Business Monday

The big gamble: Catalyst Pharmaceuticals of Coral Gables bets on new drug for rare disease

Patrick McEnany is the CEO and co-founder of Catalyst Pharmaceuticals. The company is betting its future on a drug called Firdapse, which is used to treat a rare neurological disease called LEMS.
Patrick McEnany is the CEO and co-founder of Catalyst Pharmaceuticals. The company is betting its future on a drug called Firdapse, which is used to treat a rare neurological disease called LEMS. MIAMI HERALD STAFF

About six years ago, Lisa Rountree, 45, a mother of two in Ocean Springs, Mississippi, noticed she had a droopy eye. Soon she felt weak and fatigued around the house and whenever she went out. These symptoms got worse.

“I didn’t have any energy, and moving around was very difficult,” said Rountree, who previously led an active life. The illness became debilitating. She fell several times. Stairs became a challenge: “I even had to use a wheelchair when our family visited Disney World.”

Doctors initially weren’t sure of the cause. But about 2 1/2 years ago, Rountree was diagnosed with Lambert-Eaton Myasthenic Syndrome, or LEMS — a rare and sometimes fatal autoimmune neuromuscular disease that affects about 3,000 to 3,500 people in the United States.

She began taking Firdapse, a new drug that was then being tested in clinical trials by Coral Gables-based Catalyst Pharmaceuticals, and saw dramatic improvement.

“It’s amazing the difference it made,” said Rountree. “It literally changed my life. I’m active all the time now.”

Firdapse is one of a group of specialized “orphan drugs” being developed across the country to treat rare diseases, mostly by small pharmaceutical companies like Catalyst. Its chemical name is a mouthful: amifampridine phosphate, or 3,4-DAP. It is an organic compound first synthesized by researchers at a Paris hospital center more than three decades ago.

And its development by publicly traded Catalyst throws a spotlight on the way orphan drugs are readied for the federal approval they need before they can hit the marketplace.

For a small company like Catalyst, which already spent more than $30 million to research and develop Firdapse but has yet to see any revenue from it, it’s also a big gamble: If all goes well, as the company expects, the drug — whose potential cost to patients could be in the high five figures or even six figures — will receive the go-ahead from the U.S. Food and Drug Administration early next year.

“Our mission is to develop treatments for rare neurological diseases like LEMS, and Firdapse fit our model,” Patrick McEnany, chairman, CEO and co-founder of Catalyst. “To do this, a lot of money has to be invested in R&D.”

Some financial analysts who have watched as Firdapse has wended its way through the regulatory process are excited by the drug’s possibilities and have given Catalyst a “buy” rating because of that. Doctors who treat LEMS patients are also generally positive about it.

But a rival company’s claim, and accusations that the company might “profiteer” from the potential sky-high cost to patients, pose challenges.

And if the FDA doesn’t give the drug its final OK, the company could lose millions, threatening its survival.


It’s not the first time Catalyst has gambled on a drug in development.

McEnany and Hubert Huckel, M.D., established Catalyst in 2002 to develop a drug that held promise for treating cocaine addiction, using their own savings and money from friends and family to fund the then-private company.

For many years, McEnany was an executive in the pharmaceuticals industry. He had been chairman and chief executive office of Miami-based Royce Laboratories Inc., and oversaw its merger with Watson Pharmaceuticals of California. After the merger, he was president of Royce, then a wholly owned subsidiary of Watson, and vice president for corporate development at Watson.

He was born in Coral Gables, graduated from Christopher Columbus High School in Miami and studied accounting and finance at Florida State University and the University of Miami. “Unfortunately, for financial reasons, I did not compete my degree,” McEnany said.

Huckel, who died in December, also had a long career in the pharmaceutical sector. He earned his medical degree from the University of Vienna and worked in the Hoechst Group for 29 years. He retired in 1993 as chairman of the board of Hoechst-Roussel Pharmaceuticals Inc., and he was a member of the Rockefeller University Council as well as Catalyst’s board.

When the drug failed to work on cocaine addicts during clinical trials, Catalyst lost millions of dollars and saw its shares plummet in 2012.

Despite this costly setback, the two company founders saw a new opportunity in Firdapse the same year. They had seen early studies indicating it was useful in treating LEMS and perhaps other neurological disorders, and it already was being sold in the European Union.

“Catalyst is a business, but we got into this business to help people,” McEnany said. “If small companies like ours don't take the financial risks to develop drugs for rare diseases, the big pharma companies aren’t going to not fill the gap.”

New drugs sometimes move from country to country and from company to company before finding a home, and that’s how it was with 3,4-DAP, which would later become Firdapse. The drug — chemically amifampridine phosphate, along with another version of what the FDA describes as a “new molecular entity” — were first developed at the Assistance Publique Hôpitaux de Paris, a large group of hospitals in France. 3,4-DAP was being tested on LEMS patients there as early as 1983.

In LEMS, simply stated, there is a communications gap between nerve signals and muscles, and these suffering from the disease cannot control muscle movement. Firdapse allows signals to reach and activate muscles.

Catalyst says that Firdapse, a tablet, dramatically relieves symptoms, as it did for Rountree. It has benign side effects, the company says, and is more stable than another version of 3,4-DAP made by a different company, which requires refrigeration.

The corporate chain reaction that eventually led Catalyst to obtain the rights to the drug in North America started when EUSA Pharma first acquired development rights from the French hospital group.

Eventually, San Rafael-California based BioMarin acquired the rights to the compound and named it Firdapse. After launching the drug in the European Union in 2010, BioMarin started a Phase III clinical trial to gain FDA approval for selling Firdapse in the U.S. Instead, it decided to seek a partner, perhaps to concentrate resources on developing other drugs in its pipeline. So in 2012, it licensed the rights to develop and sell the drug in the U.S., Canada and Mexico to Catalyst.

Since 2011, Catalyst has raised $86.4 million dollars by selling shares to the public. Currently the largest shareholders are institutional and mutual fund investors: Baker Brothers Advisors; Point72 Asset Management; Consonance Capital Management; Broadfin Capital and Federated Kauffman Fund, according to Yahoo! Finance. Fifteen other institutional investors hold stakes, and McEnany is also a large shareholder.

The company believes it currently has enough cash to launch Firdapse commercially next year, when it expects to receive the FDA’s approval: As of March 31, 2015, Catalyst reported it had more than $41 million on hand in cash and cash equivalents.


In its quest for success, time has been on Catalyst’s side.

Three years have passed since the company acquired Firdapse rights for North America and began pouring money into its development. But it’s already near the final steps of its regulatory journey.

Expediting its development and review by the FDA is its designation as an “orphan drug,” which it received in 2009; and in 2013, as a “breakthrough therapy,” which means the medication offers “substantial improvement over existing therapies,” according to the agency.

A big reason why Catalyst found Firdapse an attractive investment was that the drug had already been studied and tested. Other companies that owned the rights to 3,4 DAP before 2012 also had spent millions assembling 57 pre-clinical studies, in addition to early clinical studies. The FDA also was aware that Firdapse has been sold in the European Union since 2010. These facts enabled Catalyst to greatly reduce the amount of time and money a company would typically spend on preliminary research for a drug in development.

As required for all prescription drugs seeking approval for commercial use in the United States, Firdapse has completed all the necessary steps. BioMarin and Catalyst carried out four different Phase I studies. BioMarin started the Phase III clinical trial, which was taken over and completed successfully by Catalyst. In this case, the FDA did not require a Phase II, but rather one, well-controlled pivotal study (in Catalyst’s case, Phase III) and other supportive evidence because of orphan drug designation and the very small number of patients with LEMS.

A typical Phase I study usually includes 20-80 healthy people; Phase II, up to 300 people with a certain disease or disorder; and Phase III, from several hundred to 3,000 people with the targeted disease.

In the case of orphan drugs, however, the samples are much smaller because the target populations are very small. Firdapse’s Phase III study, for instance, included 38 people with LEMS. This was the study that Rountree was in.

Now Catalyst is poised to face the final hurdle in the FDA process: applying for new drug approval (NDA). To succeed, Catalyst must submit data proving conclusively to regulators that Firdapse is safe to use on patients. The company expects to do that this summer or early fall.

“We recently completed the most rigorous of clinical trials on Firdapse, and we’ve begun filing a new drug approval — equivalent to about 20,000 pages of data — to the FDA,” McEnany said.

Should Firdapse not make it through this final step, Catalyst might consider taking another gamble, this time on the success of other drugs it has in development, and raise millions in new capital.

Other new drugs in Catalyst’s pipeline: CPP-115, which appears to be useful in treating infantile spasms, epilepsy, Tourette syndrome and post traumatic stress disorder (PTSD); and CPP-109, which also may be useful in treating PTSD and Tourette’s.

Or Catalyst could decide that it can’t afford to move ahead, and investors could lose tens of millions of dollars.


Equity analysts who cover Catalyst are optimistic the FDA will approve Firdapse.

“Based on available data, we assign a 90 percent probability of success for an FDA approval in mid-2016,” said analysts Edward Nash and Yun Zhong in a SunTrust Robinson Humphrey investment advisory report.

Another analyst concurred. “We expect Catalyst to file for approval of Firdapse by the fourth quarter of this year and receive regulatory approval by mid-2016, paving the way for a second-half 2016 launch of the drug in the United States,” said Raghuram Selvaraju, a researcher at MLV & Co., an investment bank and institutional broker dealer, in a recent report.

Two research analysts at Piper Jaffray Investment Research, Charles Duncan and Roy Buchanan, also believe that Catalyst is on track for Firdapse approval; they also believe that the drug has the potential to treat another rare disease, congential myasthenic syndrome (CMS), and perhaps other disorders.

All three companies have assigned a “buy” rating to Catalyst shares.

Some neurologists who treat LEMS patients are cautious in their praise.

Khema Sharma, a neurologist and professor of neurology at the University of Miami Miller School of Medicine, has treated patients with LEMS and other orphan disorders. One LEMS patient has used Firdapse, and “responded well,” he said. As with other drugs, the dosage must be controlled, he said, to avoid complications such as changes in heart rate.

Shin J. Oh, an Alabama neurologist who has been seeing LEMS patients for more than 30 years, is more enthusiastic: He sees Firdapse as an important new drug for treating LEMS. He became a consultant for Catalyst about a month ago.

“We were able to show definite benefits with Firdapse among LEMS patients,” said Oh, who was an independent researcher on the Phase III clinical trials of Firdapse conducted for Catalyst on LEMS patients at 13 clinical sites in the U.S. and Europe. “This drug will make a difference for patients.”

Oh is currently treating patients with Firdapse on an expanded access program, which provides the drug free to patients before commercialization.

“The results of this study are a lifetime goal for me,” said Oh, a professor emeritus at the University of Alabama Medical School. “Finally, at the end of my career, I was able to present the data that show the effectiveness of this drug.”


As it moves closer to Firdapse’s final review for commercial use, however, Catalyst is dealing with some thorny problems. Among those is a potential challenge from a family-owned pharmaceutical company based in Princeton, N.J.

Jacobus Pharmaceutical Co. Inc. produces 3,4-DAP in a formulation different from Catalyst's Firdapse. Jacobus has conducted clinical trials and is providing the drug to LEMS patients as part of an expanded access program.

In a phone interview, Laura Jacobus, whose father founded the company, said the company’s goal is to “help patients.” It is not influenced by outside shareholders, who are only interested in making money, she said.

Jacobus did not want to discuss details of the company’s plans and said she did not know how many LEMS patients were receiving 3,4-DAP from her company.

It is not clear how far along Jacobus may be in seeking FDA approval for its LEMS drug. But in recent reports to investors, two analysts who cover Catalyst said they did not view Jacobus as a likely threat to Firdapse’s approval.

Catalyst also hit a bump in the road late last year when a small group of Catalyst shareholders sued the company for damages, claiming that Catalyst failed to disclose that another company — Jacobus — was testing a drug biologically equivalent to Firdapse. That omission caused them to lose money on the stock in 2013, they claimed — although Catalyst shares in the five years leading up to year-end 2014 have increased significantly.

A graph published in Catalyst’s 2014 annual report indicated that $100 invested in Catalyst shares at the end of December 2009 would have been worth $471.73 at the end of Dec. 2014. In comparison, $100 invested in the same period in the NASDAQ composite index would have been worth $223.74, in the Russell MicroCap $211.34 and in the NASDAQ Biotechnology index $379.71.

Catalyst agreed to a $3.5 million settlement last November to dismiss the class action lawsuit, which was covered by its insurance carrier. At the time, McEnany said the company believed it would have prevailed in court but decided to settle to “avoid potential costs of continued litigation” and disrupting the company and its management.


Catalyst also came under criticism from a writer at TheStreet, an online publication that provides financial news and analysis. In its articles, TheStreet accused Catalyst of “profiteering,” saying it will charge LEMS patients $60,000 to $80,000 a year for Firdapse if it receives FDA approval. It also suggested that Jacobus would seek FDA approval for its version of the LEMS drug.

Catalyst has not yet released its projected price for Firdapse, which is sold by BioMarin in Europe for an annual cost of about $60,000 a patient. But like other orphan drugs, it won’t be cheap.

Investment advisory firm SunTrust Robinson Humphrey recently predicted that Catalyst will price Firdapse at $70,000 to $100,000 per year per patient. Another equity research firm, MLV & Co., predicted that Catalyst could charge between $150,000 to $200,000 per year.

These analysts, plus Piper Jaffray, have all assigned “buy” ratings to Catalyst stock.

Along with the potential to charge high prices for recovering their investments, the first company to obtain FDA approval for an orphan drug to treat LEMS will be granted seven-year marketing exclusivity by the FDA, a 50 percent tax credit based on R&D investments, and other incentives.

These sky-high prices for orphan drugs are the norm for the U.S. pharmaceutical industry. Four drugs approved in 2013 for rare diseases by other companies cost patients between $250,000 to $290,000 per year. The U.S. populations for these specific drugs are estimated to be between 500 and 20,000 people.

Defenders of the FDA’s orphan drug policy and the high-priced therapies say that without the opportunity to recover investments, companies would not take the risk to develop drugs for small populations. As a result, those patients would suffer.

“About 5,000 rare diseases have been identified,” McEnany said. “One in 10 Americans has a rare disease. Small companies are the ones that develop these drugs, and without FDA incentives and marketing protection, no one would take the risk.”

Sharma, the University of Miami medical school neurologist, echoes that sentiment. “We are in a capitalist society, and they have to charge more,” he said. The FDA orphan drug program works because we are seeing new drugs reach the market, “and without it, no one would invest in these drugs.”

“Without these drugs, society will pay,” Sharma added. “Patients would suffer and would have to stay home and miss work. Other people will need to take care of them. All of this is a cost to society.”

How do patients afford such high prices? Private and government insurance plans negotiate payment levels and drug companies offer special pricing for those without insurance. In some special compassionate cases, patients can receive medications free of charge.

Rountree, for example, received Firdapse at no charge under Catalyst’s Phase III clinical trial and currently obtains it under the company’s expanded access program.

If Firdapse, widely seen as the most promising new LEMS therapy to date, does not win FDA approval, some LEMS patients likely will still be able to obtain 3,4-DAP (but not the Firdapse formulation) from compounding pharmacies or an expanded access program. But until the FDA approves some formulation of the drug for commercial use, it cannot be sold to the public — or to all the LEMS patients who desperately need it.

“Some of these patients have no other treatment. Sharma said. “If you can find a drug that works, it will help.”

The writer can be reached at

How drugs get to your medicine cabinet

Thousands of drugs and therapies are being developed around the world. Some are what the FDA calls “novel new drugs,” or truly innovative medications that advance clinical care to a new level. But most are new forms of previously approved drugs or generic formulations.

Major pharmaceutical companies like Merck, Bayer and Pfizer spend most of their research money — estimated by the pharmaceuticals industry to have totaled more than $51 billion last year — on new drugs targeting large population groups.

Rare diseases affect very small populations, and don’t offer the financial benefits of mass markets for diseases like cancer, heart disease diabetes, and hepatitis C.

Some large companies do invest in treatments for rare diseases, like LEMS, but most “orphan drug” R&D is carried out by smaller companies.

The FDA reported that it approved 41 “novel new drugs” in 2014, more than any other year on record. Of these, 17 were approved to treat rare or “orphan” diseases, also a record. These included drugs for treating multicentric Castleman’s disease, a rare tropical disease called leishmaniasis and a rare genetic disorder called mucopolysaccaridosis type IVA.

Typically, it takes 10 years or more to develop a new drug for general use and costs $2.6 billion, according to the Pharmaceutical Research and Manufacturers of America (PhRMA, a large trade and lobbying group. That price tag, which covers the period from 2000 to the early part of the second decade, includes the cost of failed drugs. Less than 12 percent of drugs entering clinical trials are approved, PhRMA said.

“Development” means that after a company identifies a potentially useful drug, it carries out preclinical (animal) testing, makes an Investigational New Drug application to the FDA, then does Phase I studies (usually 20-80 healthy people), Phase II studies (up to about 300 people with a certain disease or disorder), and Phase III (from several hundred to 3,000 people with the targeted disease).

In the case of orphan drugs, the samples are much smaller since target populations are very small.

If Phase III studies show that a drug is safe and effective and is statistically more effective than a placebo, the company submits a New Drug Application (NDA), which contains the results of all the trials and any other relevant research done on the drug.

The FDA has 60 days to decide if it will act on the NDA and file it for review. It can also refuse an application it deems incomplete.

The FDA says that it expects to act on at least 90 percent of NDAs for “normal drugs” no later than 10 months after applications are received. The goal is six months for priority drugs. The latter refer to drugs that are classified as breakthrough therapies (like Firdapse), that offer a significant improvement over existing therapies or that fill an unmet need. These drugs can receive expedited development and review.

If Firdapse is approved this year by the FDA for commercial sale, that will mean it took more than 15 years since amifampridine phosphate was developed at a hospital in Paris. (It is not clear exactly when this “new molecular entity” was first synthesized, but independent researchers were studying the new compound in the late 1980s.)

Approval this year would come about six years after BioMarin acquired the rights to the drug, which it called Firdapse, and began clinical trials, and three years after Catalyst continued the clinical trials, which concluded last year.

Two factors helped speed up the review process for Firdapse. First, it was awarded “orphan drug status” by the FDA in 2009. And second, the FDA granted “breakthrough therapy” status to Firdapse in 2013, which means it is eligible for fast-track status.

The FDA also is well aware that Firdapse has been sold in the European Union since 2010.

According to BioPharmGuy, a national website that provides a data base on pharmaceutical companies in each state, Florida has more than 120 biotech, pharmaceutical and life sciences companies. The list includes Catalyst, Bio-Tissue, Beckman-Coulter, Teva and Noven Pharmaceuticals in the Miami area. The FDA will not comment on whether any of these companies are seeking approval of a new drug.


Catalyst Pharmaceuticals Inc.

Business: Catalyst is a small biopharmaceutical company that finds and develops drugs to treat rare diseases, a business that requires large investments and carries a high level of risk. Although it currently does not sell any drugs, the company has invested heavily in developing one new compound — called Firdapse — for treating two rare and debilitating neurological diseases. Catalyst will soon apply to the U.S. Food and Drug Administration (FDA) for approval to sell Firdapse in North America. If the FDA grants approval, Catalyst expects to begin selling this new drug sometime next year. The company is also developing another new drug to treat other rare medical conditions such as infantile spasms and Tourette Syndrome. The FDA defines rare diseases or disorders as those affecting less than 200,000 people in the United States. The company, originally founded as Catalyst Pharmaceutical Partners Inc., recently changed its name to Catalyst Pharmaceuticals Inc.

Founders: Patrick J. McEnany and Hubert E. Huckel, M.D. (died in 2014).

Founded: 2002.

Headquarters: 355 Alhambra Circle, Coral Gables.

Chairman, CEO and co-founder: Patrick J. McEnany.

Employees: Currently 16, up from eight last year. Catalyst plans to add more professional staff in anticipation of a new drug launch in 2016. The company contracts outside laboratories and institutions to conduct clinical trials and other studies.

Ownership: Publicly traded on NASDAQ (Symbol: CPRX).

Financials: The company has no sales revenues. Its R&D activities, operating expenses and other costs are funded by the capital it has raised from private investors. Its most recent public stock offering earlier this year raised about $34.7 million. Last year, Catalyst reported a net loss of $15.5 million, up from a loss of nearly $12.2 million in 2013. R&D expenses accounted for the bulk of company spending in both years.


Sources: Catalyst Pharmaceuticals and filings with the U.S. Securities and Exchange Commission.

Catalyst Pharmaceutical shares: What the analysts say

Coral Gables-based Catalyst Pharmaceuticals, which trades on the NASDAQ exchange under the symbol CPRX, lost $15.5 million last year and nearly $12.2 million in 2013. These losses resulted mostly from large investments in research and development for a drug to treat a rare autoimmune neurological disease called LEMS (Lambert-Eaton Myasthenic Syndrome) and other neurological disorders.

Catalyst has zero revenues because it doesn’t sell anything — as yet. Still, the company has raised tens of millions of dollars through public stock offerings in recent years and stock analysts have assigned a “buy” rating to its shares.

The company is counting on FDA approval of its main drug — Firdapse — so it can start selling the drug to LEMS patients and others in the U.S., Canada and Mexico next year.

Firdapse has already been approved for sale in the European Union and is being produced and sold there by another U.S. pharmaceutical firm, California-based BioMarin, which sold the Firdapse North America rights to Catalyst in 2012.

So why would anyone invest in a company with no revenues and a product that is awaiting approval by a huge, unpredictable government bureaucracy?

“The first company that gets to the market with a new drug for LEMS will own the market,” said Charles Duncan, who has a doctorate in pharmaceutical sciences and is a senior research analyst for Piper Jaffray Investment Research.

His investment firm and others are optimistic that Catalyst will obtain FDA approval to market Firdapse in North America to about 900 neuromuscular specialist and will be able to obtain substantial revenues to cover their past investments and financial losses.

Duncan, and his research analyst associate at Piper Jaffray, Roy Buchanan, Ph.D., recommend that investors buy Catalyst stock, with an “overweight” rating.

In recent reports to investors, the Piper Jaffray analysts point out that Firdapase has been well-studied, is already being used successfully for LEMS in the EU, and recently completed its critical Phase III FDA clinical trials. Catalyst is also well capitalized, has clear plans for launching Firdapse and seems to be well ahead of another company, New Jersey-based Jacobus Pharmaceutical, which is also testing a competing version of the drug.

They also believe Firdapse has potential to treat patients with another rare disease, Congenital Myasthenic Syndome (CMS), and perhaps other disorders.

If approved, Piper Jaffray projects Firdapse revenues in the U.S. market alone to move from zero in 2015 to $22.7 million in 2016 and rise to more than $160 million per year in 2020.

Analysts from two other investment advisory firms, SunTrust Robinson Humphrey and MLV & Co., also have assigned “buy” ratings to Catalyst. Thompson/First Call reported this month that four analysts cover Catalyst, and all four currently have a “buy” rating on the stock.

Investors apparently agree. In February, Catalyst raised about $34.7 million by selling 11.5 million shares of its stock.

Since 2011, Catalyst has raised about $86.4 million by selling shares to the public.

Friday, Catalyst stock closed at $5.21 a share, down 1 cent from the previous day. The 52-week range for Catalyst was $2.14 to $5.30.


What is LEMS?

LEMS is an autoimmune neuromuscular disease affecting mostly adults. It is caused by a disruption in communication between nerves and muscles, so that a nerve signal fails to activate the muscle. Symptoms include fatigue, muscle weakness, difficulty swallowing or speaking and irregular eye movements.

The disease is often difficult to diagnose and may be confused with Myesthenia Gravis, another autoimmune neuromuscular disorder.

About 50 percent or more of people diagnosed with LEMS have cancer, usually small cell lung cancer. If the cancer is treated successfully, the LEMS symptoms often improve. For LEMS patients without cancer, traditional treatments include immunotherapy, 4-Aminopyridine (Fampridine) and guanidine, a drug that can have serious side effects.