Q4 2021 Catalyst Pharmaceuticals Inc Earnings Call
Greetings and welcome to the catalyst Pharmaceuticals fourth quarter and full year 2021 results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Ali.
Like Randy Chief Financial Officer for catalyst Pharmaceuticals. Thank you you may begin.
Good morning, everyone and thank you for joining our conference call to discuss first quarter 'twenty.
<unk> 2021 financial resource.
The call today, we have Patrick Mcenany, Chairman and Chief Executive Officer.
We are also joined by investors.
Operating officer.
And Jesse no Carman, Chief commercial officer.
Q&A session. We'll also have sister, Gary Ingenito, Chief medical and regulatory option.
We began I would like to remind you that in the filing comments and the Q&A session. We will make statements about expected future results, which may be forward looking statements.
Let me just say a securities law.
These statements relate to our current expectations estimates and projections and are not guarantees of future performance.
They involve risks.
Certainties and assumption this is supposed to be made to not to be accurate.
It's really in line with the effects of COVID-19, and actual results may vary from the expectations contained in our core income statement.
Alright, and should be considered conjunction with the detailed information contained in our SEC filings.
The risk factors described.
'twenty one reinforce the Form 10-K .
I'll turn the call over to that.
Thanks Shelly.
Good morning, everyone and thank you for joining us today for catalyst fourth quarter and full year 2021 financial results and update call.
2021 was an extraordinary year for catalyst as we had changed several significant milestones and achieved strong financial performance, creating a substantial foundation to sustain our growth plans as we diligently pursue opportunities to diversify our commercial and development.
Portfolio.
To date in 2022, we have continued to execute our business plan and operating budget.
Let's start with our commercial performance in the first fourth quarter of 2021.
We achieved <unk> net product revenues of $38 million.
24% revenue increase versus the fourth quarter of 2020.
Growth during the fourth quarter was driven by continued strong <unk> performance.
Not yet being back to optimal pre pandemic conditions.
Our full year 2021, total revenues were $141 million, representing an 18% increase year over year compared to $119 million in total revenue for 2020.
Net income before income taxes for Q4 of 2021 was $12 8 million, a 47% increase compared to $8 7 million for Q4 of 2020.
We reported GAAP net income of $9 million for Q4, 2021, or nine cents per basic and diluted share.
We ended the year 2021 with $191 million in cash and short term investments.
We continue to judiciously repurchase shares of our common stock from the open market.
During 2021, we repurchased two 2 million shares at an average price of $5.47 per share for a total purchase price of $12 $1 million.
We have guided full year 2022, total revenues to be between $195 million and $205 million, representing a 38% to 45% increase in total revenues compared to 2021.
We also anticipate our cash opex to be between 65 and $70 million for the full year.
Ali will provide you with more details during her financial report.
Our 2022 guidance assumptions reflect a positive outcome from the U S courts, reaffirming the orphan drug exclusivity for <unk> for the treatment of adult patients with Lambert Eaton Myasthenic syndrome.
As we reported last month U S District Court ruled that the U S approval of reserves <unk> for the treatment of pediatric <unk> patients violated U S orphan drug exclusivity for <unk> as a result, the U S approval of previously granted for reserves for pediatric patients.
It's now been rescinded by the FDA.
The reaffirmation of referred as market exclusivity is a significant milestone, enabling us to advance treatment within the <unk> community, where deferred actually has already been prescribed by 647 unique positions to approximately 25% of the estimated 3000.
Loans patients.
Importantly, this outcome represents a pivotal point for additional new patient enrollment growth as those patients who are researching seemed to transition deferred apps.
We estimate the number of patients recently on <unk>, so being about 125 patients a significant majority of whom are adult managed patients and we've already seen many of those patients transition referred apps during this quarter, which aligns with our revenue forecast for the year.
The transition of reserve Chi patients preferred apps is preceding seamlessly.
Thanks to our patient first approach and our established catalyst pathways access programs, which are there to assist all patients seeking access to <unk> treatment.
Similarly, we announced last week a victory in the Federal Court of Canada, and the law suit by catalyst Pharmaceuticals.
So require health, Canada to enforce the data protection preferred apps as an innovative truck.
In that case, the judge agreed with our position shortly implacability of the data protection provisions and that health, Canada approval, a resurging does not comply with them.
<unk> has been removed from the market in Canada, and the matter remanded to the minister of health for a range of termination consistent with the judge's decision.
Our other significant litigation is pending patent suit against Jacobus and Panther Rx Jacobus has firmed specialty pharmacy for researching.
As soon as Allen discovery, and we will continue to keep you advised as this case progresses.
We entered 2022 with significant momentum and with a continued focus on sustained product growth as well as to the rare disease community we serve we.
We have enhanced our efforts to drive awareness and education to both patients and providers.
Expanded focus on Perineoplasty patients.
Extending out to thoracic oncologists provides an important potential for reaching new Orleans patients as approximately 70% of loans patients have some form of cancer. Most typically in small cell lung cancer.
We also expect to see continued growth with newly diagnosed patients who are not yet on perhaps as well as acceleration on the process margins repetitive loans diagnosis.
Yeah.
We have also made important advances in strengthening our intellectual property portfolio for preferred apps.
With the recent issuance of three new U S patents.
Patents are directed to the treatment of patients suffering from labs and cover all MSA I'm, putting a capitalized resides within a limited patient population.
This milestone further fortifies, our intellectual property estate and we believe this provides us with lasting commercial durability preferred apps, which has U S patent protection until 2034.
All of these newly issued patents will be listed in the Fda's Orange book within the next few weeks, which will bring the total number of patents were stage two five.
We will continue to execute our key initiatives to further strengthen and protect the long term durability of <unk>.
Steve will provide more details later on this call.
We're also pleased with the progress being made by our sub licensee partner <unk> pharma.
In December 2021, Guy to initiate a small phase III registration study in Japan.
With the efficacy and safety of <unk> for the treatment of labs.
The initiation of this trial marked an important milestone towards expanding our global footprint.
Currently there are no proved treatments programs in Japan, and we believe <unk> can provide a meaningful new therapy option to those living with this disease.
Assuming the trial is successful.
Uh huh.
We expect first absolutely granted 10 years marketing exclusivity upon approval in that market.
Okay.
Our goal to expand our portfolio and pipeline with differentiated products to treat rare diseases.
Which currently are without any approved therapy remains a strategic priority for this year.
We have a robust and enhanced process in place and identifying potential assets to pursue and have made considerable progress on this front.
Our teams are actively engaged in an extensive due diligence and we are encouraged about projects currently under review.
Yes.
We remain confident in our ability to advance on these initiatives this year.
Okay.
Yeah.
Okay.
As part of our ongoing effort to help raise awareness and amplify the voices of patients with rare disease.
The need for improved therapies, we recently achieved up to with the leading patient.
<unk> groups.
And our partners at NASDAQ for participating reopening golf ceremony on February 28.
So on a global rare disease day 2022.
We thank all of our partners, who are coming together and allowing us to show our support for the rare disease community.
As a result of the many accomplishments catalyst is named on Forbes 2020 to Americas.
Small companies publish list ranking 65 out of more than 1000 company screened.
It is an honor to be recognized by Forbes as one of the country's best small companies as well as acknowledgment of the value we are creating.
<unk>.
And same yet we are excited about the path ahead of US we continue to execute across all near and long term priorities to drive substantial growth, we believe that we're well positioned.
To build upon our success and are optimistic about the future.
Now I will turn the call over to Jeff <unk>, our Chief commercial officer.
We will provide further highlights on our commercial execution.
Okay.
Thanks, Pat and good morning, everyone. The catalyst commercial team performed extremely well over the course of 2021, we are very pleased with them with our full year <unk> net sales of 138 million, representing a 16% growth year over year.
In Q4, 2021, net sales were $38 3 million, a 7% growth versus Q3 2021. Despite challenges presented by the continued resurgence of the pandemic.
Wanted to take this opportunity to thank the entire catalyst team for their flawless execution in 2021.
A true testament to our ability to remain agile, while maintaining our commitment to the <unk> community.
The foundation of the business.
Can use to be solid operational excellence drove new patient starts maintained favorable access continued high compliance and lower discontinuation.
Naive new enrollments in 2021 were 15% greater year over year, while discontinuation were 20% less your year over year.
Q4 discontinuation were only 5%.
Which is the lowest discontinuation rate since the commercial launch in 2019 and 37% fewer.
And Q4 of 2020.
We expect considerable growth in 2022 and beyond.
Perhaps market penetration is approximately 25% of the total adult population.
Organically growth will be driven from new patient enrollments of already diagnosed adult <unk> patients not yet on fair to us as well as the significant number of <unk> patients who are unfortunately misdiagnosed.
Or undiagnosed.
Additionally, we expect our non personal promotion and other educational efforts with small cell lung cancer treaters about lens and furnace will yield more adult patients with a proper diagnosis of lens and accelerate the opportunity to receive treatment for this disease.
Early indicators, thus far in Q1.
Show that we are building upon the momentum from 2021.
Q1 growth in patients on therapy.
Is on pace to exceed the entire year of 2021.
Reimbursed patient discontinuation rates are also tracking to match the Q4 discontinuation rate of 5%.
We continue to collaborate with advocacy groups such as Nord.
Global genes muscular Dystrophy Association Myasthenia Gravis Foundation of America, Hunker, Mg and Myasthenia Gravis Association as part of the ongoing effort to the biopharma industry and patient advocacy groups to call attention to the need for collaboration.
To encourage research and development of orphan drugs and bring new treatments to market for rare diseases that affect small patient populations.
In addition to ring the opening bell at NASDAQ to celebrate rare disease day catalyst has launched a lens aware podcast to increase awareness of and connections in the <unk> community.
Furthermore, we partner with key professional societies like the American Association of neuromuscular and electro diagnostic medicine.
And the American Academy of neurology to educate their members about labs, and <unk> and their respective conferences.
Our catalyst pathways patient services team did a tremendous job in 2021 supporting the needs of adult <unk> patients caregivers and health care professionals.
Catalyst pathways has numerous types of financial assistance programs to help patients with their out of pocket costs.
Patients enrolled in catalyst pathways, including those who are covered by Medicare.
Accessing foundation assistance have an average co pay of less than $2 per month.
Prescription approval rates remain over 90% across all payers government or private commercial insurers.
The catalyst pathways patient services team also connects patients the community advocacy resources.
Such as patient support groups.
All of these resources are crucial as we effectively and compassionately transition patients from research.
In closing we are very optimistic about the growth potential preferred apps, we will continue to generate new patient enrollments through precise commercial execution and seamless transition of reserves patients.
<unk> is committed to serving the lumps community. It is passionate about ensuring access for all of them stations.
I'll now turn the call over to Dr. Steven Miller our.
Our Chief operating officer, and Chief Scientific Officer for an update on R&D activities.
Thanks for the commercial out there Jeff I'll now provide an update on the important progress, we're making on our clinical and product development efforts. Carlos continues to work on improvements to further franchise to address the needs of all patients. Our medical Affairs Department continues to make valuable progress and increasing health care provider aware.
This was through our medical affairs programs.
An accredited continuing medical education or CME courses.
Available through Medicaid too.
Over 5000, mostly health care provider workers have viewed the course and as of February 17.
1700 licensed health care providers have obtained CME credit.
<unk> also provided a grant to physician education resource to host a lunch session at a live tumor board of oncologists to expand our support for CMA programs. This program will be recorded and provided as an enduring adult labs CME of course.
Tens of primarily for oncologists for one year physician education resources will make this program available to all oncologists and their database along with posting as forward several neurology and oncology publications soon.
CME courses provided a non biased educational opportunity for doctors to support gaining knowledge and clinical updates in particular therapeutic area and countless sponsored CME courses have been very successful method of educating physicians about lumps.
In alignment with our commitment to provide treatment for all <unk> patients. We are now completing a supplementary NDA submission package for the treatment of pediatric labs referred ups, we anticipate filing the supplement with the FDA. This quarter catalyst has all the required data and included all necessary safety data to finally complete Sebastian for this wave.
The expansion of <unk>.
Preparation of the supplement is a high priority for catalyst as we remain committed to advancing our efforts to expand the use of <unk>. So that we may be able to provide all levels of patients with an approved treatment option.
We have made significant progress on developing an intellectual property estate to extend the market exclusivity referred us we've recently announced the three new patents covering additional patient I'm a fan of Purdy and metabolized types has been allowed and I am pleased to report that they have now been issued by the U S patent and trademark office.
One of the three patents was issued on March eight and the other two patents were issued two days ago, bringing the total number of issued patents protecting the Florida franchise to five the claims and these two patents combined with our previously issued patents claim the treatment of all relevant Amazon I'm pretty and metabolize or touch within the <unk> patient population.
One of the three new patents is already listed in the Fda's Orange book in the last two will be listed by the end of the quarter, bringing the total number of patents listed in the Fda's Orange book patents.
As a reminder, the first two patents were listed in the Orange book shortly after their issuance in 2021 and 2020 to describe this.
<unk> is an important milestone as our patent portfolio now provides broad comprehensive protection for the part of our franchise regardless of the map to metabolize retired.
We are pleased with the progress we're making on the intellectual property front and we will continue to execute our key initiatives to strengthen and protect the long term durability referred us, which currently has a patent or exclusivity protection in the U S until mid 2034.
In addition to the U S. Hurt US currently has data exclusivity in Canada until July of 2028, and in Japan, We expect <unk> will be granted 10 years of market exclusivity upon approval in that market.
As previously reported.
That list has been developing the long acting version referred us and earn development efforts, we are progressing well.
During the course of the past several quarters, we conducted an in depth evaluation of how the new formulation will be used by doctors and patients in doing so it was determined that transitioning patients to the long acting dosing regiments.
More involved process and anticipated for doctors to accommodate and manage due to the wide variability and metabolism of M. A fabric, but havent settled transfer is tied to or not to.
And patients and also due to the great differences in drug release characteristics between the two formulations. Additionally, it was determined that titration dosing.
A new formulation with differ substantially from the card version with photos and such differences could lead to collections on how best to treat and titrate patients and could even be a risk for medication dosing errors.
Therefore, adding <unk> to.
Two the available treatment options would not be the most beneficial path for treatment delivery and for achieving optimal patient care compared to music always the currently approved <unk> formulation and alignment with our commitment to our patient first approach and to do what we believe is best for patients and health care providers, we have decided.
Further development of a long acting version of firms, we will continue to be open to further development opportunities in the future whenever such development is in the best interest of patients.
Now I would like to provide an update on our ongoing global expansion initiatives.
As we previously announced in June we partnered with Idaho pharma for the development and commercialization of <unk> for the treatment of Liberty Central in Japan. Currently there are no approved therapies programs in Japan, and we believe <unk> has the potential to be a novel therapy to address this important unmet leaf.
Made great strides in initiating development activities, including consulting with the Japanese pharmaceuticals, and medical devices agency to confirm the clinical study parameters and requirements to obtain regulatory approval as.
As a result of their efforts Dino initiated the required clinical study in December of last year and anticipate this to be a small scale phase III clinical trial catalyst continues to support title and the execution of the clinical trial by supplying clinical trial materials as well as collaborating with Dino.
And its efforts to obtain the required documentation for the Japanese regulatory authorities.
We will continue to execute on our key initiatives to enhance the market exclusivity referred us I'm expand deferred us margin geographically during this quarter. We also advanced our objective is to expand our portfolio overseas treatments beyond photos as Pat mentioned, we continued to actively evaluate new products or other types of transactions to expand.
<unk> product offerings, and or our research and development pipeline.
Our teams, including the product development team are actively and vigorously engaging in the process as we look for worthwhile prospects, where we can utilize our expertise resources and knowhow to expand our programs and drive growth.
We have an improved process in a very efficient approach towards notified.
In assessing opportunities.
We are very pleased with the progress we are making as we remain committed to advancing our initiatives to expand our portfolio overseas treatments. We remain enthusiastic about the path ahead.
And our ability to identify the right opportunities to maximize our capabilities.
I will now turn the call over to Ali Grande, Our Chief Financial Officer to review our financial results.
Thank you Steve.
We are very pleased with our financial policy.
Full year 2021, as Hugh pointed we ended the year with cash and investments and slightly more than $191 million and no funded debt. We believe this allows us the financial flexibility to advance our existing R&D programs. This is Larry.
Strategic initiative <unk> Macquarie.
Are you into booties and innovate.
These technology.
Leading to future growth and value creation.
Our total net revenues by 2021.
<unk> million, an 18% increase when compared to total revenues.
In 2020.
Despite the continued challenges of COVID-19 total revenue.
Revenue was $138 million 2021, a 16% increase over the net.
<unk> of $119 million by 'twenty five.
Net income before income taxes by 2021 almost.
25%, 26% increase or net income before income taxes by 2000 22 million.
We reported GAAP net income by 2021 of $39 million was 38.
87 cents per diluted.
Michigan.
In 2020 leave your place GAAP, net income 75 million, which Sylvain consent, Rebase and 71% reserve ratio.
It's important to remember that these figures are not comparing 2020 benefited from approximately $33 million of income tax benefit.
From the recording of a one time noncash deferred tax asset along with $32 million on the reversal of our valuation allowance in the third.
Quarter of 2020.
Alright.
<unk> 2021 .
Thanks Nathan.
95%.
In 2020, we been.
Benefited from the use of net operating loss.
And he says ablation in Ireland in 2021 and future periods, we expect that we will benefit from the use of deferred tax assets relating to <unk> eight now.
I'm joined Suntrust credit, although those are subject to certain limitations.
That's right.
Because of the significant effect of the onetime employee.
Please go ahead.
In 2020 <unk> of the non-GAAP measures were presented in Yesterdays press release provide a more useful comparison of our results.
Operations by 27 basis points by 2021 races, 20 'twenty non.
non-GAAP net income for 2021 was 59 million with 57 days.
85, <unk> this year.
GAAP net income.
Doug based compensation expense of $6 million depreciation of 192000, and an income tax provision of $19 million.
This compares to non-GAAP net income in 2020.
48 million a 47.
Five.
MS Shannon would you.
GAAP net income.
Compensation of 6 million depreciation of 92000, and an income tax benefit of 32 nine.
And approximately 22% increase of non-GAAP income year over year.
The sales expenses.
$22 million in 2021 compared to $17 million in 2020.
25% of total operating cost in 2021 to.
22% by 2020.
Cost of sales.
This is principally principally royalties, which increased by 3% when net sales exceeded $100 million.
Any foundry in India.
I mean, we.
Hi.
Yeah.
Sure Phil.
Other income increases over 100 million each year.
Yes.
Research and development expenses in 'twenty, and 'twenty, and 2020 , one when comparable at $17 million for 2021 and 16 million for 2020.
<unk> expenses decreased slightly as a percentage of total operating expenses were 19% for 2021 to 20.
21% for 20 times.
SG&A expenses for 2021 'twenty.
Compared to $44 million in 'twenty one.
SG&A expenses decreased slightly as has been the operating.
Operating expenses of 56% for 2021 compared to 57% for 'twenty 'twenty. However.
The increase in SG&A expenses in 2021 was principally due to increased legal costs and increased Conciliations defense crises.
Thank you.
More detailed information on an allergy season by 2021 financial disappointment maybe.
And let me point on Form 10-K , which was filed with the Securities and Exchange Commission yesterday March 16, and can be found on the Investor Relations page of our website, that's www dot Kelly's finance desktop.
And with that I will turn the call.
All right.
Thanks Ali.
We believe we are well positioned to build upon our success and are optimistic about the company's future as we diligently pursue opportunities to diversify our commercial and development portfolio.
It aligns with our core mission to deliver value for patients healthcare providers and shareholders.
Finally, I'd like to thank all of our employees for their continued dedication and commitment to positively impacting patients' lives.
Operator, we would now like to open the call for questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your hand.
Before pressing this darcie.
Our first question comes from the line of Joe Kevin <unk> with Piper Sandler. Please proceed with your question.
Hey, guys. Thanks for taking my question and congrats on all the progress here Pat I think you mentioned that a significant amount of reserve do patients have already transitioned to <unk> I'm, just wondering if you'd be able to maybe more specifically say how many of the estimated 125 have done so and so is it fair to say that the grow.
The observed in <unk> that I think Jeff mentioned, it is being driven by this transition thanks, and I have a follow up or two.
Okay.
Sure.
Joe we really don't want to be specific but I can tell you that many of those patients have already transitioned.
And we expect the trends transition to be completed by the end of April .
And so we're very pleased with.
How seamless this process has been and I think we owe a lot to our specialty pharmacy, Innova Rx who's really done a great job and was ready and willing and able to take on this task.
As far as growth.
Going forward, Jeff do you want to take that sure I can just tell you. The transitions did account for a significant part of that growth, but I will also say that.
In March, but what we've observed.
He truly naive patients. So those patients that have never been on <unk> or uncertainty that has enrolled in a prescribed.
That number is tracking to be our best month ever.
So that's what we've seen in March so we are excited about our organic growth as well.
Okay got it that's really helpful. Maybe maybe as a follow up I'm wondering what data points inform your estimated number of patients that were on or is there a G.
And how you've gone about identifying them and whether it's possible that maybe there's there's more patients than than you've estimated.
Okay.
Yes, Jeremy you might be right.
We don't know for a fact.
We know the number of patients that were in <unk> that went to reserve <unk>. Once it was approved based on.
Some of the docs, who had been involved with the company for quite some time. So we know what we lost.
And we assume that there were some growth.
On the research side over the last couple of years. So we've got some pretty good data points that I think supports a 125.
Plus or minus 10%, but I think that incentives.
Pacific is we can be on that subject.
Okay got it and maybe if I could just squeeze one last one and I'm wondering if there would be a point where in the absence of any business development you would consider alternative ways to return capital to shareholders like potentially a special dividend.
Okay.
Yeah. Good question.
I think I'm trying to play a special dividend.
We have continued to buy our shares back judiciously as we.
As we can be.
We spent $12 million last year buying shares back we continue the program.
So that's all.
Our way of I guess, returning money to shareholders.
Paying a special dividend. So I do believe strongly that we will have a transaction completed sometime this year.
Okay, great. Thanks for taking my question.
Alright, thank you.
Thank you. Our next question comes from the line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.
Yeah, Good morning, Pat and his team.
Let me add my congratulations on the commercial progress this last year.
I had a few questions for you.
I need to ask you or Jeff a little bit more about the market dynamics I guess I'm wondering as you think about the switch patients versus new patient adds.
Where would you think you know that.
Bulk of the growth could come from this year and then also if if.
You go beyond the I think it was <unk> 10.
47 prescribers what is your goal in terms of the number of prescribers by year end, just just kind of roughly what you grow that by 5% 10%.
What do you think about that.
Charles I think the number of prescribers is difficult to predict.
If you look at the numbers, it's easy to see that a lot of those prescribers.
Oh, we have one patient, where maybe two or three patients.
And so.
We do believe that our educational programs are very important in helping get to a proper diagnosis and a prescription for a <unk> patient and so you know we have a strong effort.
To increase that number but.
To us that that's not really.
Terminal metric or a goal that we look at.
We really look at patient counts and things like that.
So.
So a good question.
Question, but we don't have an answer to that and I can't give you a.
Number that you know as a target for this year for prescribers.
That number is growing nicely and it seems to correlate to our spend for education to Hcp's.
And as you know, we've got a CME program debt hedged.
Thanks, Kate stocks and we've had I think 1500.
Docks avail themselves of that program and actually earn their credit.
And over 5000 folks that have actually been to the program and studied.
The program itself so.
I think there is a correlation there between our education.
And the number of docs.
We will see as prescribers preferred apps.
Okay. That's helpful.
I'm sorry, I was just to address your other question there about patients so.
So organic versus transition we've demonstrated the ability to grow organically about 10% to 15% every year organically and we expect to do the same this year.
But I also will say that we do see some tailwind that will be helping.
With the hopefully the.
Opening in the country back up again because of the pandemic like we've seen in March we're seeing some good new enrollments in these truly naive patients and we expect to see strong enrollments in these patients for the rest of the year. So we do anticipate significant growth from those patients too.
Okay. That's helpful.
Quick question on asset acquisitions.
That could occur perhaps this year.
So I'm wondering if you can provide some additional color on how you think.
That would.
Leverage your existing infrastructure, either sales or back office and if you can provide some color.
On.
Really the focus.
Focus areas, maybe therapeutic focus areas for those asset acquisitions that you can anticipate being able to complete this year and then I had one follow up for Alex.
Okay.
So.
Yeah.
We would.
Initially, we were looking and hoping to leverage our sales force.
With finding a product that would fit.
<unk> fit into the bag of our neuromuscular sales call point.
Previously Ed.
<unk>.
Okay.
Just to narrow focus Charles.
Again, I think we've repeated this previously but we've.
We made a couple of offers over the last 18 months.
And which were fair offers.
The counter offers at that time.
Really egregious and when you looked around and really couldn't find anything else in neuro or neuromuscular as it made sense. So we decided to expand our focus.
To a much broader therapeutic spectrum.
Including any therapeutic class.
Outside of.
Collagen.
And so.
<unk>.
That continues to be our focus we.
We are looking for projects that are obviously rare disease.
Net.
There are beyond proof of concept.
And.
Frankly, hopefully an approved product or a marketed product that we could could acquire.
Yeah.
So I'm not sure that on new sales at the commercial side.
<unk>.
From the reps point of view there is a lot of leverage there.
I think from the back office point of view.
Market access payer.
Patient.
Access.
Advocacy I think that the.
We're in good shape to take on other projects.
Which can be Levered and also.
There are operational levers as well, including our finance and accounting and as well as our MH sales in medical affairs. So I think that there are synergies.
<unk> will be available to us on most acquisitions.
Okay. That's helpful. One last question for Ali I guess, some I'm kind of wondering how you're thinking first of all thank you for the guidance on revenue and Opex, but I'm wondering how you're thinking about opex is here, especially given some of the reduced legal costs.
If you can provide a little bit of color, especially as that drops to the bottom line. How do you feel about last year. It was.
And this I think a couple of pennies.
But then going into this year, what would you project for for Bottomline.
Charles I'll take that analogy can certainly chime in.
So for last year, we had a couple of areas, where there were a few issues.
Opex was up slightly over budget.
And a lot of that had to do with higher litigation costs related to our actions against the FDA health, Canada as well as our patent litigation with Jacobus and patent litigation was very costly far more than we had budgeted and part of that where there are a few APA.
And there that we didn't count on and.
And so.
<unk>.
We think those over budget is good ROI based on the outcome. So we're we're pleased to against and those certainly not budgeted.
We saw higher charitable contributions of 501 C iii's.
Foundations that assist Medicare out of pocket expenses.
Related to all limitations, not just heard apps lupus patients.
And that amounted to about $1 $3 million over budget.
And we think.
We absorbed.
So the best of our knowledge, we were the only one with a foundation of assistance for low risk patients.
Which meant that those donations went to all patients that have loans that might require assistance no matter, which drug they were taking a which therapy that they needed.
So.
Again about $1 million and higher litigation expense about 1 million three and higher charitable contributions and then.
Other side, if you will in cost of goods sold.
As a percentage.
As <unk>.
It was higher as a result of some inflationary pressure we saw on the supply side, especially in the third and fourth quarter.
Which we hope are true.
Transitory.
As well as some cost associated with some scale up work that we did too.
To increase the batch size for our commercial launch.
And that total was about $2 million and remember that our cost of goods sold.
Our royalties are in there.
And that royalty up to $100 million in each year is 14%.
For sales.
Over 100 million Theres, an additional 3% royalty so.
As a result of those three items that I, just mentioned that took our cost of goods.
Was actually about one 7% over 2000 2015, 9% versus 14, 2%.
Ed.
And I think those combined.
Total over $4 million, which account for the <unk>.
<unk>.
Oh Miss on EPS.
For the year.
So Gary.
So going forward going forward.
This year we've stated.
Cash Opex, which is our operating expenses less noncash comp and depreciation will be somewhere between $65 million $70 million.
And some of the it sounds like some of those.
Driver too.
His last year may be this year.
Of course, forgetting about the inflationary pressures he can't really.
Perhaps guide that but.
The other drivers.
Yes, yes, we are.
We I think we will find out by the end of this year that those investments that we've made.
Last year that got us over budget.
<unk> had a great ROI.
For the year.
Okay.
Okay very good thanks for the thorough answer and for taking our questions. Congrats on a good year of progress.
Thanks Charles.
Thank you. Our next question comes from the line of Scott Henry with Roth Capital Partners. Please proceed with your question.
Thank you <unk> and good morning, and let me start with a happy St. Patrick's day, Pat It sounds like you may be one that celebrates that holiday.
Thank you. Thank you Scott.
And also give alright, I dig into the questions. Let me just say I thought the on hold music has certainly turned it up a notch.
So moving forward now.
A couple of follow up questions there.
First on the cost of goods sold percentage that.
That 15.9.
How would you say when we think about 2022 I.
Should we be thinking of a number north somewhere between 16, and 17% and that's that.
Kind of the way those trends should play out or or maybe some of those one time costs may offset that just trying to get a sense of because I know there are those step ups in revenue numbers.
And the royalties.
Charles I think that as I'm sorry, Scott.
I'm not sure that.
We want to give any guidance on that but I think that 15, 9% were at the high end and from a conservative point of view, it's probably not a bad place to be.
Okay Fair enough and then the other thing that sort of jumped out at me when when you look through the 10-K and separate.
Selling costs versus GAA it looked like the selling costs were higher in Q4.
Any any driver to that too should I think about that going forward.
Jeff you want to take that.
Okay.
Yes.
There are areas that we felt that we can make further investments in Q4.
Scott.
Ed.
Some of the new programs that we've initiated.
You want to take that Jeff shared some to add to what Pat was saying and what we like to do is we look at ROI on through the initiatives that we're doing and then there are some initiatives that just are not playing out the way. We thought then we'll reallocate what we also did in Q4 was we initiated the <unk>.
Non personal promotion to the oncologist.
And that also ramped up.
Some of the selling expenses there so.
In anticipation of the new year coming we like to put some of these new resources in place. So that we can get traction early in the year. So that's why we saw the increase in selling expenses.
Okay great.
And then the thing.
The thing about 2022 and in the kind of the quarterly progression throughout the year.
She week sort of expect you know a.
A bolus in the beginning of that step up in patients and then gradual growth thereafter.
Or will it be more steady growth quarter to quarter.
Well I think.
It's apparent question and we're hoping that the pandemic is subsiding here and the country is opening up so what we're seeing is that we're seeing a strong march because of the country is opening up again.
And we do anticipate from there is steady.
Steady new enrollments similar to what we're seeing in March.
Okay great.
You may be referring to the bolus of patients that are transitioning to <unk> apps.
So.
And we've stated we expect that transaction to be completed by the end of April so.
You will you will see a step up.
Pink in.
Q1.
Youll continue to see what we're calling referred to as organic growth.
Those are.
As Jeff had mentioned earlier those are the naive patient center.
I would say 99%.
Any form of 34, DAP, meaning they haven't been on <unk> or or researching.
Before.
And so.
And remember it takes a little time to get these folks that are transitioning on to reimburse drug.
So.
So I think that you will see sequential growth quarter to quarter. This year from our commercial team.
Okay, Great and then a final bigger picture more strategic question Pat.
I'd mentioned does as you look to acquire other technologies that perhaps.
Some of the prices out there or are not favorable for for what you would want to pay.
Sometimes when prices are high.
The times, it's better to be a seller than a buyer.
Is that something you think about in your equation, perhaps being a seller as opposed to be an acquirer.
Scott No we.
Don't.
Think about that often but as a public company obviously.
If there was incoming interest from the buy side.
We as a public company and the board of directors has to consider.
B a fair offer.
But it is not one of our initiatives for this year.
Okay fair enough.
Well. Thank you again for taking all the questions.
Thank you Scott.
Thank you. Our next question comes from the line of Joon Lee with true Securities. Please proceed with your question.
Alright, thanks for taking our questions and congrats on VR accolades from Forbes.
Thank you Jan Hi, Sir what have been the experience for adapt among small cell lung cancer patients. So far it's been aggressive disease with survival of about two years or less from the timeless diagnosis. So curious if your rate of patient identification is keeping up or able to exceed.
Patient loss and also comparing neoplastic syndromes, such as lemons, the part of small cell lung cancer or other cancer diagnostic group to facilitate diagnosis and reimbursement.
Have a quick follow up after that.
I'll take the first question there and we are seeing significant uptake in the percent of our new enrollments that are tumor lens or paraneoplastic months patients. Currently we're about 20% of our new enrollments are tumor lapsed patients. So.
Part of our our goal is to increase that percentage.
And the other part of this is as you mentioned the survival rate in those patients.
Two years or so.
We're hopeful that we can accelerate the diagnosis.
Lens in those patients. So we can help those patients sooner. So that's that's the other part of this the education process that we're putting out there.
I just have one additional thing to add to what Chuck said.
By making efforts to help diagnose these patients sooner hopefully very small cell lung cancer will be diagnosed earlier, giving these patients.
A better prognosis.
Longer lifespan.
In two years that you mentioned in your question.
What I meant.
The chances of them being part of the DRG or small cell lung cancer is that something thats reasonable or.
We're not thinking about this correctly.
Yes, I don't think Thats on the radar at this point Jim.
Great.
And we're really interested in the opportunity in Japan, I know that the Dino is running the trial, but assuming they're running a similar trial as Charles as what you did in the U S.
Are you able to disclose what they are looking at day 14 or D. Four because based on the two trials you ran successfully the date for had a much more drastic effect size in terms of two empty and just curious.
Also their strategy and can you tell us a little bit about died, though we know that it's a big Japanese conglomerate with.
A bigger exposure in the consumer segment, but curious what the experience is in the pharma development. Thank you.
Okay, well, let me answer the first part of your question with regard to the trial.
It is.
A different design than we ran in the United States, but it's also a single arm design and so it basically is.
Really just to verify that patient Japanese patients will respond to therapy similar to what we've seen in the double blind controlled studies response.
Our patients studied in the U S.
As we have previously announced it was a very small study.
<unk> and Idaho has confirmed with P. M. B, a small study will be sufficient for that market and anticipate completing a relatively quickly.
Okay.
So with regard to <unk> experience.
Actually.
Recently entered the pharmaceutical space in our growth.
Built an entire pharmaceutical division they have hired a large number of very experienced pharmaceutical executives across all areas.
So of course, including our research and development regulatory affairs sales and marketing manufacturing and they have all the necessary.
Experience powered to successfully market the product in Japan, and they are pursuing other products. All those this is one product that they really were happy to get because they feel will be very successful in Japan.
I might add to that.
What are there for.
First couple of products, it's a very important product to them.
No.
That sounds great from their website.
Okay. That's great. That's a single arm will be sufficient sounds like that it sounds like a very.
Surmountable bar.
You recently announced an agreement with Biomarin to extend the agreement to most of Asia. I mean does that include China or does that not include China, because it sounds like that.
Given the small cell lung cancer population, there could be an opportunity, but can you elaborate on that.
Yes, our agreement.
But we have negotiated with Biomarin basically requires us to file an NDA.
Japan before we are allowed to pursue marketing of our products in the remainder of the Asia Pacific region. Obviously as we just spoke about we are growing as quickly as we can to get that NDA filed in Japan. So that we can open the remainder of our market expansion.
Correct.
Annie's population is large close to 1 billion people, they're heavy smokers and so there is a lot of small cell lung cancer in China.
And then just simply because of the sheer number of people there should be a large number of laboratories are as well and so it is one of the nation's among food.
Several nations.
Interest to us in the Asia Pacific region.
Thank you.
Yeah.
Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Mcewen for any final comments.
Thank you thanks, everyone for joining our call and we look forward to our next corporate update have a great day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.