Categories Earnings Call Transcripts

Catalyst Pharmaceuticals Inc. (CPRX) Q4 2021 Earnings Call Transcript

CPRX Earnings Call - Final Transcript

Catalyst Pharmaceuticals Inc. (NASDAQ: CPRX) Q4 2021 earnings call dated Mar. 17, 2022

Corporate Participants:

Alicia Grande — Vice President, Chief Financial Officer and Treasurer

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Jeff Del Carmen — Chief Commercial Officer

Steven R. Miller — Chief Operating Officer and Chief Scientific Officer

Analysts:

Joseph Catanzaro — Piper Sandler — Analyst

Charles Duncan — Cantor Fitzgerald — Analyst

Scott Henry — ROTH Capital Partners — Analyst

Joon Lee — Truist Securities — Analyst

Presentation:

Operator

Greetings, and welcome to the Catalyst Pharmaceuticals Fourth Quarter and Full-Year 2021 Results Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions]

I would now like to turn the conference over to your host, Ali Grande, Chief Financial Officer for Catalyst Pharmaceuticals. Thank you. You may begin.

Alicia Grande — Vice President, Chief Financial Officer and Treasurer

Good morning, everyone, and thank you for joining our conference call to discuss Catalyst’s fourth quarter and full-year 2021 financial results and corporate highlights. Leading the call today, we have Patrick McEnany, Chairman and Chief Executive Officer. We are also joined by Dr. Steven Miller, Chief Operating Officer and Chief Scientific Officer; and Jeffrey Del Carmen, Chief Commercial Officer. For the Q&A session, we’ll also have Dr. Gary Ingenito, Chief Medical and Regulatory Officer.

Before we begin, I would like to remind you that in the following comments and in the Q&A session, we will make statements about expected future results, which may be forward-looking statements for purposes of the federal securities laws. These statements relate to our current expectations, estimates and projections and are not guarantees of future performance. They involve risks, uncertainties and assumptions that are difficult to predict and may prove not to be accurate, especially in light of the effects of COVID-19. Actual results may vary from the expectations contained in our forward-looking statements. These forward-looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in our 2021 Annual Report on Form 10-K.

At this time, I’ll turn the call over to Pat.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thanks, Ali. Good morning, everyone, and thank you for joining us today for Catalyst’s fourth quarter and full-year 2021 financial results and update call. 2021 was an extraordinary year for Catalyst as we attained several significant milestones and achieved strong financial performance, creating a substantial foundation to sustain our growth plans as we diligently pursue opportunities to diversify our commercial and development portfolio. To-date in 2022, we have continued to execute our business plan and operate to budget.

Let’s start with our commercial performance in the fourth quarter of 2021, where we achieved FIRDAPSE net product revenues of $38 million, an 24% revenue increase versus the fourth quarter of 2020. Growth during the fourth quarter was driven by continued strong FIRDAPSE performance despite not yet paying back to optimal pre-pandemic conditions. Our full-year 2021 total revenues were $141 million, representing an 18% increase year-over-year compared to $119 million in total revenue for 2020. Net income before income taxes for Q4 of 2021 was $12.8 million, a 47% increase compared to $8.7 million for Q4 of 2020.

We reported GAAP net income of $9 million for Q4 of 2021 or $0.09 per basic and diluted share. We ended the year 2021 with $191 million in cash and short-term investments. We continue to judiciously repurchase shares of our common stock from the open market. During 2021, we repurchased 2.2 million shares at an average price of $5.47 per share for a total purchase price of $12.1 million. We have guided full-year 2022 total revenues to be between $195 million and $205 million, representing a 38% to 45% increase in total revenues compared to 2021. We also anticipate our cash opex to be between $65 million and $70 million for the full-year.

Ali will provide you with more details during her financial report. Our 2022 guidance assumptions reflect the positive outcome from the U.S. Courts reaffirming the orphan drug exclusivity for FIRDAPSE for the treatment of adult patients with Lambert-Eaton Myasthenic Syndrome. As we reported last month, the U.S. District Court ruled the U.S. approval of Ruzurgi for the treatment of pediatric LEMS patients violated U.S. orphan drug exclusivity for FIRDAPSE. As a result, the U.S. approval previously granted for Ruzurgi for pediatric patients has now been rescinded by the FDA. The reaffirmation of FIRDAPSE market exclusivity is a significant milestone, enabling us to advance treatment within the LEMS community, where FIRDAPSE has already been prescribed by 647 unique positions to approximately 25% of the estimated 3,000 LEMS patients.

Importantly, this outcome represents a pivotal point for additional new patient enrollment growth as those patients on Ruzurgi seek to transition to FIRDAPSE. We estimate the number of patients recently on Ruzurgi to be about 125 patients, a significant majority of whom are adult LEMS patients, and we’ve already seen many of those patients transition to FIRDAPSE during this quarter, which aligns with our revenue forecast for the year. The transition of Ruzurgi patients to FIRDAPSE is proceeding seamlessly, thanks to our patient-first approach and our established Catalyst Pathways access programs, which are there to assist all patients seeking access to FIRDAPSE for LEMS treatment. Similarly, we announced last week a victory in the Federal Court of Canada in a lawsuit by Catalyst and KYE Pharmaceuticals to require Health Canada to enforce the data protection for FIRDAPSE as an innovative drug. In that case, the judge agreed with our positions on the inapplicability of the data protection provisions and that Health Canada’s approval of Ruzurgi did not comply with them.

Ruzurgi has been removed from the market in Canada and the matter remanded to the Minister of Health for redetermination consistent with the judge’s decision. Our other significant litigation is our pending patent suit against Jacobus and PantherRx. Jacobus is a pharm [Phonetic] — specialty pharmacy for Ruzurgi. This suit is now in discovery and we’ll continue to keep you advised as this case progresses. We entered 2022 with significant momentum and with a continued focus on sustained product growth, as well as to the rare disease community we serve. We have enhanced our efforts to drive awareness and education of our patients and providers with an expanded focus on paraneoplastic patients, extending out to thoracic oncologists provides an important potential for reaching new LEMS patients, as approximately 50% of LEMS patients have some form of cancer, most typically, small cell lung cancer.

We also expect to see continued growth with newly diagnosed LEMS patients who are not yet on FIRDAPSE, as well as acceleration of the process for a definitive LEMS diagnosis. We have also made important advances in strengthening our intellectual property portfolio for FIRDAPSE, with a recent issuance of three new U.S. patents. These patents are directed to the treatment of patients suffering from LEMS and cover all amifampridine metabolizer types within the LEMS patient population. This milestone further fortifies our intellectual property estate. And we believe this provides us with lasting commercial durability for FIRDAPSE, which has U.S. patent protection until 2034. All of these newly issued patents will be listed in the FDA’s Orange Book within the next few weeks, which will bring the total number of patents listed to five. We will continue to execute our key initiatives to further strengthen and protect the long-term durability of FIRDAPSE.

Steve will provide more details later on this call. We’re also pleased with the progress being made by our sub-licensee partner DyDo Pharma. In December 2021, DyDo initiated a small Phase 3 registration study in Japan to evaluate the efficacy and safety of FIRDAPSE for the treatment of LEMS. The initiation of this trial marked an important milestone towards expanding our global footprint. Currently, there are no approved treatments for LEMS in Japan, and we believe FIRDAPSE can provide a meaningful new therapy option to those living with this disease.

Assuming the trial is successful, we expect FIRDAPSE to be granted 10 years of market exclusivity upon approval in that market. Our goal to expand our portfolio and pipeline with differentiated products to treat rare diseases, which currently are without any approved therapy remains a strategic priority for this year. We have a robust and enhanced process in place in identifying potential assets to pursue and have made considerable progress at this front. Our teams are actively engaged in extensive due diligence and we are encouraged about projects currently under review. We remain confident in our ability to advance on these initiatives this year.

As part of our ongoing effort to help raise awareness and amplify the voices of patients with rare disease and need of approved therapies, we recently teamed up with the leading patient advocacy groups and our partners in NASDAQ for participating in the opening bell ceremony on February 28 to honor Global Rare Disease Day 2022. We thank all of our partners for coming together and allowing us to show our support for the rare disease community.

As a result of the many accomplishments, Catalyst is named on Forbes 2022 America’s Best Small Companies published list, ranking 65 out of more than 1,000 companies screened. It is an honor to be recognized by Forbes as one of the country’s best small companies, as well as acknowledgment of the value we are creating. In saying that, we are excited about the path ahead of us. We continue to execute across all near and long-term priorities to drive substantial growth. We believe that we’re well positioned to build upon our success and are optimistic about the future.

Now I will turn the call over to Jeff Del Carmen, our Chief Commercial Officer, who will provide further highlights on our commercial execution.

Jeff Del Carmen — Chief Commercial Officer

Thanks, Pat, and good morning, everyone. The Catalyst’s commercial team performed extremely well over the course of 2021. We are very pleased with the full-year FIRDAPSE net sales of $138 million, representing a 16% growth year-over-year. In Q4 2021, net FIRDAPSE sales were $38.3 million, a 7% growth versus Q3 2021, despite challenges presented by the continued resurgence of the pandemic. I want to take this opportunity to thank the entire Catalyst team for their flawless execution in 2021, a true testament to our ability to remain agile, while maintaining our commitment to the LEMS community.

The foundation of the FIRDAPSE business continues to be solid. Operational excellence drove new patient starts, maintained favorable access, continued high compliance and lower discontinuations. Naive new enrollments in 2021 were 15% greater year-over-year, while discontinuations were 20% less year-over-year. Q4 discontinuations were only 5%, which is the lowest discontinuation rate since the commercial launch in 2019,and 37% fewer than Q4 2020. We expect considerable growth in 2022 and beyond. The current FIRDAPSE market penetration is approximately 25% of the total adult LEMS population.

Organically, growth will be driven from new patient enrollments of already diagnosed adult LEMS patients not yet on FIRDAPSE, as well as the significant number of LEMS patients who are unfortunately misdiagnosed or undiagnosed. Additionally, we expect our non-personal promotion and other educational efforts of small cell lung cancer treaters about LEMS and FIRDAPSE will yield more adult patients with a proper diagnosis of LEMS and accelerate the opportunity to receive treatment for this disease.

Early indicators thus far in Q1 showed that we are building upon the momentum from 2021. Q1 growth in patients on therapy is on pace to exceed the entire year of 2021. Reimbursed patient discontinuation rates are also tracking to match the Q4 discontinuation rate of 5%. We continue to collaborate with advocacy groups such as NORD, Global Genes, Muscular Dystrophy Association, Myasthenia Gravis Foundation of America, Conquer MG and Myasthenia Gravis Association is part of the ongoing effort to the biopharma industry and patient advocacy groups to call attention to the need for collaboration to encourage research and development of orphan drugs and bring new treatments to market for rare diseases that affects small patient populations.

In addition to ringing the opening bell at NASDAQ to celebrate Rare Disease Day, Catalyst has launched a LEMS Aware Podcast to increase awareness of and connections in the LEMS community. Furthermore, we partner with key professional societies like the American Association of Neuromuscular and Electrodiagnostic Medicine and the American Academy of [Phonetic] Neurology to educate their members about LEMS and FIRDAPSE at their respective conferences. Our Catalyst Pathways patient services team did a tremendous job in 2021, supporting the needs of adult LEMS patients, caregivers and healthcare professionals. Catalyst Pathways has numerous types of financial assistance programs to help patients with their out-of-pocket costs. Patients enrolled in Catalyst Pathways, including those who are covered by Medicare, and accessing foundation assistance, have an average co-pay of less than $2 per month.

Prescription approval rates remain over 90% across all payers, government or private commercial insurers. The Catalyst Pathways patient services team also connects patients to community and advocacy resources such as patient support groups. All of these resources are crucial as we effectively compassionately transition patients from Ruzurgi. In closing, we are very optimistic about the growth potential for FIRDAPSE. We will continue to generate new patient enrollments through precise commercial execution and the seamless transition of Ruzurgi patients. Catalyst is committed to serving the LEMS community and is passionate about ensuring access for all LEMS patients.

I’ll now turn the call over to Dr. Steven Miller, our Chief Operating Officer and Chief Scientific Officer for an update on R&D activities.

Steven R. Miller — Chief Operating Officer and Chief Scientific Officer

Thanks for the commercial update, Jeff. I’ll now provide an update on the important progress we are making on our clinical and product development efforts. Catalyst continues to work on improvements to FIRDAPSE franchise to address the needs of all patients. Our medical affairs department continues to make valuable progress in increasing healthcare provider awareness of LEMS through our medical affairs programs and accredited Continuing Medical Education or CME course about LEMS is available through Medscape.

To-date, over 5,000, mostly healthcare provider workers have viewed the course, and as of February 17, 1,700 licensed healthcare providers have obtained CME credit. We have also provided a grant to physician education resource to host a LEMS session at a live tumor Board of oncologists to expand our support for CME programs. This live program will be recorded and provided as an enduring adult lab CME course, intended primarily for oncologists for one year. Physician education resources will make this program available to all oncologists in their database along with posting ads for it in several neurology and oncology publications.

CME courses provide a non-biased educational opportunity for doctors that support gaining knowledge and clinical updates in particular therapeutic area, and Catalyst sponsored CME courses have been a very successful method of educating physicians about LEMS. In alignment with our commitment to provide treatment for all LEMS patients, we are now completing a supplementary NDA submission package for the treatment of pediatric LEMS with FIRDAPSE. We anticipate filing this supplement with the FDA this quarter. Catalyst has all the required data, including all necessary safety data to finally complete submission for this label expansion.

The preparation of this supplement is a high priority for Catalyst as we remain committed to advancing our efforts to expand the use of FIRDAPSE so that we may be able to provide all LEMS patients with an approved treatment option. We have made significant progress on developing an intellectual property estate to extend the market exclusivity of FIRDAPSE. We recently announced the three new patents covering additional patient amifampridine metabolizer types had been allowed, and I’m pleased to report that they have now been issued by the U.S. Patent and Trademark Office. One of the three patents was issued on March 8, and the other two patents were issued two days ago, bringing the total number of issued patents protecting the FIRDAPSE franchise to five.

The claims in these new patents combined with our previously issued patents claimed the treatment of all relevant amifampridine metabolizer types within the LEMS patient population. One of the three new patents is already listed in the FDA’s Orange Book, and the last two will be listed by the end of the quarter, bringing the total number of patents listed in the FDA’s Orange Book to five patents. As a reminder, the first two patents were listed in the Orange Book shortly after their issuance in 2021 and 2020 respectively. This is an important milestone as our patent portfolio now provides broad comprehensive protection for the FIRDAPSE franchise regardless of the NAT2 metabolizer type. We are pleased with the progress we are making on the intellectual property front, and we will continue to execute our key initiatives to strengthen and protect the long-term durability of FIRDAPSE, which currently has patents exclusivity protection in the U.S. until mid 2034.

In addition to the U.S., FIRDAPSE currently has data exclusivity in Canada until July of 2028, and in Japan, we expect FIRDAPSE will be granted 10 years of market exclusivity upon approval in that market. As previously reported, Catalyst has been developing a long-acting version of FIRDAPSE and our development efforts were progressing well. Over the course of the past several quarters, we conducted an in-depth evaluation of how the new formulation would be used by doctors and patients. In doing so, it was determined that transitioning patients to the long-acting dosing regimens will be a much more involved process than anticipated for doctors to accommodate and manage due to the wide variability in metabolism of amifampridine by N-acetyltransferase Type 2 or NAT2 in patients, and also due to the great differences in drug release characteristics between the two formulations.

Additionally, it was determined that titration and dosing on the new formulation would differ substantially from the current version of FIRDAPSE and such differences could lead to complexities on how best to treat and titrate patients and could even be a risk for medication dosing errors. Therefore, adding FIRDAPSE LA to the available treatment options would not be the most beneficial path for treatment delivery and for achieving optimum patient care compared to using only the currently approved FIRDAPSE formulation. In line with our commitment to our patient-first approach and to do what we believe is best for patients and healthcare providers, we have decided to suspend further development of the long-acting version of FIRDAPSE. We will continue to be open to further development opportunities in the future whenever such development is in the best interest of patients.

Now I would like to provide an update on our ongoing global expansion initiative. As we previously announced in June, we partnered with DyDo Pharma for the development and commercialization of FIRDAPSE for the treatment of Lambert-Eaton Myasthenic Syndrome in Japan. Currently, there are no approved therapies for LEMS in Japan. And we believe FIRDAPSE has the potential to be a novel therapy to address this important unmet need. DyDo has made great strides in initiating development activities, including consulting with the Japanese Pharmaceuticals and Medical Devices Agency to confirm the clinical study parameters and requirements to obtain regulatory approval.

As a result of their efforts, DyDo initiated the required clinical study in December of last year and anticipates that this to be a small-scale Phase 3 clinical trial. Catalyst continues to support DyDo in the execution of the clinical trial by supplying clinical trial materials, as well as collaborating with DyDo in its efforts to obtain the required documentation for the Japanese regulatory authorities. We will continue to execute on our key initiatives to enhance the market exclusivity of FIRDAPSE and expand the FIRDAPSE market geographically.

During this quarter, we also advanced our objectives to expand our portfolio of rare disease treatments beyond FIRDAPSE. As Pat mentioned, we continue to actively evaluate new products or other kinds of transactions to expand both Catalyst product offerings and/or our research and development pipeline. Our teams, including the product development team are actively and vigorously engaging in the process as we look for worthwhile prospects where we can utilize our expertise, resources and know-how to expand our programs and drive growth. We have an improved process enabling a very efficient approach to identifying and assessing opportunities, and are very pleased with the progress we are making as we remain committed to advancing our initiatives to expand our portfolio of rare disease treatments. We remain enthusiastic about the path ahead and confident in our ability to identify the right opportunities to maximize our capabilities and resources.

I will now turn the call over to Ali Grande, our Chief Financial Officer to review our financial results.

Alicia Grande — Vice President, Chief Financial Officer and Treasurer

Thank you, Steve. We are very pleased with our financial results for the fourth quarter and full-year 2021. As reported, we ended the year with cash and investments of slightly more than $191 million and no funded debt. We believe this allows us the financial flexibility to advance our existing R&D programs and to support our strategic initiatives requiring earlier-stage opportunities and innovative technologies leading to future growth and value creation.

Our total net revenues for 2021 were $141 million, an 18% increase when compared to total revenues of $119 million for 2020. Further, despite the continued challenges of COVID-19, total FIRDAPSE product revenue net was $138 million for 2021, a 16% increase over the net product revenue of $119 million for 2020. Net income before income taxes for 2021 was $53 million and almost 25% — 26% increase over net income before income taxes for 2020 of $42 million. We reported GAAP net income for 2021 of $39 million or $0.38 per basic and $0.37 per diluted share. For the year 2020, we reported GAAP net income of $75 million or $0.72 per basic and $0.71 per diluted share.

It is important to remember that these figures are not comparative. 2020 benefited from approximately $33 million of income tax benefit, principally from the recording of a one-time non-cash deferred tax asset of almost $32 million upon the reversal of our valuation allowance in the third quarter of 2020. Our effective tax rate for 2021 on an annualized basis was 25%, while in 2020, we benefited from the use of our federal net operating losses and the release of [Phonetic] valuation allowance. In 2021 and future periods, we expect that we will benefit from the use of our deferred tax assets, primarily relating to Florida state net operating losses and the orphan drug credit, although those are subject to certain limitations resulting in a more normalized tax rate. Because of the significant effect of the one-time recording of our deferred tax assets in 2020, we believe that the non-GAAP measures we presented in yesterday’s press release provide a more useful comparison of our results of operations for 2020 versus — for 2021 versus 2020.

Non-GAAP net income for 2021 was $59 million or $0.57 per basic and $0.55 per diluted share, which excludes from GAAP net income stock-based compensation expense of $6 million, depreciation of $192,000, and an income tax provision of $13 million. This compares to non-GAAP net income for 2020 of $48 million or $0.47 per basic and $0.45 per diluted share, which excludes from GAAP net income stock-based compensation of $6 million, depreciation of $92,000, and an income tax benefit of $33 million. The above represent an approximately 22% increase of non-GAAP income year-over-year. Cost of sales expenses were approximately $22 million in 2021 compared to $17 million in 2020. This represents 25% of total operating costs in 2021 compared to 22% for 2020. Cost of sales — cost of principal royalties, which increased by 3%, while net sales exceeded $100 million in any calendar year as defined in the applicable license agreement.

We expect higher overall royalties as a percentage of product sales, as their income increases over $100 million per year each year as per our forecast. Research and development expenses in 2020 and 2021 were comparable at $17 million for 2021 and $16 million for 2020, and the expenses decreased slightly as a percentage of total operating expenses to 19% for 2021 compared to 21% for 2020. SG&A expenses for 2021 totaled $50 million compared to $44 million in 2020. SG&A expenses decreased as a percentage of total operating expenses to 56% for 2021 compared to 57% for 2020. However, the overall increase in SG&A expenses in 2021 was basically due to increased legal costs and increased contributions to [Indecipherable] patients. More detailed information and analysis of our 2021 financial performance may be found in our annual report on Form 10-K, which was filed with the Securities and Exchange Commission yesterday March 16 and can be found on the Investor Relations page of our website at www.catalystpharma.com.

And with that, I will turn the call back over to Pat.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thanks, Ali. We believe that we are well positioned to build upon our success and are optimistic about the Company’s future as we diligently pursue opportunities to diversify our commercial and development portfolio that aligns with our core mission to deliver value to patients, healthcare providers and shareholders. Finally, I’d like to thank all of our employees for their continued dedication and commitment to positively impacting patients’ lives.

Operator, we would now like to open the call for questions.

Questions and Answers:

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Joe Catanzaro with Piper Sandler. Please proceed with your question.

Joseph Catanzaro — Piper Sandler — Analyst

Hey guys, thanks for taking my question, and congrats on all the progress here. Pat, I think you mentioned that a significant amount of Ruzurgi patients have already transitioned to FIRDAPSE. I’m just wondering if you’d be able to maybe more specifically say how many of the estimated 125 have done so? And is it fair to say that the growth observed in 1Q that I think Jeff mentioned is being driven by this transition? Thanks. And I have a follow-up or two.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Sure. Joe, we really don’t want to be specific, but I can tell you that many of those patients have already transitioned, and we expect the transition to be completed by the end of April. And so we’re very pleased with how seamless this process has been. And I think we owe a lot to our specialty pharmacy AnovoRx, who has really done a great job and was ready and willing and able to take on this task. As far as growth going forward, Jeff, do you want to take that?

Jeff Del Carmen — Chief Commercial Officer

Sure. I can just tell you, the transitions did account for a significant part of that growth. But I will also say that in March, what we’ve observed the truly naive patients, so those patients that have never been on FIRDAPSE or Ruzurgi that have been enrolled and been prescribed, that number is tracking to be our best month ever. So that’s what we’ve seen in March. So we are excited about our organic growth as well.

Joseph Catanzaro — Piper Sandler — Analyst

Okay. Got it. That’s really helpful. Maybe as a follow-up, I’m wondering what data points inform your estimated number of patients that were on Ruzurgi? And how you’ve gone about identifying them? And whether it’s possible that maybe there’s more patients than you’ve estimated?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Yeah. Joe, you might be right. We don’t know for a fact. We know the number of patients that were on FIRDAPSE that went to Ruzurgi once it was approved based on some of the docs who have been involved with the Company for quite some time. So we know what we lost, and we assumed that there was some growth on the Ruzurgi side over the last couple of years. So we’ve got some pretty good data points that I think supports 125 plus or minus 10%. But I think that’s as specific as we can be on that subject.

Joseph Catanzaro — Piper Sandler — Analyst

Okay. Got it. And maybe if I could just squeeze one last one in. I’m wondering if there would be a point where in the absence of any business development, you would consider alternative ways to return capital to shareholders like potentially a special dividend? Thanks.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Yeah. Good question. I don’t think that’s on the plate of special dividend. We’ve continued to buy our shares back judiciously as we can be. We spent $12 million last year buying shares back, we continue the program. So that’s our way of, I guess, returning money to shareholders without paying a special dividend. So I do believe strongly that we will have a transaction completed sometime this year.

Joseph Catanzaro — Piper Sandler — Analyst

Okay, great. Thanks for taking my questions.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Right. Thank you.

Operator

Thank you. Our next question comes from the line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

Charles Duncan — Cantor Fitzgerald — Analyst

Yeah, good morning, Pat and team. Let me add my congratulations on the commercial progress this last year. Had a few questions for you. Wanted to ask you or Jeff a little bit more about the market dynamics. I guess I’m wondering, as you think about the switch patients versus new patient adds, where would you think the bulk of the growth could come from this year? And then also if you go beyond, I think it was 647 prescribers, what is your goal in terms of the number of prescribers by year-end? Just kind of roughly, would you grow that by 5%, 10%, what do you think about that?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Charles, I think the number of prescribers is difficult to predict. If you look at the numbers, it’s easy to say that a lot of those prescribers who only have one patient or maybe two or three patients. And so we do believe that our educational programs are very important in helping get to a proper diagnosis and a prescription for a LEMS patient. And so we have a strong effort to increase that number. But to use that, that’s not really an internal metric or a goal that we look at. We really look at patient counts and things like that. So it’s a good question, but we don’t have an answer to that, and I can’t give you a number that is a target for this year for prescribers.

It — that number is growing nicely, and it seems to correlate to our spend for education to HCPs. And as you know, we’ve got a CME program that educates docs and we’ve had, I think, 1,500 docs avail themselves of that program and actually earn their credit. And over 5,000 folks that have actually been to the program and studied the program itself. So I think there’s a correlation there between our education and the number of docs that we will see as prescribers for FIRDAPSE.

Jeff Del Carmen — Chief Commercial Officer

And Charles…

Charles Duncan — Cantor Fitzgerald — Analyst

Okay. That’s helpful. I’m sorry.

Jeff Del Carmen — Chief Commercial Officer

Charles, just to address your other question there about patients organic versus transition. We’ve demonstrated the ability to grow organically about 10% to 15% every year organically, and we expect to do the same this year. But I also will say that we do see some tailwinds that will be helping with the — hopefully, the opening of the country back up again because of the pandemic, like we’ve seen in March, we’re seeing some good new enrollments of these truly naive patients, and we expect to see strong enrollments of these patients for the rest of the year. So we do anticipate significant growth from those patients too.

Charles Duncan — Cantor Fitzgerald — Analyst

Okay. That’s helpful. Quick question on asset acquisitions that could occur perhaps this year. I guess I’m wondering if you can provide some additional color on how you think that would leverage your existing infrastructure, either sales or back office? And if you can provide some color on really the focus areas, maybe therapeutic focus areas for those asset acquisitions that you can anticipate being able to complete this year? And then I had one follow-up for Ali.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Okay. So the — we would — initially, we were looking and hoping to leverage our sales force with finding a product that would fit into the bag of our neuromuscular sales call point previously. And that was just too neuro [Phonetic] focus, Charles. We, again, I think we’ve repeated this previously, but we made a couple of offers over the last 18 months, and which were the fair offers and the counter offers at that time were really egregious. And we looked around and really couldn’t find anything else in neuro or neuromuscular that made sense. So we decided to expand our focus to a much broader therapeutic spectrum, including any therapeutic class outside of oncology. And so that continues to be our focus. We are looking for projects that are obviously a rare disease that are beyond proof of concept.

And frankly, hopefully, an approved product or a marketed product that we could acquire. We — so I’m not sure that on the sales, the commercial side, there’s — from the reps point of view, there’s a lot of leverage there. I think from the back office point of view, market access, patient access advocacy, I think that the — we’re in good shape to take on other projects which can be levered. And also there are operational levers as well, including our financing and accounting, and as well as our MSLs and medical affairs. So I think that there are synergies that are — would be available to us on most acquisitions.

Charles Duncan — Cantor Fitzgerald — Analyst

Okay. That’s helpful. One last question for Ali. I guess I’m kind of wondering how you’re thinking, first of all, thank you for the guidance on revenue and opex. But I’m wondering how you’re thinking about opex this year, especially given some of the reduced legal costs? And if you can provide a little bit of color, especially as that drops to the bottom-line, how do you feel about last year? Was this slightness, I think a couple of pennies, but then going into this year, what would you project for bottom-line?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Charles, I’ll take that, and Ali can certainly chime in. So for last year, we had a couple of areas where there were a few issues. Opex was up slightly over budget. And a lot of that had to do with higher litigation costs related to our actions against the FDA, Health Canada, as well as our patent litigation with Jacobus. And that litigation was very costly, far more than we had budgeted. And part of that were there a few appeals in there that we didn’t count on. And so we think those over budget is a good ROI based on the outcome. So we’re pleased with that spin, those certainly not budgeted.

We saw higher charitable contributions, the 501(c)(3s) foundations that assist Medicare out-of-pocket expenses related to all LEMS patients, not just FIRDAPSE LEMS patients. And that amounted to about $1.3 million over budget. And we think we absorbed — to the best of our knowledge, we were the only one with foundation assistance for LEMS patients, which meant that those donations went to all patients that have LEMS that might require assistance, no matter which drug they were taking on which therapy that they needed.

So again, about $1 million in higher litigation expense, about $1.3 million in higher charitable contributions. And then on the other side, if you will, cost of goods sold as a percentage was — is — was higher as a result of some inflationary pressure that we saw on the supply side, especially in the third and fourth quarter, which we hope are transitory, as well as some costs associated with some scale-up work that we did to increase the batch size for our commercial lots, and that total was about $2 million. And remember, in our cost of goods sold, our royalties are in there. And that royalty up to $100 million in each year is 14%. For sales, over $100 million, there’s an additional 3% of royalty. So as a result of those three items that I just mentioned, that took our cost of goods was actually about 1.7% over 2020, 15.9% versus 14.2%. And I think those combined total over $4 million, which account for the $0.02 to $0.03 miss on EPS for the year. So going…

Charles Duncan — Cantor Fitzgerald — Analyst

Very thorough…

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

So going forward…

Charles Duncan — Cantor Fitzgerald — Analyst

Going forward. Yeah.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Yeah, this year, we’ve stated that cash opex which is our operating expenses, less non-cash comp and depreciation will be somewhere between $65 million and $70 million.

Charles Duncan — Cantor Fitzgerald — Analyst

And some of the — it sounds like some of those drivers to the expenses last year may abate this year, of course, forgetting about the inflationary pressures, you can’t really perhaps guide that, but the other drivers?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Yes. yes. We — I think we will find out by the end of this year that those investments that we made last year that got us over budget had a great ROI for the year.

Charles Duncan — Cantor Fitzgerald — Analyst

Okay, very good. Thanks for the thorough answer and for taking our questions. Congrats on a good year of progress.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thanks, Charles.

Operator

Thank you. Our next question comes from the line of Scott Henry with ROTH Capital Partners. Please proceed with your question.

Scott Henry — ROTH Capital Partners — Analyst

Thank you, and good morning. And let me start with a happy St. Patrick’s Day. Pat, it sounds like you may be one that celebrates that holiday.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thank you. Thank you, Scott. Thank you.

Scott Henry — ROTH Capital Partners — Analyst

And also before I dig into the questions, let me just say I thought the on-hold music has certainly turned it up a notch. So moving forward now, a couple of follow-up questions there. First, on the cost of goods sold percentage, that 15.9%. How would you — so when we think about 2022, should we be thinking of a number north somewhere between 16% and 17%, is that kind of the way those trends should play out or maybe some of those one-time costs may offset that? Just trying to get a sense of — because I know there are those step-ups in revenue numbers.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

In the royalty, yeah. Charles, I think that — I’m sorry, Scott, I’m not sure that we want to give any guidance on that. But I think that 15.9% were at the high end. And from a conservative point of view, it’s probably not a bad place to be.

Scott Henry — ROTH Capital Partners — Analyst

Okay. Fair enough. And then the other thing that sort of jumped out at me, when you look through the 10-K and it separates selling costs versus G&A. It looked like the selling costs were higher in Q4. Any driver to that? Should I think about that going forward?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Jeff, do you want to take that? The — yes, so there were areas that we thought that we could make further investments in Q4, Scott, that some of the new programs that we’ve initiated. You want to take that, Jeff?

Jeff Del Carmen — Chief Commercial Officer

Sure. So to add to what Pat was saying, what we like to do is we look at ROI on some of the initiatives that we’re doing. And if there are some initiatives that just are not playing out the way we thought then they’ll reallocate. What we also did in Q4 was we initiated the non-personal promotion to oncologists. And that also ramped up the — some of the selling expenses there. So in anticipation of the new year coming, we like to put some of these new resources in place so that we can get traction early in the year. So that’s why we saw the increase in selling expenses.

Scott Henry — ROTH Capital Partners — Analyst

Okay, great. And then thinking about 2022 in the kind of the quarterly progression throughout the year, should we sort of expect a bolus in the beginning of that step-up in patients and then gradual growth thereafter or will it be more steady growth quarter-to-quarter?

Jeff Del Carmen — Chief Commercial Officer

Well, I think it’s a fair question. And we’re hoping that the pandemic is subsiding here and the countries opening up. So what we’re seeing is that we’re seeing a strong March because of the countries opening up again. And we do anticipate from there a steady new enrollments similar to what we’re seeing in March.

Scott Henry — ROTH Capital Partners — Analyst

Okay, great.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

So, Scott, you may be referring to the bolus of patients that are transitioning to FIRDAPSE. So — and we’ve stated we expect that transition to be completed by the end of April. So you will see a step-up I think in Q1, you’ll continue to see what we’re calling referred to as organic growth. Those are as Jeff had mentioned earlier, those are the naive patients that are — when I say naive, naive to any form of 3,4-DAP, meaning they haven’t been on FIRDAPSE or Ruzurgi before. And so — and remember, it takes a little time to get these folks who are transitioning on to reimbursed drug. So I think that you’ll see sequential growth quarter-to-quarter this year from our commercial team.

Scott Henry — ROTH Capital Partners — Analyst

Okay, great. And then final bigger picture, more strategic question, Pat. You had mentioned as you look to acquire other technologies that perhaps some of the prices out there are not favorable for what you would want to pay. Sometimes when prices are high, sometimes it’s better to be a seller than a buyer. Is that something you think about in your equation perhaps being a seller as opposed to be an acquirer?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Scott, no, we don’t think about that often. But as a public Company, obviously, if there was incoming interest on the buy side, we, as a public Company and our Board of Directors have to consider what would be a fair offer, but it is not one of our initiatives for this year.

Scott Henry — ROTH Capital Partners — Analyst

Okay, fair enough. Well, thank you, again, for taking all the questions.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thank you, Scott.

Operator

Thank you. Our next question comes from the line of Joon Lee with Truist Securities. Please proceed with your question.

Joon Lee — Truist Securities — Analyst

Hi, thanks for taking our questions, and congrats on the accolades from Forbes.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thank you, Joon.

Joon Lee — Truist Securities — Analyst

Sure. What has been the experience of FIRDAPSE among small cell lung cancer patients so far? It’s an aggressive disease with survival of about two years or less from the time of diagnosis. So curious if your rate of patient identification is keeping up or able to exceed patient loss? And also can paraneoplastic syndromes such as LEMS be part of small cell lung cancer or other cancer diagnostic group to facilitate diagnosis and reimbursement? Thanks. And I have a quick follow-up after that.

Jeff Del Carmen — Chief Commercial Officer

I’ll take the first question there. And we are seeing significant uptake in the percent of our new enrollments that are tumor LEMS or paraneoplastic LEMS patients, currently, we’re about 20% of our new enrollments are tumor LEMS patients. So part of our goal is to increase that percentage. And the other part of this is, as you mentioned, the survival rate of those patients about two years or so, we’re hopeful that we can accelerate the diagnosis of LEMS in those patients, so we can help those patients sooner. So that’s the other part of this — the education process that we’re putting out there.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

I just have one additional thing to add to what Jeff just said. By making efforts to help diagnose these patients sooner, hopefully, their small cell lung cancer will be diagnosed earlier, giving these patients a better prognosis and a longer life span than the one to two years that you mentioned in your question.

Joon Lee — Truist Securities — Analyst

Yeah. What about the chances of LEMS being part of the DRG or for small cell lung cancer. Is that something that’s reasonable or am I not thinking about this correctly?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Yeah. I don’t think that’s on the radar at this point, Joon.

Joon Lee — Truist Securities — Analyst

Great. And we’re really interested in the opportunity in Japan. I know that DyDo is running the trial, but assuming they’re running a similar trial as Charles [Phonetic] as what you did in the U.S., are you able to disclose whether they’re looking at day 14 or day 4? Because based on the two trials you ran successfully, the day 4 had a much more drastic effect size in terms of QMT. I’m just curious what — if that’s also their strategy? And can you tell us a little bit about DyDo? We know that it’s a big Japanese conglomerate with a bigger exposure in the consumer segment, but curious what the experience is in the pharma development? Thank you.

Steven R. Miller — Chief Operating Officer and Chief Scientific Officer

Okay. Well, let me answer the first part of your question with regard to the trial. It is a different design than we ran in the United States, but it’s also a single-arm design. And so it basically is really just to verify that patient — Japanese patients will respond to therapy similar to what we’ve seen in the double-blind controlled studies response for patients that have studied in the U.S. As we have previously announced, it is a very small study, and the — and DyDo has confirmed with PMDA that the small study will be sufficient for that market and they anticipate completing it relatively quickly.

With regard to DyDo’s experience, they have actually recently entered the pharmaceutical space and it built — has built an entire pharmaceutical division. They have hired a large number of very experienced pharmaceutical executives across all areas of pharmaceuticals, including research and development, regulatory affairs, sales and marketing, manufacturing, and they have all the necessary experience and talent to successfully market the product in Japan. And they are pursuing other products, although this is one product that they really were happy to get because they feel it will be very successful in Japan.

Joon Lee — Truist Securities — Analyst

Thank you.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

I might add that being one of their first couple of products, it’s a very important product to do.

Joon Lee — Truist Securities — Analyst

No, I think I got that sense based on their website. That’s great that the single-arm will be sufficient. Sounds like a very surmountable bar. Then you recently announced an agreement with BioMarin to extend the agreement to most of Asia. I mean does that include China or does that not include China? Because it sounds like, especially given the small cell lung cancer population, there could be an opportunity, but can you elaborate on that?

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Yeah. So our agreement that we negotiated with BioMarin basically requires us to file an NDA in Japan before we are allowed to pursue marketing of the products in the remainder of the Asia-Pacific region. Obviously, as we just spoke about, we are going as quickly as we can to get that NDA filed in Japan so that we can open the remainder of our market expansion. You are correct, the Chinese population is large, close to 1 billion people, and they’re heavy smokers, and so there is a lot of small cell lung cancer in China. And then just simply because of the sheer number of people, there should be a large number of limitations there as well. And so it is one of the nations among the several nations that are of interest to us in the Asia-Pacific region.

Joon Lee — Truist Securities — Analyst

Thank you.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I’ll turn the floor back to Mr. McEnany for any final comments.

Patrick J. McEnany — Co-Founder, Chairman, President and Chief Executive Officer

Thank you. Thanks, everyone, for joining our call. We look forward to our next corporate update. Have a great day.

Operator

[Operator Closing Remarks]

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