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Catalyst Pharmaceuticals, inc (NASDAQ:CPRX)
Q3 2021 Earnings Call
Nov 10, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Catalyst Pharmaceuticals Third Quarter 2021 Earnings Call and Webcast. [Operator Instructions]

It's now my pleasure to turn the call over to Ali Grande, CFO. Please go ahead.

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

Good morning, everyone, and thank you for joining our conference call to discuss Catalyst's third quarter 2021 financial results and corporate highlights.

Leading the call today, we have Patrick McEnany, Chairman and Chief Executive Officer. We are also joined by Mr. Steven Miller, Chief Operating Officer and Chief Scientific Officer; and Jeffrey Del Carmen, Chief Commercial Officer. For the Q&A session, we will also have Dr. Gary Ingenito, Chief Medical and Regulatory 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 federal securities laws. These statements relate to our current expectations, estimates and projections and are not guarantees of future performance. They will risk, uncertainties and assumptions that is difficult to predict and may prove not to be accurate, especially in light of the effects of COVID-19. 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 2020 annual report on Form 10-K.

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

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

Thanks, Ali.

Good morning, everyone, and thank you for joining us today for Catalyst's third quarter results and update call.

I'm very pleased to report that we delivered record Firdapse revenue results for the third quarter ending September 30. We generated net Firdapse revenues of $35.9 million, an increase of 23% versus the third quarter of 2020. Firdapse revenues for the nine-month period were $99.7 million as compared to $87.9 million for the nine months last year, which represents a 13% increase year-over-year. At this time, I anticipate continued organic growth through the end of this year and for the foreseeable future.

Net income before income taxes for Q3 2021 was $14.1 million, a 20% increase when compared to $11.7 million for the third quarter of last year. We reported GAAP net income of $10.3 million for the third quarter of this year or $0.10 per basic and diluted share. We ended the quarter with $174.8 million in cash and short-term investments, further supporting our long-term growth strategy to diversify through reinvestments in our business or external growth opportunities. These results also highlight the strength of our commercial capabilities and resilience as we continue to execute throughout the current environment. Ali will have more to provide during her financial presentation.

Our share purchase program continues with 949,746 shares purchased in the open market during the third quarter. And since inception in March of this year through the end of the third quarter, we have purchased 1,729,746 shares at an average price of $5.15 per share. Notwithstanding our success in treating many LEMS patients, as of now, we have only reached about 25% of the estimated 3,000 US LEMS patients. We remain confident of the progress of our commercial team is making in evolving the market for the Firdapse brand. We continue to make substantial investments in Firdapse, focusing on expanding reach to targeted healthcare specialists, most recently to oncologists and general neurologists, providing resources to help shorten the diagnostic journey for LEMS patients and support through patient and healthcare provider education programs. Our focus on commercial execution excellence remains a top priority to us as well as to the patients we serve. Jeff will provide additional information on our commercial progress shortly.

Importantly, we have made substantial advancements related to Firdapse exclusivity and commercial potential in the US. Most notable was the receipt of a positive decision from the 11th Circuit Court of Appeals supporting new orphan drug exclusivity for Firdapse tablets 10 milligram for trading LEMS patients in the US. We are currently extremely pleased with the court's decision. While there is a 45-day period for which an inbound curing request can be submitted to the court related to the court's decision, we remain confident in our position and look forward to when we can fully recognize our exclusivity. Our priority has always been and will continue to be on addressing patients' needs first. We are well-prepared to do what we genuinely can to ensure that all LEMS patients will have uninterrupted access to amifampridine for treating their condition.

We also continue to make important progress in bolstering our intellectual property for Firdapse. Currently two patents have been issued that extend the life of our intellectual property portfolio to 2034, both of which are listed in the Orange Book. We have additional patents pending to further strengthen the IP portfolio, adding to our commitment to protect the innovation and the product's commercial potential. As we continue to execute our commercial-related initiatives, we're taking a very targeted approach toward our clinical development programs. We are working on expanding the label from Firdapse as we plan to see US approval to include pediatric LEMS patients, which we believe numbers our 10 to 15 children. This program further underscores our continued commitment to providing an important treatment option for LEMS patients of all ages. We're also continuing our efforts to expand the global footprint for Firdapse beyond the US, Canada and Japan. Steve will have more to add shortly regarding activities outside of the US.

In addition, having objectively and thoroughly evaluated the clinical development timeline, regulatory path and commercial viability for MuSK-MG, we have elected to end the program and concentrate our R&D efforts in other areas. We believe having a more focused approach toward our development programs will drive the greatest value for the Company and enable us to better utilize our resources to pursue value-creating opportunities to expand our focus beyond Firdapse.

During the quarter, we made considerable progress on our efforts to build a more diversified portfolio that aligns our growth strategy and priorities, including the potential to expand the breadth and depth of our pipeline. With a robust process in place during the third quarter of 2021, we engaged in extensive due diligence activities on a potential acquisition that fit our strategic objectives. However, after a thorough and extensive assessment of the acquisition candidate, we elected not to further pursue this opportunity.

Coupled with our strong balance sheet, we are in an excellent position to take advantage of opportunities that meet our specified criteria and commitment to pursue rare disease opportunities and are very encouraged about projects that are currently under review. Our quarterly achievements demonstrate continued performance excellence, supported by several key strategic decisions that have positioned Catalyst firmly for the future. In saying that, we are excited about the path ahead as we continue to execute across all priorities to drive sustainable growth for the long term.

Finally, there are a couple of other points worth noting. First, we achieved these results during a period when Catalyst and most of our peers were affected to some degree by the Delta variant of COVID-19. As this variant is abating, we are beginning to see a more normalized pattern of practices with healthcare providers and patients. Lastly, while addressing the COVID-19 effects, I want to reiterate that as we have previously stated, our supply chain is rock solid with qualified redundancies throughout our supply chain.

Now I will turn the call over to Jeff Del Carmen, our Chief Commercial Officer, who will provide further highlights of our commercial execution for the quarter.

Jeff Del Carmen -- Chief Commercial Officer

Thanks, Pat, and good morning, everyone.

As Pat mentioned, Q3 net Firdapse sales were $35.9 million, which represents 23.1% growth for the quarter versus the same quarter last year; 6.7% growth versus Q2 2021. We are extremely proud of the continued strong performance by the entire Catalyst organization. Strong net revenue in Q3 was driven primarily by steady new patient enrollments, continued favorable reimbursement dynamics and stable discontinuation rates. While we continued to see some sporadic COVID-19 related slowdowns in new patient starts due to delays at the point-of-care between diagnostic testing and initiation of treatment, Q3 new patient enrollments were still 26% higher this quarter versus same quarter last year and slightly higher than Q2 2021. Our strong patient persistency resulted in continued low 90-day discontinuation rates of less than 15%. In October, net new patients were the highest monthly total in 2021, a result of consistent [Indecipherable] to Firdapse' new enrollments, adult LEMS patients restarting Firdapse and low discontinuation rates. We are proud that around 800 adult LEMS patients have received the Firdapse prescription since launch. However, Catalyst is focused on the significant remaining opportunity to help all adult LEMS patients. We are confident that our continued heavy investment in patient resources will shorten the diagnostic journey for LEMS patients and enable Catalyst to serve the significant number of remaining LEMS patients sooner. Thus far, approximately 3,000 unique undiagnosed potential patients have opted in to receive useful information regarding LEMS, an increase of nearly 1,000 since our last earnings call. Furthermore, we continue to meet key milestones in the development and execution of our oncology LEMS strategy.

Approximately 50% of LEMS patients are thought to be tumor LEMS patients, with the vast majority having small cell lung cancer. Therefore, we believe that oncology is a key element of our future growth. After completing a thorough assessment of the market, conducting ad boards with oncology thought leaders and ongoing market research, we are excited to launch our non-personal promotion to thoracic oncologists in Q4. Engagement with this segment of the market has resulted in early positive indicators that the strategy put into motion will yield more patients with a proper diagnosis of LEMS and accelerate the opportunity to receive treatment for this disease.

We continue to partner with key professional societies like AAAEM, which provide continuing education for all levels of neuromuscular healthcare providers. We had the opportunity at the recent annual meeting to engage with their constituency and educate clinicians about LEMS in new and innovative ways, helping to identify atypical LEMS adult patients. Through healthcare provider education, we expect more patients will benefit from a correct and timely LEMS diagnosis.

Our Catalyst Pathways patient services team remains dedicated to supporting the needs of adult LEMS patients, caregivers and healthcare professionals, as well as providing educational resources regarding LEMS and Firdapse. In addition, 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 and access in foundation assistance, have an average co-pay of less than $2 a month. Prescription approval rates remain over 90% across all payers, government or private commercial and shares. Catalyst Pathways patient services team also connects patients with community and advocacy resources such as patient support groups.

In closing, we are pleased with our performance in Q3 and are excited about the significant opportunity ahead to help all adult LEMS patients. We are confident that the strategies and tactics we have put in place will deliver sustained growth in Q4 and beyond. I want to thank the entire team at Catalyst for their unwavering commitment to the LEMS community.

I will now turn the call over to Dr. Steven Miller, our Chief Operating Officer and Chief Scientific Officer, for an update on R&D activities.

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

Thanks for the commercial update, Jeff.

I'll now provide an update on our clinical pipeline and product development efforts. We continue to make important progress with our development programs for Firdapse, including advancing our plans for developing a long-acting formulation of amifampridine phosphate in order to provide an improved dosing experience that is a more convenient option for patients and provides enhanced consistency in its therapeutic effect. Plans are underway to initiate an additional pharmacokinetic study in the first quarter of 2022 to study the drug release and absorbent characteristics of the most recent long-acting formulations. Our design efforts have been guided by input from patient and physician panels regarding the desired performance characteristics of a long-acting version of Firdapse. We believe the target characteristics of our long-acting formulation of amifampridine phosphate will address the needs of the LEMS patient community as we continue to execute all our plans to advance this development program.

In alignment with our commitment to provide a treatment for all LEMS patients, we are now preparing a supplementary MDA submission package for the treatment of pediatric LEMS with Firdapse. We anticipate filing this supplement with the FDA in the first quarter of 2022. Catalyst has all the required data, including all necessary safety data, to file a complete submission for this label expansion. The preparation of this supplement is a high priority for Catalyst as we remain committed to advancing our efforts to expand the use of Firdapse so that we may be able to provide all LEMS patients with an approved treatment option.

Now I would like to provide an update on the MuSK-MG program. As previously announced, Catalyst submitted plans including a protocol for a new clinical trial for the symptomatic treatment of MuSK and myasthenia gravis or MuSK-MG to the agency for their review and comment. Having received the agency's comments, we convened an advisory board meeting during the third quarter consisting of key opinion leaders and experts for input and options for the MuSK-MG development program. This included some physicians that had experienced using Firdapse to treat MuSK-MG in our most recent trial. After an in-depth evaluation of the feasibility and measurability of study endpoints for this indication, as well as the input from the agency and advisors that was received, we have concluded that the universal use of Firdapse as a first-line therapy for MuSK-MG is unlikely and therefore we have decided to put off further development plans at this time. However, for those patients that currently receive Firdapse to treat their MuSK-MG symptoms, we will continue to support them through investigator initiated programs in accordance with agency regulations.

We continue to make valuable progress in increasing healthcare provider awareness of LEMS through our medical affairs programs. An accredited continuing medical education or CME course about LEMS is now available through Medscape. To date, over 4,600, mostly healthcare provider learners have viewed the course and as of this October, 1,338 licensed healthcare providers have taken the CME test. Our medical science liaisons also recently completed hosting several neuromuscular and medicine fellows from various academic medical centers for another Catalyst sponsored hands-on training session on LEMS given by neuromuscular experts earlier this month. Previous sessions like this one have received strong positive feedback on their ability to raise awareness among fellows of the diagnostic challenges with LEMS.

Now I would like to provide an update on our ongoing global expansion initiative. As we previously announced in June, we partnered with DyDo Pharma for the development and commercialization of Firdapse for the treatment of Lambert-Eaton myasthenic syndrome in Japan. DyDo has made great strides initiating development activities, including consulting with the Japanese Pharmaceuticals and Medical Devices Agency to confirm clinical study parameters and requirements to obtain regulatory approval. As a result of their efforts, DyDo is preparing their clinical trial notification and anticipate a small-scale Phase III clinical trial will be initiated in 2022. Catalyst continues to support DyDo in preparing the clinical activities by supplying clinical trial materials as well as collaborating with DyDo in its efforts to obtain required documentation for the Japanese regulatory authorities.

We have made significant progress on developing an intellectual property estate to extend the market exclusivity for Firdapse. As of the third quarter 2021, we have two patents listed for Firdapse in the FDA's Orange Book, which extends the IP portfolio to 2034. We have several other pending patents related to the use of Firdapse filed with the US Patent and Trademark Office and anticipate that they may issue later this year or in early 2022. In addition to the US, Firdapse currently has stated exclusivity in Canada out to 2028, and in Japan, we expect Firdapse will be granted 10 years of market exclusivity upon approval in that market. We will continue to seek opportunities to enhance the portfolio estate to further protect the market exclusivity for Firdapse and to expand the Firdapse market geographically.

During this quarter, we advanced our objectives to expand our portfolio of rare disease treatments beyond Firdapse. As Pat mentioned, we continue to actively evaluate new products or other transactions to expand both Catalyst's product offerings and/or our research and development pipeline. Our teams are actively and vigorously engaging in the process as we look for worthwhile prospects where we can utilize our expertise, resources and know-how to expand our programs and drive growth.

With a very efficient approach in place, we are enthusiastic about the path ahead and confident in our ability to identify the right opportunities to maximize our capabilities and resources.

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

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

Thanks, Steve.

We are very pleased with our financial results for the third quarter. As reported, we ended the quarter with cash and investments of $174.8 million and no funded debt. We believe this allows us the financial flexibility to advance our [Indecipherable] programs and support our strategic initiatives of acquiring earlier stage opportunities and innovative technologies to enable growth and value creation. Total net revenues for the third quarter of 2021 were $36 million, a 22.6% increase when compared to total revenues of $29.3 million for Q3 '20. Despite the continued challenges of COVID-19, total Firdapse product revenue net was $35.9 million for the third quarter of 2021, a 23% increase over net product revenue of $29.2 million for the third quarter in 2020. Net income before income taxes for Q3 2021 was $14 million, an approximately 20% increase when compared to $11.7 million for Q3 2020.

We reported GAAP net income of $10.3 million for Q3 2021 or $0.10 per basic and diluted share. For Q3 2020, we reported GAAP net income of $43.3 million or $0.42 per basic and $0.41 per diluted share. However, these figures are not comparative as the third quarter of 2020 benefited from the reporting of a one-time non-cash deferred tax asset of approximately $31.6 million upon reversal of the related valuation allowance. Our effective tax rate in the third quarter of 2021 on an annualized basis was 24.3% as compared to 2.8% in the third quarter of 2020. While in 2020, we've benefited from the use of our federal net operating losses, in 2021 and future periods, we expect that we will benefit from the use of our deferred tax assets primarily relating to state NOLs and the orphan drug tax credits, although those are subject to certain limitations, resulting in a more normalized tax rate.

Because of the significant effect of the one-time reporting of our deferred tax assets in the third quarter of 2020 compared to the third quarter of 2021, we believe that the non-GAAP measures we presented in yesterday's press release provide a more useful comparison of our results of operations for the third quarter of 2021 versus the third quarter of 2020. Non-GAAP net income for Q3 '21 was $15.6 million or $0.15 per basic and $0.14 per diluted share, which excludes from GAAP net income stock-based compensation expense of $1.5 million, depreciation of $31,000 and the income tax provision of $3.7 million. This compares to non-GAAP net income for Q3 2020 of $13.2 million or $0.13 per basic and $0.12 per diluted share, which excludes from GAAP net income stock-based compensation of $1.5 million, depreciation of $30,000 and an income tax benefit of $31.6 million. The above represents an almost 18% increase of non-GAAP income year-over-year for the third quarter.

Research and development expenses were $4.5 million for the third quarter of 2021 compared to $3.7 million for the third quarter of 2020. R&D expenses remain consistent at 20% and 21% of total operating costs for the third quarter of 2021 and the third quarter of 2020, respectively. We expect that research and development expenses will continue to be substantial in 2021 and beyond as we advance the development of a long-acting formulation for Firdapse and continue our expanded access programs. In addition, we expect R&D will also increase in future periods if we successfully execute on our strategic initiatives to acquire or in-license innovative technology platforms and our earlier stage programs in other therapeutic areas outside of neuromuscular disease.

SG&A expenses for the third quarter of 2021 totaled $12.2 million compared to $10 million in the third quarter of 2020 [Phonetic]. SG&A expenses decreased slightly as a percentage of total operating expenses to 55% for the third quarter in 2021 compared to 57% for the third quarter of 2020. We expect that SG&A expenses will continue to be substantial in 2021 as we continue our efforts to increase revenues from Firdapse and take steps to further expand our business. More detailed information and analysis may be found in the Company's quarterly report on Form 10-Q, which was filed with Securities and Exchange Commission yesterday, November 9, and can be found on the Investor Relations page of our website at www. catalystpharma.com.

And with that, I'll turn the call over to Pat.

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

Thanks, Ali.

Catalyst continued to demonstrate resilience and strong execution in the third quarter of the year, providing us very strong foundation for the Company as we make progress on our business development activities and look to build a portfolio of rare disease, marketed products and/or other clinical programs.

Finally, I would like to thank all of our employees who have each demonstrated a dedication to making a positive impact on patients' lives. This would not happen without their passion and commitment to serving the LEMS community.

This ends our prepared remarks. We will now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question today is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Yeah. Hey, good morning, Pat and team. Congratulations on a nice quarter of performance. Thanks for taking our questions. I had one on commercial, one on pipeline and one on strategy. Perhaps I'll start with the commercial. Regarding Firdapse growth drivers in '22, not really asking for guidance here, but it might be nice to know whether or not you'd be comfortable providing guidance in '22 later, in a few weeks, maybe with starting for '22, but more importantly, when you think about the growth drivers for '22, what is the key factor that you're focused on? Is it increasing awareness or is it increasing breadth or depth of prescribers?

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

Yes. So your first question, Charles, is as far as giving guidance, as we go through the process of developing our budget for next year in our forecasts, and hopefully looking at this pandemic from the rearview mirror, I think perhaps early in Q1 we might feel comfortable in giving guidance. So that's our hope and desire is that we can give some revenue guidance at the beginning of the year -- the new year. In regard to the key growth factors, I'll let Jeff address that.

Jeff Del Carmen -- Chief Commercial Officer

Thanks, Charles, for the question. We see significant opportunity in 2022 to grow. Specifically, when we look at the diagnosed patients that are out there already for LEMS that are not yet on Firdapse, we have enrolled [Indecipherable] these leads. And many of these physicians are telling us at this point that they're just waiting for these patients to come in and visit before they prescribe. So we have that, that's one. Other things, we take a look at the oncology and the tumor LEMS patients. We're applying significant resources there to educate HCPs as well as patients on tumor LEMS, the disease and potential treatments.

So, we already are seeing growth right now. I will give you a quick specific here. In 2021, our new enrollments -- 22% of the new enrollments are tumor LEMS patients. That's a growth of 10% from 2019 [Indecipherable] 2019 saw 12%. So we're seeing growth with the limited resources that we've applied there thus far. And we know all the work that we've done to date this year will generate new patient opportunities oncology or tumor LEMS patients next year. The other part is, you take a look at the other 3,000 patients that are out there. A significant portion of these patients are either undiagnosed or misdiagnosed. So we've applied resources there to help educate patients, caregivers and physicians about LEMS and treatments that are available and we will shorten that patient journey. And that will open up the opportunities for these patients to be served sooner. So that's where we see the significant growth come into 2022.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Very good. Appreciate that added color, Jeff. Regarding the pipeline question that I had, I'm actually intrigued with several of the pipeline initiatives, but I wanted to focus on the pediatric filing that you've mentioned. It seems to make a lot of sense, although you said it's a very, very, very low incidence of -- or incidence and prevalence for pediatric patients with LEMS. I guess I'm wondering if you anticipate being able to provide some PK data or other supportive evidence for that filing. And then, is it possible that pediatric LEMS is actually under-diagnosed and where would the source of pediatric LEMS be from? Could it be for small cell lung cancer patients that are pediatric, which I'm sure is very few, or what is the source to pediatric LEMS? Genetic?

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

Charles, I'll let Steve Miller answer that question.

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

Thanks for the question, Charles. First, let me speak to the origin of pediatric LEMS. It is autoimmune like the LEMS for adults. It is essentially the same disease. As you probably know, all autoimmune conditions typically occur later in life, although they can occur in pediatric patients, but it is relatively low frequency, and that is the origin of why the numbers are relatively small. It is possible that there is some undiagnosed cases that are out there but the reality is that the number of patients is relatively small. At this point in time, we believe there may be perhaps 10 to 15 pediatric LEMS patients that are known currently. There may be others out there as well. And as we move our commercial efforts into the pediatric LEMS based upon approval, we may be able to find those patients. The most important thing is that in spite of the fact that it's just a few patients, it's very important for us to ensure that we can make sure that every single LEMS patient, regardless of who they are, what age they are or where they are, is able to get an approved therapy for the disease.

Charles Duncan -- Cantor Fitzgerald -- Analyst

Okay. That's very helpful. Appreciate the focus on delivering for patients. Last question is strategy. I'm not sure if you're going to be able to answer this but I'll give it a shot anyway. So, you said that you've got -- you're happy with 11th Court of Appeals designation in terms of orphan, possible [Indecipherable] hearing. What's your sense of being able to say with a definitive statement on the outcome of that? And regarding legal interactions with want to-be competitors, if you will, how would clarity on the outcome, especially a win with that, putting it to bed, change your perspectives on investment in Firdapse marketing, the pipeline and potential in licensing?

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

So, Charles, as we've previously stated, the FDA and [Indecipherable] have 45 days from the opinion to seek an inbound hearing or rehearing of the opinion. And that [Indecipherable] approximately November 15. And the statistics bear out that less than 5% of the requests actually ever get reheard. And so we don't know what other strategies may be incorporated by the other side, if you will, but that would be the first step. And of course, the FDA, as we understand it, would require actually the approval of the Solicitor General's Office to even make that request. So we don't know what the next steps will be. We believe even if a request is submitted, it is likely based on the results of the three-judge panel in the opinion, which was strongly worded, we think that it's very unlikely that a rehearing would be granted. And so, of course, the other option is cert in applying a request in Supreme Court for hearing and less than 2% of cases that are sent to the Supreme Court are actually heard by the Supreme Court. So, we are, from a commercial perspective and a patient advocacy perspective, we're ready at any point for what the decision of the Court may be. Ultimately -- and the overturning, if you will, of the FDA approval for researching. And what the results of that would be in terms of transitioning -- a warm transition of patients to [Indecipherable].

Charles Duncan -- Cantor Fitzgerald -- Analyst

Okay. That answers my question. We look forward to some visibility on that and appreciate the focus on, like I said, serving the patients. Thanks for taking my questions.

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

Thank you, Charles.

Operator

Next question today is coming from Scott Henry from ROTH Capital. Your line is now live.

Scott Henry -- ROTH Capital -- Analyst

Thank you, and good morning. Pat, sort of a follow-up to the appellate court question. Obviously, we can look at the organic growth of Firdapse and chart that out over the next couple of years. But if Ruzurgi is pulled off the market, can you talk about how that would change the outlook? Sort of what could be the incremental upside to the revenue line if that event were to occur? Thank you.

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

Scott, that's a great question. And we're reluctant really to talk much about that. Really, the concern would be -- first concern would be a smooth transition where no patient ever misses a dose of their drug. That's our biggest concern. And I think that we're prepared for that. I know we're prepared for that. We previously have stated, when asked how many patients are on Ruzurgi, we of course don't have access to that information. But based on the number of patients that we lost when Ruzurgi was approved, and likely some growth, we've said that we believe that there are somewhere between 100 to 125 patients that are currently receiving Ruzurgi. We know a number of those patients are at higher doses than what our average dose patient is, which is on average about 60 milligrams for an adult patient. So, I think those are the only metrics that we can talk about at this point. And perhaps in giving guidance, if we do so early next year, we can be a bit more specific than we can right now.

Scott Henry -- ROTH Capital -- Analyst

Okay. Thank you, Pat. And if you were to pick up those patients, would that be sort of a step increase or would you expect them to come in gradually or kind of overnight? Just trying to think about that.

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

I think we're seeing some patient migration actually right now to a lesser degree. But I would expect that it would be a fairly large bolus over a 30 day to 60 day period of time.

Scott Henry -- ROTH Capital -- Analyst

Okay. Great. Thank you for taking that question. Just a small follow up for Ali, a couple of model questions. First, the tax rate was 27% in third quarter. What should we think about as the ongoing tax rate? I would expect it to be perhaps close to 22%, 23%. And then, even though R&D is expected to be substantial, should we expect that to trend down given some of the programs that are not getting resources currently?

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

So, first, I'll address your tax question. We expect the future rate to be more of a normalized range. So we expect to [Indecipherable] rate of 21%, plus approximately from 2 to 4%. On your [Indecipherable] questions, well, you are correct that some of our programs are winding down. We do expect to have some R&D expenses from future programs that we might pick up in the future based on our growth strategy.

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

Scott, I'll add to that. Thank you, Ali. For modeling purposes, I don't think you're going to see R&D expenses go down. They'll probably accelerate some as we bring in new projects and opportunities, which we expect in '22. So, I don't think that that number is going to decline.

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

Yes. We'd also continue to have expenses from our Expanded Access programs, including -- and we'll have some expenses from our continuing -- or we expect to have expenses from our continued MuSK-MG patients that we'll continue to supply.

Scott Henry -- ROTH Capital -- Analyst

Okay. Great. Thank you for taking the questions.

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

Thank you, Scott.

Operator

Thank you. Our next question is coming from Joe Catanzaro from Piper Sandler. Your line is now live.

Joseph Catanzaro -- Piper Sandler -- Analyst

Hey, guys. Thanks so much for taking my question. Maybe just one quick one for me. I was just wondering, over the last year or so of your team's BD diligence, what have you found the most challenging? Has it been asset quality, deal terms or something else? And what specifically led you not to pursue that 1 asset that you alluded to? Thanks.

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

Yeah. Good question, Joe. Thank you. The issue really came down to when we brought in subject matter experts and our team was able to do a deeper dive. The issue really was about valuation more than anything. The number that -- in looking at public disclosures, when we dug in a little bit, we just couldn't get comfortable with the valuation of the transaction. And we just spent a lot of time and effort and so we were certainly quite invested in the project. And so I think it took a lot of discipline on our part to walk away, which was unfortunate. But I think the biggest challenge has been, until we opened up to other therapeutic areas, the biggest challenge was trying to find something in neuro. And as you know, we recently decided that we're going to look outside of neuro and everything -- any therapeutic area outside of oncology. And so, that's opened up quite a vast opportunities for some we're looking at. And I think that valuations as you look at products into our companies that might have some innovative technology, those valuations have come down a bit as you guys know since the beginning of this year. And so, I think at the time it is pretty much a seller's market. I think it's a little more balanced at this point and I think that companies are -- who are in need for additional capital are looking around what their strategic options may be to just doing another financing.

Joseph Catanzaro -- Piper Sandler -- Analyst

Okay. Got it. That's very helpful. Thanks for taking my question.

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

Thanks, Joe.

Operator

Thank you. Your next question is coming from the Joon Lee from Truist. Your line is now live.

Lars -- Truist -- Analyst

Good morning. This is Lars [Phonetic] on for Joon and thank you for taking my questions. I have two. First on the small trial in Japan with your partner, DyDo. Can we just kind of get an idea of what the study design looks like and timelines? And then second, what have been your challenges of getting the diagnosed patient population onto Firdapse? Thank you.

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

Thanks for the question, Joon. We're not going to go into any detail about the study design because of confidentiality reasons with DyDo. I can tell you that it is smaller than the studies that we ran in the United States, as we had previously discussed publicly. And it should be relatively short period of time to recruit and complete the study, shorter than we spent on studies in the United States.

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

Could you repeat the second part of your question, please?

Lars -- Truist -- Analyst

Sure. I just wanted to get an idea of what have been your challenges in reaching the diagnosed LEMS population and putting them on Firdapse?

Jeff Del Carmen -- Chief Commercial Officer

I'll take that answer. And it's really not the challenge of reaching these patients. Because we know the patients and who is treating these patients who -- these physicians. And many times, it's just the logistics behind it. There was a backlog in patient visits because of the Delta variant and other reasons. So the physicians, what they're telling our field force is that as soon as that patient comes back in, they will then put that patient on Firdapse, if appropriate. So that's -- we feel like there is a backlog, pent-up demand that will happen once these patients can get back in there. But we are extremely proud of our growth that we've had and we see this as being incremental growth moving forward. Does that address your question?

Lars -- Truist -- Analyst

It does, thank you.

Operator

Thank you. We've reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

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

Thanks, everyone, for joining our call today. We look forward to our next corporate update. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

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

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

Jeff Del Carmen -- Chief Commercial Officer

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

Charles Duncan -- Cantor Fitzgerald -- Analyst

Scott Henry -- ROTH Capital -- Analyst

Joseph Catanzaro -- Piper Sandler -- Analyst

Lars -- Truist -- Analyst

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