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spk01: Greetings and welcome to the Catalyst Pharmaceuticals fourth quarter and full year 2021 results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Allie Grandy, Chief Financial Officer for Catalyst Pharmaceuticals. Thank you. You may begin.
spk03: Good morning, everyone, and thank you for joining our conference call to discuss Catalyst's first quarter and full year 2021 financial results and corporate highlights. In the call today, we have Patrick McEnany, Chairman and Chief Executive Officer. We are also joined by Dr. Stephen 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 federal securities laws. These statements relate to our current expectations, estimates, and projections, and are not guarantees of future performance. They involve risk, 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 in Form 10-2. At this time, I'll turn the call over to Beth.
spk05: Thanks, Allie. 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 the budget. Let's start with our commercial performance in the fourth quarter of 2021, where we achieved FERDAP's net product revenues of $38 million a 24% revenue increase versus the fourth quarter of 2020. Growth during the fourth quarter was driven by continued strong FERDAPS performance, despite not yet being 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 9 cents 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 op-ex to be between $65 and $70 million for the full year. Allie 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 FERDAPs for the treatment of adult patients with Lambert-Eaton myasthenic syndrome. As we reported last month, the U.S. District Court ruled that the U.S. approval of Resurgy for the treatment of pediatric women's patients violated the U.S. orphan drug exclusivity for FERDAPs. As a result, the U.S. approval previously granted for Resurgy for pediatric patients has now been rescinded by the FDA. The reaffirmation of FERDAPS market exclusivity is a significant milestone, enabling us to advance treatment within the LIMS community, where FERDAPS has already been prescribed by 647 unique physicians to approximately 25% of the estimated 3,000 LIMS patients. Importantly, this outcome represents a pivotal point for additional new patient enrollment growth, as those patients on Resurgy seek to transition to Ferdaps. We estimate the number of patients recently on Resurgy to be about 125 patients, a significant majority of whom are adult LIMS patients, and we've already seen many of those patients transition to Ferdaps during this quarter. which aligns with our revenue forecast for the year. The transition of Resurgy patients to PRDAPs 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 PRDAPs for limbs treatment. Similarly, we announced last week a victory in the Federal Court of Canada in the lawsuit by Catalyst and Kai Pharmaceuticals to require Health Canada to enforce the data protection for Ferdaps as an innovative drug. In that case, the judge agreed with our positions on the applicability of the data protection provisions and that Health Canada's approval of Resurgy did not comply with them. Resurgy 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 Panther Rx, Jacobus' specialty pharmacy for resurging. 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 to both patients and providers with an expanded focus on perineoplastic patients. Extending out to thoracic oncologists provides an important potential for reaching new lens patients as approximately 50% of lens patients have some form of cancer, most typically small cell lung cancer. We also expect to see continued growth with newly diagnosed LIMS patients who are not yet on PRDAPs, as well as acceleration of the process for definitive LIMS diagnosis. We have also made important advances in strengthening our intellectual property portfolio for PRDAPs. With the recent issuance of three new U.S. patents, These patents are directed to the treatment of patients suffering from LIMS and cover all amifampradine metabolizer types within the LIMS patient population. This milestone further fortifies our intellectual property of state, and we believe this provides us with lasting commercial durability for PRDAPs, 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 FERDEPs. Steve will provide more details later in this call. We're also pleased with the progress being made by our sub-licensing partner, Dido Pharma. In December 2021, GAIDO initiated a small phase three registration study in Japan to evaluate the efficacy and safety of FURDAPs for the treatment of limbs. The initiation of this trial marked an important milestone towards expanding our global footprint. Currently, there are no approved treatments for limbs in Japan, and we believe FURDAPs can provide a meaningful new therapy option to those living with this disease. Assuming the trial is successful, we expect VIRDAPs 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 and identifying potential assets to pursue and have made considerable progress on 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 in need of approved therapies, we recently teamed up with the leading patient advocacy groups and our partners at NASDAQ for participating in the opening golf ceremony on February 28th to honor Global Rare Disease Day 2022. We thank all of our partners for coming together and allowing us to show our support 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 the acknowledgement 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 are well-positioned to build upon our success. We are optimistic about the future. Now I will turn the call over to Jeff DelCarmon, Chief Commercial Officer of who will provide further highlights on our commercial execution.
spk07: Thanks, Pat, and good morning, everyone. The Catalyst commercial team performed extremely well over the course of 2021. We are very pleased with a full-year Ferdaps net sales of $138 million, representing a 16% growth year over year. In Q4 2021, net Ferdaps 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 Ferdas 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 Ferdaps 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 Ferdaps as well as a significant number of LEMS patients who are unfortunately misdiagnosed or undiagnosed. Additionally, we expect our non-personal promotion in other educational efforts to small cell lung cancer treaters about LEMS and FERDAPs 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 show 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, ConquerMG, and Myasthenia Gravis Association. It's part of the ongoing efforts of 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 affect 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 Neurology to educate their members about LEMS and FERDAPs 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 copay 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 and compassionately transition patients from resurgi. In closing, we are very optimistic about the growth potential for FERDAPs. We will continue to generate new patient enrollments through precise commercial execution and the seamless transition of Resurgy 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.
spk04: 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 Ferdapp's 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. An 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 LEMS 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 lens patients, we are now completing a supplementary NDA submission package for the treatment of pediatric lens with FURDAPS. We anticipate filing this supplement with the FDA this quarter. Catalyst has all the required data, including all necessary safety data, to file a 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 FURDAPS 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 Ferdinand's. We recently announced the three new patents covering additional patient amphetamine metabolizer types have been allowed, and I am 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 8th, and the other two patents were issued two days ago, bringing the total number of issued patents protecting the Ferdows franchise to five. The claims in these new patents, combined with our previously issued patents, claim the treatment of all relevant amethamperidine metabolizer types within the lens 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 Ferdows 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 Ferdaps, which currently has patent exclusivity protection in the U.S. until mid-2034. In addition to the U.S., Ferdaps currently has data exclusivity in Canada until July of 2028, and in Japan, we expect Ferdaps will be granted 10 years of market exclusivity upon approval in that market. As previously reported, ATLAS has been developing a long-acting version of FRDFs 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 would be a much more involved process than anticipated for doctors to accommodate and manage due to the wide variability in metabolism of amfapidine by anacetyltransferase 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 of the new formulation would differ substantially from the current version of Ferdows, 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. Adding Ferdaps 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 Ferdaps formulation. In alignment 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 Ferdaps. 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 Dido Pharma for the development and commercialization of Ferdaps for the treatment of Lambert-Eaton myosin in Japan. Currently, there are no approved therapies for LEMS in Japan. And we believe Ferdaps has the potential to be a novel therapy to address this important unmet need. Dido 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, Dido initiated the required clinical study in December of last year and anticipates that this to be a small-scale Phase III clinical trial. Catalyst continues to support DITO in the execution of the clinical trial by supplying clinical trial materials as well as collaborating with DITO 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 FURDAPs and expand the FURDAPs market geographically. During this quarter, we also advanced our objectives to expand our portfolio of rare disease treatments beyond Ferdows. 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 Grandi our Chief Financial Officer, to review our financial results.
spk03: 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 acquiring 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 furthest product revenue net was $138 million for 2021, A 60% INCREASE OVER THE NET PRODUCT REVENUE OF $119 MILLION FOR 2020. NET INCOME BEFORE INCOME TAXES FOR 2021 WAS $53 MILLION, AN ALMOST 26% INCREASE OVER NET INCOME BEFORE INCOME TAXES FOR 2020 OF $42 MILLION. WE REPORTED GAP NET INCOME FOR 2021 OF $39 MILLION, OR $0.38 PER BASIC, AND $0.37 PER DILERAGE YEAR. For the year 2020, we reported GAAP net income of $75 million, or $0.72 per basic, and $0.71 for the other share. It is important to remember that these figures are not comparative. 2020 benefited from approximately $33 million of income tax benefits, 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 analyzed basis was 25%. While in 2020, we benefited from the use of our federal net operating losses and the release of valuation allowance. In 2021 and future periods, we expect that we will benefit from the use of our deeper tax assets, primarily relating to Florida State, narrow trading 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 asset 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 2021 versus 2020. Non-GAAP net income for 2021 was 59 million, or 57 cents per basis, and 55 cents per daily share, which excludes from GAAP net income, stock-based compensation expense of six million, depreciation of 192,000, and an income tax provision of 30 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 represents 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 consists principally of royalties, which increase by 3% when net sales exceed $100 million in any calendar year as defined in the applicable license agreement. HIGHER OVERALL ROYALTIES AS THE PERCENTAGE OF PRODUCT SALES AS THEIR INCOME INCREASES OVER $100 MILLION EARLIER 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 THE PERCENTAGE OF TOTAL OPERATING EXPENSES TO 19% FOR 2021 COMPARED TO 21% FOR 2020. SG&A EXPENSES FOR 2021 TOTAL 50 MILLION COMPARED TO 44 MILLION IN 2020. SG&A EXPENSES DECREASED LIGHTLY 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 principally due to increased legal costs and increased contributions to 501 organizations. 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 16th, and can be found on the investor relations page of our website at www.calaispharma.com. And with that, I will turn the call back over to Doug.
spk05: Thanks, Ally. 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.
spk01: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Joe Cabanzaro with Piper Sandler. Please proceed with your question.
spk02: Hey, guys. Thanks for taking my question, and congrats on all the progress here. Pat, I think you mentioned that a significant amount of resurgi patients have already transitioned to Ferdapse. 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.
spk05: 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 patients 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 at OvoRx, 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?
spk07: Sure, I can just tell you the transitions did account for the 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 Ferdaps or Resurgy, that have 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.
spk02: 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 Resurgy and how you've gone about identifying them and whether it's possible that maybe there's more patients than you've estimated.
spk05: Yeah, sure. You might be right. We don't know for a fact. We know the number of patients that were on Ferdaps that went to Resurgy once it was approved based on, you know, some of the docs who had been involved with the company for quite some time. So we know what we lost, and we assume that there was some growth on the Resurgy 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.
spk02: 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.
spk05: Yeah, good question. I don't think that's on the plate, a special dividend. You know, 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.
spk02: Okay, great. Thanks for taking my question. Great.
spk05: Thank you.
spk01: Thank you. Our next question comes from line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.
spk09: 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 market dynamics. I guess I'm wondering, as you think about the switch patients versus new patient ads, 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?
spk05: Charles, I think the number of prescribers is difficult to predict. You know, if you look at the numbers, it's easy to see that, you know, a lot of those prescribers 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 LIMS patient. And so, you know, 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, you know, is a target for this year for prescribers. 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 FURNAPS.
spk09: Okay.
spk07: Charles, just to address your other question there about patients organic versus transition. You know, 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 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.
spk09: 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 Allie.
spk05: Okay. So the, you know, 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 narrow a focus, Charles. Again, I think we've repeated this previously, but we made a couple of offers over the last 18 months, which were fear 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, you know, including any therapeutic class outside of oncology. And so that continues to be our focus. We We are looking for projects that are obviously rare disease, that are beyond proof of concept, and frankly, hopefully, an approved product or a marketed product that we could acquire. So I'm not sure that on the sales, the commercial side, from the rep's 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 we're in good shape to take on other projects which can be levered. And also, there are operational levers as well, including our finance and accounting and as well as our MSLs and medical affairs. So I think that there are synergies that would be available to us on most acquisitions.
spk09: 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? It was a slight miss, I think a couple of pennies. But then going into this year, what would you project for bottom line?
spk05: 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 were 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 spend. Those certainly not budgeted. We saw higher charitable contributions, the 501 , foundations that assist Medicare out-of-pocket expenses, related to all LIMS patients, not just FERDAPS LIMS 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 LIMS patients, which meant that those donations went to all patients that had limbs that might require assistance no matter which drug they were taking or 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, the cost of goods sold as a percentage 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% royalty. So as a result of those three items that I just mentioned, That took our cost of goods was actually about 1.7 percent over 2020, 15.9 percent versus 14.2 percent. And I think those combined total over $4 million, which account for the two to three cent miss on EPS. So going forward, this year, we've stated that cash OPEX, which is our operating expenses, less non-cash comp and depreciation, will be somewhere between $65 and $70 million.
spk09: 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?
spk05: Yes. 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.
spk09: Okay, very good. Thanks for the thorough answer and for taking our questions. Congrats on a good year of progress.
spk05: Thanks, Charles.
spk01: Thank you. Our next question comes from the line of Scott Henry with Roth Capital Partners. Please proceed with your question.
spk08: 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. Thank you.
spk05: Thank you, Scott.
spk08: 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 follow-up questions there. First... on the cost of goods sold percentage, that 15.9. So when we think about 2022, should we be thinking of a number 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.
spk05: 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 at that 15.9%, we're at the high end, and, you know, from a conservative point of view, it's probably not a bad place to be.
spk08: Okay, fair enough. And then the other thing that sort of jumped out at me, when you look through the 10K 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?
spk05: Jeff, do you want to take that? Yeah, so, you know, There were areas that we felt 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?
spk07: Sure. So to add to what Pat was saying, what we like to do is, you know, we look at ROI on some of the initiatives that we're doing. And if there are some initiatives that just are not, you know, playing out the way we thought, then we'll reallocate What we also did in Q4 was we initiated the non-personal promotion to oncologists, and that also ramped up 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.
spk08: Okay, great. And then... Thinking about 2022 and 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?
spk07: Well, you know, I think it's a fair question, and we're hoping that the pandemic is subsiding here and the country's opening up. So what we're seeing is that we're seeing a strong March because the country's opening up again. And we do anticipate from there a steady, steady new enrollments similar to what we're seeing in March. Okay, great.
spk05: So, Scott, you may be referring to the bolus of patients that are transitioning to herd apps. So... And we've stated we expect that transition to be completed by the end of April. So, you know, 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 90 patients that are When I say naive, naive to any form of 3,4-DAP, meaning they haven't been on Ferdaps or Resurgy 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.
spk08: 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. You know, 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 being an acquirer?
spk05: 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 a board of directors think have to consider would be a fair offer, but it is not one of our initiatives for this year.
spk08: Okay, fair enough. Well, thank you again for taking all the questions.
spk05: Thank you, Scott.
spk01: Thank you. Our next question comes from the line of June Lee with Truist Securities. Please proceed with your question.
spk10: Hi, thanks for taking our questions, and congrats to the accolades from Forbes.
spk05: Thank you, June.
spk10: Hi, sir. What has been the experience of Ferdaps among small cell lung cancer patients so far? You know, 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 perineoplastic syndrome, 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.
spk07: I'll take the first question there. And we are seeing significant uptake in, you know, the percent of our new enrollments that are tumor lens or perineoplastic lens patients. You know, currently we're about 20% of our new enrollments are tumor lens patients. So, you know, 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, you know, two years or so. we're hopeful that we can accelerate the diagnosis of lens in those patients so we can help those patients sooner. So that's the other part of the education process that we're putting out there.
spk04: 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 lifespan than the one or two years that you mentioned in your question.
spk10: Yeah. What about the chances of them being part of the DRT or small cell lung cancer? Is that something that's reasonable, or am I not thinking about this correctly?
spk05: Yeah, I don't think that's on the radar at this point, Jim. Great.
spk10: And we're really interested in the opportunity in Japan. I know that the Daido is running the trial, but assuming they're running a similar trial as what you did in the U.S., are you able to disclose where 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 QMG. I'm just curious if that's also their strategy there. And can you tell us a little bit about Daido? 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 format development. Thank you.
spk04: 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 Japanese patients will respond to therapy similar to what we've seen in the double-blind control studies response for patients that are studied in the U.S. As we have previously announced, it is a very small study, and the NDAIDO has confirmed with PMDA that the small study will be sufficient for that market, and they anticipate completing it relatively quickly. Okay. With regard to Dido's experience, they have actually recently entered the pharmaceutical space and have 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 expertise 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.
spk05: I might add that being one of their first couple of products, it's a very important product to them.
spk10: No, I think I got that transcript from their website. Okay, 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?
spk04: Yes, our agreement... that we negotiated with BioMoran 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 expansions. You are correct. The Chinese population is large, close to a 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 of interest to us in the Asia-Pacific region.
spk10: Thank you.
spk01: 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.
spk06: Thank you. Thanks, everyone, for joining our call. We look forward to our next corporate update. Have a great day.
spk01: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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