Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule of the Exchange Act:

As of June 30, 2020, the last business day of the Registrant’s most recently completed second quarter, the aggregate market value of all voting, and common equity held by was $444,887,344.

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).    Yes  ☐    No  ☒

This Annual Report on Form contains “forward-looking statements”, as that term is defined in the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, plans or objectives for future operations and anticipated results of operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, “believes”, “anticipates”, “proposes”, “plans”, “expects”, “intends”, “may”, and other similar expressions are intended to identify forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or other achievements to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the section entitled “Item 1A – Risk Factors” and those discussed in the section entitled “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Caution Concerning Forward-Looking Statements.”

We are a biopharmaceutical company focused on developing and commercializing innovative therapies for people with rare, debilitating, chronic diseases. We are currently focusing our efforts on products that treat diseases in the neuromuscular and neurological space, but we recently decided to expand our strategic focus to include acquiring or innovative technology platforms and earlier stage programs in other rare disease therapeutic categories outside of these spaces. We are dedicated to making a meaningful impact on the lives of those suffering from rare diseases, and we believe in putting patients first in everything we do.

The pandemic has resulted, and is expected to continue to result, in significant economic disruption, and has adversely affected and will likely continue to adversely affect our business. We are actively monitoring the situation and are taking those actions that may be required by federal, state or local authorities or that we determine are in the best interests of our patients, investigators, employees and stockholders.

In March 2020, in light of worsening conditions as a result of the pandemic, we implemented a number of safety related initiatives among our employees, including a travel ban and a work from home policy for all employees. This included our customer-facing employees, who began working remotely and utilizing telephone and technologies to provide support to patients and their healthcare providers. We believe that because many healthcare providers have delayed seeing new patients because of the pandemic, there has been a delay in the diagnosis of new LEMS patients and their initiating therapy, which has slowed our efforts to locate new patients who could benefit from our therapy. However, we believe that as more healthcare providers resume seeing new patients on a regular basis, that this aspect of the pandemic on our business will lessen.

Our Firdapse supply chain remains robust and thus far we have observed no disruptions in the production of Firdapse. We reiterate that we are committed to providing patients with the ability to obtain an uninterrupted supply of Firdapse, and we believe that we have an adequate supply of Firdapse to address patients’ needs for the foreseeable future. Further, we are advised by our U.S. manufacturing partners that they have implemented contingency plans to remain in operation. We are committed to meeting our patients’ needs for Firdapse and believe that our supply chain will continue to remain solid and uninterrupted through the outbreak and beyond.

Until such time as the pandemic is over, it will likely adversely impact the timetable of our ongoing and contemplated clinical trials and studies, and increase the costs of such trials and studies, consistent with the impact that the pandemic has had on many biopharmaceutical companies.

Our Board of Directors recently approved an expansion in our company’s strategic focus to include acquiring or innovative technology platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases. To accomplish these new priorities, we are prepared to invest more heavily in research and development, including acquiring earlier stage opportunities and innovative technology. We believe that this strategic expansion will better position our company to build out a broader more diversified portfolio of drug candidates that we believe will add greater value to our company over the near and long-term. However, there can be no assurance that whatever product candidates or technology platforms we acquire, if any, will be successfully developed.

To spearhead this investment, we have commenced a national search for a key executive to manage this more progressive strategy. This person will likely be an M.D. or Ph.D. with at least years of relevant pharmaceutical experience and experience in developing innovative drug technology. This person will be responsible for portfolio expansion planning and developing medicines from discovery through marketing authorizations, as well as strategic leadership across all R&D activities including, direct oversight of science and clinical research.

In October 2012, we licensed the North American rights to Firdapse, a proprietary form of amifampridine phosphate, or chemically known as phosphate. When we acquired the rights to the product, it had already been granted orphan drug designation by the Food and Drug Administration (FDA) for the treatment of patients with LEMS, a rare and sometimes fatal autoimmune disease characterized by muscle weakness. Additionally, in August 2013, we were granted “breakthrough therapy designation” by the FDA for Firdapse for the treatment of LEMS. Further, the FDA has granted Orphan Drug Designation for Firdapse for the treatment of Myasthenia Gravis (MG).

On November 28, 2018, we received approval from the FDA for Firdapse 10 mg tablets for the treatment of adult LEMS patients (ages 17 and above). In January 2019, we launched Firdapse in the United States, selling through a field force experienced in neurologic, central nervous system or rare disease products consisting at the time of approximately 20 field personnel, including sales (Regional Account Managers), patient assistance and insurance navigation support (Patient Access Liaisons), and payor reimbursement (National Account Managers). We also have a field-based force of six medical science liaisons who are helping educate the medical communities and patients about LEMS and about our ongoing clinical trial activities evaluating Firdapsefor other ultra-orphan, neuromuscular diseases. Finally, we are working with several rare disease advocacy organizations (including Global Genes, the National Organization for Rare Disorders (NORD), and the Myasthenia Gravis Foundation of America) to help increase awareness and level of support for patients living with LEMS, Anti-MuSK antibody positive myasthenia gravis, or and other neurological diseases, and to provide education for the physicians who treat these rare diseases and the patients they treat.

In early 2020, we expanded our field sales group by almost one hundred percent and contracted with an experienced inside sales agency generating leads through telemarketing to targeted physicians. We made these changes to expand our sales efforts beyond the neuromuscular specialists who regularly treat LEMS patients to reach the roughly 9,000 neurology and neuromuscular healthcare providers that may be treating an adult LEMS patient who can benefit from Firdapse. We also continue to make available at a LEMS voltage gated calcium channel (VGCC) antibody testing program for use by physicians who suspect that one of their patients may have LEMS and wish to reach a definitive diagnosis. Further, we are continuing to expand our digital and social media activities in order to introduce our product and services to potential patients and their healthcare providers.

In order to help adult LEMS patients afford their medication, we, like other pharmaceutical companies which are marketing drugs for ultra-orphan conditions, have developed an array of financial assistance programs that are available to reduce patient and deductibles to a nominal affordable amount. For eligible patients with commercial coverage, a assistance program designed to keep costs to not more than $10.00 per month is available for all LEMS patients prescribed Firdapse. We are also donating, and committing to continue to donate, money to qualified, independent charitable foundations dedicated to providing assistance to any U.S. LEMS patients in financial need. Subject to compliance with regulatory requirements, our goal is that no LEMS patient is ever denied access to their medication for financial reasons.

In May 2019, the FDA approved a New Drug Application (NDA) for Ruzurgi, another version of amifampridine for the treatment of pediatric LEMS patients (ages 6 to under 17). While the NDA for Ruzurgi only covers pediatric patients, we believe that Ruzurgi is regularly being prescribed off label to adult LEMS patients. We believe that under applicable law, Jacobus is not permitted to market its amifampridine product to adult LEMS patients in the United States, and we are continuing to aggressively take all steps available to us to protect Firdapse’s exclusivity under the Orphan Drug Act. There can be no assurance, however, that we will be able to stop the prescribing of Ruzurgi to adult LEMS patients. If Jacobus is able to successfully sell Ruzurgi to additional adult LEMS patients, it could have a material adverse effect on our business, financial condition and results of operations.

On August 10, 2020, we announced the results from our Phase 3 clinical trial evaluating Firdapse for the treatment of adults with Our trial was a multi-site, international (United States, Italy and Serbia), double-blind, placebo-controlled, clinical trial being conducted under a Special Protocol Assessment (SPA) with the FDA. Unfortunately, the trial did not achieve statistical significance on its primary endpoint or its secondary endpoint. However, we have recently concluded a detailed analysis of the data from this trial in an effort to understand why the Phase 3 trial did not meet statistical significance on its endpoints, even though clinical improvement was observed by patients and investigators during the initial dose-titration period of the trial and in our previous trial. We found in our analysis that there was a large degree of symptom variability during the double-blind withdrawal period. We believe that sources of such variability can be addressed in a redesigned study that may better demonstrate the efficacy of our drug for the treatment of

We plan to present our hypotheses and a revised protocol to the FDA with respect to the indication for discussion during the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our protocol design or, even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence for approval of the indication. While we prepare for the meeting with FDA, we also plan to evaluate new clinical trial sites and discuss the new trial design with investigators. After meeting with the FDA, we will determine whether or not to proceed with a new trial that incorporates the new trial design.

Our exploratory study, (A Randomized Placebo Controlled Crossover Study to Evaluate the Safety and Efficacy of Amifampridine Phosphate in Ambulatory Patients with Spinal Muscular Atrophy (SMA) Type 3, met the primary endpoint of a statistically significant difference for the Hammersmith Functional Motor Scale Expanded (HFMSE). Clinically, however, the effect was modest. The secondary endpoints were not statistically significant, although several individual quality of life measures demonstrated a nominally positive statistically significant change. Key opinion leaders with whom we have spoken believed that Firdapse needed to show a large clinically significant change if there was the possibility to affect disease progression through retrograde signaling from enhanced neuromuscular junction function. After considering all of these factors, we have concluded that the modest results exhibited in this study are unlikely to result in a sufficient modification of disease progression, and, particularly in light of the fact that there are now three approved disease modifying medications for SMA Type 3, we have decided not to pursue the SMA Type 3 indication further.

We intend to conduct a study evaluating Firdapseas a treatment for Hereditary Neuropathy with Liability to Pressure Palsies (HNPP). The scientific basis for considering this indication is that leakage of neuron potassium channels is observed in HNPP. Since Firdapse is a potassium channel blocker, it may mitigate the pathological effects of the potassium channel leakage in HNPP patients. There can be no assurance that this study will be successful.

Our NDS filing for Firdapse for the symptomatic treatment of LEMS was approved by Health Canada on July 31, 2020. In August 2020, we entered into a license agreement with KYE Pharmaceuticals (KYE), pursuant to which we licensed the Canadian rights for Firdapse for the treatment of LEMS to KYE. Pursuant to the license agreement, KYE is obligated to pay us an payment based on approval and product supply, data protection milestones based on achievements of sales and regulatory milestones, and a sharing of defined net sales upon commercialization.

In December 2018, we entered into a definitive agreement with Endo International plc’s subsidiary, Endo Ventures Limited (“Endo”), for the further development and commercialization of generic Sabril tablets through Endo’s United States Generic Pharmaceuticals segment, Par Pharmaceutical. Pursuant to the agreement, in December 2018, we received an payment of $500,000. We will be entitled to receive a milestone payment of $2.0 million on the commercial launch of the product. Further, we will receive a sharing of defined net profits upon commercialization and we are obligated to share the costs of certain development expenses.

Firdapse is Catalyst’s registered trade name in the United States for amifampridine phosphate tablets. Amifampridine is the WHO (World Health Organization) registered INN (International Nonproprietary Name) and United States Adopted Name (USAN) for the chemical entity, often abbreviated as or DAP. Firdapse contains the phosphate salt of amifampridine, hence the name “amifampridine phosphate.” We will refer to our drug by its trade name in the United States (Firdapse), by the INN/USAN (amifampridine), or by the specific salt in our product (amifampridine phosphate), throughout this

Myasthenia Gravis, or MG, is a chronic autoimmune neuromuscular disorder that is characterized by fluctuating weakness of the voluntary muscle groups. The prevalence of MG in the United States is estimated to be about 20/100,000 population (equating to an estimate of approximately 64,000 patients in the United States). However, according to the Myasthenia Gravis Foundation of America, MG is probably under diagnosed and the prevalence may be higher. For example, patients with may have focal or regional weakness and muscle atrophy that are more suggestive of motor neuron or muscle membrane (myopathy) disease. MG occurs in all races, both genders, and at any age. MG is not thought to be directly inherited (although it occasionally occurs in more than one member of the same family), nor is it contagious.

About 15% of MG patients test negative for the acetylcholine receptor antibody. These patients have seronegative (SN) MG. Approximately of these patients with SNMG test positive for antibodies against muscle-specific receptor tyrosine kinase (MuSK), a surface membrane component essential in the development of the neuromuscular junction. These patients are identified as having Anti-MuSK antibodies identify a clinically distinguishable, more severe form of MG. The disease is characterized by a prominent weakness of the neck, and sometimes respiratory musculature. Although many patients with are presently treated with standard MG treatments such as anticholinesterase inhibitors or immunosuppressants, such patients do not generally respond adequately to these treatments.

Based on currently available information, we estimate that there are between 3,000 and 4,800 patients in the United States. There is currently no drug therapy approved by the FDA for the treatment of

There is currently no standard medical treatment for HNPP. Management generally involves strategies to avoid or modify positions (such as leaning on the elbows) and activities that cause symptoms, and using splints or pads on the wrists or arms to avoid pressure on the nerves. An ankle-foot orthosis may be needed permanently for those with a residual foot drop. Management of pain may include pain medicines and/or prescription drugs used for peripheral neuropathy.

We conducted two successful Phase 3 double-blind, placebo controlled clinical trials evaluating Firdapse for the treatment of LEMS. The results of the first trial published in 2016 in (). The results of the second trial were published in March 2019 in the Journal of Clinical Neuromuscular Disease ().

In early 2020, we expanded our field sales group by almost one hundred percent and established a partnership with an experienced inside sales agency generating leads through telemarketing to targeted physicians. Through this expansion of our sales team, we are working to expand our sales efforts beyond the neuromuscular specialists who regularly treat LEMS patients to reach roughly 9,000 neurology and neuromuscular healthcare providers that might be treating an adult LEMS patient who can benefit from Firdapse. We also make available a LEMS voltage gated calcium channel (VGCC) antibody testing program for physicians who suspect their patient may have LEMS and wish to reach a definitive diagnosis.

In order to help patients afford their medication, we, like other pharmaceutical companies who are marketing drugs for ultra-orphan conditions, have developed an array of financial assistance programs that are available to reduce patient and deductibles to a nominal affordable amount. For eligible patients with commercial coverage, a assistance program designed to keep costs to $10 or less per month is available for all LEMS patients prescribed Firdapse. We are also donating, and committing to continue to donate, money to qualified, independent charitable foundations dedicated to providing assistance to LEMS patients in financial need. Our goal is to ensure that no LEMS patient is ever denied access to their medication for financial reasons.

In May 2019, the FDA approved an NDA for Ruzurgi, Jacobus Pharmaceuticals’ version of amifampridine for the treatment of pediatric LEMS patients (ages 6 to under 17). We believe that the vast majority of Ruzurgi sales are to adult LEMS patients who are being prescribed the drug off label. If Jacobus is able to successfully sell Ruzurgi to additional adult LEMS patients, it could have a material adverse effect on our business, financial condition and results of operations.

Sales of pharmaceutical products depend in significant part on the availability of coverage and adequate reimbursement by third party payors, such as state and federal governments, including Medicare and Medicaid, managed care providers, private commercial insurance plans and pharmacy benefit management (PBM) plans. Decisions regarding the extent of coverage and the amount of reimbursement to be provided for Firdapse are expected to be made on a and in some cases, on a basis. Particularly given the rarity of LEMS, our experience has been that securing coverage and appropriate reimbursement from third-party payors requires targeted education and highly skilled insurance navigation experts that have experience with rare disease launches and medical exception processes at insurance companies to provide patient coverage for important rare disease therapies. To that end, we have engaged a dedicated team of field-based market access account managers and reimbursement experts as well as a patient service center staffed with experienced personnel focused on ensuring that clinically-qualified patients have access to our product.

In February 2016, we initiated an investigator-sponsored, randomized, double-blind, placebo-controlled, crossover clinical trial evaluating the safety, tolerability and potential efficacy of Firdapse as a symptomatic treatment for patients with Seven patients participated in this trial. On March 15, 2017, we reported results from this trial. Both of the efficacy endpoints of change from baseline (CFB) in total Quantitative Myasthenia Gravis (QMG) score (p=0.0003) and CFB in total Myasthenia Gravis Activities of Daily Living score (p=0.0006) were statistically and clinically significant in this trial. Several secondary efficacy measures also achieved statistical significance. Amifampridine phosphate was well tolerated in this population of patients.

The results of this study were published in SAGE Open Medicine and can be accessed at .

Subsequently, we engaged in a Phase 3 clinical trial evaluating Firdapse for the treatment of adults with Our trial was a multi-site, international (United States, Italy and Serbia), double-blind, placebo-controlled, clinical trial being conducted under a Special Protocol Assessment (SPA) with the FDA. The trial enrolled more than 60 MuSK antibody positive patients. It also enrolled more than 10 generalized myasthenia gravis patients who were assessed with the same clinical endpoints. However, achieving statistical significance in this subgroup of patients was not required.

On August 10, 2020, we announced the results from our Phase 3 clinical trial evaluating Firdapse for the treatment of adults with Unfortunately, the trial did not achieve statistical significance on its primary endpoint or its secondary endpoint, even though clinical improvement was observed by patients and investigators during the initial dose-titration period of the trial and in the company’s previous trial. However, we have recently concluded a detailed analysis of the data from this trial in an effort to understand why the Phase 3 trial did not meet statistical significance on its endpoints. We found in our analysis that there was a large degree of symptom variability during the double-blind withdrawal period. We believe that sources of such variability can be addressed in a redesigned study that may better demonstrate the efficacy of our drug for the treatment of

With respect to the indication, we plan to present our hypotheses and a revised protocol to the FDA for discussion during the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our protocol design or, even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence for approval of the indication. While we prepare for the meeting with FDA, we also plan to evaluate new clinical trial sites and discuss the new trial design with investigators. After meeting with the FDA, we will determine whether or not to proceed with a new trial that incorporates the new trial design.

Our exploratory study, (A Randomized Placebo Controlled Crossover Study to Evaluate the Safety and Efficacy of Amifampridine Phosphate in Ambulatory Patients with Spinal Muscular Atrophy (SMA) Type 3, met the primary endpoint of a statistically significant difference for the Hammersmith Functional Motor Scale Expanded (HFMSE). Clinically, however, the effect was modest. The secondary endpoints were not statistically significant, although several individual quality of life measures demonstrated a positive nominally statistically significant change. Key opinion leaders with whom we have spoken believed that Firdapse needed to show a large clinically significant change if there was the possibility to affect disease progression through retrograde signaling from enhanced neuromuscular junction function. After considering all of these factors, we have concluded that the modest results exhibited in this study are unlikely to result in a sufficient modification of disease progression, and, particularly in light of the fact that there are now three approved disease modifying medications for SMA Type 3, we have decided not to pursue the SMA Type 3 indication further.

We intend to conduct a study evaluating Firdapse as a treatment for Hereditary Neuropathy with Liability to Pressure Palsies (HNPP). The scientific basis for considering this indication is that leakage of neuron potassium channels is observed in HNPP. Firdapse is a potassium channel blocker and may mitigate the pathological effects of the potassium channel leakage in HNPP patients.

HNPP is an autosomal-dominantly inherited peripheral nerve disease caused by a heterozygous deletion of PMP22 gene, leading to a reduction of PMP22 proteins by of normal level, which results in disruption of the myelin sheaths of motor neuron axons. Patients with HNPP often present with focal sensory and motor deficits. The events may be triggered by mild mechanical compressions innocuous to healthy humans. In addition, HNPP patients are also afflicted by fatigue. We believe that HNPP affects about 6,000 patients in the Unites States. There can be no assurance of the results of this trial.

We had previously reported that we planned to evaluate Firdapse as a treatment of Kennedy’s disease (spinal bulbar muscular atrophy). Previously, key opinion leaders had suggested to us that Firdapse might be an effective treatment for the symptoms of Kennedy’s disease. However, given the results of the SMA Type 3 study and the lack of a targeted mechanism of action for Firdapse in Kennedy’s disease, we have determined not to pursue this indication further.

In September 2015, we announced the launch of a program to develop our version of vigabatrin as a generic version of Sabril, which is marketed in the United States by Lundbeck. Lundbeck’s exclusivity for Sabril expired on April 26, 2018. Vigabatrin comes in two dosage forms – a powder sachet and a tablet. Par Pharmaceutical brought the first generic version of the powder sachet to market, and since then several additional generic versions of this product have been approved. However, there is only one approved generic version of the tablets at this time.

On December 18, 2018, we entered into a definitive agreement with Endo International plc’s subsidiary, Endo Ventures Limited (“Endo”), for the further development and commercialization of generic Sabril tablets through Endo’s United States Generic Pharmaceuticals segment, Par Pharmaceutical. Pursuant to the agreement, in December 2018, we received an payment of $500,000. We will be entitled to receive a milestone payment of $2.0 million on the commercial launch of the product. Further, we will receive a sharing of defined net profits upon commercialization and certain expenses for development.

We are licensed in Florida as a virtual drug manufacturer, which means that we have no manufacturing capacity and we are obligated to rely on contract manufacturers and packagers. We have no plans to build or acquire the manufacturing capability needed to manufacture any of our research materials or commercial products, and we expect that our drug products and drug substances will be prepared by contractors with suitable capabilities for these tasks and that we will enter into appropriate supply agreements with these contractors at appropriate times in the development and commercialization of our products. Because we will use contractors to manufacture and supply our products, we will be reliant on such contractors. Further, the contractors selected would have to be inspected by the FDA and found to be in substantial compliance with federal regulations in order for a drug application for one of our drug candidates to be approved, and there can be no assurance that the contractors we select would pass such an inspection.

In May 2019, we became aware that the FDA had approved an NDA for Jacobus Pharmaceuticals for Ruzurgi, their version of amifampridine for the treatment of pediatric LEMS patients (ages 6 to under 17). While we have filed suit against the FDA to vacate their approval of Ruzurgi, there can be no assurance as to the outcome of this lawsuit or as to the impact of the approval of Ruzurgi on our business, financial condition or results of operations.

To qualify for these statutory exemptions, a compounded drug product must satisfy several legal requirements. One of these requirements restricts the universe of bulk drug substances that a compounder may use. Specifically, every bulk drug substance used in compounding: (1) must comply with an applicable and current USP or NF drug monograph, if one exists, as well as the current USP chapters on pharmacy compounding; (2) if such a monograph does not exist, the bulk drug substance must be a component of an drug; or (3) if a monograph does not exist and the bulk drug substance is not a component of an drug, it must appear on a list of bulk drug substances that may be used in compounding (i.e., the “Section 503A bulk substances list 1”). While the advertising provisions in Section 503A were ruled unconstitutional in part in the United States by the Supreme Court in 2002, the FDA, since 2013, has aggressively regulated and exercised oversight over the practice of pharmacy compounding following the compounding incident at the New England Compounding Center in Massachusetts that sickened hundreds and killed over 60 individuals.

While the FDA has been aggressively enforcing Section 503A since its compounders may still compound “near copies” (but not “essentially copies”) of approved drug products, under Section 503A, so long as the prescriber makes a change to the compounded formulation that produces for that patient a significant difference between the commercially available drug and the compounded version. Compounders may also copy commercially available products if they do not do so in “regular or inordinate amounts.” In January 2018, FDA published a Final Guidance document titled, “Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product Under Section 503A of the Federal Food, Drug, and Cosmetic Act.” This Final Guidance sets forth FDA’s enforcement policy concerning those compounders that make essentially copies of commercially available drug products. FDA has defined the term “regular or inordinate” in the Final Guidance to mean: “a drug product that is essentially a copy of a commercially available drug product is compounded regularly or in inordinate amounts if it is compounded more frequently than needed to address unanticipated, emergency circumstances, or in more than the small quantities needed to address unanticipated, emergency circumstances.” FDA has further stated it will not take enforcement action, considering all the facts and circumstances, against a compounder that compounds less than four “essentially copies” of a commercially available drug product in a calendar month.

Once a pharmaceutical candidate is identified for development it enters the testing stage. tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Prior to beginning human clinical trials, an IND sponsor must submit an IND to the FDA. The IND sponsor must submit the results of the tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some or testing may continue even after the IND is submitted. In addition to including the results of the studies, the IND will also include a protocol detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated, if the trial lends itself to an efficacy evaluation. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30–day time period, raises concerns or questions about the conduct of the trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. The FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA.

FDA approval of an NDA is required before marketing of the product may begin in the United States. The NDA must include the results of product development, studies and clinical studies, together with other detailed information, including information on the chemistry, manufacture and composition of the product. The FDA has 60 days from its receipt of the NDA to review the application to ensure that it is sufficiently complete for substantive review before filing it. The FDA may request additional information rather than file an NDA. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA files it. Once the submission is filed, the FDA begins an substantive review. The submission of an NDA is also subject to the payment of a substantial application fee (for FDA fiscal year 2021 this fee is $2,875,842), although a waiver of such fee may be obtained under certain limited circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for the indication sought. Further, the sponsor of an approved NDA is subject to an annual program fee, which for FDA fiscal year 2021 is $336,432 per prescription drug product. User fees typically increase annually. The approval process is lengthy and difficult, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s identity, strength, quality, purity and stability.

A SPA is a process in which sponsors may request to meet with the FDA to reach agreement on the design and size of certain clinical trials, clinical studies, or animal trials to determine if they adequately address scientific and regulatory requirements. As part of this process, sponsors submit specific questions about protocol design and scientific and regulatory requirements. After the FDA completes the review of a SPA request, the FDA may issue a SPA Letter, including an assessment of the protocol, agreement or with the proposed protocol, and answers to the sponsor’s relevant questions.

Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for advertising, promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. As a condition of NDA approval, the FDA may also require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides, communication plans for the healthcare professionals, and other Elements To Assure Safe Use, or ETASU. ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of the drug.

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims covering the applicant’s product or approved methods of using the product. Upon approval of a drug, each of the patents listed in the application for the drug are then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application, or ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or carves out) any language regarding the patented rather than certify to a listed patent. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

The ANDA application also will not be approved until any applicable exclusivity listed in the Orange Book for the referenced product has expired.

505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference. If the Section 505(b)(2) applicant can establish that reliance on FDA’s prior findings of safety and effectiveness or published literature is scientifically appropriate, it may eliminate the need to conduct certain or clinical studies of the new product.

Generic drugs may enter the market after the approval of an ANDA. The ANDA development process typically does not require new or clinical studies, but it does typically require one or more bioequivalence studies to show that the ANDA drug is bioequivalent to the previously approved brand name reference listed drug. Bioequivalence studies compare the bioavailability of the proposed drug product with that of the approved listed product containing the same active ingredient. Bioavailability is a measure of the rate and extent to which the active ingredient or active moiety is absorbed from a drug product and becomes available at the site of action. A demonstration of bioequivalence means that the rate and extent of absorption of the ANDA drug is not significantly different from the rate and extent of absorption of the brand name reference listed drug when administered at the same molar dose under similar experimental conditions.

As noted above, generic drug products are generally introduced to the marketplace at the expiration of patent protection and market exclusivity for the reference listed drug. However, if an ANDA applicant is the first ANDA applicant to submit an ANDA containing a Paragraph IV certification, that ANDA may be eligible for a period of generic marketing exclusivity on approval. This exclusivity, which under certain circumstances must be shared with other ANDA applicants with Paragraph IV certifications, lasts for 180 days, during which the FDA cannot grant final approval to other ANDA sponsors of an application for a generic equivalent to the same reference drug. Under certain circumstances, eligibility for exclusivity may be forfeited.

Various types of changes to an approved ANDA must be requested in a prior approval supplement. In addition, some changes may only be approved only after new bioequivalence studies are conducted or other requirements are satisfied. In addition, the ANDA applicant must demonstrate that manufacturing procedures and operations conform to FDA cGMP requirements. Facilities, procedures, operations, and/or testing of products are subject to periodic inspection by the FDA and other authorities. In addition, the FDA conducts and post-approval reviews and inspections to determine whether the systems and processes are in compliance with cGMP and other FDA regulations.

Pediatric exclusivity is another type of exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the five-year and three-year and seven-year orphan exclusivities. This exclusivity may be granted if an NDA sponsor submits pediatric data that fairly responds to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied. If the FDA determines that information relating to the use of the new drug in the pediatric population may produce health benefits in the population, the clinical study is deemed to fairly respond to the FDA’s request and the reports of pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection covering the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application relying on the NDA sponsor’s data.

The European Orphan Drug Regulation is considered for drugs intended to diagnose, prevent or treat a life-threatening or very serious condition afflicting five or fewer per 10,000 people in the EU, including compounds that for serious and chronic conditions would likely not be marketed without incentives due to low market return on the sponsor’s development investment. The medicinal product considered should be of significant benefit to those affected by the condition. Benefits of being granted Orphan Medicinal Product Designation are significant, including eight years of data exclusivity, two years of marketing exclusivity and a potential extension of both. The EU Community and Member States may not accept or grant for ten years a new marketing authorization or application for another drug for the same therapeutic indication as the orphan drug, although the period can be reduced to six years if, after the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of the marketing exclusivity. A supplementary protection certificate may extend the protection six months beyond patent expiration if that is later than the orphan drug exclusivity period. To apply for the supplementary protection, a pediatric investigation plan, or PIP, must be included in the market application. In Europe all drugs now seeking marketing authorization need to have a PIP agreed with the European Medicines Agency (EMA) before it can be approved, even if it is a drug being developed specifically for a pediatric indication. If a product is developed solely for use in the pediatric population, then a Pediatric Use Marketing Authorization, or PUMA, may provide eight years of data exclusivity and ten years of marketing exclusivity.

Sponsors of clinical trials of products, including drugs, are required to register and disclose certain clinical trial information. Information related to the product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of results of these trials can be delayed in certain circumstances for up to two years after the date of completion of the clinical trial. Competitors may use this publicly-available information to gain knowledge regarding the progress of development programs.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including promotion, may also violate false claims laws. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

Prescription drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug promotion, including advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the United States Prescription Drug Marketing Act (PDMA), a part of the FDCA. In addition, Title II of the Federal Drug Quality and Security Act of 2013, known as the Drug Supply Chain Security Act (DSCSA), has imposed new “track and trace” requirements on the distribution of prescription drug products by manufacturers, distributors, and other entities in the drug supply chain. The DSCSA requires product identifiers (i.e., serialization) on prescription drug products in order to eventually establish an electronic interoperable prescription product to system to identify and trace certain prescription drugs distributed in the United States and preempts existing state drug pedigree laws and regulations on this topic. The DSCSA also establishes new requirements for the licensing of wholesale distributors and third-party logistic providers, although FDA regulations addressing wholesale distributors and third party logistics providers have not yet been promulgated. We serialize our product at both the package and homogeneous case level, pass serialization and required transaction information to our customers, and believe that we comply with all such requirements.

We make available free of charge on or through our Internet website our Annual Report on Form Quarterly Reports on Form Current Reports on Form and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC). Our Internet address is . The content on our website is not, nor should it be deemed to be, incorporated by reference into this Form

Until we launched Firdapse for the treatment of LEMS in January 2019, we focused all of our efforts on obtaining regulatory approval for Firdapse for the treatment of LEMS, on evaluating Firdapse for the treatment of other neuromuscular diseases including CMS, and SMA Type 3, on raising capital, and on recruiting personnel. On November 28, 2018, the FDA approved our first product, Firdapse for the treatment of adults with LEMS, which became commercially available in January 2019. While we reported net income of $75.0 million for fiscal 2020 and $31.9 million for fiscal 2019, we have a prior history of operating losses in all prior fiscal years of our existence. There can be no assurance that we will remain profitable.

Even with the FDA approval of Firdapse, the bulk active pharmaceutical ingredient in the drug (i.e., amifampridine) may be used by compounding pharmacies pursuant to Section 503A of the Federal Food, Drug, and Cosmetic Act because the ingredient is a component of an drug product, and pharmacies may lawfully compound for individually identified patients under Section 503A using components of approved drug products. In addition, drugs that are not approved by FDA for the treatment of LEMS, such as a related aminopyridine drug, dalfampridine (Ampyra), may nonetheless be prescribed by physicians for the treatment of LEMS.

On January 6, 2021, we announced an expansion in our strategic focus to include acquiring or innovative technology platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases. We are evaluating opportunities to or acquire products, product candidates and technologies on a selective and targeted basis. Our business development efforts may fail to result in our acquiring rights to additional products, product candidates or technologies, or may result in our consummating transactions with which you do not agree.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate is lengthy and complex, and we may be unable to or acquire the rights to any such products, product candidates or technologies from third parties for several reasons. The success of this strategy depends partly upon our ability to identify, select and acquire or promising product candidates and technologies.

The and acquisition of pharmaceutical products is an area characterized by intense competition, and a number of companies (both more established and early stage biotechnology companies) are also pursuing strategies to or acquire product candidates or technologies that we may consider attractive. We believe that other companies may be particularly active in pursuing opportunities to or acquire the same or similar products which we may seek to acquire. More established companies may have a competitive advantage over us due to their size, cash resources and greater research, preclinical or clinical development or commercialization capabilities, while earlier stage companies may be more aggressive or have a higher risk tolerance. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to or acquire the rights to the relevant product candidate or technology on terms that would allow us to make an appropriate return on our investment. Moreover, we may devote resources to potential acquisitions or opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts or we may incorrectly judge the value of an acquired or product candidate or technology.

If we are unable to successfully obtain rights to suitable product candidates or technologies, our business, financial condition and prospects for growth could suffer. In addition, acquisitions and arrangements for product candidates and technologies are inherently risky, and ultimately, if we do not complete an announced acquisition or license transaction or integrate an acquired or licensed product candidate or technology successfully and in a timely manner, we may not realize the benefits of the acquisition or license to the extent anticipated and the perception of the effectiveness of our management team and our company may suffer in the marketplace. In addition, even if we are able to successfully identify, negotiate and execute one or more transactions to acquire or new product candidates or technologies, our expenses and short-term costs may increase materially and adversely affect our liquidity.

In addition, acquisitions and may entail numerous operational, financial and legal risks, including:

As a public reporting company, we are required to comply with the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, including periodic reports, disclosures and more complex accounting rules. As directed by Section 404 of Sarbanes-Oxley, the SEC adopted rules requiring public companies to include a report of management on a company’s internal control over financial reporting in their Annual Report on Form Based on current rules, we are required to annually report under Section 404(a) of Sarbanes-Oxley regarding our management’s assessment as to the effectiveness of our internal control over financial reporting. Further, under Section 404(b) of Sarbanes-Oxley, our auditors are required to report on their assessment as to the effectiveness of our internal control over financial reporting. If we or our auditors are unable to conclude that we have effective internal control over our financial reporting, investors could lose confidence in the reliability of our consolidated financial statements, which could result in a decrease in the value of our common stock.

We are highly dependent on our officers and key employees and on our Board of Directors. The loss of the services of any of these individuals could significantly impede the achievement of our scientific and business objectives. Other than an employment agreement with Patrick J. McEnany, our Chairman, President and Chief Executive Officer with respect to his services, we have no employment or retention agreements with any of our other officers or key employees. If we lose the services of any of our existing officers or key employees, or if we were unable to recruit qualified replacements on a timely basis for persons who leave our employ, our efforts to develop our drug candidates might be significantly delayed. We do not carry insurance on any of our personnel.

The ongoing global outbreak of the coronavirus and the various attempts throughout the world to contain it, have created significant volatility, uncertainty and disruption. The pandemic has had, and may continue to have, significant effects on our operations. There can be no assurance as to whether and how long these effects will last and whether following the pandemic whatever trends have occurred will not remain in place and continue to affect our business.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities. Global health concerns, such as the pandemic, could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns such as the pandemic could disproportionately impact the hospitals and clinical sites in which we conduct any of our clinical trials, which could have a material adverse effect on our business and our results of operation and financial condition.

As a result, our drug development activities may not result in any safe, effective and commercially viable additional indications, and we may not be able to commercialize our products successfully. For example, for several years, we evaluated Firdapse for the treatment of CMS, and SMA Type 3. However, Firdapse failed to meet the primary endpoints in a Phase 3 trial for CMS and we are no longer pursing this indication. Further, and even though we achieved statistical significance in the primary endpoint in our trial for SMA Type 3 the lack of robust results in this trial has caused us to decide to no longer pursue this indication. Finally, our Phase 3 clinical trial evaluating Firdapse for the treatment of adults with did not achieve statistical significance on its primary endpoint or its secondary endpoint even though clinical improvement was observed by patients and investigators during the initial dose-titration period of the trial and in the company’s previous trial. We plan to redesign a Phase 3 study that may better demonstrate the efficacy of our drug for the treatment of and discuss it with FDA during the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our protocol design or, even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence for approval of the indication.

We will only obtain regulatory approval to commercialize Firdapse for additional indications if we can demonstrate to the satisfaction of the FDA (or the equivalent foreign regulatory authorities) in adequate and well-controlled clinical studies and trials that the drug is safe and effective for its intended use, that the clinical and other benefits outweigh the safety risks and that it otherwise meets approval requirements. As we have experienced in the past, a failure of one or more or clinical trials or studies can occur at any stage of drug development. We may experience numerous unforeseen events during, or as a result of, testing that could delay or prevent us from obtaining regulatory approval for, or commercializing our drug candidates, including but not limited to:

We do not currently have the ability to independently conduct studies or clinical studies and trials, and we typically rely on third parties, such as third-party contract research and governmental organizations, medical institutions and clinical investigators (including academic clinical investigators), to conduct studies and trials for us. Our reliance on third parties for development activities reduces our control over these activities. These third parties may not complete activities on schedule or may not conduct our studies and our clinical studies and trials in accordance with regulatory requirements or our study design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be adversely affected, and our efforts to obtain regulatory approvals for and commercialize Firdapse for additional indications may be delayed.

We are licensed in Florida as a virtual drug manufacturer, which means we have no manufacturing capacity and we will be obligated to rely on contract manufacturers and packagers. We cannot be sure that we will successfully manufacture any product, either independently or under manufacturing arrangements, if any, with third party manufacturers. Moreover, if any manufacturer should cease doing business with us or experience delays, shortages of supply or excessive demands on their capacity, we may not be able to obtain adequate quantities of product in a timely manner, or at all. Manufacturers, and in certain situations their suppliers, are required to comply with current NDA commitments and current good manufacturing practices (cGMP) requirements enforced by the FDA, and similar requirements of other countries. The failure by a manufacturer to comply with these requirements could affect its ability to provide us with product. Although we intend to rely on third-party contract manufacturers, we are ultimately responsible for ensuring that our products are manufactured in accordance with cGMP. In addition, if, during a preapproval inspection or other inspection of our third-party manufacturers’ facility or facilities, the FDA determines that the facility is not in compliance with cGMP, any of our marketing applications that lists such facility as a manufacturer may not be approved or approval may be delayed until the facility comes into compliance with cGMP and completes a successful by the FDA.

Significant of manufacturing may require additional validation studies, which are costly and which the FDA must review and approve. In addition, quality issues may arise during those activities because of the inherent properties of a drug candidate itself or of a drug candidate in combination with other components added during the manufacturing and packaging process, or during shipping and storage of the finished product or active pharmaceutical ingredients. If we are unable to successfully manufacture of any of our drug candidates in sufficient quality and quantity, the development of that drug candidate and regulatory approval or commercial launch for any resulting drug products may be delayed or there may be a shortage in supply, which could significantly harm our business.

Our success in managing our growth will depend in part on the ability of our executive officers to continue to implement and improve our operational, management, information and financial control systems, and to expand, train and manage our employee base, and particularly to expand, train and manage a specially-trained sales force to market our products. We may not be able to attract and retain personnel on acceptable terms given the intense competition for such personnel among biotechnology, pharmaceutical and healthcare companies, universities and research institutions. Our inability to manage growth effectively could cause our operating costs to grow at a faster pace than we currently anticipate and could have a material adverse effect on our business, financial condition, results of operations and prospects.

The pricing of pharmaceutical products, in general, and of specialty drugs, in particular, has been a topic of concern in the United States Congress, where hearings have been held on the topic, and several bills have been introduced proposing a variety of actions to restrain the prices of drugs. Former President Trump frequently discussed his intention to reduce drug prices, as has President Biden. The former Administration solicited public comment on a variety of regulatory proposals to reduce drug prices, and the Department of Health and Human Services (HHS) published an interim final rule that establishes a Most Favored Nation (MFN) Model for Medicare Part B drug payment. This regulation would substantially change the drug reimbursement landscape as it bases Medicare Part B payment for 50 selected drugs on prices in foreign countries instead of average sales price, or ASP. The MFN drug payment amount is expected to be lower than the current payment limit because U.S. drug prices are generally the highest in the world. Although the MFN Model payment methodology was scheduled to begin on January 1, 2021, it faces uncertain prospects for implementation. By the end of December 2020, three federal courts had granted orders preventing implementation of the MFN Model rule. The likelihood of implementation of any of the former Administration reform initiatives is uncertain, particularly in light of the recent change in administration on January 20, 2021 and the new administration’s silence to date on these issues. We cannot predict how any such laws or regulations, or new laws or regulations that have yet to be proposed, will affect the pricing of our product, of orphan drugs generally, or of pharmaceutical products generally.

In February 2019, we received a letter from Senator Bernie Sanders asking us to justify our pricing decision for Firdapse. In the letter, Senator Sanders accuses us of “fleecing” Americans and “immoral exploitation” because of our decision regarding the pricing of Firdapse. We responded to Senator Sanders, who issued a public statement in response asking Commissioner Scott Gottlieb to allow pharmacies and manufacturers who were previously making this drug to be permitted to resume providing it.

Firdapse targets diseases with small patient populations. A key component of the successful commercialization of a drug product for these indications includes identification of patients and a targeted prescriber base for the drug product. Due to small patient populations, we believe that we would need to have significant market penetration to achieve meaningful revenues and identifying patients and targeting the prescriber base are key to achieving significant market penetration. Typically, drugs for conditions with small prevalence have higher prices in order to generate a return on investment, and as a result, the prices at which we anticipate we may sell Firdapse will need to be relatively high in order for us to generate an appropriate return for the investment in these product development programs and achieve meaningful gross margins, and high per patient prices could drive physicians to seek out compounding pharmacies to provide compounded amifampridine to fill their prescriptions rather than Firdapse, thereby lowering the Firdapse market share or penetration in the market. There can be no assurance that we will be successful in achieving a sufficient degree of market penetration and/or obtaining or maintaining high prices for Firdapse for diseases with small patient populations. Further, even if we obtain significant market share for Firdapse, because the potential target populations are very small, we may not be able to maintain profitability despite obtaining such significant market share. Additionally, patients who discontinue therapy or do not fill prescriptions are not easily replaced by new patients, given the limited patient population.

The FDA and other regulatory authorities generally approve products for particular indications. Firdapse may not be approved for any or all of the indications that we request, which would limit the indications for which we can promote it and adversely impact our ability to generate revenues. We may also be required to conduct costly, post-marketing studies if FDA or other regulatory authorities request additional information.

Before we can obtain future regulatory approval for the sale of our drug candidates for an indication, we may have to conduct, at our own expense, tests in animals in order to support the safety of our drug candidates. testing is expensive, difficult to design and implement, can take several years to complete, and is uncertain as to outcome. Our tests may produce negative or inconclusive results, and on the basis of such results, we may decide, or regulators may require us, to halt ongoing clinical trials or conduct additional testing.

Our product promotion and advertising are also subject to regulatory requirements and continuing regulatory review. In particular, the marketing claims we will be permitted to make in labeling or advertising regarding our marketed products will be limited by the terms and conditions of the labeling and available scientific data. We must submit copies of our advertisements and promotional labeling to the FDA at the time of initial publication or dissemination. If the FDA believes these materials or statements promote our products for unapproved indications, or with unsubstantiated claims, or if we fail to provide appropriate safety related information, the FDA could allege that our promotional activities misbrand our products. Specifically, the FDA could issue an untitled letter or warning letter, which may demand, among other things, that we cease such promotional activities and issue corrective advertisements and labeling to all recipients of the misbranded materials. The FDA also could take enforcement action including seizure of allegedly misbranded product, injunction, or criminal prosecution against us and our officers or employees. If we repeatedly or deliberately fail to submit such advertisements and labeling to the agency, the FDA could withdraw our approvals. Moreover, the Department of Justice can bring civil or criminal actions against companies and executives that promote drugs or biologics for unapproved uses, based on the Federal Food, Drug, and Cosmetic Act, the False Claims Act, and other federal laws governing the marketing and reimbursement for such products under federally supported healthcare programs such as Medicare and Medicaid. Monetary penalties in such cases have often been substantial, and civil penalties can include costly mandatory compliance programs and potential exclusion of a company’s products from federal healthcare programs.

In 2010, former President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together, the “Health Care Reform Law”), a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional health policy reforms. The Health Care Reform Law, among other things, revised the definition of Average Manufacturer Price used by the Medicaid Drug Rebate Program for reporting purposes, which could increase the amount of Medicaid drug rebates to states and extended the rebate program to beneficiaries enrolled in Medicaid managed care organizations. The Health Care Reform Law also imposed a significant annual fee on companies that manufacture or import branded prescription drug products and established an annual fee on entities that sell branded prescription drugs or biologics to specified government programs in the United States. The Health Care Reform Law also expanded the 340B drug discount program (excluding orphan drugs), including the creation of new penalties for and included a discount (now 70%, on brand name drugs for Medicare Part D participants in the coverage gap, or “donut hole.” The Health Care Reform Law increased the Medicaid rebates for line extensions or reformulated drugs, which could substantially increase our Medicaid rebate rate (in effect limiting reimbursement for these patients).

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and waivers. The company that first obtains FDA approval for a designated orphan drug for a given rare disease receives marketing exclusivity for use of that drug for the stated disease or condition for a period of seven years, with an additional six months of exclusivity if the product also qualifies for pediatric exclusivity. Orphan drug exclusive marketing rights may be lost if the FDA later determines that the request for designation was materially defective, a subsequent product is deemed clinically superior, or if the manufacturer is unable to deliver sufficient quantity of the drug.

Certain provisions of our certificate of incorporation and and applicable provisions of Delaware corporate law, may make it more difficult for or prevent a third party from acquiring control of us or changing our Board of Directors and management. These provisions include:

The Rights Plan was implemented through our entry into a rights agreement with Continental Stock Transfer & Trust Company, as rights agent, and the declaration of a dividend distribution of one preferred stock purchase right (each, a Right) for each outstanding share of our common stock. The dividend was paid on October 7, 2011 to holders of record as of that date. Each right is attached to and trades with the associated share of common stock. The rights will become exercisable only if a person acquires beneficial ownership of 17.5% or more of our common stock (or, in the case of a person who beneficially owned 17.5% or more of our common stock on the date the rights plan was adopted, such person acquires beneficial ownership of any additional shares of our common stock) or after the date of the Rights Agreement, commences a tender offer that, if consummated, would result in beneficial ownership by a person of 17.5% or more of our common stock.

The graph below matches Catalyst Pharmaceuticals, Inc.’s cumulative total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index, the Russell MicroCap index, and the NASDAQ Biotechnology index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2015 to 12/31/2020.

To spearhead this investment, we have commenced a national search for a key executive to manage this more progressive strategy. This person will likely be an M.D. or Ph.D. with at least years of relevant pharmaceutical experience and experience in developing innovative drug technology. This person will be responsible for portfolio expansion planning and developing medicines from discovery through marketing authorizations, as well as strategic leadership across all R&D activities including, direct oversight of science and clinical research.

In October 2012, we licensed the North American rights to Firdapse, a proprietary form of amifampridine phosphate, or chemically known as phosphate. When we acquired the rights to the product, it had already been granted orphan drug designation by the Food and Drug Administration (FDA) for the treatment of patients with LEMS, a rare and sometimes fatal autoimmune disease characterized by muscle weakness. Additionally, in August 2013, we were granted “breakthrough therapy designation” by the FDA for Firdapse for the treatment of LEMS. Further, the FDA has granted Orphan Drug Designation for Firdapse for the treatment of Myasthenia Gravis (MG).

On November 28, 2018, we received approval from the FDA for Firdapse 10 mg tablets for the treatment of adult LEMS patients (ages 17 and above). In January 2019, we launched Firdapse in the United States, selling through a field force experienced in neurologic, central nervous system or rare disease products consisting at the time of approximately 20 field personnel, including sales (Regional Account Managers), patient assistance and insurance navigation support (Patient Access Liaisons), and payor reimbursement (National Account Managers). We also have a field-based force of six medical science liaisons who are helping educate the medical communities and patients about LEMS and about our ongoing clinical trial activities evaluating Firdapsefor other ultra-orphan, neuromuscular diseases. Finally, we are working with several rare disease advocacy organizations (including Global Genes, the National Organization for Rare Disorders (NORD), and the Myasthenia Gravis Foundation of America) to help increase awareness and level of support for patients living with LEMS, Anti-MuSK antibody positive myasthenia gravis, or and other neurological diseases, and to provide education for the physicians who treat these rare diseases and the patients they treat.

In early 2020, we expanded our field sales group by almost one hundred percent and contracted with an experienced inside sales agency generating leads through telemarketing to targeted physicians. We made these changes to expand our sales efforts beyond the neuromuscular specialists who regularly treat LEMS patients to reach the roughly 9,000 neurology and neuromuscular healthcare providers that may be treating an adult LEMS patient who can benefit from Firdapse. We also continue to make available at a LEMS voltage gated calcium channel (VGCC) antibody testing program for use by physicians who suspect that one of their patients may have LEMS and wish to reach a definitive diagnosis. Further, we are continuing to expand our digital and social media activities in order to introduce our product and services to potential patients and their healthcare providers.

In order to help adult LEMS patients afford their medication, we, like other pharmaceutical companies which are marketing drugs for ultra-orphan conditions, have developed an array of financial assistance programs that are available to reduce patient and deductibles to a nominal affordable amount. For eligible patients with commercial coverage, a assistance program designed to keep costs to not more than $10.00 per month is available for all LEMS patients prescribed Firdapse. We are also donating, and committing to continue to donate, money to qualified, independent charitable foundations dedicated to providing assistance to any U.S. LEMS patients in financial need. Subject to compliance with regulatory requirements, our goal is that no LEMS patient is ever denied access to their medication for financial reasons.

In May 2019, the FDA approved a New Drug Application (NDA) for Ruzurgi, another version of amifampridine for the treatment of pediatric LEMS patients (ages 6 to under 17). While the NDA for Ruzurgi only covers pediatric patients, we believe that Ruzurgi is regularly being prescribed off label to adult LEMS patients. We believe that under applicable law, Jacobus is not permitted to market its amifampridine product to adult LEMS patients in the United States, and we are continuing to aggressively take all steps available to us to protect Firdapse’s exclusivity under the Orphan Drug Act. There can be no assurance, however, that we will be able to stop the prescribing of Ruzurgi to adult LEMS patients. If Jacobus is able to successfully sell Ruzurgi to additional adult LEMS patients, it could have a material adverse effect on our business, financial condition and results of operations.

On August 10, 2020, we announced the results from our Phase 3 clinical trial evaluating Firdapse for the treatment of adults with Our trial was a multi-site, international (United States, Italy and Serbia), double-blind, placebo-controlled, clinical trial being conducted under a Special Protocol Assessment (SPA) with the FDA. Unfortunately, the trial did not achieve statistical significance on its primary endpoint or its secondary endpoint. However, we have recently concluded a detailed analysis of the data from this trial in an effort to understand why the Phase 3 trial did not meet statistical significance on its endpoints, even though clinical improvement was observed by patients and investigators during the initial dose-titration period of the trial and in our previous trial. We found in our analysis that there was a large degree of symptom variability during the double-blind withdrawal period. We believe that sources of such variability can be addressed in a redesigned study that may better demonstrate the efficacy of our drug for the treatment of

We plan to present our hypotheses and a revised protocol to the FDA with respect to the indication for discussion during the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our protocol design or, even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence for approval of the indication. While we prepare for the meeting with FDA, we also plan to evaluate new clinical trial sites and discuss the new trial design with investigators. After meeting with the FDA, we will determine whether or not to proceed with a new trial that incorporates the new trial design.

Our exploratory study, (A Randomized Placebo Controlled Crossover Study to Evaluate the Safety and Efficacy of Amifampridine Phosphate in Ambulatory Patients with Spinal Muscular Atrophy (SMA) Type 3), met the primary endpoint of a statistically significant difference for the Hammersmith Functional Motor Scale Expanded (HFMSE). Clinically, however, the effect was modest. The secondary endpoints were not statistically significant, although several individual quality of life measures demonstrated a nominally positive statistically significant change. Key opinion leaders with whom we have spoken believed that Firdapse needed to show a large clinically significant change if there was the possibility to affect disease progression through retrograde signaling from enhanced neuromuscular junction function. After considering all of these factors, we have concluded that the modest results exhibited in this study are unlikely to result in a sufficient modification of disease progression, and, particularly in light of the fact that there are now three approved disease modifying medications for SMA Type 3, we have decided not to pursue the SMA Type 3 indication further.

We intend to conduct a study evaluating Firdapseas a treatment for Hereditary Neuropathy with Liability to Pressure Palsies (HNPP). The scientific basis for considering this indication is that leakage of neuron potassium channels is observed in HNPP. Since Firdapse is a potassium channel blocker, it may mitigate the pathological effects of the potassium channel leakage in HNPP patients. There can be no assurance that this study will be successful.

Our NDS filing for Firdapse for the symptomatic treatment of LEMS was approved by Health Canada on July 31, 2020. In August 2020, we entered into a license agreement with KYE Pharmaceuticals (KYE), pursuant to which we licensed the Canadian rights for Firdapse for the treatment of LEMS to KYE. Pursuant to the license agreement, KYE is obligated to pay us an payment based on approval and product supply, data protection milestones based on achievements of sales and regulatory milestones, and a sharing of defined net sales upon commercialization.

In December 2018, we entered into a definitive agreement with Endo International plc’s subsidiary, Endo Ventures Limited (“Endo”), for the further development and commercialization of generic Sabril tablets through Endo’s United States Generic Pharmaceuticals segment, Par Pharmaceutical. Pursuant to the agreement, in December 2018, we received an payment of $500,000. We will be entitled to receive a milestone payment of $2.0 million on the commercial launch of the product. Further, we will receive a sharing of defined net profits upon commercialization and we are obligated to share the costs of certain development expenses.

Cost of sales consists of third-party manufacturing costs, freight, royalties, and indirect overhead costs associated with sales of Firdapse. Cost of sales may also include period costs related to certain inventory manufacturing services, inventory adjustments charges, unabsorbed manufacturing and overhead costs, and manufacturing variances. Prior to FDA approval in November 2018, the cost of manufacturing Firdapse was expensed, including our of anticipated launch product. This will cause the cost of sales to appear artificially low as we consumed product manufactured and in process prior to approval, and will continue to do so until we deplete such product.

Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well as support for selected investigator-sponsored research. The major components of research and development costs include preclinical study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, consulting, and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials, and allocations of various overhead costs related to our product development efforts. To date, all of our research and development resources have been devoted to the development of Firdapse, (our version of vigabatrin), and formerly and we currently expect that our future development costs will be attributable principally to the continued development of Firdapse.

Our cost accruals for clinical studies and trials are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical study and trial sites and clinical research organizations (CROs). In the normal course of our business we contract with third parties to perform various clinical study and trial activities in the development of potential products. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events or milestones, the successful enrollment of patients, the allocation of responsibilities among the parties to the agreement, and the completion of portions of the clinical study or trial or similar conditions. The objective of our accrual policy is to match the recording of expenses in our consolidated financial statements to the actual services received and efforts expended. As such, expense accruals related to preclinical and clinical studies or trials are recognized based on our estimate of the degree of completion of the event or events specified in the specific study or trial contract. We monitor service provider activities to the extent possible; however, if we underestimate activity levels associated with various studies or trials at a given point in time, we could be required to record significant additional research and development expenses in future periods. Preclinical and clinical study and trial activities require significant expenditures. We anticipate paying significant portions of a study or trial’s cost before they begin and incurring additional expenditures as the study or trial progresses and reaches certain milestones.

We prepare our consolidated financial statements and notes thereto which accompany this report in accordance with U.S. GAAP. To supplement our financial results presented on a U.S. GAAP basis, we may use financial measures in our reports filed with the Commission and/or our communications with investors. measures are provided as additional information and not as an alternative to our consolidated financial statements presented in accordance with GAAP. Our financial measures are intended to enhance an overall understanding of our current financial performance. We believe that the financial measures we present provide investors and prospective investors with an alternative method for assessing our operating results in a manner that we believe is focused on the performance of ongoing operations and provide a more consistent basis for comparison between periods.

The financial measure that we present exclude from the calculation of net income the expense associated with stock-based compensation. Further, we often report net income (loss) per share, which is calculated by dividing net income (loss) by the weighted average common shares outstanding.

Any financial measures that we report should not be considered in isolation or as a substitute for comparable U.S. GAAP accounting, and investors should read them in conjunction with our financial statements and notes thereto prepared in accordance with U.S. GAAP. Finally, the measures of net income (loss) we may use may be different from, and not directly comparable to, similarly titled measures used by other companies.

We recognize stock-based compensation for the fair value of all share-based payments, including grants of stock options and restricted stock units. For stock options, we use the Black-Scholes option valuation model to determine the fair value of stock options on the date of grant. This model derives the fair value of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and dividend yield. Expected volatility is based on reviews of historical volatility of our common stock. The estimated expected option life is based upon the simplified method. Under this method, the expected option life is presumed to be the between the vesting date and the end of the contractual term. We will continue to use the simplified method until we have sufficient historical exercise data to estimate the expected life of the options. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the expected life of our stock options awards. For the years ended December 31, 2020 and 2019, the assumptions used were an estimated annual volatility of 81.4% and 75.5%, expected holding periods of four and a half years, and risk-free interest rates of 0.24% to 1.64% and 1.51% to 2.53%, respectively.

For the year ended December 31, 2020, research and development expenses decreased approximately $2.3 million compared to the same period in 2019, primarily attributable to the decreases in medical and regulatory affairs and quality assurance expenses and expenses from our ongoing clinical trials evaluating Firdapse for the treatment of and SMA Type 3, as we closed out these trials in the latter part of 2020; partly offset by increases in employee stock-based compensation, which is and relates to the expense of stock compensation awards to certain employees and stock option awards due to headcount increases.

We expect that research and development expenses will continue to be substantial in 2021 as we begin a trial for HNPP, continue our Expanded Access Program, take steps to continue the development of a long-acting formulation of Firdapse, continue our regulatory path to seek approval of Firdapse in Japan and evaluate Firdapseas a treatment for other neuromuscular diseases.

Total stock-based compensation for the years ended December 31, 2020 and 2019 was $6.3 million and $3.8 million, respectively. In 2020, grants were principally of stock options relating to 2020 bonus awards and grants to new employees. In 2019, option grants were principally for bonus awards and to new employees hired in connection with the launch of Firdapse.

Our net income for 2020, which excludes an approximately $6.3 million expense associated with stock-based compensation, was approximately $81.2 million ($0.78 per basic and $0.76 per diluted share). Our income for 2019, which excludes an approximately $3.8 million expense associated with stock-based compensation, was approximately $35.7 million ($0.35 per basic and $0.34 per diluted share).

For the year ended December 31, 2019, we recognized $102.3 million in net revenue from product sales of Firdapse. We had no revenues from product sales for the year ended December 31, 2018. We had no revenues from our collaborative arrangement in 2019. We had revenues in 2018 in the amount of $500,000 relating to the payment from Endo in connection with the collaboration for vigabatrin tablets.