Executive Summary / Key Takeaways

• Catalyst Pharmaceuticals delivered a record first quarter in 2025, demonstrating robust top-line growth driven by strong performance across its diversified portfolio of rare disease therapies.
• FIRDAPSE, the company's foundational LEMS therapy, continues its trajectory of consistent organic growth, supported by a healthy patient pipeline, recent dose expansion approval, and strategic initiatives targeting the underdiagnosed cancer-associated LEMS population.
• AGAMREE, the recently launched DMD treatment, is rapidly establishing itself in the market, showing promising early adoption, balanced patient sourcing from competitors, and potential for long-term differentiation supported by ongoing real-world evidence studies.
• A strong balance sheet with over $580 million in cash provides Catalyst significant financial flexibility to pursue its strategic "buy and build" approach, targeting accretive or near-accretive rare disease assets to further diversify and expand its portfolio.
• While facing the anticipated loss of exclusivity for FYCOMPA starting in mid-2025, the company has implemented strategies to manage the expected revenue decline, leveraging product stickiness and payer relationships, while focusing future growth drivers on its expanding rare disease pipeline.

A Rare Opportunity: Building a Portfolio in Underserved Markets

Catalyst Pharmaceuticals, Inc. (NASDAQ: CPRX) has strategically positioned itself as a commercial-stage biopharmaceutical company dedicated to addressing the significant unmet needs of patients living with rare and difficult-to-treat diseases. The company's business model centers on in-licensing, developing, and commercializing novel, high-quality medicines, a strategy that has successfully transitioned it from a development-focused entity to a profitable, multi-product commercial enterprise. This journey, funded primarily through product sales and strategic capital raises, has culminated in a diversified portfolio featuring three key therapies: FIRDAPSE for Lambert-Eaton myasthenic syndrome (LEMS), FYCOMPA for epilepsy, and AGAMREE for Duchenne muscular dystrophy (DMD).

At the heart of Catalyst's approach is a deep commitment to patients, manifested through comprehensive support programs like Catalyst Pathways and financial assistance initiatives designed to ensure access to therapy. This patient-centricity, coupled with a disciplined "buy and build" strategy, forms the core of the investment thesis: leveraging operational excellence and financial strength to acquire and successfully commercialize differentiated rare disease assets, thereby creating sustainable value.

The competitive landscape in rare diseases is dynamic, populated by both larger biopharmaceutical companies and smaller, specialized players. Direct competitors like Sarepta Therapeutics (SRPT), PTC Therapeutics (PTCT), BioMarin Pharmaceutical (BMRN), and Amicus Therapeutics (FOLD) operate in overlapping therapeutic areas, particularly in neuromuscular and genetic disorders. While some rivals, such as SRPT and BMRN, may possess greater scale, broader pipelines, and higher historical profitability margins (SRPT's 2024 operating margin was 20% compared to CPRX's TTM operating margin of 43.27%, while BMRN's was 25%), Catalyst distinguishes itself through focused commercial execution, efficient operations, and a strategic emphasis on acquiring late-stage, de-risked assets. CPRX's TTM Gross Profit Margin stands at a robust 82.62%, reflecting favorable product economics. Its lean operational structure contributes to a strong TTM Net Profit Margin of 36.91% and a high TTM Current Ratio of 6.14 and zero debt, providing significant financial agility compared to some competitors burdened by higher R&D costs or debt levels (e.g., PTCT with a TTM operating margin of -38% and significant debt).

Technological Differentiation: AGAMREE's Novel Approach

A key element of Catalyst's competitive positioning, particularly within the burgeoning DMD market, lies in the technological differentiation of AGAMREE. Acquired from Santhera (SNN), AGAMREE is described as a novel corticosteroid with a unique mode of action based on differential effects on glucocorticoid and mineralocorticoid receptors. This mechanism is anticipated to offer potential benefits over traditional corticosteroids, which are the current standard of care for DMD.

While specific quantitative data on AGAMREE's comparative advantages from the most recent filing is focused on commercial uptake, prior studies and management commentary highlight the nature of the expected benefits: comparable efficacy to existing corticosteroids with the potential for a better-tolerated side effect profile. This includes potential long-term benefits related to bone health, growth parameters, behavioral outcomes, and cardiovascular health, areas where traditional steroids often present significant challenges.

To validate these potential differentiators and strengthen AGAMREE's market position, Catalyst is investing in the SUMMIT study, a 5-year real-world evidence-based initiative. This study aims to collect long-term safety and quality of life data, providing deeper insights into the product's benefits. Additionally, the company is conducting a Phase 1 study to define the immunosuppressive dose of vamorolone, with the stated goals of exploring future indications and its potential use in conjunction with gene and cell therapies for DMD that require concurrent immunosuppression. Results from this Phase 1 study are expected around mid-2025.

The "so what" for investors is clear: AGAMREE's potential for a differentiated safety and tolerability profile could provide a significant competitive moat in the crowded DMD market, allowing it to capture market share from both branded (Emflaza) and generic (prednisone) competitors. Successful outcomes from the SUMMIT study could support future label updates, further solidifying AGAMREE's position as a preferred treatment option and potentially driving sustained revenue growth beyond the initial launch phase. This technological differentiation is a critical strategic response to the competitive pressures in the DMD space.

FIRDAPSE: The Enduring Foundation of Growth

FIRDAPSE, Catalyst's flagship product for LEMS, remains the bedrock of the company's financial performance. As the only evidence-based FDA-approved treatment for LEMS in the U.S., FIRDAPSE enjoys a strong market position. The company has consistently demonstrated its ability to drive organic growth for this therapy, even years after its initial launch.

In the first quarter of 2025, FIRDAPSE net sales reached $83.7 million, representing a robust 25.3% increase compared to the same period in 2024. This growth was fueled by continued adoption among newly diagnosed patients, supported by Catalyst's effective identification and management of a pipeline of over 500 potential LEMS patients. A modest tailwind from the normalization of prescription activity following the Change Healthcare cybersecurity incident in Q1 2024 also contributed, though this effect is expected to level out in Q2 2025. Further contributing to growth is the increased flexibility offered by the recently approved 100mg maximum daily dose, which has led to an increase in the average daily dose and is expected to continue doing so in the near term.

Catalyst is strategically focused on expanding the FIRDAPSE market by targeting the estimated 90% of small cell lung cancer patients with LEMS who remain undiagnosed. By shifting focus to community oncology settings and implementing screening initiatives, the company aims to accelerate diagnosis rates and bring more eligible patients onto therapy, although the significant impact from this initiative is anticipated in out years beyond 2025.

The FIRDAPSE franchise is protected by a portfolio of patents, with the latest expiring in 2037. While facing Paragraph IV patent litigation from generic manufacturers, Catalyst has achieved favorable settlements with some filers, notably restricting Teva's (TEVA) generic entry until February 25, 2035, under certain conditions. Litigation with the remaining generic filers continues, and the outcome remains uncertain, posing a key risk to the long-term exclusivity of the product. Royalties payable under license agreements, including minimum annual royalties to Jacobus related to the RUZURGI settlement, are factored into the cost of sales.

For the full year 2025, Catalyst forecasts FIRDAPSE net product revenue to be between $355 million and $360 million, reflecting continued confidence in the brand's organic growth potential.

AGAMREE: Rapid Ascent in the DMD Market

AGAMREE represents the most significant recent addition to Catalyst's portfolio and a key driver of near-term growth. Launched commercially in the U.S. on March 13, 2024, for the treatment of DMD, AGAMREE has quickly gained traction.

In Q1 2025, AGAMREE generated $22.0 million in net product revenue, a substantial increase from the $1.2 million reported in Q1 2024 (which only included a partial quarter post-launch). This performance underscores the rapid adoption and increasing prescriber engagement for the product. Management highlights that AGAMREE is successfully sourcing patients from both branded (Emflaza) and generic (prednisone) corticosteroid segments in a balanced manner, with approximately 44% of transitions coming from each, indicating broad acceptance within the market. Patient retention rates have also been robust.

Catalyst has deployed a dedicated AGAMREE field team to drive deeper adoption within the approximately 100 DMD Centers of Excellence. While the crowded DMD landscape presents competitive challenges and may lead to a "queuing effect" as patients are evaluated for various new therapies, management expects this dynamic to work its way through by mid-2025, allowing for continued growth. The company is also focused on improving reimbursement approval times as payers finalize their policies.

International expansion for AGAMREE is underway through a partnership with KYE Pharmaceuticals in Canada. KYE's New Drug Submission for AGAMREE was accepted for Priority Review by Health Canada in April 2025, with a potential for marketing authorization before the end of 2025.

Catalyst forecasts AGAMREE net revenue for the full year 2025 to be between $100 million and $110 million, reflecting strong confidence in the product's continued market penetration and growth trajectory. Royalties payable to Santhera are tiered based on net sales, and a $12.5 million milestone is payable once net product revenue reaches $100 million in a calendar year.

FYCOMPA: Managing the Transition

Acquired in January 2023, FYCOMPA added a commercial epilepsy product to Catalyst's portfolio, contributing to revenue diversification. In Q1 2025, FYCOMPA net sales were $35.6 million, an increase of 17.1% from Q1 2024. This performance was driven by steady demand and disciplined execution to maximize value ahead of the anticipated loss of exclusivity.

FYCOMPA faces generic competition with the expiration of key patents. Loss of exclusivity is expected on or after May 23, 2025, for the tablet formulation and on or after December 15, 2025, for the oral suspension. While the company expects to continue marketing the product post-LOE, it anticipates a measured revenue decline in the second half of 2025, with further erosion in 2026 and beyond as generic entry impacts price and volume.

Catalyst is implementing strategies to manage this transition, leveraging the inherent stickiness of anti-seizure medications and working with payers to maintain favorable positioning where possible. For the full year 2025, FYCOMPA net product revenue is forecast to be between $90 million and $95 million, reflecting the expected impact of generic entry later in the year. Royalties payable to Eisai (ESALY) will commence after patent expiry, with lower rates applicable once generics enter the market.

Financial Strength and Strategic Flexibility

Catalyst's financial health is a significant strength underpinning its growth strategy. The company ended the first quarter of 2025 with a robust cash and cash equivalents balance of $580.7 million, an increase from $517.6 million at the end of 2024. This strong liquidity position is supported by consistent cash flow generation from operations, which totaled $60.0 million in Q1 2025. The company operates with no debt, providing substantial financial flexibility.

This strong balance sheet is critical for executing Catalyst's "buy and build" strategy. The company is actively evaluating a pipeline of potential licensing and acquisition opportunities, focusing on late-stage, clinically differentiated rare disease assets across various therapeutic areas. Management emphasizes a disciplined, comprehensive approach to identifying opportunities that can add significant value. The current market environment, characterized by turmoil in capital markets, is seen as potentially beneficial for Catalyst's acquisition strategy, presenting opportunities to acquire assets at attractive valuations.

Operating expenses are expected to increase modestly in 2025 compared to 2024. Research and development expenses are forecast to range between $15 million and $20 million (excluding acquisitions), reflecting investments in the SUMMIT study and initiatives to explore AGAMREE label expansion. Selling, general, and administrative expenses are also expected to rise due to personnel additions and the strategic alignment of dedicated commercial teams for FIRDAPSE and AGAMREE, effective April 1, 2025, aimed at enhancing focus and execution for each brand.

The effective income tax rate was 20.4% in Q1 2025 and is expected to be relatively consistent with the 2024 annualized rate of 24.2% for the full year 2025, influenced by factors like state taxes and equity compensation deductions. Cost of sales is expected to trend higher as the year progresses due to increasing royalties tied to higher sales volumes and tiered royalty structures.

Risks and Considerations

Despite its strong performance and strategic positioning, Catalyst faces several key risks. The outcome of the ongoing FIRDAPSE patent litigation with the remaining generic filers (Hetero and Lupin) remains uncertain, and an unfavorable ruling could allow earlier generic entry than currently anticipated, impacting future revenues. The impending loss of exclusivity for FYCOMPA will lead to revenue decline, and the pace and extent of this erosion will depend on generic market dynamics and payer responses.

The success of Catalyst's portfolio expansion strategy is not guaranteed. Identifying, acquiring, and successfully integrating new assets, particularly larger or earlier-stage opportunities, presents inherent challenges and requires significant capital and operational capacity. Regulatory risks persist for existing products (e.g., potential label changes, manufacturing compliance) and future pipeline candidates (e.g., approval uncertainty for new indications or acquired assets). Market dynamics, including competition from existing therapies, emerging technologies (like gene therapies), and evolving payer policies (including the impact of the IRA), could affect pricing, reimbursement, and market access for Catalyst's products. Reliance on third-party manufacturers and distributors also introduces supply chain risks.

Conclusion

Catalyst Pharmaceuticals has demonstrated strong commercial execution and strategic acumen, culminating in a record-breaking first quarter in 2025 and a reaffirmed optimistic outlook for the full year. The core investment thesis is centered on the company's ability to leverage its profitable FIRDAPSE franchise and rapidly growing AGAMREE asset, supported by a robust balance sheet, to drive continued growth through organic market penetration, lifecycle management initiatives, and disciplined portfolio expansion via acquisitions and partnerships. While the impending loss of exclusivity for FYCOMPA presents a near-term headwind, the company's focus on maximizing value from this asset while strategically investing in its rare disease pipeline, particularly the differentiated AGAMREE and the enduring FIRDAPSE, positions it for long-term success. The strategic pivot to target the undiagnosed cancer-associated LEMS population and the ongoing studies to further differentiate AGAMREE highlight proactive efforts to expand market opportunities. Investors should monitor the outcomes of the remaining FIRDAPSE litigation, the pace of the FYCOMPA revenue decline, the continued adoption trajectory of AGAMREE, and progress on the business development front as key indicators of the company's ability to sustain its growth momentum and deliver on its rare disease mission.