medicines from discovery through marketing authorizations, as well as strategic leadership across all R&D activities including, direct oversight of science and clinical research.We are dedicated to making a meaningful impact on the lives of those suffering from rare diseases, and we believe in putting patients first in everything we do. Impact of the COVID-19 pandemic on our businessThe has resulted, and is expected to continue to result, in significant economic disruption, and has adversely affected and will likely continue to adversely affect our business. We are actively monitoring the situation and are taking those actions that may be required by federal, state or local authorities or that we determine are in the best interests of our patients, investigators, employees and stockholders.In March 2020, in light of worsening conditions as a result of the pandemic, we implemented a number of safety related initiatives among our employees, including a travel ban and a work from home policy for all employees. This included our customer-facing employees, who began working remotely and utilizing telephone and 24 Our Firdapse ® supply chain remains robust and thus far we have observed no disruptions in the production of Firdapse® . We reiterate that we are committed to providing patients with the ability to obtain an uninterrupted supply of Firdapse® , and we believe that we have an adequate supply of Firdapse® to address patients’ needs ® and believe that our supply chain will continue to remain solid and uninterrupted through theUntil such time as the COVID-19 pandemic is over, it will likely adversely impact the COVID-19 pandemic has had on many biopharmaceutical companies. Firdapse ® In October 2012, we licensed the North American rights to Firdapse When we acquired the rights to the product, it had already been granted orphan drug designation by the Food and Drug Administration (FDA) for the treatment of patients with LEMS, a rare and sometimes fatal autoimmune disease characterized by muscle weakness. Additionally, in August 2013, we were granted “breakthrough therapy designation” by the FDA for Firdapse® , a proprietary form of amifampridine phosphate, or chemically known as® for the treatment of LEMS. Further, the FDA has granted Orphan Drug Designation for Firdapse® for the treatment of Myasthenia Gravis (MG).On November 28, 2018, we received approval from the FDA for Firdapse ® 10 mg tablets for the treatment of ® in the United States, selling through a field force experienced in neurologic, central nervous system or rare disease products consisting at the time of approximately 20 field personnel, including sales (Regional Account Managers), patient assistance and insurance navigation support (Patient Access Liaisons), and payor reimbursement (National Account Managers)® for other ultra-orphan, neuromuscular diseases. Finally, we are working with several rare disease advocacy organizations (including Global Genes, the National Organization for Rare Disorders (NORD), and the Myasthenia Gravis Foundation of America) to help increase awareness and level of support for patients living with LEMS, Anti-MuSK antibody positive myasthenia gravis, orIn early 2020, we expanded our field sales group by almost one hundred percent and contracted with ® . We We are supporting the distribution of Firdapse ® through “Catalyst ™ ™ In order to help adult 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 ® . We are also 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 25 In May 2019, the FDA approved a New Drug Application (NDA) for Ruzurgi ® , another version of amifampridine® only covers pediatric patients, we believe that Ruzurgi® is regularly being prescribed off label to adult LEMS patients.We believe that under applicable law, Jacobus is not permitted to market its amifampridine product to adult LEMS patients in the United States, and we are continuing to aggressively take all steps available to us to protect Firdapse’s additional adult LEMS patients, it could have a material adverse effect on our business, financial condition and results of operations.® exclusivity under the Orphan Drug Act. There can be no assurance, however, that we will be able to stop the® to adult LEMS ® off-label toWe also believe that the FDA’s approval of Ruzurgi ® violated our statutory rights and was in multiple other respects arbitrary, capricious and contrary to law. As a result, in June 2019 we filed suit against the FDA and several related parties challenging this approval and related drug ® violated multiple provisions of FDA regulations regarding labeling, resulting in misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated our statutory rights to Orphan Drug Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit sought an order setting aside the FDA’s approval of Ruzurgi® .On July 30, 2020, the Magistrate Judge considering our lawsuit against the FDA filed a Report and Recommendation in which she recommended to the District Judge handling the case that she grant the FDA’s and Jacobus’ motions for summary We believe that the District Judge’s decision is incorrect as a matter of law and contrary to the plain language of the Orphan Drug Act. We believe that if the District Judge’s decision to grant summary We are currently developing a long-acting formulation of amifampridine phosphate. A number of candidate formulations have been prepared, and three of the most promising formulations were evaluated in a pharmacokinetic (PK) study completed during the fourth quarter of 2020. The results of this first PK study will be used to inform the design and refinement of future product formulations and additional PK work to be conducted in 2021. We have also completed a number of advisory board meetings with both patients and doctors in order to establish the optimum target characteristics of the long-acting formulation of amifampridine phosphate that are desired by the LEMS patient community and treating physicians. There can be no assurance that we will be able to successfully develop a long-acting formulation of amifampridine phosphate, that any such formulation will be approved by the FDA for marketing, or that any such formulation will be commercially viable. On August 10, 2020, we announced the from our Phase 3 clinical trialtop-line results® for the treatment of adults withUnfortunately, the MSK-002 trial did not achieve statistical significance on MuSK-MG Phase 3 trialproof-of-concept MuSK-MG. We MuSK-MG indication for discussion during the first half of 2021. However, there can be no assurance that MuSK-MG indication. In preparing to present this ® for this indication.We ® ® is a potassium channel blocker, it may mitigate the pathological effects of the potassium channel leakage in HNPP patients. There can be no assurance that thisproof-of-concept 26 There can be no assurance that ® ® for Our NDS filing for Firdapse ® for the symptomatic treatment of LEMS was approved by Health Canada on July 31, 2020. In August 2020, we entered into a license agreement with KYE Pharmaceuticals (KYE), pursuant to which we licensed the Canadian rights for Firdapse® for the treatment of LEMS to KYE. Pursuant to the license agreement, KYE is obligated to pay us anup-front payment based on approval and product supply, data protection milestones based on achievements of sales and regulatory milestones, and a sharing of defined net sales upon commercialization.On August 10, 2020, Health Canada issued a Notice of Compliance (NOC) to Medunik for Ruzurgi ® for the treatment of LEMS. We have since initiated a legal proceeding in Canada seeking judicial review of Health Canada’s decision to issue the NOC for Ruzurgi® as incorrect and unreasonable under Canadian law. Data protection, per Health Canada regulations, is supposed to prevent Health Canada from issuing a NOC to a drug that directly or indirectly references an innovative drug’s data, for eight years from the date of the innovative drug’s approval. The Ruzurgi® Product Monograph clearly references pivotal nonclinical carcinogenicity and reproductive toxicity data for amifampridine phosphate developed by us. As such, we believe that our data was relied upon to establish the nonclinical safety profile of Ruzurgi® needed to meet the standards of the Canadian Food and Drugs Act. There can be no assurance of the results of this proceeding.In May 2019, we entered into an amendment to our license agreement for Firdapse ® . Under the amendment, we have expanded our commercial territory for Firdapse® , which originally was comprised of North America, to include Japan. Additionally, we have an option to further expand our territory under the license agreement to include most of Asia, as well as Central and South America, upon the achievement of certain milestones in Japan. Under the amendment, we will pay royalties on net sales in Japan of a similar percentage to the royalties that we are currently paying under our original license agreement for North America.We ® for the treatment of LEMS in Japan. We also ® in Japan or obtain orphan drug designation.All of our patent rights for Firdapse ® are derived from our license agreement. In August 2020, the United States Patent and Trademark Office (USPTO) In that regard, ® , PantherRx Rare LLC (PantherRx), for infringement of the ‘893 Patent. The suits have since been combined in the U.S. District Court for New Jersey. The lawsuit arises from Jacobus’ and PantherRx’s sales and marketing of Ruzurgi® ® product infringes the ‘893 patent when administered in accordance with its product labeling. The lawsuit seeks damages and injunctive relief to prevent further marketing of Ruzurgi® in violation of our patent rights. The lawsuit is in the early stages and there can be no assurance as to the results of these proceedings.We are also pursuing additional patent applications for Firdapse ® in an effort to further protect our drug product. There can be no assurance that any additional patents will be issued which provide additional intellectual property protection for our drug product.There can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future will not claim that we have infringed on their patents. In the event that our products or technologies infringe or violate the patent or other proprietary rights of third parties, there is a possibility we may be prevented from pursuing product development, manufacturing or commercialization of our products that utilize such technologies until the underlying patent dispute is resolved. For example, there may be patents or patent applications held by others that contain claims that our products or operations might be determined to infringe or that may be broader than we believe them to be. Given the complexities and uncertainties of patent laws, there can be no assurance as to the impact that future patent claims against us may have on our business, financial condition, results of operations, or prospects. 27 Generic Sabril ® In December 2018, we entered into a definitive agreement with Endo International plc’s subsidiary, Endo Ventures Limited (“Endo”), for the further development and commercialization of generic Sabril ® There can be no assurance that our collaboration with Endo for the development of generic Sabril ® Capital Resources At 10-Q. There can be no assurance that we will continue to be successful in commercializing Firdapse®
Revenues. During the fiscal quarter ended March 31, 2021 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® . ® for the symptomatic treatment of LEMS and as of ® in Canada. ® in Canada.For the three months ended March 31, 2021, 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. Cost of Sales. Cost of sales consists of third-party manufacturing costs, freight, royalties, and indirect overhead costs associated with sales of Firdapse ® ® was expensed, including ourbuild-up of anticipated launch product. This 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 formerlyCPP-115, and we currently expect that our future development costs will be attributable principally to the continued development of Firdapse® . However, as noted in the Overview above, we are prepared to invest in future research and development, including earlier stage opportunities and innovative technology.28 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 significantup-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 Recently Issued Accounting Standards. For discussion of recently issued accounting standards, please see Note 2, “Basis of Presentation and Significant Accounting Policies,” in the interim consolidated financial statements included in this report. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations is 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 revenues and expenses during the reporting periods. For a full discussion of our accounting policies, please refer to Note 2 on the Financial Statements included in our 10-K that we filed with the Management’s Discussion and Analysis of Financial Condition and Results of Operations Form 10-K. Results of Operations Revenues For the ® . The increase of approximately $1.1 million in Cost of Sales. Cost of sales was approximately ® .Research and Development Expenses Research and development expenses for the three-month periods ended
For the three develop a long-acting formulation of amifampridine phosphate.MuSK-MG clinical trial and proof-of-concept We expect that research and development expenses will continue to be substantial in proof-of-concept ® in Japan and evaluate Firdapse® as a treatment for other neuromuscular diseases.in-license innovative technology platforms and/or earlier stage programs in other therapeutic categories outside of Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended
For the three timing of commitments to make contributions to 501(c)(3) organizations supporting LEMS patients of approximately $2.0 million, increases in ® We expect that selling, general and administrative expenses will continue to be substantial in future periods as we continue our efforts to ® and take steps Stock-Based Compensation Total stock-based compensation for the year-end bonus awards. In the first quarter of 2020, grants were principally year-end bonus Other Income, Net We reported other income, net in all periods relating to our investment of Income Taxes Our effective income tax rate was We had no uncertain tax positions as of Net Our net income was Liquidity and Capital Resources Since our inception, we have financed our operations primarily through multiple public and private offering of our securities and, since January 2019, from revenues from product We incurred operating losses through the quarter ended March 31, 2019 and reported operating income for the first time during the three and six month periods ended June 30, 2019. We expect to continue to spend substantial dollars on our current and future drug development programs. 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 In the future, we may require additional working capital to support our operations depending on our future success with Firdapse ® sales 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 extent to which we seek to acquire or in-license additional drug development candidates;the scope, rate of progress and cost of our clinical trials and other product development activities; 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 ® ;the effect of competition and market developments; and the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other intellectual property We may raise additional funds if required in the future 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.32 Cash Flows. Net cash provided by operating activities was non-current assets and $0.3 million in inventory, an increase in operating lease liability of $0.9 million and of $3.2 million ofnon-cash expenses. This was partially offset by decreases of $1.7 million in accounts payable and $7.0 million in accrued expenses and other liabilities. During the three months ended March 31, 2020, net cash provided by operating activities was primarily attributable to our net income of non-cash expenses. This was partially offset by increases of non-current assets, Net cash used in investing activities was Net cash provided by financing activities during the Contractual Obligations and Arrangements. We have entered into the following contractual arrangements: Payments 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 Royalties to the third-party licensor of the rights sublicensed to us ® equal to 7% of net sales (as defined in the For the three Employment agreements Purchase commitment. Lease for office space Off-Balance Sheet Arrangements.We currently have no debt or finance leases. We have an operating off-balance sheet arrangements as such term is defined in rules promulgated by the SEC.33 Caution Concerning Forward-Looking Statements This Current Report on Form 10-Q 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” in our 10-K. The continued successful commercialization of Firdapse ® and the development of additional indications for Firdapse® is 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 ® 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 turn out 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 our drug at rates that are higher than historically experienced or are higher than we project; Whether Firdapse ® patients can be successfully titrated to stable therapy;Whether we can continue to market Firdapse ® on a profitable and cash flow positive basis;Whether any revenue guidance that we provide to the public market will turn out to be accurate; Whether payors will The ability of our third-party suppliers and contract manufacturers to maintain compliance with current Good Manufacturing Practices (cGMP); The ability of our distributor and the specialty pharmacies that distribute our product to maintain compliance with applicable law; Our ability to maintain compliance with applicable rules relating to our patient assistance programs and our contributions to 501(c)(3) organizations that support LEMS patients; The scope of our intellectual property and the outcome of any future challenges or opposition to our intellectual property, and, conversely, whether any third-party intellectual property presents unanticipated obstacles for Firdapse ® ;Whether our lawsuits against Jacobus and the specialty pharmacy distributing its product for patent infringement will be successful; The effect on our business and future results of operations arising from the approval by the FDA of Ruzurgi ® for the treatment of pediatric LEMS patients (ages 6 to under 17);Whether our appeal of the District Court’s decision in our suit against the United States FDA seeking to vacate the FDA’s approval of Ruzurgi ® will Whether we can continue to compete successfully if the approval of Ruzurgi ® is not overturned and Ruzurgi® continues to be prescribed foroff-label use by adult LEMS patients;Whether, because of the lower price of Ruzurgi ® , payors will require that patients tryoff-label Ruzurgi® first before they approve Firdapse® as a treatment for adult LEMS patients;The impact on Firdapse ® of adverse changes in potential 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 organization, the federal government or the government of any state, including as a result of increased scrutiny over pharmaceutical pricing or otherwise;The impact on our business and results of operations of public statements by politicians and a vocal group of LEMS patients and doctors who object to our pricing of Firdapse ® ;Changes in the healthcare industry and the effect of political pressure from and actions by President 34 The state of the economy generally and its impact on our business; Changes to the healthcare industry occasioned by any The scope, rate of progress and expense of our clinical trials and studies, pre-clinical studies,proof-of-concept Our ability to complete Whether Whether Firdapse ® will ever be approved for the treatment ofWhether we can successfully commercialize Firdapse ® in Canada on a profitable basis;Whether our suit to overturn the approval of Ruzurgi ® in Canada will be successful;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 we will be able to successfully complete the clinical trial in Japan that will be required to seek approval to commercialize Firdapse ® in Japan;Whether we will be able to obtain approval to commercialize Firdapse ® in Japan;Whether we can successfully develop, obtain approval of and successfully market a long-acting version of Whether our efforts to grow our business beyond Firdapse ® through acquisitions of companies orin-licensing of product opportunities Whether we will have sufficient capital to finance any such acquisitions; Whether our version of generic vigabatrin tablets will ever be approved by the FDA; Even if our version of vigabatrin tablets is approved for commercialization, whether Endo Ventures/Par Pharmaceutical (our collaborator in this venture) will be successful in marketing the product; and Whether we will earn milestone payments on the first commercial sale of vigabatrin tablets and royalties on sales of generic vigabatrin tablets. Our current plans and objectives are based on assumptions relating to the continued commercialization of Firdapse ® and the development of additional indications for Firdapse® . Although we believe that our assumptions are reasonable, any of our assumptions could prove inaccurate. In light of 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.
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, U.S. Treasuries and short-term bond funds. 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. 35
PART II. OTHER INFORMATION
® We believe that the FDA’s approval of Ruzurgi ® violated our statutory rights and was in multiple other respects arbitrary, capricious and contrary to law. As a result, in June 2019 we filed suit against the FDA and several related parties challenging this approval and related drug ® violated multiple provisions of FDA regulations regarding labeling, resulting in misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated our statutory rights to Orphan Drug Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit sought an order ® .On July 30, 2020, the Magistrate Judge considering our lawsuit against the FDA filed a Report and Recommendation in which she recommended to the District Judge handling the case that she grant the FDA’s and Jacobus’ motions for summary We believe that the District Judge’s decision is incorrect as a matter of law and contrary to the plain language of the Orphan Drug Act. We believe that if the District Judge’s decision to grant summary judgment is correct on the law, it means that the FDA On August 10, 2020, Health Canada issued a Notice of Compliance (NOC) to Medunik for Ruzurgi ® for the treatment of LEMS. ® as incorrect and unreasonable under Canadian law. Data protection, per Health Canada regulations, is supposed to prevent Health Canada from issuing a NOC to a drug that directly or indirectly references an innovative drug’s data, for eight years from the date of the innovative drug’s approval. The Ruzurgi® Product Monograph clearly references pivotal nonclinical carcinogenicity and reproductive toxicity data for amifampridine phosphate developed by us. As such, we believe that our data was relied upon to establish the nonclinical safety profile of Ruzurgi® needed to meet the standards of the Canadian Food and Drugs Act. There can be no assurance of the results of this proceeding.Patent Litigation ® are derived from our license agreement. In August 2020, the United States Patent and Trademark Office (USPTO) allowed U.S. Patent No. 10,793,893 (the ’893 patent) to our licensor and thereby to us, and the patent issued on October 6, 2020. The patent is directed to the use of suitable doses of amifampridine to treat patients, regardless of the therapeutic indication, that are slow metabolizers of amifampridine. Any drug product containing amifampridine with a label that states the patented dosing regimens and doses in the Dosing and Administration section prior to April 7, 2034, the expiration date of the patent, could possibly infringe this patent. Generic drug product labels would necessarily have to do this, and we intend to take all appropriate actions to protect our intellectual property.36 In that regard, in October 19, 2020, we ® , PantherRx Rare LLC (PantherRx), for infringement of ® ® product infringes the ‘893 patent when administered in accordance with its product labeling. The lawsuit seeks damages and injunctive relief to prevent further marketing of Ruzurgi® in violation of our patent rights.The lawsuit is in the 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.
There are many factors that affect our business, our financial condition, and the results of our operations. In addition to the information set forth in this quarterly report, you should carefully read and consider “Item 1A. Risk Factors” in Part I, and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, of our 10-K filed with the SEC, which contain a description of significant factors that might cause our actual results of operations in future periods to differ materially from those currently expected or desired.
Issuer Purchases of Equity Securities In March 2021, the Company’s Board of Directors approved a share repurchase program that authorizes the repurchase of up to $40 million of the Company’s common stock, pursuant to a repurchase plan under Rule 10b-18 of the Securities Act. The share repurchase program commenced on March 22, 2021.
None
Not applicable
None 37
SIGNATURES Pursuant to the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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