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Catalyst Pharmaceutical Partners: Business Model And Near-Term Catalysts

|Includes:Catalyst Pharmaceutical Partners, Inc. (CPRX)

Catalyst Pharmaceutical Partners, Inc.(NASDAQ: CPRX), is a specialty pharmaceutical company focused on in-licensing, developing and commercializing novel prescription drugs to treat rare (orphan) neuromuscular and neurological diseases, including Lambert-Eaton Myasthenic Syndrome (LEMS), infantile spasms, and Tourette's disorder.

Firdapse- Expanded access vs. FDA Approved drug

Firdapse is amifampridine phosphate and being developed by Catalyst as a prescription drug as we normally get from pharmacy under room temperature. It's a stable form of 3,4-Diaminopyridine(or 3,4-DAP), which can only be stored in the refrigerator.

3,4-DAP, like many other FDA unapproved drugs, is under FDA Expanded access for LEMS, sometimes called "compassionate use," is the use of an investigational drug outside of a clinical trial to treat a patient with a serious or immediately life-threatening disease or condition who has no comparable or satisfactory alternative treatment options. Based on same FDA website, some companies provide the drug for free to patients. Other companies charge patients costs associated with the manufacture of the drug. Most insurance companies will not pay for access to an investigational drug.

To be clear, the drugs under FDA Expanded access are not allowed to be sold, these disapproved drugs will require drug trials and certification - a massive and expensive process. Under current law, after successful completion of FDA trials these drugs will be granted approval and can be sold for profits.

I hope above provide clarification on why Jacobus Pharmaceuticals, a small, private, family-owned pharmaceutical company in New Jersey, has provided LEMS patients in the U.S. with an effective drug known as 3,4-Dap free of charge, which was pointed out by Street Analyst Adam Feuerstein in his article . However, the article didn't inform readers that drugs under FDA Expanded access are not allowed to be sold for any profit by law.

People may question why get FDA approved if an Expanded access is in place. Let's imagine below three real life scenarios:

1. The manufacturer no longer in business or change its mind. There is not an obligation for manufacturer to provide free drug forever despite the fact that the disease will affect human being forever.

2. Life-threatening disease or conditions are rarely just unique to US. What to do with rest of world where arguably more patients than US and Europe combined?

3. If a patient condition deteriorates in the morning & desperately need the prescription, but going through the FDA Expanded access would take weeks, if not months.

That's why company like Catalyst, BioMarin Pharmaceutical (NASNAQ: BMRN) go through drug trials and certification to get drug approved so that patients would be protected for all three above scenarios.

It's true Catalyst could make profits, which can only be used to further develop its other pipelines like CPP-115. This would in turn cure more patients for other diseases. It's good for the long term wellbeing of all patients & Insurance Company will reimburse the cost like all other prescription drugs approved by FDA. FDA is gold standard for medicine development in the world and I believe Catalyst's following FDA regulatory pathway is the only game in town.

Firdapse vs 3,4-DAP- who get FDA approval first?

It's unknown why Jacobus Pharmaceuticals, after 20 years providing the drug for free, suddenly decide on going through massively expensive trial process to get 3,4-DAP approved by FDA. However, one version provided by Adam Feuerstein in his article suggested that Jacobus wanted to continue its free drug business for the benefit of patients. I think everyone deserve their opinion, it's up to intelligent investors to interpret Jacobus true intention.

Putting intention aside, who get approve first is rather a simple question just by comparing the FDA status of the clinical trials of both companies.

Catalyst's lead candidate, Firdapse™ for the treatment of LEMS, is currently undergoing testing in a global, multi-center, pivotal phase III trial. It just received Breakthrough Therapy Designation (BTD) From FDA & the top line result will be scheduled to release in Q2/2014.

For years, the pharmaceutical industry has been searching for new ways to get its drugs to market faster and with fewer pre-approval testing and clinical trial requirements. And it appears that the industry has made significant headway with the 2012 passage of the Food and Drug Administration Safety and Innovation Act (FDASIA), which allows FDA to expedite the development and review of such drugs very quickly under the designation of being a "breakthrough therapy."

Jacobus Pharmaceuticals's Effectiveness of 3,4-Diaminopyridine in Lambert-Eaton Myasthenic Syndrome (DAPPER) is currently undergoing Phase II trial. The company is a family drug maker and doesn't have a website. So investors have limited info available.

Assuming Jacobus has enough financial resources (ballpark $15 to $25 millions per Catalyst trials), based on FDA regulations govering clinical trials, Jacobus need to request a post-phase II meeting in order to establish a formal Phase III pivotal trial protocol. Then after a successful Phase III trial, New Drug Application (NDA) can be prepared for FDA approval.

From above, it's reasonable to conclude, with a good safety margin, that Jacobus Pharmaceutical is years behind Catalyst in getting FDA approval, if at all.

After FDA approval Firdapse, the expanded access run by Jacobus would be ceased by FDA regulations governing Expanded Access.

As no drug product containing amifampridine for any indication has been approved by FDA, If catalyst is the first to obtain approval of the product in the U.S., it will also be eligible for five-year new chemical entity exclusivity, which provides a five-year period of marketing exclusivity for all indications.This would effectively block Jacobus Pharmaceuticals from getting approved by other indications.

Near Term Catalysts

Recent share price correction provides a very compelling entry for the upcoming potential run-up of below near-term catalysts:

Q4 2013

• Complete enrollment of Firdapse™ Phase III clinical trial

1H 2014

• Top-line results from Tourette's Disorder study


• Top-line results from Firdapse™ Phase III clinical trial

With the fact that 3,4-DAP has been around for 20 years under FDA compassionate use programs & Firdapse was approved and marketed by Biomarin in Europe since 2010, the probability of positive Phase III result for Firdapse is very high.

2013 average Analyst Ratings for Catalyst is 4.83 on a positive Phase III- Firdapse. Per Wikipedia, people who develop LEMS are usually over 40. As the world population aging in US, Europe, China, Japan, Canada, etc, the market potential for Firdapse will grow accordingly.

Thoughts on CPP-115

Even Firdapse is Catalyst's current top candidate, long term investors believe the Catalyst real game changer is CPP-115. You can find very good Seeking Alpha Articles from respected contributors in here, here and here.

It's interesting to note that the current average analyst price target of 4.83 didn't assign any value in CPP-115. So any significant developments in CPP-155 could have a potential large effect on analyst's price target upgrades. Analysts and investors will closely watch how Catalyst will move forward its CPP-115 strategy after Top-line results from Tourette's Disorder study in Q1/2014, which may include a potential partnership deal with a large pharma.

Final Note

In biotech world, when there is compelling story, the smart money always gets in first. Case in point, I noticed a high qualify biotech investor- New Leaf Venture Partners (NLVP)- participated recent secondary financing of Catalyst at 1.73. NLVP also participated private placement in Acadia Pharmaceuticals (NASDAQ: ACAD) at $4.43 in November 2012 and exited this year at huge rally.

Like most development-phase pharmaceuticals, Catalyst certainly runs the risk of failure in one or all of its current or upcoming trials. Multiple expected and unknown developments or opinions from other analysts could significantly impact share price. I advise much DD into this promising company before opening any type of investment position.

Disclosure: I am long CPRX.

Stocks: CPRX