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Catalyst Pharmaceuticals Inc  (NASDAQ:CPRX)
Q2 2019 Earnings Call
Aug. 08, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Catalyst Pharmaceuticals Second Quarter 2019 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ali Grande, Chief Financial Officer. Thank you. You may begin.

Alicia Grande -- Vice President, Chief Financial Officer and Treasurer

Good morning, everyone. Thanks for joining today's conference call. On today's call, we have Pat McEnany, Chairman and Chief Executive Officer; Dr. Steve Miller, Chief Operating Officer and Chief Scientific Officer; Dr. Gary Ingenito, Chief Medical Officer and Head of Regulatory Affairs; and Dan Brennan, Chief Commercial Officer.

Before we begin, I would like to remind you that in the following comments and in the Q&A session, we will make statements about expected future results, which may be forward-looking statements for purposes of the federal securities laws. These statements relate to our current expectations, estimates and projections and are not guarantees of future performance. They involve risks, uncertainties and assumptions that are difficult to predict, which may prove not to be accurate. Actual results may vary.

These forward-looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in our annual report on Form 10-K.

At this time, I'll turn the call over to Pat.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thank you, Ali. Good morning, everyone, and thank you for joining us on our second quarter 2019 financial results call. As you probably saw in our press release issued yesterday afternoon, we continue to see strong progress in our commercial launch of Firdapse for LEMS this past quarter. Our management team as well as all facets of our commercial, medical affairs, patient services and accounting financial teams have been rock solid in the execution of our Firdapse launch brand. I'm heartened by the support that we continue to receive from the LEMS community and healthcare providers, who are proud to assist patients with access to Firdapse.

The support that we have received has enabled us to work within the LEMS community to deliver a meaningful impact on patients' lives through not only treatment, but support and education systems as well. I'm especially humbled by the kind words that we continue to receive from patients and caregivers who are previously in a compassionate use program and have now transitioned to Firdapse, an evidence-based FDA-approved therapy. Also the feedback that we have received from adult LEMS patients, who were previously naive to any form of 3,4-DAP are now being treated with Firdapse, has been encouraging. Remember, as previously reported, only a few hundred patients in the US had access to an investigational medicine prior to the FDA's approval of Firdapse.

Our efforts and ability to meet the treatment needs of all the adult patients suffering from LEMS has been motivational for us. We continually monitor patient satisfaction through surveys to measure how pleased patients are with Catalyst's Pathways, programs and services as well as the ease and efficiency in getting insurance coverage and receive their monthly shipments of Firdapse. As of the end of July, we've had 223 completed survey responses from Firdapse patients and Catalyst Pathways with an average score of 4.8 on a scale of one to five. Further, 96% of patients rated our programs a four or a five and 88% of patients responded with the five.

Today, we will discuss the status of the three business priorities that we have previously outlined for the calendar year: first, the continued strong commercial launch of Firdapse for LEMS; second, the development of Firdapse for additional indications in our robust pipeline; and third, the reformulation of a longer acting, potentially more convenient and patient-friendly formulation of Firdapse. But before that, I'd like to address several other business matters, including the lawsuit that Catalyst has filed against the FDA. As we have previously announced, we have filed a lawsuit to challenge the approval of Jacobus Pharmaceutical's new drug application for Ruzurgi, an alternate formulation of amifampridine for the treatment of LEMS in pediatric patients. Among other claims, we believe that by approving the Jacobus product, the FDA has violated our orphan drug and new chemical exclusivities that under the Orphan Drug Act have been granted to -- for Firdapse.

We also believe that the labeling for Ruzurgi violated multiple provisions of FDA regulations, resulting in misbranding and violation of the Food Drug and Cosmetic Act. Additionally, in our complaint, we were seeking a court order vacating the approval of Ruzurgi. We filed a complaint on June 12 and we will keep you apprise as developments occur. Beyond these comments, and given the ongoing legal proceedings, we are somewhat limited in what we can discuss.

Also, during the second quarter, we announced that we have amended our Firdapse license with BioMarin to include Japan. Our original license was for North America and has been amended to add Japan. And upon achievement of certain milestones in Japan, the license can further be expanded to include most of Asia as well as South and Central America. Japan represents the second largest economy in the free world, and there are currently no approved therapies to treat the LEMS population in Japan. On subsequent earnings call, we will provide you with status reports on milestones and time lines for our efforts to commercialize Firdapse in Japan.

Now I'd like to return to the discussion of the commercial launch of Firdapse for LEMS. We announced in our press release yesterday afternoon that we recorded $28.8 million in net revenue for the second quarter and an operating profit of $11 million or $0.11 per share basic and $0.10 per diluted share. On our last earnings call, we announced that we expected by the end of the second quarter to have most of the 300-or-so LEMS patients that participated in both early access programs to be transitioned to commercial Firdapse without a single lapse in their therapy. We are pleased to announce that by the end of the second quarter, essentially all of those 300 patients are today on Firdapse. Now that the vast majority of these patients have been transitioned to commercial Firdapse, which was the initial goal, we expect new patient enrollments to continue in a steady, more measured pace. This was expected trajectory from the start and is typical of a product launched in the ultra-rare orphan disease space. We continue to believe that at this time, it would not be appropriate to provide revenue guidance for 2019. However, I will say that almost halfway through the third quarter, new patient enrollments continued a steady pace as we expected and revenues are robust. Ali will be providing additional information on this quarter's financial results shortly.

I now would like to walk you through some of the commercial launch, key performance indicators that we monitor daily to track our progress on the Firdapse launch. As of June 30th, we had 437 LEMS patients that have been prescribed Firdapse by their physician. 409 of those patients were active on Firdapse and 223 unique prescribers have written at least one prescription. And a fact that I'm most proud of is that as of today, 138 adult LEMS patients who prior to our approval on launch did not have access to any form of amifampridine are now enrolled in Catalyst Pathways and most are already being treated with Firdapse. This continues to validate our premise that when we took on the development of Firdapse in 2012 that there was indeed an unmet medical need for an FDA approved Firdapse that could fulfill this need. We continue to have collaborative discussions with payers regarding reimbursement of Firdapse. We reiterate that one of our principal goals is to ensure that all and that is underscored and capitalized all adult LEMS patients have affordable and easy access to Firdapse.

To that end, each patient that is enrolled in our Catalyst Pathways program is assigned a personal patient access layers on, or PAL, who is in the field and can meet with the patient and their caregiver or the physician office and work closely with the patient to guide him or her through obtaining coverage for Firdapse and to make sure that the patient's experience is stress-free and efficient as possible. Dan will provide shortly additional details regarding the progress of our commercial launch.

As I mentioned, our second priority is the development of the remainder of our pipeline with a focus on expanding the use of Firdapse further indications beyond LEMS. We currently have several ongoing trials, including a Phase III trial in MuSK-MG, a Phase III trial in CMS or congenital myasthenic syndromes and a proof-of-concept study in Spinal Muscular Atrophy Type 3. We expect to have top line results from the CMS trial and complete enrollment in the MuSK-MG trial in the second half of this year. Further, we expect to report top line results from the MuSK-MG and the SMA Type 3 trials in the first half of next year. Pending positive results from these programs, we would like to supplement our approved Firdapse label for LEMS to include the additional neuromuscular indications. We are excited about our robust clinical pipeline, and we look forward to providing you with updates on each of these development programs as we progress.

Lastly, our third priority is to develop a longer acting and more patient-friendly formulation of Firdapse. Steve will provide you more information on these programs in a few minutes. As you have heard, we've had an incredibly productive quarter for which I'd like to thank our entire Catalyst team for making this possible. We are grateful for the efforts of each of our employees, striving to bring evidence-based FDA-approved therapies to treat rare neuromuscular diseases. And most importantly, we are proud to know that our work is helping LEMS patients today to enjoy productive lives. It is the patient that is most important to us and why we exist.

I'll now turn the call over to Dan Brennan, our Chief Commercial Officer, who will provide more details regarding our commercial activities. Dan?

Daniel J. Brennan -- Chief Commercial Officer

Thank you, Pat, and good morning, everyone. As Pat has mentioned, we have had another strong quarter and we are enthusiastic about the launch progress thus far. Our teams in the field and the office across sales, patient services, medical, patient advocacy, marketing are all working well together and it's a great team effort. Our main goal is to reach and help as many adult LEMS patients as possible, as they navigate and live with this debilitating disease. I would like to emphasize how truly debilitating this disease is.

Patients find it hard to stand up, lift their arms, they encounter extreme fatigue in leg, arm and neck muscles, experience severe bouts of blurred or double vision, all too often forcing them to leave the workforce or an enjoyable retirement and require the support of a caregiver to help them with even the most mundane daily activities. In some of the worst cases, people affected by LEMS speak of having to spend their days in the hospital, trying to determine the cause and proper diagnosis for their ailments. At Catalyst, it is our mission to change this so that all patients suffering with LEMS and their doctors are better able to identify and treat the disease, and we believe we are making good progress.

Let me share some of our results comparing the end of Q2 with the end of Q1. As Pat mentioned, at the end of our second quarter, following FDA-proven launch, there were 437 unique adult LEMS patients in the US who have been prescribed Firdapse. This compares to 365 on March 31st, the end of Q1. We are pleased to announce that 409 adult LEMS patients were active on Firdapse treatment at the end of Q2 compared to 338 at the end of Q1. A majority of those patients in Q1 and Q2 have been patients who were previously in a compassionate use or expanded access program and receiving Jacobus investigational amifampridine rebates or our own amifampridine phosphate. Our initial launch beginning on January 15th of this year focused on transitioning those existing patients, and we are proud that those who transition to Firdapse did so without a delay or lapse in their medication treatment and delivery. Given the disease severity and immediate impact on mobility without medicine, smooth transition without lapse and medication was very important to these patients, and therefore, they are important to us.

There are numerous stories and examples of heroics from our specialty pharmacy, Innova-RX and our field personnel to respond to late notice, 24 to 48-hour emergency delivery needs for Firdapse sent to emergency rooms or patients away from their homes. I'm very proud of our efforts to achieve this goal. And second phase of our commercial launch began on February 4 and focused on adult patients diagnosed with LEMS, but without awareness or access to any investigational drug. It is truly gratifying to hear reports from patients about their response to this life-changing medicine. Our field teams continue to remark how unaware many physicians are about LEMS or the availability of an approved drug that treats the disease so well in adults. And we know broad awareness is generated from having an approved drug and the need to promote and communicate across the nation.

As of the end of Q2, there were 118 patients prescribed Firdapse, who were new to amifampridine or 3,4-DAP. We call this group naive to 3,4-DAP, and we are pleased with the progress helping this group of LEMS patients. At the end of Q1, there were 55 naive to 3-DAP -- 3,4-DAP patients. And as we reported last call, this grew to 81 by May 9. At the end of Q2, that was 118. And as of today, as Pat mentioned, there have been 138 unique new naive patients with Firdapse prescriptions.

At the end of Q2, there have been over 100 general neurologists or other non-neuromuscular specialists, who were not previously able to access the compassionate used INDs, not aware of 3,4-DAP or felt it was too burdensome to obtain 3,4-DAP, who have now prescribed Firdapse. Another commercial priority in the Firdapse launch has been insurance reimbursement and affordable patient access to Firdapse. Thanks to the communication efforts of our market access team and Catalyst Pathways insurance and patient lease on teams, the coverage for Firdapse has been strong. About 95% of insured patients have received positive coverage determinations from their insurer and all uninsured patients or those denied coverage from their insurer have received three charitable patient assistance medication. At the end of Q2, we had over 350 patients on insurer reimbursed medicine, which compares to 246 at the end of Q1. Out-of-pocket monthly co-pays and payments from patients continues to average around $5.60 per month. The concerns when we announced our launch plans that patients would be unable to access the medication due to cost have been absolutely unfounded in practice. Not a single patient who has enrolled in Catalyst Pathways has failed to obtain access to the product.

Finally, we have a regular patient satisfaction survey available online and on the phone for all Firdapse patients enrolled in Catalyst Pathways. And as you heard from Pat, we have had over 200 survey responses from different patients, where over 95% are rated a four, five on the five-point scale and 88% rated a 5 out of 5. So we are pleased with our commercial results in the first 6 months following launch and look to continue that success into the second half of the year. In the month of July, the number of unique patients with Firdapse prescription has increased from 437 to 457. And 19 of those 20 new patients were from the naive or new to 3,4-DAP adult LEMS patients, who didn't have access to 3,4-DAP previously. We expect enrollments in this range around 15 patients per month during the next phase of commercialization, which now gets into the tougher work of raising awareness, patient identification and diagnosis for an ultra-rare disease that is not top of mind with physicians and patients.

Internally, we have an aspirational goal to help 500 or more adult LEMS patients' access to this life-changing medicine by the end of the year. We are motivated to reach this target, which is almost 20% of the 3,000 diagnosed and undiagnosed adult LEMS patients we believe are suffering in the US. Now that the transition of patients from investigational medicine to Firdapse is complete, we have updated our three strategic priorities from a commercial perspective: first, help patients on Firdapse remain on Firdapse with a high level of satisfaction; second, continue to raise awareness about Firdapse to already diagnosed LEMS patients; and third, improve timely diagnosis of LEMS patients and ensure that they are seen by a knowledgeable healthcare provider.

New commercial programs that are in development include a low-cost antibody test program that Catalyst will support and provide to general neurologists and neuromuscular physicians across the country. A find-a-physician tool to help LEMS patients find new and second-opinion neuromuscular physicians to help them in their efforts to reach a conclusive diagnosis. We have just recently started our digital awareness and education campaigns directed to patients and healthcare providers. We feel that when these programs are fully implemented, they will address a number of diagnostic issues that currently delay LEMS patients from being properly diagnosed or even sometimes being misdiagnosed.

I'd also like to highlight the benefit and importance of our field-based patient access liaisons who have been and continue to be instrumental in helping patients with their initial prescriptions and dosing titration regimens, helping patients understand and navigate their insurance and always being there even in person if patients have questions regarding their medication or insurance coverage. And we will expand our recent programs around the country for where LEMS patients can come together for inpatient meet ups to learn from healthcare experts on the latest research in the disease, have questions answered and learn from each other as well as hear about nutrition, exercise or stress reduction, tips and tricks that can help them live more fully with their disease. We will also continue our educational and awareness efforts by exhibiting and supporting events with important patient organizations and neuromuscular physician societies, like the MGFA, MDA, Nord, Global Genes, AAN, AAMEM as well as explore impact of partnering with other groups like the American Autonomic Society and Rheumatology or Immunology Specialty groups. As you hopefully can see, we look to build upon the initial success of this launch to find a way for all 3,000-or-so adult patients suffering from LEMS to have affordable access to this truly helpful medication and ensure that these patients are satisfied with our program, services and efforts. As we move successfully toward that goal, we feel Catalyst will be successful and able to study other indications and medicines that will help more and more patients with rare neuromuscular and neurological diseases.

And with that, I'll turn it over to Steve.

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

Thank you, Dan. As both Dan and Pat have mentioned, while we are focused on the commercial launch of Firdapse for adult patients with LEMS, we also continue to be committed to investing in and developing Firdapse for additional neuromuscular indications. I will briefly summarize our additional programs for Firdapse for other indications.

First, we have an ongoing Phase III multisite international trial ongoing in MuSK myasthenia gravis or MuSK-MG, and Catalyst remains optimistic that this trial will confirm the favorable outcomes from the previous investigator-sponsored, proof-of-concept trial for this indication. This trial is being conducted under an FDA-approved special protocol assessment. Catalyst expects to complete enrollment of theapproximately 60 MuSK-MG and 10 generalized MG subjects by the end of 2019. However, due to the complexity of this international trial and the importance of exactly abiding by our agreement with the agency in the special protocol assessment, we now expect to report top line results in the first half of 2020. Pending positive results of this trial, we intend to submit a supplemental NDA to the FDA to potentially add MuSK-MG to our already approved label for Firdapse. The current standard of care for myasthenia gravis is generally ineffective in MuSK-MG patients. So we look forward to the potential of providing these patients with an effective and approved therapeutic alternative. Additional details on this trial can be found on clinicaltrials.gov.

As part of Catalyst commitment to patients, all patients that participate in the clinical trial for MuSK-MS are offered the opportunity to continue treatment with Firdapse to treat the condition. If the patient and their physician feels the patient is benefiting from treatment and we expect to continue such extended treatment until this indication for Firdapse is approved. Second, we are currently conducting a Phase III clinical trial to evaluate Firdapse for the treatment of certain types of CMS. This trial, which includes adult and pediatric subjects is being conducted across sites around the United States and Canada. We continue to expect top line results from this trial in the second half of this year. This has been an important project for Catalyst for several years because there are currently no approved therapies for CMS and very few off-label alternatives that, unfortunately, provide limited symptomatic relief and for a small portion of the known CMS types. Additional details of this trial are available on clinicaltrials.gov.

Pending the outcome of this trial and further discussions with the agency, we intend to submit a supplemental NDA to the FDA to potentially add CMS to our already approved label for Firdapse. We also continue to support all eligible CMS patients at our expanded access program for Firdapse if the patient and their physician feel the treatment with Firdapse is beneficial.

Finally, we are also conducting a proof-of-concept clinical study evaluating Firdapse as a symptomatic treatment for patients with spinal muscular atrophy Type 3 and ambulatory subjects. The study is designed as a randomized one-to-one, double-blind, two period, two treatment crossover outpatient proof-of-concept study to evaluate the safety, tolerability and potential efficacy of amifampridine ambulatory patients diagnosed with SMA Type 3. The study is planned to include approximately 12 patients, and we currently expect to report top line results from this study in the first half of 2020. Additional details of this trial are available on clinicaltrials.gov.

As with Catalyst's other trials, patients who have completed this trial will be offered the opportunity to continue treatment with Firdapse to treat their condition if the patient and their physician feels the patient is benefiting from treatment. Catalyst original licensed territory was for North America, which included Canada. And now that Catalyst has received approval of Firdapse for LEMS in the United States, we have been preparing to file a new drug submission, or NDS, in Canada for the treatment of LEMS with Firdapse. Well, it is too soon to comment on an anticipated filing date for the Canadian market, we will keep you posted as our efforts progress.

In May of this year, Catalyst announced an agreement with BioMarin to add Japan to our marketing territory. Catalyst has already begun the process of filing for orphan drug designation in Japan and also on filing a Japanese NDA. Again, it is too soon to comment on the anticipated data filing for the Japanese market, but we will keep you posted on our progress. Many patients have also requested a long-acting form of Firdapse and as part of our patient focus, we have an ongoing project to develop this new form of Firdapse. These kinds of projects are complex and often involve new clinical studies and it is still too early in the development of this new Firdapse dose from to provide any more specific comments other than to say that we are working diligently on this project, and we'll keep you informed as we move forward.

In closing, Catalyst also continues to examine other potential uses for Firdapse. Should any material progress be made in these potential new indications, we will provide updates. Catalyst also accepts grant applications from research that wish to conduct research on other potential uses of Firdapse and depending on the nature of the request, Catalyst may provide investigational drug, placebo tablets and or funding for this type of investigator-sponsored research. Details of this application process can be found on our website.

I will now turn the call over to Ali Grande, Chief Financial Officer, to review our financial results.

Alicia Grande -- Vice President, Chief Financial Officer and Treasurer

Thanks, Steve. On Wednesday, August 7th, we filed our quarterly report on Form 10-Q for the second quarter ending June 30, 2019 in which we reported net income of $11 million or $0.11 per basic share and $0.10 per diluted share for the second quarter of 2019 as compared to a net loss of $6 million or $0.06 per basic and diluted share for the second quarter of 2018. For the quarter ended June 30, 2019, net product revenue from the launch of Firdapse was $28.8 million. Related cost of sales for the same quarter were $4.3 million. Research and development expenses were $4.6 million for the second quarter of 2019 as compared with $3.7 million in the second quarter of 2018.

Research and development expenses for the second quarter of 2019 primarily consisted of expenses for medical, regulatory affairs and quality assurance programs as well as expenses from our ongoing Firdapse clinical trials and studies and our expanded access program. Research and development expenses in the comparable period in 2018 primarily consisted of consulting expenses as we prepared to submit our NDA for Firdapse for the treatment of LEMS as well as expenses of our Firdapse clinical trials and studies and our expanded access program. The company expects that the costs related to research and development activities will continue to be substantial throughout 2019 as we continue our ongoing clinical trials and studies in MuSK-MG, CMS and SMA Type 3 and our expanded access program for Firdapse.

Selling, general and administrative expenses for the second quarter of 2019 totaled $9 million as compared to $2.6 million in the second quarter of 2018. The increase when compared to the same period in 2018 is primarily due to increased selling expenses, including cost of commercial system implementation of our sales force and supporting personnel, product launch expenses, market access and market research expenses and professional fees associated with our lawsuits against the FDA. The company expects selling, general and administrative expenses to increase in 2018 as we continue to build our infrastructure and commercial and patient programs in support of further sales activities in 2019 and prosecute our lawsuits against the FDA.

On June 30, 2019, Catalyst had cash and investments of $64.9 million and no funded debt. Although there can be no assurance based on current available information, we believe that these resources will be sufficient to support our planned operations for at least the next 12 months. More detailed financial information and analysis may be found in the company's quarterly report on Form 10-Q, which was filed with the Securities and Exchange Commission on Wednesday, August 7, 2019 and can be found on the Investor Relations page of our website at www.catalystpharma.com.

I will now turn the call back to Pat.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thanks, Ali. We are very pleased with this quarter's results, and I will like to thank everyone involved in making this happen, including our patients, physicians, employees and other Catalyst stakeholders. Together, we are changing the lives every day of patients with rare neuromuscular diseases. We look forward to building on this strong launch foundation and providing you additional updates from our ongoing trials later this year.

This ends our formal presentation. I'll now turn the call over to the operator for questions.

Questions and Answers:

Operator

Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Charles Duncan of Cantor Fitzgerald. Please go ahead.

Charles C. Duncan -- Cantor Fitzgerald & Co. -- Analyst

Hi, Pat and team, thanks for taking my questions and congrats to nice quarter and the progress. I had a quick question regarding the naive patient starts. I'm wondering if you could characterize better that source of demand, how it's coming to you or -- and/or did this make a contribution in the second quarter in terms of revenue? Or would that be the naive patients, perhaps making an impact in terms of revenue going forward?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Dan, do you want to take that?

Daniel J. Brennan -- Chief Commercial Officer

Sure. So I think this was a question on last call as well. The naive patients, again, this was a group of what we see from the claims data, primarily 1,500 patients that have already been diagnosed with LEMS. And so there are many patients out there that perhaps have already been trying to get to 3,4-DAP and just weren't able to get into a study and such. And so there was an initial pent-up demand and we saw a good number of those patients reaching out to us actually. But then also same with their physicians, and many new physicians were prescribing for these patients. And so there was a pent-up demand and now we're starting to see that get into, as I mentioned, what looks like to be somewhere around the 15 patients per month. That will come in, again, either from patients that are hearing about it or reading about it online from the physicians and our efforts in the field with our sales reps and some of our digital efforts. In Q2 -- as I mentioned earlier, there were 55 of these patients in Q1. By the end of Q2, that grew to 115. And right now, we're at 138. So in Q2, it had some meaningful impact as far as revenues are concerned. We are seeing, in Q2, a relatively quick turnaround on the patient enrollment forms to getting through PAs and benefits being delivered in Q2. Actually, that was under 10 days. So I think that there was some revenue recognition from those patients even in Q2 and certainly as we move forward.

Charles C. Duncan -- Cantor Fitzgerald & Co. -- Analyst

Okay, that's helpful. And regarding the -- you mentioned feedback encouraging, not a surprise for patients experienced on the drug, but with regard to the naive patients, if you could provide some more color on the feedback that you're getting at the greatest initial response in terms of efficacy? Is it tolerability or overall impact on quality of life?

Daniel J. Brennan -- Chief Commercial Officer

Gary, do you want to take that?

Gary Ingenito -- Chief Medical Officer

Sure. I think the feedback, again, for the naive patients has been positive with high levels of satisfaction and the attention that they are receiving personally from the Catalyst patient access liaisons to help them, while navigate the system as well as to get appropriately titrated on their medication. And that's something that I think patients have been reporting that they're not used to having with other medications or companies.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

So if I can add to that, Charles, it's important for the physician to work with the patients, especially during this initial phase, the titration period, where a patient might be experiencing some of the side effects that are typical at this drug like some minor GI issues as well as some tingling paresthesia. And so there is some hand-holding and consulting that's required with these patients -- these naive patients initially. And I think that between the docs and our MSLs and our PALs, I think that they've done a wonderful job helping the patient get through this initial titration and -- period.

Charles C. Duncan -- Cantor Fitzgerald & Co. -- Analyst

Thanks. That's a positive, Pat. Thanks for the color. Last question for Steve, perhaps multi-part. Wanted to ask you about the upcoming CMS data. Would you see a win there being just statistical significance? Or are you looking for some effect size to transition into the next phase, have those conversations with the agency and possibly file an sNDA? And then the second part of the question is regarding the MuSK-MG program. It seems like that's making progress. You said that you were offering continued treatment -- an extended treatment for certain patients. Could you characterize approximately the percentage that have decided to go on to the drug after the trial?

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

Sure. Well, thank you, Charles. Hopefully, I'll remember all your questions. First, with regard to CMS, that's a relatively small trial in a perfect world. We'd like to see statistical significance. But remember, there's also multiple gene types for CMS. I think when there was simply to see some signal data from one or more of the genetic groups that are captured in our CMS trial. As I mentioned in the call, one of the things that we have to do after the completion of the trial is have a discussion with the FDA about the results. And that discussion will be the very subject that you asked about, which is what does the trial tell us? And what does that mean for moving forward with the indication in which genetic subtypes are hopefully all or will be allowed on the label. So hopefully, that answers your question. With regard to the MuSK trial, let me answer your second question first and that is about the number of patients that seek the extended treatment. The short answer is virtually all the patients have agreed to continue on therapy after completion of the randomized portion of the trial. So clearly, those patients feel that the drug is benefiting them in some way if they decided to continue on the treatment. Could you do me a favor and repeat the first part of your question with regard to MuSK, just to make sure I answer it properly?

Charles C. Duncan -- Cantor Fitzgerald & Co. -- Analyst

Yes. That was really it. I guess I would add, what is kind of the gating factor in terms of the timing of the MuSK-MG trial?

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

Well, as I mentioned on the call, it's got a -- it's just a very large, complex trial with many sites, both in the United States and internationally. And at the conclusion of enrollment, which we expect in this half, we will be cycling through all of the sites to clean up all the data, clean up all the records and close -- properly close the sites and make sure that all the data is pristine as it should be for any trial. And simply because of the large number of sites in these international locations, it will carry us into the first half of next year.

Charles C. Duncan -- Cantor Fitzgerald & Co. -- Analyst

Okay. Thanks for the information

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

Okay. Thank you

Operator

Thank you. Our next question is coming from Joe Catanzaro of Piper Jaffray. Please go ahead.

Joseph Catanzaro -- Piper Jaffray -- Analyst

Hey, guys, thanks for taking the questions and congrats on the nice quarter. I guess my first question, you provided a bunch of metrics that provide some insight. But I'm wondering if you could provide a little bit more color in terms of the refill rate, maybe the exact percentage of refills you're seeing? And then along those lines, by the numbers you provided, it sounds like there were about 25 patients or so who have -- who initiated treatment, but subsequently discontinued. I'm wondering if you could provide some detail around why those patients discontinued treatment.

Daniel J. Brennan -- Chief Commercial Officer

Sure. This is Dan. I can give some insight to the refill rate. The refill rate is very strong, as you would imagine, in a highly symptomatic disease where the medicine provides immediate benefit to the patient. So actually, for our active patients, the refill rate per month is at about 98% to 100%. So the active patients are refilling on a regular basis. The second question on some discontinuation. And I think this goes in a little bit with the question that Charles asked as well. We did see in the studies for naive patients coming on board approximately in the neighborhood of 15% discontinuation or the trial -- the drug didn't work well in patients. And so we were expecting for naive patients somewhere in the neighborhood of a 15% to 20% discontinuation rate in its [Indecipherable]. As you would imagine that Pat mentioned, in some cases, it's the side effects being intolerable, and we try to help patients with that. There is a neurotherapeutic window for the drugs. We help the patient understand that concept. We help the physicians, but in some cases, it is just truly intolerable for the patient. In other cases, the patient feels more benefit. And again, we have to wonder whether or not they're just not going to be a responder or if it's an element of the dosing and the titration. And so that's why we spend so much time and effort there. But the long story short is, we do see somewhere in the neighborhood of the 15% to 20% discontinuation from new patients. And this is one of the reasons why we do provide the first 30 to 60 days is actually bridge-free product so that patients and payers know that they can look for the response before the payers will start paying.

Joseph Catanzaro -- Piper Jaffray -- Analyst

Okay, got it. That's helpful. I guess my next question, maybe at a high level, can you guys provide any detail or insight in terms of what you're seeing in the marketplace with regards to Ruzurgi? Are you hearing anything from physicians and patients? Have you seen any physicians transition your patients off of Firdapse on to Ruzurgi, just wondering if you have any color around that?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

We have heard very little and seeing very little from discontinuations from patients in our Catalyst Pathways or from physicians thus far. There are some, but it actually is very, very minimal and very little from what we are hearing and seeing, both at the field level with their sales representative as well as from our Catalyst Pathways and our ongoing patients.

Joseph Catanzaro -- Piper Jaffray -- Analyst

Okay, got it. That's helpful. And then maybe just one last question. Just following up on the MuSK-MG timing. I just wanted to make sure it's clear that the change in timing around top line data is more due to just your expectations of the time it's going to take to clean up the data and do the analysis. And then maybe speculating if the trial completes enrollment in 2019 and the primary endpoint is a day 10 time point, can we expect the data earlier in the first half of 2020 rather than later?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Steve?

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

This is Steve. It's conceivable that the data could be earlier in the first half of next year. The -- once the enrollment is complete, and as you said, the exposure period is relatively short. Once all the patients have completed, the next stage is to make sure that all the data has been entered in the electronic data collection system and that all queries get answered. Some investigators are quicker about it than others. And if all the investigators are very responsive to getting data entered and also making sure all queries were closed and all the sites have been checked, it could be fairly early in the first half of next year. If we have delinquent investigators, it can take longer. And so it's somewhat of an unknown as to how fast investigators can get it done. Many of the investigators of other trials going on as well and competing resources. And so we have to make sure that we're out there all the time talking to them and keeping them interested in our trial.

Joseph Catanzaro -- Piper Jaffray -- Analyst

Got it. Thanks for taking the questions.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is coming from Joon Lee of SunTrust Robinson Humphrey. Please go ahead.

Fang-Ke Huang -- SunTrust Robinson Humphrey -- Analyst

Hey, thank you for taking our question. This is Fang-Ke Huang for Joon. Quick question. So you mentioned that there is about 15 new patient come in per month. And I did some calculation, that's about 90 patients coming in for the second half of '19 and then about 180 patients coming in for the whole year. So based on the calculations you're going to be end up with 500 patients at the end of '19 and then 680 patients by the end of '20. Is that calculation reasonable or fair or we are too conservative in terms of calculating how many patients can be helped with that?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Dan?

Daniel J. Brennan -- Chief Commercial Officer

Yeah, I think directionally that -- you can be comfortable on that. It's always difficult to predict on such an ultra-rare disease, where there are 1,500 diagnosed patients, and then we estimate another 1,500 that are undiagnosed. It's hard to determine what the study states, a number of new prescriptions and patients coming in. But I think that, that is what we see right now. And from my experience in working with rare diseases, this seems to be following that trend.

Fang-Ke Huang -- SunTrust Robinson Humphrey -- Analyst

Great, thank you. And then my second question is on the CMS. So basically in the CMS trial as well as the MuSK-MG trial, and they all have a dose finding and treatment running phase. And so just wondering that in the CMS trial, what's the screening rate? If patients are eligible, what's the screening success rate so that it can be randomized in the subsequent treatment -- or subsequent study?

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

We haven't commented on the screening success rate. In other words, how many patients are screened versus how many ultimately get randomized. I can -- but just in general, I can say that it's similar to what we've seen in the past in other neuromuscular trials.

Fang-Ke Huang -- SunTrust Robinson Humphrey -- Analyst

Okay, great. Thank you, guys, and congrats on a strong quarter.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thank you, Fang.

Operator

Thank you. Our next question is coming from Leland Gershell of Oppenheimer. Please go ahead.

Leland Gershell -- Oppenheimer & Co. Inc. -- Analyst

Good morning. I wanted to ask a bit more about the LEMS patients out there who are currently not on therapy. With regard to accessibility of those patients in terms of them being perhaps in outlying areas, seeing general neurologists, obviously, a much perhaps larger population and a more focused group of the specialists and how you see getting to those patients in terms of what strategies you're going to use and what expense you might incur as you have to perhaps deploy more effort to get to those patients? And then I have a follow-up.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Dan?

Daniel J. Brennan -- Chief Commercial Officer

Sure. So we are continually purchasing a claims' data that updates us on the prescriptions. We buy prescription data as well. But the procedures and the diagnosis codes physicians across the country. And we still see, even on our quarterly update, new physicians and oftentimes general neurologists using diagnosis codes for these LEMS patients and that's when we hand those leads, in essence, over to our sales representatives and we have inside sales folks that are calling off these offices as well. So we have kind of the traditional purchase and understand the data from a physician level and then hand that off to our sales force. And whether that's in urban world, we do see the same. Where there is a good mix you would think that many of these patients are in the large urban centers, but actually, they are quite a few. And in fact, oftentimes 50-50, where they're out in outlying areas. And so we send our sales reps or have the phone calls to those offices and follow up. But in addition, we're also investing quite a bit in digital communications book to physicians and patients. And so that's search terms, where we are providing educational information on both about LEMS as well as Firdapse and such, and that's really starting to ramp up now here in the second half of the year.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

And Dan, let me add to that. I think longer term, the Ambassadors program that we have from fellows, that's an investment that we're making, a fairly hefty investment over the next couple of years, reaching out to fellows from various institutions and holding meetings around their country to educate them about the disease and about the clinical benefit of Firdapse. And they go back to their institutions and they educate some of their associates, and we had one in Dallas in May with 14 fellows. I believe they went back to their various institutions. And I think 13 of those have already had meetings at their various institutions with their -- with the other fellows. So part of it is longer-term educational effort that we're doing that will pay dividends not immediately probably, but longer term to augment what Dan has just said, the other efforts that we're doing.

Leland Gershell -- Oppenheimer & Co. Inc. -- Analyst

Okay, that's very helpful. And then just on the sustained release formulation. I know you're not giving much of an update here. But just wondering when we might hear on when that might be moving forward in position to perhaps running a clinical study. Could that be sometime in 2020?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Steve?

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

I believe at this time, that's a reasonable assumption about when we might start some clinical work. Obviously, there's formulation work that's continuing that needs to be completed and then manufacturing of clinical batches.

Leland Gershell -- Oppenheimer & Co. Inc. -- Analyst

Okay, great. Thanks very much for taking the questions.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thanks, Leland.

Operator

Thank you. Our next question is coming from Scott Henry of Roth Capital. Please go ahead.

Scott Henry -- ROTH Capital Partners -- Analyst

Thank you. Good morning. And really strong results, Pat. Just had a couple of questions. First, a modeling question. It looks like the cost of goods sold is running around 15%. That would seem a little bit low, given -- I think this is about 14% in total royalties being paid. Any clarity what's going on there?

Alicia Grande -- Vice President, Chief Financial Officer and Treasurer

Yes. So most of our launch supply we manufacture before the FDA approval. So as per accounting guidance, we extend that to R&D on prior years. So the cost that we were able to capitalize form most of the launch surprise was only labeling and packaging. As we deplete that product and start manufacturing new product for Argentina sales, you'll see a more realistic cost of sales. So we expect the cost of sales to increase as paying process volume.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Scott, in the past, we've talked about for modeling purposes, including the royalties to use on a conservative basis, about 20%.

Scott Henry -- ROTH Capital Partners -- Analyst

Okay.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Knowing of that 14% of that is royalties.

Scott Henry -- ROTH Capital Partners -- Analyst

Perfect. Thank you for that clarity. And then with regards to the FDA lawsuit, are there any events we should be looking for? Are there any clock ticking? Or just trying to get a sense of anything we should look for from a time line or event structure there?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Yeah. We believe that federal agencies and suits like this have about 60 days to respond. There was a clerical glitch that delay -- will probably delay that by 10 days. So we think that our response will be filed probably sometime around Labor Day. So that's really all the color we can give at the moment, Scott.

Scott Henry -- ROTH Capital Partners -- Analyst

Okay, great. That's helpful. And then the Japan indication, I don't know, have you given any color as to kind of the size of that market? And what sort of time line we should be thinking about to reach that market?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Yeah, we're a little guarded right now. Our team was there last week in Japan working with our regulatory -- Japanese regulatory group and our CRO. And so we're going to be a little bit guarded until we can be more precise about timing. We believe the prevalence based on literature and some of the reports that we've seen and some of the work that had actually been conducted by BioMarin indicate that it's somewhere between 800 to maybe 1,300, 1,400 LEMS patients and that would sort of match up as a percentage on a prevalence basis. As it relates to the US, about 40% of patients. So 1,200 or so. So that's all we have at this point, Scott, on Japan or there were...

Scott Henry -- ROTH Capital Partners -- Analyst

Okay. And then time line-wise?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Pardon me?

Scott Henry -- ROTH Capital Partners -- Analyst

Any comments on how long it could take to get that to filing or on the market?

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

No, we should have more information on that later in the year. We have several more meetings scheduled in Japan between now and the end of the year. And I would say, as we get more clarity, we'll be in a position to provide some guidance and time lines.

Scott Henry -- ROTH Capital Partners -- Analyst

Okay, great. That should do it for me. Thank you for taking the questions.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thanks, Scott.

Operator

Thank you. At this time, I'd like to turn the floor back over to management for closing comments.

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Thank you, operator. I want to close today by saying how excited we are about the progress that we've made so far in 2019. We thank you for joining today's call and look forward to providing further updates as the year progresses. Have a nice day.

Operator

[Operator Closing Remarks]

Duration: 58 minutes

Call participants:

Alicia Grande -- Vice President, Chief Financial Officer and Treasurer

Patrick J. McEnany -- Co-Founder, Chairman, President and Chief Executive Officer

Daniel J. Brennan -- Chief Commercial Officer

Steven R. Miller -- Chief Operating Officer and Chief Scientific Officer

Charles C. Duncan -- Cantor Fitzgerald & Co. -- Analyst

Gary Ingenito -- Chief Medical Officer

Joseph Catanzaro -- Piper Jaffray -- Analyst

Fang-Ke Huang -- SunTrust Robinson Humphrey -- Analyst

Leland Gershell -- Oppenheimer & Co. Inc. -- Analyst

Scott Henry -- ROTH Capital Partners -- Analyst

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