Catalyst Pharmaceuticals Annual Report 2014

FY2014 Annual Report · Catalyst Pharmaceuticals

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2014 ANNUAL REPORT

Catalyst is Committed to Changing the Lives
of Patients With Rare, Debilitating Diseases

• Successfully completing the
largest phase 3 clinical trial in
LEMS patients

• Introduced the Firdapse Expanded
Access Program (EAP) for patient
suffering with LEMS or CMS

• Catalyst continues to provide
strong support to both patient
and professional associations
including AANEM, AAN, ANA,
MDA and NORD

Example of the Firdapse EAP
patient announcement as seen
in MDA Quest Magazine

Dear
Stockholders,

Last
year
was
a
transformative
year
for
Catalyst
Pharmaceuticals,
as
we
successfully
completed
our
pivotal
Phase
3
clinical
trial
for
our
lead
program
and
began
laying
the
groundwork
to
become
a
fully
integrated
biopharmaceutical
company
with
a
direct
marketing
organization.

In
September
2014,
we
reported
positive
results
from
a
Phase
3
clinical
trial
evaluating
Firdapse®
for
the
treatment
of
Lambert-‐Eaton
Myasthenic
Syndrome,
otherwise
known
as
LEMS.
As
I
am
sure
you
are
aware,
LEMS
is
a
rare
neuromuscular,
autoimmune
disorder
frequently
associated
with
small
cell
lung
cancer.
There
is
currently
no
FDA
approved
treatments
for
patients
with
LEMS.
In
our
trial,
both
co-‐primary
endpoints,
quantitative
myasthenia
gravis
score
and
subject
global
impression,
demonstrated
that
Firdapse®
was
significantly
superior
to
placebo,
as
did
a
secondary
endpoint
for
the
physician's
clinical
global
impression
of
improvement.
Following
on
from
this,
we
initiated
an
expanded
access
program
(EAP)
available
on
a
compassionate
use
basis
under
which
patients
with
LEMS
and
Congenital
Myasthenic
Syndrome
(CMS)
who
meet
the
inclusion
and/or
exclusion
requirements
have
access
to
Firdapse®
via
the
EAP
at
no
charge.
Having
already
been
granted
Orphan
Drug
Designation
and
Breakthrough
Therapy
Designation
by
the
FDA
for
Firdapse®,
in
early
2015
we
continued
our
collaborative
discussions
with
the
agency
about
the
best
pathway
to
bring
Firdapse®
to
market
for
the
benefit
of
patients
suffering
from
LEMS
and
from
certain
types
of
CMS.

We
expect
to
complete
a
full
NDA
submission
for
Firdapse®
for
the
treatment
of
LEMS
in
Q3
2015.
We
have
begun
to
build
a
commercial
organization
ahead
of
a
potential
launch
of
the
product
in
2016.
Our
symposium
at
the
2014
Annual
Meeting
of
the
American
Association
of
Neuromuscular
and
Electrodiagnostic
Medicine
(AANEM),
a
key
meeting
for
specialists
treating
the
LEMS
patient
community,
had
a
large
an
enthusiastic
audience.
I
think
I
speak
for
the
entire
Catalyst
team
when
I
say
that
I
am
humbled
to
be
a
part
of
this
dedicated
physician
and
patient
advocate
LEMS
community.

Earlier
this
year
we
promoted
David
D.
Muth
to
Chief
Commercial
Officer
as
we
continue
to
accelerate
pre-‐
commercial
activities.
In
2014,
we
also
expanded
our
team
with
the
addition
of
David
J.
Caponera
to
the
newly
created
position,
Vice
President,
Patient
Advocacy
and
Reimbursement.
In
that
role,
David
is
actively
working
to
develop
a
patient
advocacy
strategy
and
appropriate
reimbursement
and
patient
assistance
initiatives.

In
addition
to
LEMS,
we
also
believe
that
Firdapse®
has
the
potential
to
treat
other
neuromuscular
disorders
such
as
certain
forms
of
CMS
and
myasthenia
gravis
caused
by
antibodies
to
muscle-‐specific
tyrosine
kinase
(MuSK
MG),
and
we
plan
to
explore
these
additional
indications
for
Firdapse®.

We
are
also
continuing
to
make
progress
with
the
rest
of
our
drug
pipeline.
We
are
currently
developing
CPP-‐115,
a
novel
GABA-‐aminotransferase
inhibitor,
which
has
potential
in
a
broad
range
of
central
nervous
system
indications,
such
as
infantile
spasms,
epilepsy,
Tourette
disorder
and
Post
Traumatic
Stress
Disorder
(PTSD).
In
September
2014,
we
initiated
our
second
Phase
1
safety
and
tolerance
study
of
CPP-‐115
(a
multiple
ascending
dose
study),
and
we
expect
to
report
top-‐line
data
from
this
Phase
1(b)
study
during
the
2nd
quarter
of
2015.
We
are
committed
to
the
development
of
our
pipeline
and
have
plans
to
explore
other

selected
diseases
in
which
modulation
of
GABA
levels
by
CPP-‐115
might
be
beneficial,
providing
further
opportunities
to
expand
the
market
and
serve
additional
patients
with
unmet
medical
needs.
We
believe
that
Catalyst
controls
all
current
intellectual
property
for
GABA-‐aminotransferase
inhibitors,
and
most
recently,
a
patent
was
issued
for
the
Reduction
or
Elimination
of
Visual
Field
Defects
by
Treating
Patients
with
CPP-‐115.

We
are
currently
supporting
an
academic
investigator
proof-‐of-‐concept
study
being
conducted
at
Mount
Sinai
Hospital
in
New
York
City
evaluating
our
other
GABA-‐aminotransferase
inhibitor,
CPP-‐109
(our
formulation
of
vigabatrin)
for
the
treatment
of
Tourette
disorder,
a
large
orphan
indication,
and
we
expect
to
report
top-‐line
results
from
this
study
during
the
2nd
quarter
of
2015.
If
the
results
of
this
study
show
evidence
of
reduced
numbers
of
tics,
we
will
likely
seek
to
develop
CPP-‐109
or
CPP-‐115
for
this
indication.

Over
the
past
year,
we
have
significantly
strengthened
our
balance
sheet.
In
April
2014,
we
raised
net
proceeds
of
approximately
$26.7
million
through
a
sale
of
13,023,750
shares
of
our
common
stock,
and,
in
February
2015,
we
raised
net
proceeds
of
approximately
$34.7
million
from
a
sale
of
11,500,000
shares
of
our
common
stock.
On
a
pro
forma
basis,
including
the
net
proceeds
of
the
February
2015
offering,
we
had
cash
and
investments
of
approximately
$74
million
as
of
December
31,
2014,
giving
us
the
capital
to
support
our
operations
through
2016,
including
our
currently
anticipated
drug
development
activities,
our
development
of
a
commercial
infrastructure
that
can
market
Firdapse®
if
we
receive
an
approval
for
the
product
and,
hopefully,
a
successful
launch
of
the
product
during
that
period.
Finally,
during
2014
and
into
2015,
we
have
been
pleased
to
see
the
substantial
improvement
in
the
quality
and
number
of
institutional
investors
who
have
made
significant
investments
in
our
company.

In
the
midst
of
all
the
success
we
are
seeing
at
Catalyst,
I
would
like
to
take
the
time
to
fondly
remember
Hubert
E.
Huckel,
M.D.,
a
founding
shareholder
and
director
of
Catalyst,
who
sadly
passed
away
at
the
end
of
last
year.
His
contributions
to
our
company
were
invaluable,
and
he
will
be
greatly
missed.

I
would
like
to
thank
all
of
the
subjects
in
our
clinical
studies,
our
clinical
investigators,
our
strategic
partner,
BioMarin
Pharmaceuticals,
our
employees
and
stockholders
like
yourself,
all
of
whom
are
helping
bring
new
drugs
to
market
to
treat
unmet
medical
needs.
We
are
committed
to
the
LEMS
patient
community,
as
well
as
to
other
patient
populations
with
unmet
medical
needs.
We
will
work
tirelessly
in
2015
and
2016
to
bring
Firdapse®
to
market
and
to
build
value
through
our
pipeline.
We
look
forward
to
keeping
you
updated
on
our
progress.

Regards,

Patrick
J.
McEnany
Chairman,
President
and
CEO
Catalyst
Pharmaceuticals

March
30,
2015

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

[Mark One]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the Fiscal Year Ended December 31, 2014

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

Commission File No. 001-33057

CATALYST PHARMACEUTICAL PARTNERS, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State of jurisdiction of incorporation or organization)

76-0837053
(IRS Employer Identification No.)

355 Alhambra Circle, Suite 1500
Coral Gables, Florida
(Address of principal executive offices)

33134
(Zip Code)

Registrant’s telephone number, including area code: (305) 529-2522

Securities Registered Pursuant to Section 12(b) of the Act.

Common Stock, par
value $0.001 per share
(Title of each class)

Nasdaq Capital Market
(Name of exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act.: None

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes

Indicate by check mark if registrant is not required to file reports pursuant to Rule 13 or Section 15(d) of the Act.
Yes

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days.
Yes

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if
any, every Interactive Data File required to be submitted and posted pursuant to rule 405 of Regulation S-T

((§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

As of June 30, 2014, the last business day of the Registrant’s most recently completed second quarter, the aggregate
market value of all voting, and non-voting common equity held by non-affiliates was $155,035,298.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date: 81,444,849 shares of common stock, $0.001 par value per share, were outstanding as of March 10,
2015.

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2015
annual meeting of stockholders. The proxy statement with respect to the 2015 annual meeting of stockholders will
be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2014.

Table of Contents

PART I...........................................................................................................................................................................
Item 1. Business……………………………………………………………………………………………………….
Item 1A. Risk Factors…………………………………………………………………………………………………
Item 1B. Unresolved Staff Comments………………………………………………………………………………..
Item 2 Properties………………………………………………………………………………………………………
Item 3. Legal Proceedings…………………………………………………………………………………………….
Item 4. Mine Safety Disclosure……………………………………………………………………………………….

PART II……………………………………………………………………………………………………………….
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities………………………………………………………………………………………………….....
Item 6. Selected Financial Data………………………………………………………………………………………
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations…………………
Item 7A. Quantitative and Qualitative Disclosures about Market Risk……………………………………………….
Item 8. Financial Statements and Supplementary Data……………………………………………………………….
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure…………………
Item 9A. Controls and Procedures…………………………………………………………………………………….
Item 9B. Other Information……………………………………………………………………………………………

PART III………………………………………………………………………………………………………………
Item 10. Directors and Executive Officers of the Registrant………………………………………………………….
Item 11. Executive Compensation…………………………………………………………………………………….
Item 12. Security Ownership of Certain Beneficial Owners and Management……………………………………….
Item 13. Certain Relationships and Related Transactions……………………………………………………………..
Item 14. Principal Accounting Fees and Services……………………………………………………………………..

PART IV……………………………………………………………………………………………………………….
Item 15. Exhibits and Financial Statement Schedules…………………………………………………………………
Financial Statements………………………………………………………………………………………….

Page
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45
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50
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65
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67

68
68
68
68
68
68

69
69
F-1

EXHIBITS FILED WITH FORM 10-K

Ex. 23.1 Consent of Independent Registered Public Accounting Firm
EX 31.1 Section 302 Certification of CEO
EX 31.2 Section 302 Certification of CFO
EX 32.1 Section 906 Certification of CEO
EX 32.2 Section 906 Certification of CFO

iii

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PART I

You are urged to read this Annual Report on Form 10-K (“Form 10-K”) in its entirety. This Form 10-K contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the
projected results discussed in these forward-looking statements. Factors that may cause such a difference include,
but are not limited to, those discussed below and in Item 1A, “Risk Factors.”

“We,” “our,” “ours,” “us,” “Catalyst,” or the “Company,” when used herein, refers to Catalyst Pharmaceutical
Partners, Inc., a Delaware corporation.

Forward-Looking Statements

This Annual Report on Form 10-K contains "forward-looking statements", as that term is defined in the Private
Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, plans or
objectives for future operations and anticipated results of operations. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, "believes", "anticipates", "proposes", "plans", "expects", "intends", "may", and other similar
expressions are intended to identify forward-looking statements. Such statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or other achievements to be materially
different from any future results, performances or achievements expressed or implied by such forward-looking
statements. Factors that might cause such differences include, but are not limited to, those discussed in the section
entitled “Item 1A – Risk Factors” and those discussed in the section entitled “Item 7 – Management’s Discussion
and Analysis of Financial Condition and Results of Operations – Caution Concerning Forward-Looking
Statements.”

The successful development and commercialization of our current drug candidates is highly uncertain. We cannot
reasonably estimate or know the nature, timing, or estimated expenses of the efforts necessary to complete the
development of, or the period in which material net cash inflows are expected to commence due to the numerous
risks and uncertainties associated with developing such products, including the uncertainty of:

(cid:120)

our estimates regarding anticipated capital requirements and our need for additional financing;

the scope, rate of progress and expense of our clinical trials and studies, pre-clinical studies, proof-of-
concept studies, and our other drug development activities;

our ability to complete our trials and studies on a timely basis and within the budgets we establish for
such trials and studies;

whether our trials and studies will be successful;

the results of our clinical studies and trials, pre-clinical studies, proof-of-concept studies, and our
other development activities, and the number of such studies and trials that will be required for us to
seek and obtain approval of new drug applications, or NDAs, for our drug candidates;

whether the third parties that assist us in our trials and studies perform as anticipated and within the
budgets established for their activities;

the ability of our third-party suppliers and contract manufacturers to maintain compliance with current
Good Manufacturing Processes (cGMP);

whether any of our drug candidates will ever be approved for commercialization;

(cid:120)

the risk that another pharmaceutical company will receive an approval for its formulation of 3,4-
diaminopyridine (3,4-DAP) for the treatment of Lambert-Eaton Myasthenic Syndrome (LEMS)
before we do;

even if one or more of our drug candidates is approved for commercialization, whether we will be
able to successfully commercialize those products;

whether we will ever be able to achieve sustained profitability;

our estimates of the pricing of our drug candidates if approved and the size of the market for such
drug candidates;

third-party payor reimbursement for any of our drug candidates that are commercialized;

the market adoption of any of our drug candidates approved for commercialization by physicians and
patients;

our ability to obtain a sufficient commercial supply of our products;

our ability to successfully obtain additional indications for our drug candidates beyond those which
may initially be approved;

the impact on sales of our products of sales of products by others that are competitive to our products;

if one or more of our products are approved for commercialization, the cost, timing or estimated
completion of any post-marketing studies that we are obligated to complete;

our expectations regarding licensing, acquisitions or strategic relationships;

changes in the laws and regulations affecting our business;

whether we can successfully protect any of our drug candidates under intellectual property laws;

the expense of filing, and potentially prosecuting, defending and enforcing any patent claims and
other intellectual property rights;

whether the settlement that we have reached of the claims brought against us in the class action
lawsuit will be approved;

our ability to develop a sales force to commercialize any products as to which we may obtain the right
to commercialize;

our ability to attract and retain skilled employees;

security breaches of our computer systems, or the computer systems of our contractors and/or
vendors;

the impact of employee or consultant misconduct; and

changes in general economic conditions and interest rates.

Our current plans and objectives are based on assumptions relating to the development of our current drug
candidates. Although we believe that our assumptions are reasonable, any of our assumptions could prove
inaccurate. In light of the significant uncertainties inherent in the forward-looking statements we have made herein,

which reflect our views only as of the date of this report, you should not place undue reliance upon such statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.

Item 1. Business

Overview

We are a biopharmaceutical company focused on developing and commercializing innovative therapies for people
with rare debilitating diseases. We currently have three drug candidates in development:

Firdapse(cid:140)

In October 2012, we licensed the North American rights to Firdapse(cid:140), a proprietary form of amifampridine
phosphate, or chemically known as 3,4-diaminopyridine phosphate, from BioMarin Pharmaceutical Inc. (BioMarin).
As part of our agreements with BioMarin, we took over the sponsorship of an ongoing Phase 3 clinical trial
evaluating Firdapse(cid:140) for the treatment of Lambert-Eaton Myasthenic Syndrome, or LEMS, a rare and sometimes
fatal autoimmune disease characterized by muscle weakness. We also hope to evaluate Firdapse(cid:140) for the treatment
of other neuromuscular orphan indications such as certain forms of Congenital Myasthenic Syndromes (CMS) and
Myasthenia Gravis (MuSK myasthenia gravis).
In August 2013, we were granted “breakthrough therapy
designation” by the U.S. Food & Drug Administration (FDA) for Firdapse(cid:140) for the treatment of LEMS and in,
March 2015, we were granted orphan drug designation for Firdapse(cid:140) for the treatment of patients with CMS.

The chemical entity 3,4-diaminopyridine (3,4-DAP) has never been approved by the FDA for any indication. If we
are the first pharmaceutical company to obtain approval for an amifampridine-based product, we will be eligible to
receive five years of marketing exclusivity with respect to the use of this product for any indication. Further,
because Firdapse(cid:140) for the treatments of LEMS and CMS has been granted Orphan Drug Designation by the FDA,
the product is also eligible to receive seven years of marketing exclusivity for this indication, running concurrently
with the five years of marketing exclusivity described above if both exclusivities are granted.

The Phase 3 trial was designed as a double blind, randomized "withdrawal trial" in which all patients were initially
treated with Firdapse(cid:140) during a 91-day run-in period followed by treatment with either Firdapse(cid:140) or placebo
(randomly assigned, about 1:1) during a two-week randomization period. A total of 38 patients completed the three
month run-in period and subsequent two week randomization period. In a trial of this design, the clinically
significant findings, when present, are worsening of symptoms in the placebo group.

On September 29, 2014, we reported top-line results from this trial. A summary of the results is as follows:

(cid:120)

Primary endpoints:

o The primary endpoint of change in quantitative myasthenia gravis score, or QMG, at day 14
reached statistical significance (p=0.0452), with a worsening of 2.2 points observed in the placebo
group and a worsening of 0.4 points observed in the treatment group.

o The primary endpoint of change in subject global impression, or SGI, at day 14 was highly
statistically significant (p=0.0028), with a worsening of 2.6 points observed in the placebo group
and a worsening of 0.8 points observed in the treatment group.

(cid:120)

Secondary endpoints:

o The secondary endpoint for the physician's clinical global impression of improvement, or CGI-I,
reached statistical significance (p=0.0267), with a worsening at day 14 of 1.1 points between the
placebo group and the treatment group.

o The secondary endpoint of change in walking speed at day 14 showed a worsening of 9.7 feet per
minute in the placebo group. The magnitude of the change relative to the variance in this test
prevented the change from achieving statistical significance.

(cid:120)

Patient tolerance of Firdapse(cid:140):

Firdapse(cid:140) was generally safe and well tolerated. During the 91-day open label run-in period,
treatment emergent adverse events occurred more frequently in treatment-naïve patients than in
previously treated patients (10% of treatment naïve patients withdrew during this part of the
study). During the placebo-controlled portion of the study, side effects occurring more frequently
in the Firdapse(cid:140) group were benign and consisted primarily of perioral and digital paresthesia
and infections. No patients withdrew during this period.

o All subjects who were randomized into the trial elected to continue with Firdapse(cid:140) in the two

year safety follow-up phase of the trial.

During 2014, we established an expanded access program (EAP) to make Firdapse(cid:140) available to any patients
diagnosed with LEMS, Congenital Myasthenic Syndrome (CMS) or Downbeat Nystagmus in the United States who
meet the inclusion and exclusion criteria, with Firdapse(cid:140) being provided to patients for free until sometime after
NDA approval. We are working with various rare disease advocacy organizations to inform physicians and patients
as to the availability of the Firdapse(cid:140) EAP.

In January 2015, we met with the FDA to discuss our anticipated submission of an NDA for Firdapse(cid:140) for the
treatment of LEMS. Based on our discussions with the FDA, we believe that our Phase 3 clinical program will
provide acceptable support for submission of an NDA for Firdapse(cid:140) for LEMS. We currently expect to submit an
NDA for Firdapse(cid:140) during the third quarter of 2015. Although there can be no assurance, we anticipate that under
those circumstances we may obtain approval from the FDA of such NDA in the first half of 2016. If approved on
this timeline, we would hope to commercially launch Firdapse(cid:140) for the treatment of LEMS shortly after its
approval.

In anticipation of the commercialization of Firdapse(cid:140), we have recently begun to prepare for the marketing of
Firdapse(cid:140) in the United States. This has included the appointment of a Chief Commercial Officer, the hiring of a
Vice President of Patient Advocacy and Reimbursement and the recent hiring of several rare disease clinical
liaisons. We are currently working with several rare disease advocacy organizations to help increase awareness of
LEMS and CMS, and to provide education for the physicians who treat these rare diseases and the patients they
treat. We anticipate developing a sales force of 15-20 representatives experienced in selling drugs that treat rare
diseases. This sales force will market Firdapse(cid:140) to the approximately 900 neuromuscular and oncology specialists
who we believe most often diagnose and treat neuromuscular diseases such as LEMS and CMS.

The following discusses several other important aspects of our development program for Firdapse(cid:140):

(cid:120) Amifampridine is a voltage-gated potassium channel blocker. The Firdapse(cid:140) tablets used in our Phase 3
pivotal trial was the same product approved for marketing in Europe and has been shown to be more stable
than the free base form, 3,4-DAP. This enhanced stability is expected to provide LEMS patients with the
assurance that their drug has the correct potency and purity in every dose.

(cid:120) We believe that another pharmaceutical company, Jacobus Pharmaceutical, has conducted a Phase 2 trial
with a different formulation of amifampridine (3,4-DAP) for the treatment of LEMS. While there can be no
assurance, based on currently available information, we continue to believe that our development program
for amifampridine phosphate is further along in development than this other company's development
program.

(cid:120) We believe that the LEMS patient community deserves the benefits of having an approved product to treat
their disease that has met the FDA’s stringent approval requirements, including a demonstration of safety
and efficacy and is widely available for use by physicians treating LEMS patients. To date, no version of
amifampridine has been approved by the FDA for use in the treatment of LEMS. To obtain approval to
market a drug in the U.S., a significant number of preclinical and clinical safety and efficacy studies must
be completed. This includes studies that evaluate the efficacy of the product, including in most cases two
adequate and well-controlled pivotal registration trials that meet the requirements established by the FDA,
although a single adequate and well-controlled pivotal registration trial may be sufficient in some cases. It
also includes studies that evaluate the drug’s long-term toxicity, acute toxicity, reproductive toxicity,

carcinogenicity, mutagenicity, cardiac safety, renal safety, pharmacokinetics, absorption, distribution,
metabolism, and elimination. Particularly with respect to products containing amifampridine, there is a
wide metabolic variability within the patient population, which must be characterized in order to provide
physicians with information about what to expect in the patients they treat and, more importantly, with
instructions on how to safely prescribe the drug to their patients. Our development plan for Firdapse(cid:140) has
been designed to meet all of these requirements.

to conduct

(cid:120) We expect to ultimately make a cumulative investment in the development and commercialization of
Firdapse(cid:140) of more than $50 million, consisting of: (i) approximately $25 million that has been spent or we
the clinical, non-clinical and safety evaluations, and
currently anticipate will be spent
manufacturing the three exhibit batches, that will be required for us to submit an NDA for Firdapse(cid:140) for
the treatment of LEMS, (ii) approximately $10 million in milestone payments that we will be obligated to
pay under our license agreement with BioMarin (a portion of which will be due when an NDA for
Firdapse(cid:140) for the treatment of LEMS is accepted for filing by the FDA and a portion of which will be due
upon the final approval of an NDA for Firdapse(cid:140) for the treatment of LEMS), and (iii) the more than $15
million that we expect to spend to conduct post-marketing studies of Firdapse(cid:140) and to develop the
infrastructure required to commercialize Firdapse(cid:140), including our efforts to improve diagnosis of the
disease through education and to develop patient advocacy programs and patient assistance programs. This
is a significant investment of capital and years of research and development by us, and is in addition to the
millions of dollars that have already been spent in the development of this product by BioMarin, by the
other former licensors of the product, and by the innovator of the product (the pharmaceutical unit
(AGEPS) of the Paris Public Hospital Authority).

(cid:120) While pricing for Firdapse(cid:140) has not been established, we recognize the importance of access to affordable
medicines. We expect to work with insurers to develop appropriate plans for broad patient access in the
U.S. market.

(cid:120) We expect to develop a patient assistance program to assist patients who cannot afford their medication.

CPP-115

We are currently developing CPP-115, a GABA aminotransferase inhibitor that, based on our pre-clinical studies to
date, we believe is a more potent form of vigabatrin, but may have fewer side effects (e.g., visual field defects, or
VFDs) than those associated with vigabatrin. We are hoping to develop CPP-115 for the treatment of epilepsy
(initially infantile spasms) and for the treatment of other selected neurological indications such as complex partial
seizures and Tourette Syndrome. CPP-115 has been granted Orphan Drug Designation by the FDA for the treatment
of infantile spasms and Orphan Medicinal Product Designation in the European Union, or E.U., for West syndrome
(a form of infantile spasms). We are currently evaluating CPP-115 in a Phase 1(b) multi-dose safety and tolerance
study. We expect to report the results of this study during the second quarter of 2015.

CPP-109

An academic investigator proof-of-concept study evaluating the use of CPP-109 (our formulation of vigabatrin,
another GABA aminotransferase inhibitor) for the treatment of Tourette Syndrome is currently ongoing and, if the
results of this study show evidence of reduced number of tics, we will likely seek to develop CPP-115 (which has
the same mechanism of action as CPP-109) for this indication. Although we have provided drug and financial
support, we do not control this study and therefore have no control over the timing of its completion. However,
based on currently available information, we expect to have top-line results for this study during the second quarter
of 2015.

Capital Resources

Based on our current financial condition and forecasts of available cash, we believe that we have sufficient funds to
support our operations through the end of 2016. However, we will require additional funding to support our
operations beyond the end of 2016. There can be no assurance that we will obtain additional funding or that we will

ever be in a position to commercialize any of our drug candidates. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" below for further
information on our liquidity and cash flow.

Our Strategy

Our goal is to develop and commercialize novel prescription drugs targeting rare (orphan) neuromuscular and
neurological diseases and disorders. Specifically we intend to:

(cid:120)

Pursue approval of Firdapse(cid:140) for LEMS.
In 2014, we reported positive results from our Phase 3 trial
evaluating Firdapse(cid:140) for the treatment of LEMS. We expect to submit an NDA for Firdapse(cid:140) in the 2015
third quarter. Although there can be no assurance, we anticipate that under those circumstances we may
obtain approval from the FDA of such NDA in the first half of 2016.
If approved on this timeline, we
would expect to commercially launch this product for the treatment of LEMS shortly after its approval.

Seek additional orphan drug indications for Firdapse(cid:140). We believe that Firdapse(cid:140) may also be an
effective treatment for other neuromuscular orphan indications such as certain forms of Congenital
Myasthenic Syndromes and Myasthenia Gravis (MuSK myasthenia gravis). Subject to the availability of
funding, we plan to pursue the necessary clinical and non-clinical trials and studies to support applications
to the FDA for approval to market Firdapse(cid:140) for these additional indications.

Continue required clinical and pre-clinical work on CPP-115. We are currently conducting a Phase 1(b)
multi-dose safety and tolerance study of CPP-115, and we hope to report the results of this study during the
second quarter of 2015. We hope to develop CPP-115 for the treatment of epilepsy (initially infantile
spasms) and for the treatment of other selected neurological indications. CPP-115 has been granted Orphan
Drug Designation by the FDA for the treatment of infantile spasms and Orphan Medicinal Product
Designation in the EU for West's syndrome (a form of infantile spasms), making the drug eligible for the
seven-year and ten-year marketing exclusivities available from the FDA and the EU for these indications,
respectively, if we are the first pharmaceutical company to obtain approval of an NDA and/or a Marketing
Authorization Application, or MAA (the European Union equivalent of an NDA) for CPP-115.

Continue studies of CPP-109 and/or CPP-115 for Tourette Syndrome. We are currently supporting an
academic study evaluating the use of CPP-109 in the treatment of Tourette Syndrome. Based upon the
results of this study, we may pursue CPP-109, or CPP-115, which has a similar mechanism of action as
CPP-109, for the treatment of Tourette Syndrome.

Seek additional funding or a partner for CPP-115. Once we have the results of our Phase 1(b) study, we
plan to decide whether to seek a strategic partner to work with us in the development and future
commercialization of CPP-115. However, no arrangements have been entered into to date.

Seek to acquire additional products. We intend to seek to acquire other late stage orphan drug
opportunities that might be complementary to Firdapse(cid:140) and can be sold through any sales force we
develop to market Firdapse(cid:140). However, no agreements have been entered into to date to acquire
additional products and any such product acquisitions would be subject to the availability of funding.

Firdapse(cid:140)

Product overview

Firdapse(cid:140) is Catalyst's and BioMarin's (depending on market region) registered trade name for amifampridine
phosphate tablets. Amifampridine is the WHO (World Health Organization) registered INN (International
Nonproprietary Name) and United States Adopted Name (USAN) for the chemical entity, 3,4-diaminopyridine, or
3,4-DAP. Firdapse(cid:140) contains the phosphate salt of amifampridine, hence the name "amifampridine phosphate."
The name of this drug is sometimes abbreviated as 3,4-DAP, or 3,4-DAPP or simply DAP. We will refer to our drug
by its trade name (Firdapse(cid:140)), by the INN/USAN (amifampridine phosphate), or both, throughout this report.

Clinical efficacy data for the symptomatic treatment of patients with LEMS with amifampridine base are derived
from five published randomized, double-blind, placebo-controlled studies and one double-blind study with an active
comparator in patients with LEMS. The data from the randomized controlled studies demonstrate statistically
significant improvements across a number of independent measures of neurological function, including Quantitative
Myasthenia Gravis (QMG) score and compound muscle action potential (CMAP), which have been demonstrated to
be clinically relevant in patients with LEMS. Results of these trials demonstrate that amifampridine is more effective
for
the symptomatic treatment of LEMS compared with placebo or active investigational comparator
(pyridostigmine). Additionally, supportive data from multiple published uncontrolled investigations and case reports
demonstrate the long-term benefits of treatment with amifampridine in patients with LEMS. These data also show
that removal of patients from drug can lead to a recurrence of underlying symptoms, but with reintroduction of
amifampridine improvement of muscle function is regained. As such, amifampridine has been recommended as
first-line symptomatic treatment for LEMS by the European Federation of Neurological Societies (now known as the
European Academy of Neurology). In December 2009, amifampridine phosphate received marketing approval by
the European Commission as Firdapse(cid:140) for the symptomatic treatment of patients with LEMS.

Safety data from clinical data published over the last 30 years in patients with LEMS or other neurological disorders
treated with amifampridine show that amifampridine is well tolerated at doses (cid:100)80 mg per day. Among the 1,279
patients or healthy subjects assessed in the literature, the most frequently reported adverse events (AEs) were
perioral and peripheral paresthesias (unusual sensations like pins and needles), and gastrointestinal disorders
(abdominal pain, nausea, diarrhea, epigastralgia (pain around the upper part of the stomach). These events were
typically mild or moderate in severity, and transient, seldom requiring dose reduction or withdrawal from treatment.

Lambert-Eaton Myasthenic Syndrome

Lambert-Eaton Myasthenic Syndrome, or LEMS, is a rare autoimmune disorder characterized primarily by muscle
weakness of the limbs. The disease is caused by an autoimmune reaction where antibodies are formed against
voltage gated calcium channels on nerve endings, which damages the channels. These calcium channels are
responsible for the transport of charged calcium atoms that activate the biochemical machinery responsible for
releasing acetylcholine. Acetylcholine is the neurotransmitter responsible for causing muscles to contract and the
failure to release enough of this neurotransmitter results in muscle weakness in LEMS patients. Additionally,
LEMS is often associated with an underlying malignancy, most commonly small-cell lung cancer (SCLC), and in
some individuals, LEMS is the first symptom of such malignancy.

Based on currently available information, we estimate that there are approximately 3,000 LEMS patients in the
United States.

LEMS generally affects the extremities, especially the legs. As LEMS most affects the parts of limbs closest to the
trunk, difficulties with climbing stairs or rising from a sitting position are commonly noted. Physical exercise and
high temperatures tend to worsen the symptoms. Other symptoms occasionally seen include weakness of the
Individuals affected with LEMS also may have a disruption of the
muscles of the mouth, throat, and eyes.
autonomic nervous system,
impaired sweating, and/or
hypotension.

including dry mouth, constipation, blurred vision,

LEMS is treated by treating the symptoms or the underlying autoimmune attack on voltage gated calcium channels.
Treatments include steroids, azathioprine and intravenous immunoglobulin, which work by suppressing the immune
system; and pyridostigmine and amifampridine, which enhance neuromuscular transmission. Plasma exchange has
also been used in an attempt to remove antibodies from the body. Firdapse(cid:140) is a symptomatic treatment and does
not alter the underlying autoimmune condition. As a voltage gated potassium blocker, Firdapse(cid:140) prevents charged
potassium particles from leaving the nerve cells, which prolongs the period of depolarization. This allows more
charged calcium atoms to enter the nerves, which enables the nerves to release acetylcholine and causes muscles to
contract and to restore lost muscle strength in LEMS patients.

Congenital Myasthenic Syndromes

Congenital myasthenic syndromes, or CMS, is a rare neuromuscular disease comprising a spectrum of genetic
defects and is characterized by fatigable weakness of skeletal muscles with onset at or shortly after birth or early
childhood; in rare cases symptoms may not manifest themselves until later in childhood. The severity and course of
the disease are variable, ranging from minor symptoms to progressive disabling weakness; symptoms may be mild,
but sudden severe exacerbations of weakness or even sudden episodes of respiratory insufficiency also occur.

Most patients with CMS respond to pharmacologic intervention, including esterase inhibitors, amifampridine (i.e.
3,4-DAP), ephedrine, fluoxetine or quinidine, and albuterol, alone or in combinations. The particular therapy is
dictated by the diagnosed CMS type, as drugs beneficial in treating one type of CMS can be detrimental in patients
with another type of CMS.

Congenital myasthenic syndrome(s) is rare, estimated at one-tenth that of myasthenia gravis, which in itself is
rare. Based on currently available information, we estimate that there are between 1,000 and 1,500 CMS patients in
the United States.

MuSK Myasthenia Gravis

The Company is currently considering conducting one or more clinical trials to evaluate whether Firdapse(cid:140) is
effective to treat patients with a type of myasthenia gravis caused by antibodies to the muscle-specific receptor
tyrosine kinase. We believe that this subtype of patients with myasthenia gravis represents 5-8% of the patients
diagnosed with myasthenia gravis. There can be no assurance that Firdapse(cid:140) will be effective in treating this type
of myasthenia gravis.

Strategic collaboration with BioMarin for Firdapse(cid:140)

On October 26, 2012, we entered into a strategic collaboration with BioMarin for Firdapse(cid:140). The key components
of the collaboration included our licensing of the exclusive North American rights to Firdapse(cid:140) pursuant to a
License Agreement, dated October 26, 2012, between us and BioMarin (the BioMarin License Agreement), and
BioMarin making a $5.0 million investment in our common stock to advance the development of Firdapse(cid:140).

Under the BioMarin License Agreement, we licensed the North American rights to Firdapse(cid:140), and, as part of the
license, we took over the Phase 3 clinical trial that BioMarin had previously begun in the United States and Europe
evaluating Firdapse(cid:140) for the treatment of LEMS. We are obligated to use our diligent efforts to seek to obtain
regulatory approval for and to commercialize Firdapse(cid:140) in the United States. We were further obligated to use
diligent efforts to complete the double-blind treatment phase of the Phase 3 trial by October 26, 2014, and BioMarin
had the right to terminate the BioMarin License Agreement if such treatment phase has not been completed in such
period (unless we were using diligent efforts to pursue the completion of such treatment phase and had spent at least
$5.0 million in connection with the conduct of the Phase III Trial during such period). We completed the Phase 3
treatment phase during September 2014 and believe that we remain in compliance with the license agreement.

Under the BioMarin License Agreement, we have agreed to make the following royalty payments:

royalty payments to BioMarin for seven years from the first commercial sale equal to: (a) 7% of net
(i)
sales (as defined in the license agreement) in North America in any calendar year for sales up to $100
million, and (b) 10% of net sales in North America in any calendar year in excess of $100 million; and

(ii) royalty payments to a third party licensor of the rights sublicensed to us for seven years from the first
commercial sale equal to 7% of net sales (as defined in the license agreement between BioMarin and the
third party licensor) in North America in any calendar year.

Under the BioMarin License Agreement, we have also agreed to make certain milestone payments to such third
party licensor and to the former stockholders of Huxley Pharmaceuticals, Inc. (Huxley) that BioMarin is obligated to
make. With respect to Firdapse(cid:140), the milestones aggregate approximately $2.6 million upon filing by the FDA of

an NDA for Firdapse(cid:140) for the treatment of LEMS, and approximately $7.2 million upon the unconditional approval
by the FDA of an NDA for Firdapse(cid:140) for the treatment of LEMS.

Firdapse(cid:140) was approved by European Medicines Agency for the treatment of LEMS in December 2009, and
BioMarin sells the product in the EU. BioMarin is also currently performing or will in the future perform certain
post-marketing studies of Firdapse(cid:140) that they are required to conduct to support their continued approval of
Firdapse(cid:140) in the EU. We have agreed to pay one half of the costs of these studies. We have also shared the costs of
a cardiac safety study and reproductive toxicity studies that have been completed and are required for approval of
Firdapse(cid:140) by the FDA.

On April 15, 2014, effective as of April 8, 2014, we and BioMarin entered into Amendment No. 1 to the License
Agreement, amending in certain respects the BioMarin License Agreement, dated October 26, 2012. The
amendment related to purchases of additional product by us from BioMarin, the sharing of data between the parties
with respect to clinical trials and studies undertaken by each party, and the payment terms for certain joint studies.

The Phase 3 clinical trial

In June 2011, BioMarin commenced a Phase 3 clinical trial in the United States studying Firdapse(cid:140) for the
treatment of LEMS, which trial was transferred to us pursuant to the BioMarin License Agreement. The trial was
designed as a randomized double-blind, placebo-controlled discontinuation trial in approximately 36 LEMS patients.
After patients were treated with amifampridine phosphate for at least 91 days, they were randomly assigned to either
continue on amifampridine phosphate or be discontinued to placebo over a 2-week period. They were then returned
to open label amifampridine phosphate treatment for a two-year follow-up period.

On September 29, 2014, we reported top-line results from this trial. A summary of the results is as follows:

(cid:120)

Primary endpoints:

(cid:120)

Secondary endpoints:

(cid:120)

Patient tolerance of Firdapse(cid:140):

o All subjects who were randomized into the trial elected to continue with Firdapse(cid:140) in the two

year safety follow-up phase of the trial.

Further details regarding the trial and its design can be found on www.clinicaltrials.gov (NCT01377922).

The results of the Phase 3 trial were reported in October 2014 at the 139th Annual Meeting of the American
Neurological Association (ANA) and at a symposium sponsored by us at the annual meeting of the American
Association of Neuromuscular and Electrodiagnostic Medicine (AANEM).

Breakthrough Therapy Designation

Firdapse(cid:140) for LEMS has been granted Breakthrough Therapy Designation by the FDA. Breakthrough Therapy
Designation was enacted as part of the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA).
FDASIA defines breakthrough therapy as a drug that is "intended, alone or in combination with one or more other
drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the
drug may demonstrate substantial improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in clinical development."

A Breakthrough Therapy Designation conveys all of the fast track program features, as well as more intensive FDA
guidance on an efficient drug development program. The FDA also has an organizational commitment to involve
senior management in such guidance. The Breakthrough Therapy Designation is a distinct status from both
accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met.

Recent Pre-NDA Meeting with the FDA on Firdapse(cid:140)

In January 2015, we met with the FDA to discuss our anticipated submission of an NDA for Firdapse(cid:140) for the
treatment of LEMS. Based on our discussions with the FDA and our review of the minutes of the meeting that we
have received from the FDA, we believe that our Phase 3 clinical program will provide acceptable support for
submission of an NDA for Firdapse(cid:140) for LEMS. Further, at the meeting, we discussed potential paths forward for
approval of certain types of CMS as an additional indication for Firdapse(cid:140).

Orphan Drug Designation

Amifampridine phosphate for LEMS has been granted Orphan Drug Designation by the FDA for the treatment of
both LEMS and CMS, making the drug eligible to be granted seven-year marketing exclusivity for these indications
if we are the first pharmaceutical company to obtain approval of an NDA for a product containing amifampridine as
the active moiety for the treatment of LEMS and/or CMS.

Pre-commercialization efforts

In anticipation of the commercial launch of Firdapse(cid:140), we have recently begun to prepare for the marketing of
Firdapse(cid:140) in the United States. This has included the appointment of a Chief Commercial Officer, the hiring of a
Vice President of Patient Advocacy and Reimbursement and the recent hiring of several rare disease clinical
liaisons. We are currently working with several rare disease advocacy organizations to help increase awareness of
LEMS and CMS and to provide education for the physicians who treat these rare diseases and the patients they treat.
We anticipate developing a sales force of 15-20 representatives experienced in selling drugs that treat rare diseases.
This sales force will market Firdapse(cid:140) to the approximately 900 neuromuscular and oncology specialists who we
believe most often diagnosis and treat neuromuscular diseases such as LEMS and CMS.

Further, as part of our commitment to the patient community, we expect to hire several account managers who will
work with our rare disease clinical liaisons to educate payors and facilitate coverage and we expect to have a
comprehensive set of patient financial support services, including a patient assistance program. We also expect to
distribute our product through a limited network of specialty pharmacies with a single dedicated call center
responsible for interfacing with patients, physicians and payors.

We have not yet established the pricing for our product. However, the independent market research that we have
obtained to date indicates that we will be able to obtain typical orphan disease pricing for our product and that our
product will be widely reimbursed by private and public payors. There can be no assurance, however, as to the
pricing of our product that we may be able to obtain or as to whether payors will object to paying for our product.

Expanded Access Program

During 2014, we established an expanded access program (EAP) to make Firdapse(cid:140) available to all patients
diagnosed with LEMS, Congenital Myasthenic Syndromes (CMS) or Downbeat Nystagmus in the United States who
meet the inclusion and exclusion criteria, with Firdapse(cid:140) being provided to patients for free until sometime after
NDA approval. We are working with various rare disease advocacy organizations to inform physicians and patients
as to the availability of the Firdapse(cid:140) EAP.

Third-Party Reimbursement

Sales of pharmaceutical products depend in significant part on the availability of coverage and adequate
reimbursement by third party payors, such as state and federal governments, including Medicare and Medicaid,
managed care providers and private insurance plans. Decisions regarding the extent of coverage and the amount of
reimbursement to be provided for Firdapse(cid:140) is expected to be made on a plan-by-plan, and in some cases, a patient-
by-patient basis. Particularly given the rarity of LEMS, we anticipate that securing coverage and appropriate
reimbursement from third-party payors will require targeted education. To that end, we expect to hire a dedicated
group of field-based payer account managers and reimbursement experts focused on ensuring that clinically
qualified patients have affordable access to our product.

Intellectual property protections for Firdapse(cid:140)

Under the BioMarin License Agreement, we licensed two pending patents and certain trademarks for Firdapse(cid:140).
One of the licensed patents is a pending composition of matter patent that, if issued, will protect Firdapse(cid:140) until
February 2027, which includes five years of patent term extension that is expected under the Patent Term
Restoration Act. This application was initially rejected following an appeal to the Patent Trial and Appeal Board.
The application was refiled with new claims. The new claims were the subject of an office action in which the
claims were rejected. A response to the rejection was filed and is awaiting further examination. There can be no
assurance that this patent will be issued. The second patent claims methods of administering Firdapse(cid:140). No
examination has occurred on this patent application and none is expected until 2016. We may also pursue other
patents in order to seek to protect the exclusivity of the drug, dosage forms and methods of administration.

No drug product containing amifampridine for any indication has been approved by the FDA. Therefore, our version
of amifampridine, if we are the first to obtain approval of the product in the U.S., will be eligible for five-year new
chemical entity exclusivity, which provides a five-year period of marketing exclusivity for all indications.

We have licensed the FIRDAPSE(cid:140) trademark from BioMarin. A trademark application for FIRDAPSE(cid:140) was
allowed, but did not register due to the inability to show use of the mark in interstate shipment. The application was
refiled and a Statement of Use submitted and accepted by the Trademark Office. We expect that FIRDAPSE(cid:140)
should become registered in due course during 2015. In January 2014, the FDA provisionally approved Firdapse(cid:140)
as a proprietary name for amifampridine phosphate tablets. This provisional approval by the FDA does not stop the
agency from rejecting the name FIRDAPSE(cid:140) at a later date.

CPP-115

Product Overview

In August 2009, we licensed the exclusive worldwide rights to commercialize certain composition of matter patents
relating to a new class of novel GABA aminotransferase inhibitors and derivatives of vigabatrin. We intend to
develop these compounds for a broad range of neurological illnesses that could benefit from the inhibition of GABA
aminotransferase. CPP-115 is our lead compound from this group of composition of matter patents.

The development efforts of CPP-115 were led by Dr. Richard B. Silverman, the John Evans Professor of Chemistry
at Northwestern University (Northwestern). Dr. Silverman, who holds 59 patents, is the inventor of pregabalin, also
known as Lyrica®, which is marketed by Pfizer. His goal in inventing the compound that became CPP-115 was to
mimic the mechanism of action of vigabatrin, while making it both more potent and specific.

CPP-115 works by the same mechanism of action as vigabatrin; that is, the inhibition of GABA aminotransferase,
which leads to increased brain GABA levels that reduce epileptogenesis. Due to these similarities, we believe that
these two drugs will share a number of biochemical features related to absorption, metabolism, and elimination, and
our pre-clinical studies of CPP-115 to date support our expectations. However, based upon our pre-clinical studies
of CPP-115 to date, we expect that there will be a significant reduction, and possibly elimination, of visual field
defects (VFDs) from the use of CPP-115 compared to vigabatrin. However, there can be no assurance that this will
ultimately prove to be the case.

Further, based on animal testing to date, CPP-115 has been shown to be at least 200 times more potent than
vigabatrin in both in-vitro and animal model studies. The increased potency could enable the development of dosage
forms potentially administrable by other routes of administration compared with the marketed oral, immediate
release formulation of vigabatrin, Sabril®. Further, based on non-clinical testing completed to date, CPP-115
appears to have superior specificity to GABA aminotransferase and we believe, will have a better side effect profile
(e.g. less VFDs) compared with Sabril®.

CPP-115 has been granted Orphan Drug Designation in the U.S. for the treatment of infantile spasms. CPP-115 has
also been granted Orphan Medicinal Product Designation in the EU to treat West syndrome (a form of infantile
spasms).

Mechanism of action for CPP-115

We believe that our drug candidate, CPP-115, will be an effective treatment for epilepsy because it increases
endogenous GABA levels in the brain through the inhibition of GABA-aminotransferase (GABA-AT). GABA-AT
is responsible for the eventual breakdown of GABA and helps to balance its inhibitory effects.

CPP-115 is a GABA analog that is readily absorbed and promptly available to the nervous system, producing effects
that last for many hours after a single dose. Due to the fact that this drug is not “receptor active”, its administration
does not appear to affect the baseline levels of dopamine, nor those variations in dopamine levels caused by normal
stimuli.

Epilepsy

Epilepsy is a brain disorder in which clusters of nerve cells, or neurons, in the brain sometimes signal abnormally. In
epilepsy, the normal pattern of neuronal activity becomes disturbed, causing strange sensations, emotions, and
behavior or sometimes convulsions, muscle spasms, and loss of consciousness. Epilepsy is a disorder with many
possible causes. Anything that disturbs the normal pattern of neuron activity - from illness to brain damage to
abnormal brain development - can lead to seizures. Epilepsy may develop because of an abnormality in brain wiring,
an imbalance of nerve signaling chemicals called neurotransmitters, imbalance of sensitivity to neurotransmitters, or
some combination of these factors. We intend to focus our development efforts for CPP-115 on its use as a treatment
for infantile spasms (West syndrome) and adult complex partial seizures.

An infantile spasm is a specific type of seizure seen in an epilepsy syndrome of infancy and childhood. The onset of
infantile spasms is usually in the first year of life, typically between 4-8 months. The seizures primarily consist of a
sudden bending forward of the body with stiffening of the arms and legs; some children arch their backs as they
extend their arms and legs. Spasms tend to occur upon awakening or after feeding, and often occur in clusters of up
to 100 spasms at a time. Infants may have dozens of clusters and several hundred spasms per day. Infantile spasms
usually stop by age five, but may be replaced by other seizure types.

In complex partial seizures, consciousness is altered. Patients may exhibit automatisms (automatic repetitive
behavior) such as walking in a circle, sitting and standing, or smacking their lips together. Often accompanying
these symptoms are the presence of unusual thoughts, such as the feeling of déjà vu, uncontrollable laughing, fear,
visual hallucinations, and experiencing unusual unpleasant odors. These symptoms are thought to be caused by
abnormal discharges in the temporal lobe.

According to the Epilepsy Foundation, there are about 2.5 million epilepsy patients in the United States, with
approximately 180,000 new cases diagnosed in the U.S. each year. Worldwide, 50 million people are estimated to
have epilepsy. The incidence of epilepsy appears to depend somewhat on the age of the individual. The risk of
epilepsy from birth through age 20 is approximately 1%. Within this group, incidence is highest during the first year
of life and increases somewhat at the onset of puberty. From age 20 to 55 it decreases again, but increases after age
55.

Anti-epileptic drugs work through a variety of mechanisms, including inhibition of sodium ion channels and the
enhancement of GABA mechanisms. Although the different types of epilepsy vary greatly, in general, available
medications can only control seizures in about two-thirds of patients. CPP-115, like vigabatrin, is a GABA-AT
inhibitor, and we are developing it initially for infantile spasms (west syndrome) and refractory complex partial
seizures. Based on the historic use of vigabatrin in treating epilepsy, we believe that CPP-115 may ultimately work
best as an adjunct therapy to existing drugs.

Vigabatrin has been marketed for decades in over 30 countries by Lundbeck and Sanofi-Aventis and their
predecessors and licensees under the brand names Sabril®, Sabrilex® and Sabrilan® (hereinafter referred to as
“Sabril®”) as an adjunct (add-on) treatment for adult epilepsy and as a primary treatment for the management of
infantile spasms. The composition of matter patents for Sabril® in the U.S. expired many years ago. On August 21,
2009, the FDA approved two NDAs for Sabril® for the treatment of infantile spasms and as an adjunctive therapy
for adult patients with refractory complex partial seizures who have failed treatments with several other anti-
epileptic drugs. The NDAs are for different formulations of Sabril® and both NDAs are held by Lundbeck Inc.
(Lundbeck). Due to the risks of visual field damage associated with vigabatrin, Sabril® was approved under an
FDA-mandated Risk Evaluation and Mitigation Strategy (REMS) program and is only available through a special
restricted distribution program approved by the FDA.

In chronic use for the treatment of epilepsy, vigabatrin has been generally well tolerated with lower than average
neurological side effects compared to other approved epilepsy therapies. The most common side effects reported
have been drowsiness and fatigue. However, one clearly established adverse side effect is the development of
peripheral visual field defects, or VFDs. VFDs occur in approximately 33% of users when cumulative dosage levels
of vigabatrin approach approximately 1,500 grams. These VFDs are manifest as a constriction of the peripheral field
of vision (i.e., "tunnel vision").

Our completed clinical and non-clinical studies of CPP-115 to date

On November 1, 2010, we announced key results for our initial series of safety and efficacy evaluations in a number
of animal and in-vitro laboratory studies. These results included superior visual safety of CPP-115, compared to
vigabatrin, pharmacokinetic data supporting oral administration of CPP-115, pharmacologic target specificity,
metabolic profile, and an absence of genotoxic, cardiovascular, respiratory, and liver enzyme side effects.
It was
also shown to be effective in multiple animal models for epilepsy and cocaine addiction.

On May 22, 2012, we reported positive results from a Phase 1(a) double-blind, placebo-controlled clinical trial
evaluating the safety, tolerability and pharmacokinetic profile of CPP-115. The study evaluated single ascending
doses ranging from 5 mg to 500 mg (a dose greater than ten times the predicted effective dose of 15-30 mg/day
derived from animal data) of CPP-115 solution administered orally to 55 healthy volunteers. CPP-115 was found to
be well tolerated with no side effects, rapidly absorbed and eliminated, and exhibited linear, dose dependent
pharmacokinetics.

Phase 1(b) Clinical Trial of CPP-115

We are currently evaluating CPP-115 in a Phase 1(b) multiple ascending dose study. The Phase 1(b) study is a
randomized, double-blind, placebo-controlled, safety, tolerability and pharmacokinetic study of multiple oral doses
of CPP-115 in healthy volunteers. The primary objective is to evaluate the safety and tolerability of multiple oral
doses of CPP-115. Secondary objectives are to determine the pharmacokinetic profile of CPP-115 and to determine
the effects of CPP-115 on brain GABA levels as measured by GABA-MRS (GABA-Magnetic Resonance
Spectroscopy) following administration of multiple oral daily doses. We expect to report the top-line results from
this study during the second quarter of 2015. We also expect to undertake, subject to the availability of funding, the

non-clinical studies of CPP-115 that will be required to support a Phase 2 study of CPP-115 evaluating its efficacy
as a treatment for infantile spasms and/or Tourette's Disorder.

Clinical and Pre-Clinical Studies of CPP-115 Undertaken by Others

The primary focus of our product development efforts is on our clinical trials and pre-clinical studies. However, we
have in the past supported and will continue in the future to support pre-clinical studies and clinical trials and studies
by academic investigators (including members of our scientific advisory committee and academic institutions with
which they are affiliated) of the use of our drug candidates that we believe might further the understanding or
increase the value of our drug candidates.

In some cases, in the past, we have provided unrestricted sponsorship funds for such studies and we may do so again
in the future. In other cases, we have provided, and may in the future provide, alternative assistance to the
investigator, most typically providing drug substance or dosage form as well as matching placebo. We expect to
continue supporting investigator studies in the future to the extent that they meet criteria acceptable to us. Such
criteria include research on the use of CPP-115 to treat various forms of epilepsy and/or other neurological
disorders, to assist investigators in designing their studies so that such studies are most appropriately conducted and,
to the extent possible, to make sure that these investigator studies potentially complement, and do not adversely
impact, our activities.

An animal study reporting positive pre-clinical efficacy in a "rat multiple hit model" in which the use of CPP-115
was evaluated for the treatment of infantile spasms was published in the January 2014 issue of the journal,
Epilepsia, The study was authored by Stephen W. Briggs, Tomonori Ono, MD, PhD, Solomon L. Moshe, MD and
Aristea S. Galanopoulou, MD, PhD of the Saul R. Korey Department of Neurology, Dominick P. Purpura
Department of Neuroscience, Laboratory of Developmental Epilepsy, The Comprehensive Epilepsy Center (CEC) at
Montefiore Medical Center / Albert Einstein College of Medicine of Yeshiva University, Bronx, New York. The
study concluded that (i) CPP-115 suppresses spasms in the multiple-hit model of infantile spasm, with onset of
effect as early as the day after the first dose; (ii) the therapeutic doses of CPP-115 were well tolerated in developing
rat pups; and (iii) CPP-115 showed efficacy for a longer duration at lower doses that were better tolerated than the
previously tested therapeutic vigabatrin doses.

CPP-115 has also been submitted to the Anticonvulsant Screening Program (ASP) of the National Institute of
Neurological Disorders and Stroke (NINDS), one of the institutes within the National Institutes of Health (NIH). To
date, CPP-115 has been tested in about 20 animal models of epilepsy, including maximal electric shock (MES) in
both rats and mice, corneal kindling in mice, minimal clonic seizure (6 Hz) model in mice, and subcutaneous
picrotoxin (scPIC). CPP-115 was also evaluated for potential efficacy in neuroprotection and neuropathic pain
models. CPP-115 has shown significant potential in a variety of epilepsy models. Due to change in focus and
budgetary constraints, the ASP has suspended further testing of a variety of potential anticonvulsant drugs, including
CPP-115. Samples of CPP-115 remain on file at NIH, and we will provide additional material to the NIH upon
request for future testing, should it be resumed. There can be no assurance that the ASP will conduct any further
testing of CPP-115.

Northwestern University License Agreement

On August 27, 2009, we entered into a license agreement with Northwestern University (Northwestern), under
which we acquired worldwide rights to commercialize new GABA aminotransferase inhibitors and derivatives of
vigabatrin which had been discovered and patented by Northwestern. Under the terms of the license agreement,
Northwestern granted us an exclusive worldwide license to United States composition of matter patents related to
the new class of inhibitors and a patent application relating to derivatives of vigabatrin. We have designated the lead
compound to be developed under this license as CPP-115.

We believe that these licensed compounds are the only known GABA aminotransferase inhibitors in existence or in
development other than vigabatrin. We also believe, based on our non-clinical testing to date of CPP-115, that these
compounds are significantly more potent than vigabatrin with less visual side effects than vigabatrin. We plan to
seek to develop these compounds for the treatment of several indications, including epilepsy (specifically, complex

partial seizures and infantile spasms). However, these compounds are at an early stage of development and there can
be no assurance as to whether these new compounds will ever be determined to be safe and effective.

Under our license agreement with Northwestern, we will be responsible for continued research and development of
any resulting drug candidates. We have the right to terminate the agreement in whole or in part after August 27,
2012, upon written notice. As of December 31, 2014, we have paid Northwestern upfront payments, milestone fees
and maintenance and patent fees aggregating $251,590, and we are obligated to pay certain additional fees and
milestone payments in future years relating to our clinical development activities under this license or payable upon
passage of time. The next milestone payment of $150,000 is due on the earlier of successful completion of the Phase
2 clinical trial for CPP-115 or August 27, 2015. We are also obligated to pay Northwestern royalties on any products
resulting from the license agreement. We also have the right to enter into sub-license agreements, and if we do, a
royalty on any sub-license fees will be payable to Northwestern.

In November 2014, the U.S. Patent & Trademark Office (US PTO) issued a Notice of Allowance on the method of
use patent for CPP-115 for neurological and psychological uses. This patent will expire in 2032, subject to potential
extensions allowed under the patent term restoration act. Patents for the same coverage remain pending in the
European Patent Office, Japan and Canada. There can be no assurance that the claims of this patent will be allowed,
or if allowed, that such claims will provide adequate patent protection for CPP-115.

CPP-109

CPP-109 and CPP-115 for the treatment of Tourette Syndrome and related license agreement

We, as a co-inventor, with scientists at New York University and the Feinstein Institute for Medical Research, have
filed patent applications in the United States, European and Canadian Patent Offices for the use of GABA
aminotransferase inhibitors, including CPP-109 and CPP-115, in the treatment of Tourette Syndrome. We also have
entered into a license agreement with NYU and the Feinstein Institute granting us worldwide rights with respect to
such patent. No office actions have been received to date and none are expected until late 2016.

Tourette Syndrome is a psychiatric disorder which usually has its onset in children or adolescents. Tourette
Syndrome is generally defined by multiple motor and vocal tics lasting for more than one year. The first symptoms
are usually involuntary movements (tics) of the face, arms, limbs, or trunks, and are frequent, repetitive and rapid.
The most common first symptom is a facial tic (for example, eye blinking) and is replaced or added to by other tics
of the neck, trunk, and limbs. There can also be verbal tics that occur with the movements, including vocalizations
such as grunting, throat clearing, shouting, and barking.

Tourette Syndrome is generally treated by a combination of therapy and psychiatric medication. Tics can be treated
with medications such as clonidine (Catapres®), haloperidol (Haldol®), pimazide (Orap®), or fluphenazine
(Prolixin®). Medications used to treat Obsessive Compulsive Disorder can also be used, such as clomipramine
(Anafranil®), fluoxetine (Prozac®) and sertraline (Zoloft®), as well as stimulants used to treat ADHD, a disorder
commonly comorbid with Tourette Syndrome, such as methylphenidate (Ritalin®), pemoline (Cylert®) and
dextroamphetamine (Dexadrine®).

An academic investigator proof-of-concept study evaluating the use of CPP-109 (our formulation of vigabatrin,
another GABA aminotransferase inhibitor) for the treatment of Tourette Syndrome is currently ongoing and, if the
results of this study show evidence of reduced number of tics, we will likely seek to develop CPP-109 or CPP-115
(which has the same mechanism of action as CPP-109) for this indication. Although we have provided drug and
financial support, we do not control this study and therefore have no control over the timing of its completion.
However, based on currently available information, we expect to have top-line results for this study before the end
of the second quarter of 2015.

Intellectual Property Rights

Licensing and Patents

Protection of our intellectual property and proprietary technology is a strategic priority for our business. We rely on
a combination of patent, trademark, copyright and trade secret laws along with institutional know-how and
continuing technological advancement, to develop and maintain our competitive position. Our ability to protect and
use our intellectual property rights in the future development and commercialization of our products, operate
without infringing the proprietary rights of others, and prevent others from infringing our proprietary rights, is
crucial to our future success. See Item 1A., “Risk Factors — Risks Related to Our Intellectual Property.”

Manufacturing and Supply

Firdapse(cid:140)

We have entered into agreements with a supplier of the active pharmaceutical ingredient (API) contained in
Firdapse(cid:140) for future requirements and we have contracted with a third-party contract manufacturer who we expect
will manufacture Firdapse(cid:140) tablets for us if Firdapse(cid:140) is approved for commercialization.

Any NDA that we submit for Firdapse(cid:140) will require a manufacturing plan. If the manufacturing plan and data are
insufficient, any NDA we may submit will not be approved. Before an NDA can be approved, our manufacturer
must also demonstrate compliance with FDA's good manufacturing practices (cGMPs) regulations and policies.
Further, even if we receive approval of an NDA for Firdapse(cid:140), if our manufacturer does not follow cGMPs in the
manufacture of our products, it may delay product launches or shipments or adversely affect our business.

Since we contract with a third party to manufacture our products, if the FDA approves an NDA for Firdapse(cid:140), our
contract manufacturer will be required to comply with all applicable environmental laws and regulations that affect
the manufacturing process. As a result, we do not believe that we will have any significant exposure to
environmental issues.

CPP-115

We have entered into a contract to manufacture the API sufficient to meet the needs of our ongoing and planned pre-
clinical and clinical studies of CPP-115. While we believe that we have ordered and obtained sufficient API for our
planned upcoming studies, there can be no assurance of this.

We have no plans at this time to build or acquire the manufacturing capability needed to prepare either the CPP-115
API or CPP-115 product on a commercial scale. We expect at this time that these materials will be prepared by a
contractor with suitable capabilities for these tasks and that we will enter into appropriate supply agreements with
these contractors at appropriate times in the development and commercialization of this product. There are no plans
at this time to enter into such agreements. Further, the contractors selected would have to be inspected by the FDA
and found to be in substantial compliance with federal regulations in order for an NDA for CPP-115 to be approved,
and there can be no assurance that the contractors we select in the future would pass such an inspection.

CPP-109

Consistent with our discontinuation of our efforts to further evaluate CPP-109 for addiction, we have shut down our
supply activities as well. However, we have retained sufficient CPP-109 to allow for the completion of the Tourette
Syndrome proof-of-concept study described above.

Sales and Marketing

We have not obtained regulatory approval for any of our drug candidates and thus we have only recently begun to
establish a commercial organization. We believe that, if approved by the FDA, it will be possible to commercialize
Firdapse(cid:140) with a focused specialty sales and marketing force that calls on the physicians, foundations and other

patient-advocacy groups focused on LEMS. Our current expectation is to commercialize Firdapse(cid:140) ourselves in the
United States, and we plan to recruit a sales and marketing force and take other steps to establish the necessary
commercial infrastructure at such time as we believe that Firdapse(cid:140) is approaching regulatory approval. In
furtherance of those objectives, in January 2015 we appointed a Chief Commercial Officer to help plan our
commercialization activities for Firdapse(cid:140) and to help us establish the required commercial infrastructure to market
Firdapse(cid:140). However, we may also consider entering into arrangements with other pharmaceutical or biotechnology
companies for the marketing and sale of Firdapse(cid:140) in Canada or Mexico, where we have also licensed the product.

Competition

The pharmaceutical industry is intensely competitive, and any product candidate developed or licensed by us would
likely compete with currently marketed and potentially new drugs and therapies even though they are not indicated
for these conditions. There are many pharmaceutical companies, biotechnology companies, public and private
universities, government agencies and research organizations that compete with us in developing various approaches
to the treatment of orphan diseases. Many of these organizations have substantially greater financial, technical,
marketing and manufacturing resources than we have.

Firdapse(cid:140) for LEMS

LEMS is currently treated with drugs and therapies including steroids, azathioprine, other immunosuppressants and
intravenous immunoglobulin, which work by suppressing the immune system, and pyridostigmine. Plasma exchange
has also been used in an attempt to remove antibodies from the body. Further, one other product, guanidine HCl
tablets, was approved many years ago (during a period when drugs were not required to be reviewed by the FDA for
both safety and effectiveness) for use in the treatment of LEMS. However, this drug has significant side effects and
is not currently viewed as an effective treatment for LEMS. Notwithstanding, drugs may be prescribed by physicians
for the treatment of LEMS whether or not they are considered effective.

In January of 2012, another pharmaceutical company, Jacobus Pharmaceutical, began its own Phase 2 trial studying
its own formulation of amifampridine for the treatment of LEMS. While there can be no assurance, we believe that
Firdapse(cid:140) is further along in development than this other company's version of amifampridine. Under the Orphan
Drug Act of 1983, the first pharmaceutical product to get approval for an indication receives the orphan exclusivity
under the statute. If this other pharmaceutical company is able to receive approval of an NDA for its formulation of
amifampridine for the treatment of LEMS before we are able to receive approval of Firdapse(cid:140) for the same
indication, we would be barred from marketing Firdapse(cid:140) in the United States during the seven-year orphan
exclusivity period, which would have a severe adverse effect on our results of operations. In addition, if this other
company were to receive five-year new chemical entity exclusivity for amifampridine for any indication prior to
approval of Firdapse(cid:140), we would be barred from marketing Firdapse(cid:140) in the United States during this five-year
exclusivity period for any indication. Further, we are aware that Jacobus Pharmaceutical has been making 3,4-DAP
available to LEMS patients under compassionate use Investigational New Drug applications (INDs) for a number of
years and we believe that approximately 200 LEMS patients receive the drug. If we are the first to obtain an
approval for this product, we may not be able to stop Jacobus from continuing to supply patients under
compassionate use INDs.

Finally, we are aware that amifampridine (i.e. 3,4-DAP) has been available from compounding pharmacies for many
years and may remain available even if we are able to obtain FDA approval of Firdapse(cid:140). Compounded
amifampridine, if it is available, is likely to be substantially less expensive than Firdapse(cid:140).

The Food and Drug Administration Modernization Act of 1997 included a new section, which clarified the status of
law. Under section 503A, drug products that are compounded by a
pharmacy compounding under Federal
pharmacist or physician on a customized basis for an individual patient may be entitled to exemptions from three
key provisions of the act: (1) the adulteration provision of section 501(a)(2)(B) (concerning the good manufacturing
practice requirements); (2) the misbranding provision of section 502(f)(1) (concerning the labeling of drugs with
adequate directions for use); and (3) the new drug provision of section 505 (concerning the approval of drugs under
new drug or abbreviated new drug applications).

To qualify for these statutory exemptions, a compounded drug product must satisfy several requirements. One of
these requirements restricted the universe of bulk drug substances that a compounder may use; i.e. that every bulk
drug substance used in compounding: (1) must comply with an applicable and current USP or NF monograph, if one
exists, as well as the current USP chapter on pharmacy compounding; (2) if such a monograph does not exist, the
bulk drug substance must be a component of an FDA-approved drug; or (3) if a monograph does not exist and the
bulk drug substance is not a component of an FDA-approved drug, it must appear on a list of bulk drug substances
that may be used in compounding (i.e., the bulk drugs list). While Section 503 was ruled unconstitutional by the
Supreme Court in 2002, the FDA has continued to aggressively oversee the practice of compounding under a
compliance policy guide utilizing its discretion under the principles described above, and these principles were
codified into a new section 503A passed by Congress as part of the Drug Quality and Security Act in 2013.

The FDA’s Pharmacy Compounding Advisory Committee at its meeting on May 6-7, 1999 voted 7-4 against
inclusion of 3,4-DAP on the bulk drugs list, largely based on the safety concerns and the commitment of Jacobus
Pharmaceuticals to make the drug available under compassionate use INDs, while pursuing FDA approval.
Therefore, since 3,4-DAP does not meet the requirements codified in Section 503A described above, the individual
or firm that compounds a drug product containing 3,4-DAP may be subject to a warning letter, seizure of product,
injunction, and/or criminal prosecution for violations of the FD&C Act.

We intend to take all available steps to try to enforce our marketing proprietary rights if we are the first company to
obtain an approval for this product. We cannot determine with certainty what impact these factors will have on the
market for our product. However, while there can be no assurance, we expect that despite these factors, we will be
able to successfully market our product.

CPP-115 for Epilepsy

The market for epilepsy treatments is highly competitive. Large pharmaceutical companies, including Pfizer
(Neurontin®, Lyrica®, Dilantin®, Zarontin®), J&J (Topamax®), UCB (Keppra®), Abbott (Depakote®), GSK
(Lamictal®), Roche (Klonopin®), and Novartis (Trileptal®) sell, or are developing, epilepsy therapies. However, as
stated earlier, approximately one-third of all epilepsy patients are refractory to treatment with any currently available
epilepsy treatments. It is difficult to determine sales of products specifically for epilepsy as many of these products
are used in other indications such as neuropathic pain, migraine, dementia, and bipolar disorders.

Factors to Consider Affecting Competition Generally

In general, our ability to compete will depend in large part upon:

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our ability to complete clinical development and obtain regulatory approvals for our drug candidates;

the efficacy, safety and reliability of our drug candidates;

the timing and scope of regulatory approvals;

product acceptance by physicians and other health care providers;

protection of our proprietary rights and the level of generic competition;

the speed at which we develop drug candidates;

our ability to supply commercial quantities of a product to the market;

our ability to obtain reimbursement from private and/or public insurance entities for product use in
approved indications;

our ability to recruit and retain skilled employees; and

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the availability of capital resources to fund development and commercialization activities, including the
availability of funding from the federal government.

Regulatory Matters

Government Regulation and Product Approval

Government authorities in the United States, at the federal, state and local level, and other countries extensively
regulate, among other things, the research, development, testing, manufacture, labeling, record-keeping, promotion,
storage, advertising, distribution, marketing and export and import of products such as those we are developing. Our
drugs must be approved by the FDA through the NDA process before they may be legally marketed in the United
States.

In the United States, drugs are subject to rigorous regulation by the FDA under the Federal Food, Drug, and
Cosmetic Act, or FDCA, and implementing regulations, as well as other federal and state statutes. The process of
obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local, and foreign
statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with
the applicable United States requirements at any time during the product development process, approval process or
after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include the
FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, a
clinical hold, warning letters, product recalls, product seizures,
total or partial suspension of production or
distribution, injunctions, fines, civil penalties or criminal prosecution. Any agency or judicial enforcement action
could have a material adverse effect on us. The process required by the FDA before a drug may be marketed in the
United States generally involves the following:

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completion of pre-clinical laboratory tests, animal studies and formulation studies according to the FDA’s
good laboratory practice, or GLP, regulations;

submission of an investigational new drug application, or IND, which must become effective before human
clinical trials may begin and which must include approval by an institutional review board, or IRB, at each
clinical site before the trials are initiated;

performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the
proposed drug for its intended use conducted in compliance with federal regulations and good clinical
practice, or GCP, an international standard meant to protect the rights and health of patients and to define
the roles of clinical trial sponsors, administrators, and monitors;

submission to, and acceptance by, the FDA of an NDA;

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is
produced to assess compliance with current good manufacturing practice, or cGMP, regulations to assure
that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and
purity;

potential FDA audit of the nonclinical and clinical trial sites that generated the data in support of the NDA;
and

FDA review and approval of the NDA.

United States Drug Development Process

Once a pharmaceutical candidate is identified for development it enters the pre-clinical testing stage. Pre-clinical
tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. Prior
to beginning human clinical trials, an IND sponsor must submit an IND to the FDA. The IND sponsor must submit
the results of the pre-clinical tests, together with manufacturing information and analytical data, to the FDA as part

of the IND. Some pre-clinical or nonclinical testing may continue even after the IND is submitted. In addition to
including the results of the pre-clinical studies, the IND will also include a protocol detailing, among other things,
the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be
evaluated, if the trial lends itself to an efficacy evaluation. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA, within the 30–day time period, raises concerns or questions about the conduct
of the trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical
trial can begin. The FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a
clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms
authorized by the FDA.

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the
supervision of one or more qualified investigators in accordance with federal regulations and GCP.

Clinical trials must be conducted under protocols detailing the objectives of the trial and the safety and effectiveness
criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, an Institutional
Review Board (IRB) at each institution participating in the clinical trial must review and approve each protocol
before any clinical trial commences at that institution. All research subjects must provide informed consent, and
informed consent information must be submitted to the IRB for approval prior to initiation of the trial. Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently
if adverse events or other certain types of other changes occur.

Human clinical trials are typically conducted in three phases. A fourth, or post-approval, phase may include
additional clinical studies. These phases generally include the following, and may be sequential, or may overlap or
be combined:

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Phase 1 clinical trials involve the initial introduction of the drug into human subjects. These studies are
designed to determine the safety of usually single doses of the compound and determine any dose limiting
intolerance, as well as evidence of the metabolism and pharmacokinetics of the drug in humans.

Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the safety and
efficacy of the drug for specific, targeted indications, to determine dosage tolerance and optimal dosage,
and to identify possible adverse effects and safety risks.

In Phase 3, if a compound is found to be potentially effective and to have an acceptable safety profile in
Phase 2 (or occasionally Phase 1) studies, the Phase 3 studies will be conducted to further confirm clinical
efficacy, optimal dosage and safety within an expanded population which may involve geographically
diverse clinical trial sites. Generally, but not always, two adequate and well-controlled Phase 3 clinical
trials are required by the FDA for approval of an NDA.

Phase 4 clinical trials are studies required of or agreed to by a sponsor that are conducted after the FDA has
approved a product for marketing. These studies are used to gain additional experience from the treatment
of patients in the intended therapeutic indication and to document a clinical benefit in the case of drugs
approved under accelerated approval regulations. If the FDA approves a product while a company has
ongoing clinical trials that were not necessary for approval, a company may be able to use the data from
these clinical trials to meet all or part of any Phase 4 clinical trial requirement. Failure to promptly conduct
Phase 4 clinical trials where necessary could result in withdrawal of approval for products approved under
accelerated approval regulations.

While Phase 1, Phase 2, and Phase 3 tests are generally required for approval of an NDA, certain drugs may not
require one or more steps in the process depending on other testing and the situation involved. Additionally, the
FDA, an IRB, or the sponsor may stop testing at any time if results show patients being exposed to unnecessary
health risks or overly dangerous side effects.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop
additional information about the chemistry and physical characteristics of the drug and finalize a process for

manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of
consistently producing quality batches of the drug candidate and, among other requirements, the manufacturer must
develop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate
packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate
does not undergo unacceptable deterioration over its shelf life.

United States Review and Approval Process

FDA approval of an NDA is required before marketing of the product may begin in the United States. The NDA
must include the results of product development, pre-clinical studies and clinical studies, together with other detailed
information, including information on the chemistry, manufacture and composition of the product. The FDA has 60
days from its receipt of the NDA to review the application to ensure that it is sufficiently complete for substantive
review before accepting it for filing. The FDA may request additional information rather than accept an NDA for
filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also
is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins
an in-depth substantive review. The submission of an NDA is also subject to the payment of a substantial application
fee (currently exceeding $2,335,000), although a waiver of such fee may be obtained under certain limited
circumstances, including when the drug that is subject of the application has received Orphan Drug Designation for
the indication sought. Further, the sponsor of an approved NDA is subject to annual product and establishment user
fees, currently exceeding $114,000 per product and $569,000 per establishment. The approval process is lengthy and
difficult and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may
require additional clinical or other data and information. Even if such data and information is submitted, the FDA
may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA may also refer applications
for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory
committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation
as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory
committee. The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for
its intended use. Before approving an NDA, the FDA will inspect the facility or facilities where the product is
manufactured to determine whether its manufacturing is cGMP–compliant to assure and preserve the product’s
identity, strength, quality, purity and stability.

If the FDA’s evaluation of the NDA submission or manufacturing facilities is not favorable, the FDA will issue a
complete response letter. The complete response letter outlines the deficiencies in the submission and often requires
additional testing or information in order for the FDA to reconsider the application. Even after submitting this
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for
approval. With limited exceptions, the FDA may withhold approval of a NDA regardless of prior advice it may have
provided or commitments it may have made to the sponsor.

Post-Approval Requirements and Consideration

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

Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved
labeling. Changes to some of the conditions established in an approved application, including changes in indications,
labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA
supplement before the change can be implemented. An NDA supplement for a new indication typically requires
clinical data similar to that in the original application, and the FDA uses the same procedures and actions in
reviewing NDA supplements as it does in reviewing NDAs.

Adverse event reporting and submission of periodic reports is required following FDA approval of an NDA. The
FDA also may require post-marketing testing, known as Phase 4 testing, and surveillance to monitor the effects of
an approved product or place conditions on an approval that could restrict the distribution or use of the product. In
addition, quality control as well as drug manufacture, packaging, and labeling procedures must continue to conform
to cGMPs after approval. Drug manufacturers and certain of their subcontractors are required to register their
establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the
FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly,
manufacturers must continue to expend time, money and effort in the areas of production and quality control to
maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product
recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing,
or if previously unrecognized problems are subsequently discovered.

The Hatch-Waxman Amendments

Orange Book Listing

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

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

A certification that the new product will not infringe the already approved product’s listed patents, or that such
patents are invalid, is called a Paragraph IV certification.
If the ANDA applicant has provided a Paragraph IV
certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent
holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a
patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent
infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA
from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a
decision in the infringement case that is favorable to the ANDA applicant.

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

Exclusivity

Upon NDA approval of a new chemical entity or NCE, which is a drug that contains no active moiety that has been
approved by FDA in any other NDA, that drug receives five years of marketing exclusivity during which FDA
cannot receive any ANDA seeking approval of a generic version of that drug. A drug may obtain a three-year
period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new
formulation for the previously approved product, if one or more new clinical studies (other than bioavailability or

bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the
applicant. During this period of exclusivity, FDA cannot approve an ANDA for a generic drug that includes the
change.

An ANDA may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.
If
there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA may
be filed before the expiration of the exclusivity period.

Section 505(b)(2) New Drug Applications

Most drug products obtain FDA marketing approval pursuant to an NDA or an ANDA. A third alternative is a
special type of NDA, commonly referred to as a Section 505(b)(2), or 505(b)(2), NDA, which enables the applicant
to rely, in part, on FDA’s previous approval of a similar product, or published literature, in support of its application.

505(b)(2) NDAs often provide an alternate path to FDA approval for new or improved formulations or new uses of
previously approved products. Section 505(b)(2) permits the filing of an NDA where at least some of the
information required for approval comes from studies not conducted by, or for, the applicant and for which the
If the Section 505(b)(2) applicant can establish that reliance on
applicant has not obtained a right of reference.
FDA’s previous approval is scientifically appropriate, it may eliminate the need to conduct certain preclinical or
clinical studies of the new product. The FDA may also require companies to perform additional studies or
measurements to support the change from the approved product. The FDA may then approve the new product
candidate for all, or some, of the label indications for which the referenced product has been approved, as well as for
any new indication sought by the Section 505(b)(2) applicant.

To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product,
the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange
Book to the same extent that an ANDA applicant would. A Section 505(b)(2) NDA may be eligible for three years
of marketing exclusivity to the same extent that a Section 505(b)(1) NDA is.

Other Regulatory Requirements

In addition to regulation by the FDA and certain state regulatory agencies, we are also subject to a variety of foreign
regulations governing clinical trials and the marketing of other products. Outside of the United States, our ability to
market a product depends upon receiving a marketing authorization from the appropriate regulatory agencies. The
requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary
widely from country to country. In any country, however, we will only be permitted to commercialize our products
if the appropriate regulatory agency is satisfied that we have presented adequate evidence of safety, quality and
efficacy. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory
authorities of foreign countries must be obtained prior to the commencement of marketing of the product in those
countries. The regulatory approval and oversight process in other countries includes all of the risks associated with
regulation by the FDA and certain state regulatory agencies as described above.

Under the European Union regulatory system, applications for drug approval may be submitted either in a
centralized or decentralized manner. Under the centralized procedure, a single application to the European
Medicines Agency leads to an approval granted by the European Commission which permits marketing of the
product throughout the European Union. The decentralized procedure provides for mutual recognition of nationally
approved decisions and is used for products that do not comply with requirements for the centralized procedure.
Under the decentralized procedure, the holders of national marketing authorization in one of the countries within the
European Union may submit further applications to other countries within the European Union, who will be
requested to recognize the original authorization based on an assessment report provided by the country in which
marketing authorization is held.

Pharmaceutical Pricing and Reimbursement

In both US and foreign markets, our ability to commercialize our products successfully, and to attract
commercialization partners for our products, depends in significant part on the availability of adequate financial
coverage and reimbursement from third-party payors, including, in the United States, governmental payors such as
Medicare and Medicaid, managed care organizations, and private health insurers. Third party payors are increasingly
challenging the prices charged for medicines and examining their cost effectiveness, in addition to their safety and
efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the cost
effectiveness of our products. Even with the availability of such studies, our products may be considered less safe,
less effective or less cost-effective than alternative products, and third party payors may not provide coverage and
reimbursement for our drug candidates, in whole or in part.

Political, economic and regulatory influences are subjecting the health care industry in the United States to
fundamental changes. There have been, and we expect there will continue to be, legislative and regulatory proposals
to change the healthcare system in ways that could significantly affect our business, including the Patient Protection
and Affordable Care Act of 2010. We anticipate that in the US, Congress, state legislatures, and private sector
entities will continue to consider and may adopt healthcare policies intended to curb rising healthcare costs. These
cost containment measures include:

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controls on government-funded reimbursement for drugs;

controls on healthcare providers;

challenges to the pricing of drugs or limits or prohibitions on reimbursement for specific products
through other means;

reform of drug importation laws; and

expansion of use of managed-care systems in which healthcare providers contract to provide
comprehensive healthcare for a fixed cost per person.

We are unable to predict what additional legislation, regulations or policies, if any, relating to the healthcare
industry or third-party coverage and reimbursement may be enacted in the future or what effect such legislation,
regulations or policies would have on our business. Any cost containment measures, including those listed above, or
other healthcare system reforms that are adopted may have a material adverse effect on our business prospects.

Orphan Drug Exclusivity and Pediatric Exclusivity Designation

Some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient
populations as orphan drugs. Under the Orphan Drug Act of 1983 (ODA), the FDA may grant Orphan Drug
Designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the
United States, or more than 200,000 individuals in the United States and for which there is no reasonable
expectation that the cost of developing and making available in the United States a drug for this type of disease or
condition will be recovered from sales in the United States for that drug. In the United States, Orphan Drug
Designation must be requested before submitting an application for marketing approval. An Orphan Drug
Designation does not shorten the duration of the regulatory review and approval process. The grant of an Orphan
Drug Designation request does not alter the standard regulatory requirements and process for obtaining marketing
approval. Safety and efficacy of a compound must be established through adequate and well-controlled studies. If a
product which has been granted Orphan Drug Designation subsequently receives the first FDA approval for the
indication for which it has such designation, the product is entitled to an orphan drug exclusivity period, which
means the FDA may not approve any other application to market the same drug for the same indication for a period
of seven (7) years, except in limited circumstances, such as where an alternative product demonstrates clinical
superiority to the product with orphan exclusivity. In addition, holders of exclusivity for orphan drugs are expected
to assure the availability of sufficient quantities of their orphan drugs to meet the needs of patients. Failure to do so
could result in the withdrawal of marketing exclusivity for the drug.

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

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

Breakthrough Therapy Designation

Breakthrough therapy designation is intended to expedite the development and review of drugs for serious or life-
threatening conditions. The criteria for breakthrough therapy designation require preliminary clinical evidence that
demonstrates the drug may have substantial improvement on at least one clinically significant endpoint over
available therapy. A breakthrough therapy designation conveys all of the fast track program features (see below for
more details on fast track designation), as well as more intensive FDA guidance on an efficient drug development
program. The FDA also has an organizational commitment to involve senior management in such guidance. Section
902 of the Food and Drug Administration Safety and Innovation Act (FDAISA) provides that actions taken to
expedite development may include the following actions, as appropriate:

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holding meetings with the sponsor and review team throughout the development of the drug;

providing timely advice to, and interactive communication with, the sponsor regarding the development of
the drug to ensure that the development program to gather the nonclinical and clinical data necessary for
approval is as efficient as possible;

taking steps to ensure that the design of the clinical trials is as efficient as practicable, when scientifically
appropriate, such as by minimizing the number of patients exposed to a potentially less efficacious
treatment;

assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient review of the
development program and to serve as a scientific liaison between the cross-discipline members of the
review team (i.e., clinical, pharmacology-toxicology, chemistry, manufacturing and control (CMC),

compliance) for coordinated internal interactions and communications with the sponsor through the review
division's Regulatory Health Project Manager; and

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involving senior managers and experienced review staff, as appropriate, in a collaborative, cross-
disciplinary review.

Fast Track Designation and Accelerated Approval

FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment
of a serious or life-threatening disease or condition for which there is no effective treatment and which demonstrate
the potential to address unmet medical needs for the condition. Under the fast track program, the sponsor of a new
drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track drug
concurrent with, or after, the filing of the IND for the drug candidate. FDA must determine if the drug candidate
qualifies for fast track designation within 60 days of receipt of the sponsor’s request.

Under the fast track program and FDA’s accelerated approval regulations, FDA may approve a drug for a serious or
life-threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a
surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured
earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity
or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the
availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that
substitutes for a direct measurement of how a patient feels, functions, or survives. Surrogate endpoints can often be
measured more easily or more rapidly than clinical endpoints. A drug candidate approved on this basis is subject to
rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical
trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a
clinical benefit during post-marketing studies, will allow FDA to withdraw the drug from the market on an
expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to
prior review by FDA.

In addition to other benefits such as the ability to use surrogate endpoints and engage in more frequent interactions
with FDA, FDA may initiate review of sections of a fast track drug’s NDA before the application is complete. This
rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the
remaining information and the applicant pays applicable user fees. However, FDA’s time period goal for reviewing
an application does not begin until the last section of the NDA is submitted. Additionally, the fast track designation
may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in
the clinical trial process.

Priority Review

Under FDA policies, a drug candidate is eligible for priority review, or review within a six to eight-month time
frame from the time a complete NDA is submitted, if the drug candidate is intended for the treatment, diagnosis or
prevention of a serious or life-threatening condition, demonstrates the potential to address an unmet medical need, or
provides a significant improvement compared to marketed drugs.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain
clinical trial information. Information related to the product, patient population, phase of investigation, study sites
and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are
also obligated to discuss the results of their clinical trials after completion. Disclosure of results of these trials can be
delayed until the new product or new indication being studied has been approved. Competitors may use this
publicly-available information to gain knowledge regarding the progress of development programs.

Anti-Kickback, False Claims Laws & the Prescription Drug Marketing Act

In addition to FDA restrictions on marketing of pharmaceutical products, other state and federal laws have been
applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-
kickback statutes and false claims statutes. The federal healthcare program anti-kickback statute prohibits, among
other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for
purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service
reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been
interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers,
purchasers and formulary managers on the other. Violations of the anti-kickback statute are punishable by
imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare
programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain
common activities from prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn
narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations
may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

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

As part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs
to physicians. The Prescription Drug Marketing Act, or the PDMA, imposes requirements and limitations upon the
provision of drug samples to physicians, as well as prohibits states from licensing distributors of prescription drugs
unless the state licensing program meets certain federal guidelines that include minimum standards for storage,
handling, and record keeping. In addition, the PDMA sets forth civil and criminal penalties for violations.

Our Employees

As of March 10, 2015 we had twelve employees. We also utilize the services of consultants including our Chief
Medical Officer and several members of our Scientific Advisory Board. None of our employees are covered by a
collective bargaining agreement. We believe our relationship with our employees and consultants is good.

Our Scientific Advisory Board

We rely on prominent scientists and physicians to advise us on the development of our drug candidates. All of our
advisors are employed by organizations other than ours and may have commitments to or consulting or advisory
agreements with other entities that may limit their availability to us. Our Scientific Advisory Board currently
consists of the following members:

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Jonathan Brodie, PhD, MD, is the chairman of our Scientific Advisory Board and Professor of Psychiatry at
New York University School of Medicine. Dr. Brodie completed his bachelor of science degree in chemistry as
a Ford Foundation Scholar and his PhD in Physiological Chemistry (Organic Chemistry minor) at
the
University of Wisconsin-Madison. He was an NIH postdoctoral Fellow in Biochemistry at Scripps Clinic and
Research Foundation and a tenured associate professor of Biochemistry at the School of Medicine at SUNY at
Buffalo. He then received his MD degree at New York University School of Medicine and joined the faculty
after completing his residency in psychiatry at NYU/Bellevue Medical Center. He has been a member of the
Promotions and Tenure Committee of the School of Medicine and co-chairman of the Executive Advisory
Committee of the General Clinical Research Center and the Protocol Review Committee of the Center for
Advanced Brain Imaging (CABI) of Nathan Kline Institute. He also served as Interim Chairman of the

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Department of Psychiatry of the NYU School of Psychiatry at the NYU School of Medicine. For 15 years, he
was the NYU Director of the Brookhaven National Laboratory/NYUSoM collaboration investigating the use of
positron emitters and PET in neuroscience and psychiatry.
In addition, Dr. Brodie serves as a
psychopharmacology preceptor to psychiatry residents. As a clinician, he treats patients in general issues of
adult psychiatry including anxiety and depression.

Robert D. Fechtner, MD, is Professor of Ophthalmology and Director, of the Glaucoma Division, at the
Institute of Ophthalmology and Visual Science, Rutgers, the State University of New Jersey. Dr. Fechtner
received his bachelor of science degree in biomedical science and his medical degree from the University of
Michigan. He completed his residency at Albert Einstein College of Medicine in New York. A fellowship in
glaucoma followed at the University of California, San Diego, under a National Research Service Award from
the National Institutes of Health. Dr. Fechtner is the Executive Vice President of the World Glaucoma
Association and has published more than 100 scientific articles and book chapters.

Eugene Laska, PhD, is a professor in the Department of Psychiatry at New York University and the Director of
the Statistical Sciences unit at the Nathan S. Kline Institute for Psychiatric Research. Dr. Laska was for 20 years
the Director of the WHO Collaborating Center for Research and Training in Mental Health Program
Management and has served as a statistical consultant to many pharmaceutical companies (including us) both
large and small with regard to biostatistics and clinical trial design.

Richard B. Silverman, Ph.D. is the John Evans Professor of Chemistry at Northwestern University. He is the
inventor of Pfizer's $4.5 billion/year Lyrica® (pregabalin), marketed worldwide for the treatment of epilepsy,
neuropathic pain, fibromyalgia, pain from spinal cord injury, and (in Europe) for generalized anxiety disorder.
He has received numerous awards, most recently Fellow of the National Academy of Inventors (2014), Fellow
of the American Academy of Arts & Sciences (2014), iCON Innovator Award of the iBIO Institute (2014),
Northwestern University Trustee Medal for Faculty Innovation and Entrepreneurship (2014), Medicinal
Chemistry Prize of the Israel Chemistry Society (2014), Fellow of the Royal Society of Chemistry (UK, 2013),
Centenary Prize of the Royal Society of Chemistry (2013), Bristol-Myers Squibb-Edward E. Smissman Award
of the American Chemical Society (2013), Sato Memorial International Award of the Pharmaceutical Society of
Japan (2012), Fellow of the American Chemical Society (2011), E.B. Hershberg Award for Important
Discoveries in Medicinally Active Substances from the American Chemical Society (2011), Perkin Medal from
the Society of Chemical Industry (2009), Medicinal Chemistry Hall of Fame of the American Chemical Society
(2009). Dr. Silverman holds 59 patents, has published over 335 peer-reviewed articles and has written five
books over his 38-year career in academia.

We plan to add additional members to our Scientific Advisory Board in the future who will be able to advise on the
development of Firdapse(cid:140) for LEMS or other neuromuscular diseases.

Available Information

We make available free of charge on or through our Internet website our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission
(SEC). Our Internet address is www.catalystpharma.com. The content on our website is not, nor should it be
deemed to be, incorporated by reference into this Form 10-K.

Item 1A.

Risk Factors

Our business involves a high degree of risk. You should carefully consider the risks and uncertainties described
below, and all of the other information contained in this Form 10-K in assessing the risks relating to ownership of
our common stock. The risks described below could cause our business, results of operations, financial condition
and prospects to materially suffer and the market price of our stock to decline.

Risks Related to our Business

We are a development stage company. Our limited operating history makes it difficult to evaluate our future
performance.

We are a development stage company and, as such, we have a limited operating history upon which you can
evaluate our current business and our prospects. The likelihood of our future success must be viewed in light of the
problems, expenses, difficulties, delays and complications often encountered in the operation of a business without
revenues, especially in the pharmaceutical industry, where failures of companies are common. We are subject to the
risks inherent in the ownership and operation of a development stage company, including availability of capital,
regulatory setbacks and delays, fluctuations in expenses, competition and government regulation. If we fail to
address these risks and uncertainties our business, results of operations, financial condition and prospects would be
adversely affected.

We have no products currently available and we have never had any products available for commercial sale.

We have had no revenues from product sales to date, currently have no products available for commercial sale, and
have never had any products available for commercial sale. We expect to incur losses at least until we are in a
position to commercialize Firdapse(cid:140), which may never occur. Our net loss was $15.5 million and $12.2 million for
the years ended December 31, 2014 and December 31, 2013, respectively. We may never obtain approval of an
NDA for any of our drug candidates and we may never achieve profitability.

Our business will require additional capital.

Our business will require additional capital to meet our product development objectives. Based on currently
available information, we estimate that we have sufficient working capital to support our operations through the end
of 2016. The expectations described above are based on current information available to us. If the cost of our
ongoing activities are greater than we expect, our assumptions may not prove to be accurate. There can be no
assurance as to the exact amount of the funding we will require or as to whether any such required funding will be
available to us when it is required.

We plan to raise additional funds in the future through public or private equity offerings, debt financings, capital
lease transactions, corporate collaborations, governmental research grants or cost sharing arrangements with
appropriate agencies that operate under the umbrella of the National Institutes of Health and/or other means.
However, there is no assurance that any such grants will be made available, and if available, that we will qualify to
receive any such grants. We may also seek to raise additional capital to fund additional product development efforts,
even if we have sufficient funds for our planned operations.

Any sale by us of additional equity or convertible debt securities could result in dilution to our stockholders. There
can be no assurance that any required additional funding will be available to us at all or available on terms
acceptable to us. Further, to the extent that we raise funds through collaborative arrangements, it may be necessary
to relinquish some rights to our technologies or grant sublicenses on terms that are not favorable to us. If we are not
able to secure funding when needed, we may have to delay, reduce the scope of or eliminate one or more research
and development programs, which could have an adverse effect on our business.

If we are not the first to obtain approval for Firdapse(cid:140) for the treatment of LEMS, we may not be able to bring it
to market.

In January of 2012, another pharmaceutical company, Jacobus Pharmaceutical, began its own Phase 2 trial studying
their own formulation of amifampridine (3,4-DAP) for the treatment of LEMS (according to the information about
this study on clinicaltrials.gov, enrollment in this trial has been discontinued as of April 2014). While there can be
no assurance, we believe that Firdapse(cid:140) is further along in development and as a result we expect that we will be in
a position to obtain the first approval of an NDA for 3,4-DAP. Under the Orphan Drug Act of 1983, the first
pharmaceutical product to obtain approval for an indication receives the orphan exclusivity under the statute. If
another pharmaceutical company is able to receive approval of an NDA for its formulation of amifampridine for the
treatment of LEMS before we are able to receive approval of Firdapse(cid:140) for the same indication, we would be
barred from marketing Firdapse(cid:140) in the United States during the seven-year orphan exclusivity period, which
would have a severe adverse effect on our results of operations. In addition, if another company were to receive five-
year new chemical entity exclusivity for amifampridine for any indication prior to approval of Firdapse(cid:140), we would
be barred from marketing Firdapse(cid:140) in the United States during this five-year exclusivity period.

The development of CPP-115 is at an early stage.

Our development of CPP-115 is at an early stage, and it is going to be several years before we are in a position to
submit an NDA for CPP-115, if our future clinical trials of this product are successful. Further, our ability to
develop CPP-115 will be dependent on our having the resources to conduct the studies and trials that would be
required. There can be no assurance that we will ever submit an NDA for CPP-115 or commercialize CPP-115.

Our business is subject to substantial competition.

The biotechnology and pharmaceutical
industries are highly competitive. Many of our competitors have
substantially greater financial and other resources, larger research and development staffs and more experience
developing products, obtaining FDA and other regulatory approvals of products and manufacturing and marketing
products than we have. We compete against pharmaceutical companies that are developing or currently marketing
therapies that will compete with our drug candidates. In addition, we compete against biotechnology companies,
universities, government agencies, and other research institutions in the development of pharmaceutical products.
While we believe that our drug candidates will offer advantages over many of the currently available competing
therapies, our business could be negatively impacted if our competitors’ present or future offerings are more
effective, safer or less expensive than ours, or more readily accepted by regulators, healthcare providers or third-
party payors. Further, if we are permitted to commence commercial sales of our drug candidates, we may also
compete with respect to manufacturing efficiency and marketing capabilities.

For example, amifampridine, the active ingredient in Firdapse(cid:140), has been available from compounding pharmacies
and from Jacobus Pharmaceutical under compassionate use INDs for many years, and will likely be available from
these sources even if we are able to obtain FDA approval of Firdapse(cid:140). Amifampridine from these sources can be
expected to be substantially less expensive than Firdapse(cid:140). The FDA Pharmacy Compounding Advisory
Committee, however, has previously issued a list of drugs which should not be compounded, and amifampridine was
included on that list. In addition, drugs that are not approved by FDA for the treatment of LEMS, such as a related
aminopyridine drug, dalfampridine (Ampyra®), may nonetheless be prescribed by physicians for the treatment of
LEMS.

For all of these reasons, we may not be able to compete successfully.

We face a risk of product liability claims and may not be able to obtain adequate insurance.

Our business exposes us to potential liability risks that may arise from the clinical testing, manufacture, and/or sale
of our pharmaceutical products. Patients have received substantial damage awards in some jurisdictions against
pharmaceutical companies based on claims for injuries allegedly caused by the use of pharmaceutical products used
in clinical trials or after FDA approval. Liability claims may be expensive to defend and may result in large
judgments against us. We currently carry liability insurance with an aggregate annual coverage limit of $15,000,000
per claim and $15,000,000 in the aggregate, with a deductible of $10,000 per occurrence. Our insurance may not

reimburse us for certain claims or the coverage may not be sufficient to cover claims made against us. We cannot
predict all of the possible harms or side effects that may result from the use of our current drug candidates, or any
potential future products we may acquire and use in clinical trials or after FDA approval and, therefore, the amount
of insurance coverage we currently hold may not be adequate to cover all liabilities we might incur. If we are sued
for any injury allegedly caused by our products, our liability could exceed our ability to pay the liability. Whether or
not we are ultimately successful in any adverse litigation, such litigation could consume substantial amounts of our
financial and managerial resources, all of which could have a material adverse effect on our business, financial
condition, results of operations, prospects and stock price.

The obligations incident to being a public company place significant demands on our management.

As a public reporting company, we are required to comply with the Sarbanes-Oxley Act of 2002 and the related
rules and regulations of the SEC, including periodic reports, disclosures and more complex accounting rules. As
directed by Section 404 of Sarbanes-Oxley, the SEC adopted rules requiring public companies to include a report of
management on a company’s internal control over financial reporting in their Annual Report on Form 10-K. Based
on current rules, we are required to annually report under Section 404(a) of Sarbanes-Oxley regarding our
management’s assessment as to the effectiveness of our internal control over financial reporting. Further, under
Section 404(b) of Sarbanes-Oxley, our auditors are required to report on their assessment as to the effectiveness of
our internal control over financial reporting. If we or our auditors are unable to conclude that we have effective
internal control over our financial reporting, investors could lose confidence in the reliability of our financial
statements, which could result in a decrease in the value of our common stock.

We are highly dependent on our small number of key personnel and advisors.

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

We have relationships with our scientific advisers and collaborators at academic and other institutions. Such
individuals are employed by entities other than us and may have commitments to, or consulting advisory contracts
with, such entities that may limit their availability to us. Although each scientific advisor and collaborator has
agreed not to perform services for another person or entity that would create an appearance of a conflict of interest,
conflicts may arise from the work in which other scientific advisers and/or collaborators are involved.

Risks Related to the Development of Our Drug Candidates

Our drug development efforts may fail.

Development of our pharmaceutical drug candidates is subject to risks of failure. For example:

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our drug candidates may be found to be ineffective or unsafe, or fail to receive necessary regulatory
approvals;

our drug candidates may not be economical to market or take substantially longer to obtain necessary
regulatory approvals than anticipated; or

competitors may market equivalent or superior products.

As a result, our drug development activities may not result in any safe, effective and commercially viable products,
and we may not be able to commercialize our products successfully. For example, for several years, we evaluated

CPP-109 (our formulation of vigabatrin) for the treatment of cocaine addiction. However, CPP-109 failed to meet
the primary and two key secondary endpoints in a Phase 2(b) trial for cocaine addiction, and we are no longer
pursuing the evaluation of CPP-109 for addiction. Further, our lead compound, Firdapse(cid:140), is for a very rare
condition for which there is no FDA-approved treatment. As such, the clinical development plan we pursued after
consulting with FDA including the clinical endpoints, protocol design, and statistical analysis plan, may not allow
the FDA to ultimately conclude that our Phase 3 trial of Firdapse(cid:140) is adequate to establish the clinical benefit of the
drug. In addition, FDA has indicated that additional data from published studies, and data from a patient registry,
would be useful in establishing the safety of Firdapse(cid:140), but we may not be able to obtain that data in a form that is
satisfactory to the FDA. Our failure to develop safe, effective, and/or commercially viable products would have a
material adverse effect on our business, prospects, results of operations and financial condition.

Failure can occur at any stage of our drug development efforts.

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

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regulators or Institutional Review Boards (IRBs) may not authorize us to commence a clinical trial or
conduct a clinical trial at a prospective trial site;

conditions may be imposed upon us by the FDA regarding the scope or design of our clinical trials, or we
may be required to resubmit our clinical trial protocols to IRBs for reinspection due to changes in the
regulatory environment;

the number of subjects required for our clinical trials may be larger, patient enrollment may take longer, or
patients may drop out of our clinical trials at a higher rate than we anticipate;

(cid:120) we may have to suspend or terminate one or more of our clinical trials if we, regulators, or IRBs determine

that the participants are being subjected to unreasonable health risks;

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our third-party contractors, clinical investigators or contractual collaborators may fail to comply with
regulatory requirements or fail to meet their contractual obligations to us in a timely manner;

the FDA may not accept clinical data from trials that are conducted at clinical sites in countries where the
standard of care is potentially different from the United States;

our tests may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional testing; and

the costs of our pre-clinical and/or clinical trials may be greater than we anticipate.

We rely on third parties to conduct our pre-clinical studies and clinical studies and trials, and if they do not
perform their obligations to us we may not be able to obtain approval for our drug candidates.

We do not currently have the ability to independently conduct pre-clinical studies or clinical studies and trials for
our drug candidates, and we rely on third parties such as third-party contract research
and governmental
organizations, medical institutions and clinical investigators (including academic clinical investigators), to conduct
studies and trials of our drug candidates. Our reliance on third parties for development activities reduces our control
over these activities. These third parties may not complete activities on schedule, or may not conduct our pre-clinical
studies and our clinical studies and trials in accordance with regulatory requirements or our study design. If these

third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be adversely
affected, and our efforts to obtain regulatory approvals for and commercialize our drug candidates may be delayed.

If we conduct studies with other parties, we may not have control over all decisions associated with that trial. To the
extent that we disagree with the other party on such issues as study design, study timing and the like, it could
adversely affect our drug development plans.

Although we rely on third parties to manage the data from our studies and trials, we are responsible for confirming
that each of our studies and trials is conducted in accordance with its general investigational plan and protocol.
Moreover, the FDA and foreign regulatory agencies will require us to comply with applicable regulations and
standards, including Good Laboratory Practice (GLP) and Good Clinical Practice (GCP), for conducting, recording
and reporting the results of such studies and trials to assure that the data and the results are credible and accurate and
that the human study and trial participants are adequately protected. Our reliance on third parties does not relieve us
of these obligations and requirements, and we may fail to obtain regulatory approval for our drug candidates if these
requirements are not met.

We will need to develop marketing, distribution and production capabilities or relationships to be successful.

In order to generate sales of any products we may develop, we must either acquire or develop an internal marketing
force with technical expertise and with supporting documentation capabilities, or make arrangements with third
parties to perform these services for us. The acquisition and development of a marketing and distribution
infrastructure will require substantial resources and compete for available resources with our drug development
efforts. To the extent that we enter into marketing and distribution arrangements with third parties, our revenues will
depend on the efforts of others. If we fail to enter into such agreements, or if we fail to develop our own marketing
and distribution channels, we would experience delays in product sales and incur increased costs.

We have no in-house manufacturing capacity and, to the extent we are successful in completing the development of
our drug candidates, we will be obliged to rely on contract manufacturers. We cannot assure you that we will
successfully manufacture any product we may develop, either independently or under manufacturing arrangements,
if any, with third party manufacturers. Moreover, if any manufacturer should cease doing business with us or
experience delays, shortages of supply or excessive demands on their capacity, we may not be able to obtain
adequate quantities of product in a timely manner, or at all. Manufacturers, and in certain situations their suppliers,
are required to comply with current NDA commitments and current good manufacturing practices (cGMP)
requirement enforced by the FDA, and similar requirements of other countries. The failure by a manufacturer to
comply with these requirements could affect its ability to provide us with product. Although we intend to rely on
third-party contract manufacturers, we are ultimately responsible for ensuring that our products are manufactured in
accordance with cGMP.

Any manufacturing problem, natural disaster affecting manufacturing facilities, or
the loss of a contract
manufacturer could be disruptive to our operations and result in lost sales. Additionally, we will be reliant on third
parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may
involve several risks, including a potential inability to obtain critical materials and reduced control over production
costs, delivery schedules, reliability and quality. Any unanticipated disruption to future contract manufacture caused
by problems at suppliers could delay shipment of products, increase our cost of goods sold and result in lost sales. If
our suppliers were to be unable to supply us with adequate supply of our drug candidates, it could have a material
adverse effect on our ability to commercialize our drug candidates.

We may not be able to sufficiently scale-up manufacturing of our drug candidates.

To date, our drug candidates have been manufactured in small quantities for pre-clinical studies and clinical trials. In
order to conduct larger trials for a drug candidate and for commercialization of the resulting drug product if that
drug candidate is approved for sale, we will need to manufacture in larger quantities. We may not be able to
successfully increase the manufacturing capacity for any of our drug candidates, whether in collaboration with third-
party manufacturers or on our own, in a timely or cost-effective manner or at all. If a contract manufacturer makes
improvements in the manufacturing process for our drug candidates, we may not own, or may have to share, the
intellectual property rights to those improvements. Significant scale-up of manufacturing may require additional

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

We may encounter difficulties in managing our growth, which would adversely affect our results of operations.

If we are successful in obtaining approval to commercialize Firdapse(cid:140) or any of our other drug candidates, we will
need to significantly expand our operations, which could put significant strain on our management and our
operational and financial resources. We currently have twelve employees and conduct much of our operations
through outsourcing arrangements. To manage future growth, we will need to hire, train, and manage additional
employees. Concurrent with expanding our operational and marketing capabilities, we will also need to increase our
product development activities. We may not be able to support, financially or otherwise, future growth, or hire, train,
motivate, and manage the required personnel. Our failure to manage growth effectively could limit our ability to
achieve our goals.

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

Pressure on drug product third-party payor coverage, reimbursement and pricing may impair our ability to be
reimbursed for any of our drug candidates which we commercialize in the future at prices or on terms sufficient
to provide a viable financial outcome.

Market acceptance and sales of Firdapse(cid:140) or any other drug candidates we develop will depend in large part on
third party payor coverage and reimbursement policies and may be affected by future healthcare reform measures in
the U.S. and other jurisdictions where we may offer our products. The continuing efforts of governmental and third-
party payors to contain, reduce or shift the costs of healthcare through various means, including an increased
emphasis on managed care and attempts to limit or regulate the price of medical products and services, particularly
for new and innovative products and therapies, may result in downward pressure on product pricing, reimbursement
and utilization, which may adversely affect our product sales and results from operations. These pressures can arise
from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related
to Medicare, Medicaid and healthcare reform, drug coverage and reimbursement policies and pricing in general.
Moreover, private health insurers and other third-party payors in the U.S. often follow the coverage and
reimbursement policies of government payors, including the Medicare or Medicaid programs. In the U.S., third-
party payors are shifting their cost containment measures to specialty products and high-cost drugs may be a target
of such measures. All of these factors may significantly affect our income and ability to be reimbursed by third-party
payors for Firdapse(cid:140) and any other drug candidate we may develop in the future.

Because the target patient population for Firdapse(cid:140) and our other drug candidates are small, we must achieve
significant market share and obtain relatively high per-patient prices for our products to achieve meaningful
gross margins.

Firdapse(cid:140) and our clinical development of our other orphan drug candidates target diseases with small patient
populations. A key component of the successful commercialization of a drug product for these indications includes
identification of patients and a targeted prescriber base for the drug product. Due to small patient populations, we
believe that we would need to have significant market penetration to achieve meaningful revenues and identifying

patients and targeting the prescriber base are key to achieving significant market penetration. In addition, the per-
patient prices at which we anticipate we may sell Firdapse(cid:140) will need to be relatively high in order for us to
generate an appropriate return for the investment in these product development programs and achieve meaningful
gross margins. There can be no assurance that we will be successful in achieving a sufficient degree of market
penetration and/or obtaining or maintaining high per-patient prices for Firdapse(cid:140) for diseases with small patient
Further, even if we obtain significant market share for Firdapse(cid:140), if approved, because the potential
populations.
target populations are very small, we may never achieve profitability despite obtaining such significant market
share. Furthermore, because the potential target populations are very small, even if we do obtain significant market
share for Firdapse(cid:140), we may never achieve profitability. Additionally, patients who discontinue therapy or do not
fill prescriptions are not easily replaced by new patients, given the limited patient population.

Our internal computer systems, or those of our contract research organization and other key vendors or
consultants, may fail or suffer security breaches, which could result in a material disruption of our product
development programs.

Our internal computer systems and those of our contract research organization and other key vendors and
consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war
and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our
operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data from
completed or ongoing clinical trials could result in delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a
loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information,
we could incur liability and the further development of our drug candidates could be delayed.

Our employees and consultants may engage in misconduct or other improper activities, including noncompliance
with regulatory standards and requirements.

We are exposed to the risk of employee or consultant fraud or other misconduct. Misconduct by our employees or
consultants could include intentional failures to comply with FDA regulations, provide accurate information to the
FDA, comply with manufacturing standards, comply with federal and state healthcare fraud and abuse laws and
regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular,
sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations
intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may
restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer
incentive programs and other business arrangements. Employee and consultant misconduct could also involve the
improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and
serious harm to our reputation. It is not always possible to identify and deter such misconduct, and the precautions
we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses
or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in
compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, including
the imposition of significant fines or other sanctions.

Risks Related to Government Regulation

We have not received regulatory approval in the United States or any foreign jurisdiction for the commercial sale
of any of our drug candidates. The regulatory approval process is lengthy, and we may not be able to obtain all of
the regulatory approvals required to manufacture and commercialize our drug candidates.

We do not currently have any products that have been approved for commercialization. We will not be able to
commercialize our products until we have obtained the requisite regulatory approvals from applicable governmental
authorities. To obtain regulatory approval of a drug candidate, we must demonstrate to the satisfaction of the
applicable regulatory agency that such drug candidate is safe and effective for its intended uses. The type and
magnitude of the testing required for regulatory approval varies depending on the drug candidate and the disease or
condition for which it is being developed. In addition, in the U.S. we must show that the facilities used to

manufacture our drug candidate are in compliance with Current Good Manufacturing Processes (cGMP). We will
also have to meet similar regulations in any foreign country where we may seek to commercialize our drug
candidates. In general, these requirements mandate that manufacturers follow elaborate design, testing, control,
documentation and other quality assurance procedures throughout the entire manufacturing process. The process of
obtaining regulatory approvals typically takes several years and requires the expenditure of substantial capital and
other resources. Despite the time, expense and resources invested by us in the approval process, we may not be able
to demonstrate that our drug candidates are safe and effective, in which event we would not receive the regulatory
approvals required to market them.

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

The FDA and other regulatory bodies must approve trade names for products. The FDA typically conducts a
thorough review of a proposed trade name, including an evaluation of potential confusion with other trade names.
We have recently submitted a request for FDA approval of the trade name Firdapse(cid:140), which request has been
conditionally approved.

If our pre-clinical studies or our clinical studies and trials are unsuccessful or significantly delayed, our ability to
commercialize our products will be impaired.

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

We recently announced positive results from our Phase 3 clinical trial for Firdapse(cid:140). However, Firdapse(cid:140) may
nevertheless fail to meet the safety and efficacy standards required by the FDA to obtain regulatory approval.

Additionally, future clinical trials for our drug candidates may not be successfully completed or may take longer
than anticipated because of any number of factors, including potential delays in the start of the trial, an inability to
recruit clinical trial participants at the expected rate, failure to demonstrate safety and efficacy, unforeseen safety
issues, or unforeseen governmental or regulatory delays. Further, our drug candidates may not be found to be safe
and effective, and may not be approved by regulatory authorities for the proposed indication. Further, regulatory
authorities and Institutional Review Boards (IRBs) that must approve and monitor the safety of each clinical study
may suspend a clinical study at any time if the patients participating in such study are deemed to be exposed to any
unacceptable health risk. We may also choose to suspend human clinical studies and trials if we become aware of
any such risks. We might encounter problems in our clinical trials, such as problems associated with Visual Field
Defects (VFDs) or other side effects that will cause us, regulatory authorities, or IRBs to delay or suspend such trial
or study.

In other countries where Firdapse(cid:140), CPP-115 or any other product we develop or license may be marketed, we will
also be subject to regulatory requirements governing human clinical studies, trials and marketing approval for drugs.
The requirements governing the conduct of clinical studies, trials, product licensing, pricing and reimbursement
varies widely from country to country.

We may face significant delays in our clinical studies and trials due to an inability to recruit patients for our
clinical studies and trials or to retain patients in the clinical studies and trials we may perform.

We may encounter difficulties in our current and future clinical studies and trials recruiting patients, particularly
since the conditions we are studying are rare conditions. We compete for study and trial subjects with others
conducting clinical trials testing other treatments for the indications we are studying for our drug candidates.
Further, unrelated third parties and investigators in the academic community have expressed interest in testing our

drug candidates. If these third-party tests are unsuccessful, or if they show significant health risk to the test subjects,
our development efforts may also be adversely affected.

If our third-party suppliers or contract manufacturers do not maintain appropriate standards of manufacturing
in accordance with cGMP and other manufacturing regulations, our development and commercialization
activities could suffer significant interruptions or delays.

We rely, and intend to continue to rely, on third-party suppliers and contract manufacturers to provide us with
materials for our clinical trials and commercial-scale production of our products. These suppliers and manufacturers
must continuously adhere to cGMP as well as any applicable corresponding manufacturing regulations outside of the
U.S. In complying with these regulations, we and our third-party suppliers and contract manufacturers must expend
significant time, money and effort in the areas of design and development, testing, production, record-keeping and
quality control to assure that our products meet applicable specifications and other regulatory requirements. Failure
to comply with these requirements could result in an enforcement action against us, including warning letters, the
seizure of products, suspension or withdrawal of approvals, shutting down of production and criminal prosecution.
Any of these third-party suppliers or contract manufacturers will also be subject to inspections by the FDA and other
regulatory agencies. If any of our third-party suppliers or contract manufacturers fail to comply with cGMP or other
applicable manufacturing regulations, our ability to develop and commercialize our products could suffer significant
interruptions and delays.

Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product
ourselves, including:

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reliance on the third party for regulatory compliance and quality assurance;

reliance on the continued financial viability of the third parties;

limitations on supply availability resulting from capacity and scheduling constraints of the third parties;

impact on our reputation in the marketplace if manufacturers of our products, once commercialized, fail to
meet the demands of our customers;

the possible breach of the manufacturing agreement by the third party because of factors beyond our
control; and

the possible termination or nonrenewal of the agreement by the third party, based on its own business
priorities, at a time that is costly or inconvenient for us.

If any of our contract manufacturers fail to achieve and maintain appropriate manufacturing standards, patients using
our drug candidates could be injured or die, resulting in product liability claims. Even absent patient injury, we may
be subject to product recalls, product seizures or withdrawals, delays or failures in testing or delivery, cost overruns
or other problems that could seriously harm our business or profitability.

If we rely on a sole source of supply to manufacture our products we could be impacted by the viability of our
supplier.

We intend to attempt to source our products from more than one supplier. We also intend to enter into contracts with
any supplier of our products to contractually obligate them to meet our requirements. However, if we are reliant on a
single supplier and that supplier cannot or will not meet our requirements (for whatever reason), our business could
be adversely impacted.

Even if we obtain regulatory approvals, our drug candidates will be subject to ongoing regulatory review. If we
fail to comply with continuing U.S. and applicable foreign regulations, we could lose those approvals, and our
business would be severely harmed.

Even if we receive regulatory approval of any drugs we are developing or may develop, we will be subject to
continuing regulatory review, including the review of clinical results which are reported after our drug candidates
become commercially available approved drugs. As greater numbers of patients use a drug following its approval,
side effects and other problems may be observed after approval that were not seen or anticipated during preapproval
clinical studies and trials. In addition, the manufacturer, and the manufacturing facilities we use to make any
approved drugs, will also be subject to periodic review and inspection by the FDA. The subsequent discovery of
previously unknown problems with the drug, manufacturer or facility may result in restrictions on the drug,
manufacturer or facility, including withdrawal of the drug from the market. If we fail to comply with applicable
continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval,
product recalls and seizures, operating restrictions and criminal prosecutions.

As a condition of NDA approval for some of our products, the FDA might require a Risk Evaluation and Mitigation
Strategy (REMS) to help ensure that the benefits of the drug outweigh the potential risks. REMS can include
medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU.
ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing
only under certain circumstances, special monitoring, and the use of patient registries. For example, approved
versions of vigabatrin, the active moiety in our CPP-109 product (which operates by the same mechanism of action
as our CPP-115 product) were approved with an FDA-mandated REMS program due to the risks of visual field
damage and are only available through a special restricted distribution program approved by the FDA. If any of our
products were to be approved with a REMS, the potential market and profitability of the drug could be materially
affected.

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

Enacted and future legislation may increase the difficulty and cost for us to commercialize Firdapse(cid:140) or any
other drug candidate we develop and affect the prices we may obtain.

In the U.S., there have been a number of legislative and regulatory changes and proposed changes relating to the
healthcare system that restrict or regulate post-approval activities, which may affect our ability to profitably sell
Firdapse(cid:140) or any other drug candidate for which we obtain marketing approval.

The Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, changed the way Medicare
covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for outpatient drug
purchases by those covered by Medicare under a new Part D and introduced a new reimbursement methodology
In addition, this legislation
based on average sales prices for Medicare Part B physician-administered drugs.
authorized Medicare Part D prescription drug plans to use formularies whereby they can limit the number of drugs
that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of

drug products, there is additional pressure to contain and reduce costs. While the MMA applies only to drug
benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations
in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result
in a similar reduction in payments from private payors. These cost reduction initiatives and other provisions of the
MMA could decrease the coverage and reimbursement that we receive for any approved products, and could
seriously harm our business. Manufacturers' contributions to this area, including donut hole coverage (as described
below) or potential excise taxes, are increasing and are subject to additional changes in the future.

In 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health
Care and Education Reconciliation Act of 2010 (together, the "Health Care Reform Law"), a sweeping law intended
to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies
against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose
new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform
Law, among other things, revised the definition of AMP for reporting purposes, which could increase the amount of
Medicaid drug rebates to states and extended the rebate program to beneficiaries enrolled in Medicaid managed care
organizations. The Health Care Reform Law also imposed a significant annual fee on companies that manufacture
or import branded prescription drug products and established an annual non-deductible fee on entities that sell
branded prescription drugs or biologics to specified government programs in the U.S. The Health Care Reform Law
also expanded the 340B drug discount program (excluding orphan drugs), including the creation of new penalties for
non-compliance and included a 50% discount on brand name drugs for Medicare Part D participants in the coverage
gap, or "donut hole." The Health Care Reform Law includes a provision to increase the Medicaid rebate for line
extensions or reformulated drugs, which depending on how this provision is implemented could substantially
increase our Medicaid rebate rate (in effect limiting reimbursement for these patients). These and other new
provisions are likely to continue the pressure on pharmaceutical pricing, may require us to modify our business
practices with healthcare practitioners, and may also increase our regulatory burdens and operating costs.

Legislative and regulatory proposals also have been made to expand post-approval requirements and restrict sales
and promotional activities for pharmaceutical products. In addition, increased scrutiny by the U.S. Congress of the
FDA's approval process may subject us to more stringent product labeling and post-marketing testing and other
requirements. Delays in feedback from the FDA may affect our ability to quickly update or adjust our label in the
interest of patient adherence and tolerability. We cannot predict whether other legislative changes will be adopted or
how such changes would affect the pharmaceutical industry generally and specifically the commercialization of
Firdapse(cid:140).

If we fail to obtain or subsequently maintain orphan drug exclusivity or regulatory exclusivity for Firdapse(cid:140) and
our other orphan drug candidates, our competitors may sell products to treat the same conditions at greatly
reduced prices, and our revenues would be significantly affected.

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

In the EU, the EMA's Committee for Orphan Medicinal Products, or COMP, grants orphan drug designation to
promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening
or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU Community and for
which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or the product would be a
significant benefit to those affected). Additionally, designation is granted for products intended for the diagnosis,
prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when,
without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary
investment in developing the medicinal product. An EU orphan drug designation entitles a party to financial
incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following medicinal
product approval. This period may be reduced to six years if the orphan drug designation criteria are no longer met,
including where it is shown that the product is sufficiently profitable not to justify maintenance of market

exclusivity. Orphan drug designation must be requested before submitting an application for marketing approval.
Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and
approval process.

Because the extent and scope of patent protection for some of our drug products may be particularly limited, orphan
drug designation is especially important for our products that are eligible for orphan drug designation. For eligible
drugs, we plan to rely on the orphan exclusivity period to maintain a competitive position. However, if we do not
obtain orphan drug exclusivity for our drug candidates or we cannot maintain orphan exclusivity for our drug
candidates, our competitors may then sell the same drug to treat the same condition and our revenues will be
reduced. Also, without strong patent protection, competitors may sell a generic version upon the expiration of
orphan exclusivity, if our patent position is not upheld.

Even if we obtain orphan drug designation for our future drug candidates, we may not fulfill the criteria for
exclusivity or we may not be the first to obtain marketing approval for any orphan indication. Further, even if we
obtain orphan drug exclusivity for a particular product, that exclusivity may not effectively protect the product from
competition because different drugs can be approved for the same condition. Even after an orphan drug is approved,
the FDA can subsequently approve a drug for the same condition if the FDA concludes that the later drug is safer,
more effective or makes a major contribution to patient care. The FDA can discontinue Orphan Drug exclusivity
after it has been granted if the orphan drug cannot be manufactured in sufficient quantities to meet demand.

Breakthrough Therapy Designation may not actually lead to a faster review process.

Under the Prescription Drug User Fee Act, the FDA has a goal of responding to NDAs for new molecular entities
within 10 months of the date that the FDA files the NDA for standard review, but this timeframe is also often
extended. We have in the past and we may in the future, seek approval of our drug candidates under programs
designed to accelerate the FDA's review and approval of NDAs. For example, the Food and Drug Administration
Safety and Innovation Act, or FDASIA, which was enacted and signed into law in 2012, established a new category
of drugs referred to as "breakthrough therapies," which are defined as drugs intended, alone or in combination with
one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence
indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically
significant endpoints, such as substantial treatment effects observed early in clinical development.
In our case,
Firdapse(cid:140) has been granted "breakthrough therapy designation" for the treatment of LEMS. In the future, we may
request breakthrough designation or fast track designation from the FDA for our other drug candidates or for
treatment of other diseases, but we cannot assure that we will obtain such designations. Moreover, even if we obtain
breakthrough designation or fast track designation from the FDA, the designations do not guarantee FDA approval
of our NDA, that the development program or review timeline will ultimately be shorter than if we had not obtained
the designations, or that the FDA will not request additional information, including requesting additional clinical
studies (although potentially a post-marketing requirement), during its review. Any request for additional
information or clinical data could delay the FDA's timely review of our NDA.

Risks Related to Our Intellectual Property

We are dependent on our relationship and license agreements, and we rely upon the patent rights granted to us
pursuant to the license agreements.

All of our patent rights for Firdapse(cid:140) are derived from our license agreement with BioMarin. Pursuant to this
license agreement, we have licensed rights under BioMarin’s Firdapse(cid:140) patent applications in the United States,
which expire in 2022 and 2034. We may lose our rights to these patents and patent applications if we breach our
obligations under the license agreement, including, without limitation, our financial obligations to BioMarin. If we
violate or fail to perform any term or covenant of the license agreement, BioMarin may terminate the license
agreement upon satisfaction of any applicable notice requirements and expiration of any applicable cure periods.
Additionally, any termination of the license agreement, whether by us or by BioMarin, will not relieve us of our
obligation to pay any license fees owing at the time of such termination. If we fail to retain our rights under the
license agreement, we would not be able to commercialize Firdapse(cid:140), and our business, results of operations,
financial condition and prospects would be materially adversely affected.

Most of our patent rights for CPP-115 are derived from our license agreement with Northwestern University.
Pursuant to this license agreement, we have exclusive worldwide rights to two patents in the United States. These
were filed and obtained by Northwestern relating to compositions of matter for a class of molecules, including CPP-
115. Both patents expire in 2023. Additionally, we have licensed rights from Northwestern to a pending patent for
derivatives of vigabatrin that are unrelated to CPP-115. These rights are subject to the right of Northwestern, under
limited circumstances, to practice the covered inventions for or on its own behalf for research. We may lose our
rights to these patents and patent applications if we breach our obligations under the license agreement, including,
without limitation, our financial obligations, including milestone payments, to Northwestern. If we violate or fail to
perform any term or covenant of the license agreement, Northwestern may terminate the license agreement upon
satisfaction of any applicable notice requirements and expiration of any applicable cure periods. Additionally, any
termination of the license agreement, whether by us or by Northwestern, will not relieve us of our obligation to pay
any license fees owing at the time of such termination. If we fail to retain our rights under the license agreement, we
would not be able to commercialize CPP-115, and our business, results of operations, financial condition and
prospects would be materially adversely affected.

If we obtain approval to market Firdapse(cid:140) or CPP-115, our commercial success will depend in large part on our
ability to use patents, especially those licensed to us by BioMarin and Northwestern, respectively, to exclude others
from competing with us. The patent position of emerging pharmaceutical companies like us can be highly uncertain
and involve complex legal and technical issues. Until our licensed patents are interpreted by a court, either because
we have sought to enforce them against a competitor or because a competitor has preemptively challenged them, we
will not know the breadth of protection that they will afford us. Our patents may not contain claims sufficiently
broad to prevent others from practicing our technologies or marketing competing products. Third parties may
intentionally attempt to design around our patents or design around our patents so as to compete with us without
infringing our patents. Moreover, the issuance of a patent is not conclusive as to its validity or enforceability, and so
our patents may be invalidated or rendered unenforceable if challenged by others.

As a result of the foregoing factors, we cannot be certain how much protection from competition patent rights will
provide us.

Our success will depend significantly on our ability to operate without
proprietary rights of third parties.

infringing the patents and other

While we are not currently aware of any third-party patents which we may infringe, there can be no assurance that
we do not or will not infringe on patents held by third parties or that third parties will not claim that we have
infringed on their patents. In the event that our technologies infringe or violate the patent or other proprietary rights
of third parties, we may be prevented from pursuing product development, manufacturing or commercialization of
our products that utilize such technologies. There may be patents held by others of which we are unaware that
contain claims that our products or operations infringe. In addition, given the complexities and uncertainties of
patent laws, there may be patents of which we are aware that we may ultimately be held to infringe, particularly if
the claims of the patent are determined to be broader than we believe them to be. Adding to this uncertainty, in the
U.S., patent applications filed in recent years are confidential for 18 months, while older applications are not
publicly available until the patent issues. As a result, avoiding patent infringement may be difficult.

If a third party claims that we infringe its patents, any of the following may occur:

(cid:120) we may be required to pay substantial financial damages if a court decides that our technologies infringe a
competitor’s patent, which can be tripled if the infringement
is deemed willful, or be required to
discontinue or significantly delay development, marketing, selling and licensing of the affected products
and intellectual property rights;

(cid:120)

a court may prohibit us from selling or licensing our product without a license from the patent holder,
which may not be available on commercially acceptable terms or at all, or which may require us to pay
substantial royalties or grant cross-licenses to our patents; and

(cid:120) we may have to redesign our product so that it does not infringe others’ patent rights, which may not be

possible or could require substantial funds or time and require additional studies.

In addition, employees, consultants, contractors and others may use the proprietary information of others in their
work for us or disclose our proprietary information to others. As an example, we do not currently have written
agreements regarding confidentiality or any other matters with several principal members of our Scientific Advisory
Board. If our employees, consultants, contractors or others disclose our data to others or use data belonging to others
in connection with our business, it could lead to disputes over the ownership of inventions derived from that
information or expose us to potential damages or other penalties.

The occurrence of any of these events could have a material adverse effect on our business, financial condition,
results of operations or prospects.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other
intellectual property rights.

There is substantial history of litigation and other proceedings regarding patent and intellectual property rights in the
pharmaceutical industry. We may be forced to defend claims of infringement brought by our competitors and others,
and we may institute litigation against others who we believe are infringing our intellectual property rights. The
outcome of intellectual property litigation is subject to substantial uncertainties and may, for example, turn on the
interpretation of claim language by the court, which may not be to our advantage, or on the testimony of experts as
to technical facts upon which experts may reasonably disagree.

Under our license agreements, we have the right to bring legal action against any alleged infringers of the patents we
license. However, we are responsible for all costs relating to such potential litigation. We have the right to any
proceeds received as a result of such litigation, but, even if we are successful in such litigation, there is no assurance
we would be awarded any monetary damages.

Our involvement in intellectual property litigation could result in significant expense to us. Some of our competitors
have considerable resources available to them and a strong economic incentive to undertake substantial efforts to
stop or delay us from commercializing products. Moreover, regardless of the outcome,
intellectual property
litigation against or by us could significantly disrupt our development and commercialization efforts, divert our
management’s attention and quickly consume our financial resources.

In addition, if third parties file patent applications or issue patents claiming technology that is also claimed by us in
pending applications, we may be required to participate in interference proceedings with the U.S. Patent Office or in
other proceedings outside the U.S., including oppositions, to determine priority of invention or patentability. Even if
we are successful in these proceedings, we may incur substantial costs, and the time and attention of our
management and scientific personnel will be diverted from product development or other more productive matters.

Risks Related to Our Common Stock

The trading price of the shares of our common stock has been and could in the future be highly volatile.

The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future. Market
prices for biopharmaceutical companies have historically been particularly volatile. Some of the factors that may
cause the market price of our common stock to fluctuate include:

(cid:120)

developments concerning our clinical studies and trials and our pre-clinical studies;

announcements of product development successes and failures by us or our competitors;

new products introduced or announced by us or our competitors;

adverse changes in the abilities of our third party manufacturers to provide drug or product in a timely
manner or to meet FDA requirements;

changes in reimbursement levels;

(cid:120)

changes in financial estimates by securities analysts;

actual or anticipated variations in operating results;

expiration or termination of licenses (particularly our licenses from BioMarin and Northwestern), research
contracts or other collaboration agreements;

conditions or trends in the regulatory climate and the biotechnology and pharmaceutical industries;

intellectual property, product liability or other litigation against us;

changes in the market valuations of similar companies;

changes in pharmaceutical company regulations or reimbursements as a result of healthcare reform or other
legislation;

changes in economic conditions; and

sales of shares of our common stock, particularly sales by our officers, directors and significant
stockholders, or the perception that such sales may occur.

In addition, equity markets in general, and the market for emerging pharmaceutical and life sciences companies in
particular, have experienced substantial price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of companies traded in those markets. Further, changes in economic
conditions in the United States, Europe or globally could impact our ability to grow profitably. Adverse economic
changes are outside our control and may result in material adverse impacts on our business or financial results.
These broad market and industry factors may materially affect the market price of our shares, regardless of our own
development and operating performance. In the past, following periods of volatility in the market price of a
company’s securities, securities class-action litigation has often been instituted against that company. Such litigation
could cause us to incur substantial costs and divert management’s attention and resources, which could have a
material adverse effect on our business, financial condition and results of operations.

Delaware law and our certificate of incorporation and by-laws contain provisions that could delay and
discourage takeover attempts that stockholders may consider favorable.

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

(cid:120)

the ability of our Board of Directors to issue preferred stock with voting or other rights or preferences;

limitations on the ability of stockholders to amend our charter documents,
supermajority voting requirements;

including stockholder

the inability of stockholders to act by written consent or to call special meetings;

requirements that special meetings of our stockholders may only be called by the Board of Directors; and

advance notice procedures our stockholders must comply with in order to nominate candidates for election
to our Board of Directors or to place stockholders’ proposals on the agenda for consideration at meetings of
stockholders.

On September 20, 2011, our Board of Directors approved the adoption of a stockholder rights plan. The rights plan
was implemented through our entry into a rights agreement with Continental Stock Transfer & Trust Company, as

rights agent, and the declaration of a non-taxable dividend distribution of one preferred stock purchase right (each, a
Right) for each outstanding share of our common stock. The dividend was paid on October 7, 2011 to holders of
record as of that date. Each right is attached to and trades with the associated share of common stock. The rights will
become exercisable only if a person acquires beneficial ownership of 17.5% or more of our common stock (or, in the
case of a person who beneficially owned 17.5% or more of our common stock on the date the rights plan was
adopted, such person acquires beneficial ownership of any additional shares of our common stock) or after the date
of the Rights Agreement, commences a tender offer that, if consummated, would result in beneficial ownership by a
person of 17.5% or more of our common stock. The rights will expire on September 20, 2016, unless the rights are
earlier redeemed or exchanged.

The intent of the stockholder rights plan is to protect our stockholders’ interests by encouraging anyone seeking
control of our company to negotiate with our board of directors. However, our stockholder rights plan could make it
more difficult for a third party to acquire us without the consent of our board of directors, even if doing so may be
beneficial to our stockholders. This plan may discourage, delay or prevent a tender offer or takeover attempt,
including offers or attempts that could result in a premium over the market price of our common stock. This plan
could reduce the price that stockholders might be willing to pay for shares of our common stock in the future.
Furthermore, the anti-takeover provisions of our stockholder rights plan may entrench management and make it
more difficult to replace management even if the stockholders consider it beneficial to do so.

In addition, Section 203 of the Delaware General Corporation Law generally prohibits us from engaging in a
business combination with any person who owns 15% or more of our common stock for a period of three years from
the date such person acquired such common stock, unless board or stockholder approval is obtained. These
provisions could make it difficult for a third party to acquire us, or for members of our Board of Directors to be
replaced, even if doing so would be beneficial to our stockholders.

Any delay or prevention of a change of control transaction or changes in our Board of Directors or management
could deter potential acquirors or prevent the completion of a transaction in which our stockholders could receive a
substantial premium over the then current market price for their shares.

Future sales of our common stock may cause our stock price to decline.

As of March 10, 2015, we had 81,444,849 shares of our common stock outstanding, of which 5,488,492 shares were
held by our officers and directors. We also had outstanding: (i) common stock purchase warrants to purchase an
aggregate of 3,433,750 additional shares of our common stock at exercise prices ranging from $1.04 to $2.08 per
share, (ii) stock options to purchase an aggregate of 3,170,000 shares at exercise prices ranging from $0.47 to $3.35
per share (1,883,333 of which are currently exercisable), and 80,000 restricted stock units that are subject to vesting.
Sales of restricted shares or shares underlying stock options and common stock purchase warrants, or the perception
in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our
common stock.

Our Board of Directors has the ability to issue “blank check” preferred stock.

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of “blank check” preferred stock,
with such designation rights and preferences as may be determined from time to time by our Board of Directors. Our
board of directors is empowered, without stockholder approval, to issue shares of preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the
holders of our common stock. In the event of such issuances, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in control of our company, pursuant to
our stockholder rights plan. Although we have no present intention to issue any shares of our preferred stock, there
can be no assurance that we will not do so in the future.

We do not intend to pay cash dividends on our common stock in the foreseeable future.

We have never declared or paid any cash dividends on our common stock or other securities, and we currently do
not anticipate paying any cash dividends in the foreseeable future. Accordingly, investors should not invest in our

common stock if they require dividend income. Our stockholders will not realize a return on their investment unless
the trading price of our common stock appreciates, which is uncertain and unpredictable.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

We currently operate our business in leased office space in Coral Gables, Florida. We currently lease approximately
2,600 square feet of space for which we pay annual rent of approximately $96,000.

Item 3.

Legal Proceedings

In October 2013 and November 2013, three securities class action lawsuits were filed against us and certain of our
executive officers and directors seeking unspecified damages in the U.S. District Court for the Southern District of
Florida (the Court). These complaints, which were substantially identical, purported to state a claim for violation of
federal securities laws on behalf of a class of those who purchased our common stock between October 31, 2012 and
October 18, 2013. Two of the cases were voluntarily dismissed by the plaintiffs and the Court granted the
Company’s motion to dismiss on the third case on January 3, 2014. However, the Court granted leave to the
plaintiffs to file an amended complaint within 20 days.

On January 23, 2014, the plaintiffs filed an amended complaint against us and one of our executive officers seeking
unspecified damages. The amended complaint purports to state a claim for alleged misrepresentations regarding the
development of Firdapse(cid:140) on behalf of a class of those who purchased shares of our common stock between
August 27, 2013 and October 18, 2013.
In February 2014, we filed a motion to dismiss the amended complaint,
which was granted in part and denied in part by the Court. Subsequently, on September 29, 2014, the Court certified
a class consisting of all persons or entities that purchased shares of our common stock during the period from
August 27, 2013, through October 18, 2013 (the Class Period), and who did not sell such securities prior to October
18, 2013 (excluding: defendants; any entities affiliated with us, our present and former officers and directors or any
legal
subsidiary or affiliate thereof; members of such excluded persons’
representatives, heirs, successors or assigns; and any entity in which any excluded person has or had a controlling
interest).

immediate families and their

Following a mediation in mid-October 2014 conducted by an independent mediator, we entered into a memorandum
of understanding (MOU) with the lead plaintiffs in the class action lawsuit to settle the lawsuit. The settlement was
then reduced to a formal stipulation of settlement between the parties to the lawsuit, which was filed with the Court
on November 21, 2014. The settlement was preliminarily approved by the Court on December 3, 2014, and a final
hearing to determine the fairness of the settlement is currently scheduled for March 16, 2015.

In connection with the settlement, we will pay $3.5 million in return for a dismissal and release of all claims against
the defendants. The settlement amount has been placed in escrow by our insurance carrier, subject to final Court
approval of the settlement. Under the proposed settlement, the defendants, and various of their related persons and
entities, will receive a full release of all claims that were or could have been brought in the action, as well as all
claims that arise out of, are based upon, or relate to the allegations, transactions, facts, representations, omissions or
other matters involved in the action related in any way to the purchase or acquisition of our securities by class
members during the class period.

The proposed settlement contains no admission of any liability or wrongdoing on the part of the defendants, each of
whom continues to deny all of the allegations against each of them and believes that the claims are without merit.
Because the full amount of the proposed settlement payment is to be paid by our insurance carrier, the settlement is
not expected to have a material adverse effect on our financial position or results of operations. There can be no
assurance that the proposed settlement will be approved by the Court.

From time to time we may become involved in legal proceedings arising in the ordinary course of business. We
believe that there is no litigation pending at this time that could have, individually or in the aggregate, a material
adverse effect on our results of operations, financial condition or cash flows.

Item 4.

Mine Safety Disclosure

Not applicable.

PART II

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities

Market Information

Our common stock trades on the Nasdaq Capital Market under the symbol "CPRX." The following table sets forth
the high and low closing sales prices per share of our common stock as reported on the Nasdaq Capital Market for
the periods indicated.

Year Ended December 31, 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Year Ended December 31, 2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Year ended December 31, 2015
First Quarter (through March 10, 2015)

High

$0.59
$1.07
$3.23
$3.39

$2.39
$2.61
$3.42
$3.03

$4.23

Low

$0.43
$0.45
$0.87
$1.32

$1.78
$1.73
$2.17
$2.37

$2.74

The closing sale price for the common stock on March 10, 2015 was $4.13. As of March 10, 2015, there were 42
holders of record of our common stock, which includes custodians who hold our securities for the benefit of others.
We estimate that there are approximately 10,000 beneficial holders of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available
funds and any future earnings to support operations and finance the growth and development of our business and do
not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related
to our dividend policy will be made at the discretion of our Board of Directors.

Performance Graph

The graph below matches Catalyst Pharmaceutical Partners, Inc.'s cumulative 5-Year total shareholder return on
common stock with the cumulative total returns of the NASDAQ Composite index, the Russell MicroCap index, and
the NASDAQ Biotechnology index. The graph tracks the performance of a $100 investment in our common stock
and in each index (with the reinvestment of all dividends) from 12/31/2009 to 12/31/2014.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Catalyst Pharmaceutical Partners, Inc., the NASDAQ Composite Index,
the Russell MicroCap Index, and the NASDAQ Biotechnology Index

$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0

12/09

12/10

12/11

12/12

12/13

12/14

Catalyst Pharmaceutical Partners, Inc.

NASDAQ Composite

Russell MicroCap

NASDAQ Biotechnology

*$100 invested on 12/31/09 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

12/09

12/10

12/11

12/12

12/13

12/14

Catalyst Pharmaceutical Partners, Inc.
NASDAQ Composite
Russell MicroCap
NASDAQ Biotechnology

100.00
100.00
100.00
100.00

157.14
117.61
128.89
106.73

204.76
118.70
116.93
122.40

69.05
139.00
140.02
166.72

309.52
196.83
203.90
286.55

471.43
223.74
211.34
379.71

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Item 6. Selected Financial Data

The selected statement of operations data for the years ended December 31, 2014, 2013, 2012, and the balance sheet
data as of December 31, 2014 and 2013, have been derived from our audited financial statements included elsewhere
in this Form 10-K. The selected statement of operations data for the years ended December 31, 2011 and 2010 and
the selected balance sheet data at December 31, 2012, 2011 and 2010 have been derived from financial statements
that are not included in this Form 10-K. Historical results are not necessarily indicative of future results. This
selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our financial statements and related notes included elsewhere in this Form
10-K.

Year Ended December 31,

Statement of Operations Data:

2014

2013

2012

2011

2010

Revenues – government grant

488,958

Operating costs and expenses:
Research and development
General and administrative

10,117,774
4,473,654

8,096,774
2,214,884

2,659,597
2,561,543

3,383,965
2,698,174

2,306,781
2,206,358

Total operating cost and expenses

14,591,428

10,311,658

5,221,140

6,082,139

4,513,139

Loss from operations

(14,591,428)

(10,311,658)

(5,221,140)

(6,082,139)

(4,024,181)

Other income, net
Change in fair value of
warrants liability

76,233

47,421

14,976

10,985

17,858

(993,866)

(1,890,359)

1,129,778

(319,908)

Loss before income taxes
Provision for income taxes

(15,509,061)
--

(12,154,596)
--

(4,076,386)

(6,391,062)

(4,006,323)

Net loss

$ (15,509,061)

$(12,154,596)

$ (4,076,386)

$ (6,391,062)

$ (4,006,323)

Net loss per share —basic

and diluted

Weighted average shares

(0.24)

(0.27)

(0.14)

(0.29)

(0.22)

outstanding —basic and diluted

64,142,534

45,452,447

30,033,108

21,728,292

18,580,223

Balance Sheet Data:

2014

2013

2012

2011

2010

As of December 31,

Cash and cash equivalents, certificates of
deposit and short-term investments

Working capital
Total assets
Warrants liability
Total liabilities
Stockholders' equity

$39,275,123
37,972,795
43,908,086
2,794,891
8,665,756
35,242,330

$23,710,596
23,180,429
25,369,554
1,819,562
3,978,302
21,391,252

$15,417,208
15,080,013
16,789,245
498,587
2,167,130
14,622,115

$6,029,067
5,394,382
6,249,257
1,645,240
2,488,559
3,760,698

$5,475,158
5,476,443
5,831,488

--
313,709
5,517,779

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with "Selected Financial Data" and our financial statements and related notes appearing elsewhere in
this Form 10-K.
In addition to historical information, this discussion and analysis contains forward-looking
statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set
forth under the caption "Risk Factors" in Item 1A of this Form 10-K.

Introduction

Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to
provide an understanding of our financial condition, changes in financial condition and results of operations. The
discussion and analysis is organized as follows:

(cid:120) Overview. This section provides a general description of our business and information about our business

that we believe is important in understanding our financial condition and results of operations.

(cid:120)

Basis of Presentation. This section provides information about key accounting estimates and policies that
we followed in preparing our financial statements for the 2014 fiscal year.

Critical Accounting Policies and Estimates. This section discusses those accounting policies that are both
considered important to our financial condition and results of operations, and require significant judgment
and estimates on the part of management in their application. All of our significant accounting policies,
including the critical accounting policies, are also summarized in the notes to our accompanying financial
statements.

Results of Operations. This section provides an analysis of our results of operations for all three fiscal
years presented in the accompanying statements of operations.

Liquidity and Capital Resources. This section provides an analysis of our cash flows, capital resources,
off-balance sheet arrangements and our outstanding commitments, if any.

Caution Concerning Forward-Looking Statements. This section discusses how certain forward-looking
statements made throughout this MD&A and in other sections of this report are based on management's
present expectations about future events and are inherently susceptible to uncertainty and changes in
circumstance.

Overview

We are a biopharmaceutical company focused on developing and commercializing innovative therapies for people
with rare debilitating diseases. We currently have three drug candidates in development:

Firdapse(cid:140)

In October 2012, we licensed the North American rights to Firdapse(cid:140), a proprietary form of amifampridine
phosphate, or chemically known as 3,4-diaminopyridine phosphate, from BioMarin Pharmaceutical Inc.
(BioMarin). As part of our agreements with BioMarin, we took over the sponsorship of an ongoing Phase 3
clinical trial evaluating Firdapse(cid:140) for the treatment of Lambert-Eaton Myasthenic Syndrome, or LEMS, a rare
and sometimes fatal autoimmune disease characterized by muscle weakness. We also hope to evaluate
Firdapse(cid:140) for the treatment of other neuromuscular orphan indications such as certain forms of Congenital
Myasthenic Syndromes and Myasthenia Gravis (MuSK myasthenia gravis). In August 2013, we were granted
“breakthrough therapy designation” by the U.S. Food & Drug Administration (FDA) for Firdapse(cid:140) for the
treatment of LEMS and, in March 2015, we were granted orphan drug designation fo r Firdapse(cid:140) for the
treatment of patients with CMS.

The chemical entity 3,4-diaminopyridine (3,4-DAP) has never been approved by the FDA for any indication. If
we are the first pharmaceutical company to obtain approval for an amifampridine-based product, we will be
eligible to receive five years of marketing exclusivity with respect to the use of this product for any indication.
Further, because Firdapse(cid:140) for the treatment of LEMS has previously been granted Orphan Drug Designation
by the FDA, the product is also eligible to receive seven years of marketing exclusivity for this indication,
running concurrently with the five years of marketing exclusivity described above if both exclusivities are
granted.

The Phase 3 trial was designed as a double blind, randomized “withdrawal trial” in which all patients were
initially treated with Firdapse(cid:140) during a 91-day run-in period followed by treatment with either Firdapse(cid:140) or
placebo (randomly assigned, about 1:1) during a two-week randomization period. A total of 38 patients
completed the three month run-in period and subsequent two week randomization period. In a trial of this
design, the clinically significant findings, when present, are worsening of symptoms in the placebo group.

On September 29, 2014, we reported top-line results from this trial. A summary of the results is as follows:

(cid:120)

Primary endpoints:

(cid:120)

Secondary endpoints:

(cid:120)

Patient tolerance of Firdapse(cid:140):

o All subjects who were randomized into the trial elected to continue with Firdapse(cid:140) in the two

year safety follow-up phase of the trial.

During 2014, we established an expanded access program (EAP) to make Firdapse(cid:140) available to any patients
diagnosed with LEMS, Congenital Myasthenic Syndrome (CMS) or Downbeat Nystagmus in the United States
who meet the inclusion and exclusion criteria, with Firdapse(cid:140) being provided to patients for free until sometime
after NDA approval. We are working with various rare disease advocacy organizations to inform physicians and
patients as to the availability of the Firdapse(cid:140) EAP.

In January 2015, we met with the FDA to discuss our anticipated submission of an NDA for Firdapse(cid:140) for the
treatment of LEMS. Based on our discussions with the FDA, we believe that our Phase 3 clinical program will
provide acceptable support for submission of an NDA for Firdapse(cid:140) for LEMS. We currently expect to submit
an NDA for Firdapse(cid:140) during the third quarter of 2015. Although there can be no assurance, we anticipate that
under those circumstances we may obtain approval from the FDA of such NDA in the first half of 2016. If
approved on this timeline, we would hope to commercially launch Firdapse(cid:140) for the treatment of LEMS shortly
after its approval.

a Vice President of Patient Advocacy and Reimbursement and the recent hiring of several rare disease clinical
liaisons. We are currently working with several rare disease advocacy organizations to help increase awareness
of LEMS and CMS and to provide education for the physicians who treat these rare diseases and the patients
they treat. We anticipate developing a sales force of 15-20 representatives experienced in selling drugs that treat
rare diseases. This sales force will market Firdapse(cid:140) to the approximately 900 neuromuscular and oncology
specialists who we believe most often diagnosis and treat neuromuscular diseases such as LEMS and CMS.

CPP-115

We are currently developing CPP-115, a GABA aminotransferase inhibitor that, based on our pre-clinical
studies to date, we believe is a more potent form of vigabatrin, but may have fewer side effects (e.g., visual field
defects, or VFDs) than those associated with vigabatrin. We are hoping to develop CPP-115 for the treatment of
epilepsy (initially infantile spasms) and for the treatment of other selected neurological indications such as
complex partial seizures and Tourette Syndrome. CPP-115 has been granted Orphan Drug Designation by the
FDA for the treatment of infantile spasms and Orphan Medicinal Product Designation in the European Union,
or E.U., for West syndrome (a form of infantile spasms). We are currently evaluating CPP-115 in a Phase 1(b)
multi-dose safety and tolerance study. We expect to report the results of this study during the second quarter of
2015.

CPP-109

An academic investigator proof-of-concept study evaluating the use of CPP-109 (our formulation of vigabatrin,
another GABA aminotransferase inhibitor) for the treatment of Tourette Syndrome is currently ongoing and, if
the results of this study show evidence of reduced number of tics, we will likely seek to develop CPP-115
(which has the same mechanism of action as CPP-109) for this indication. Although we have provided drug and
financial support, we do not control this study and therefore have no control over the timing of its completion.
However, based on currently available information, we expect to have top-line results for this study during the
second quarter of 2015.

Capital Resources

Based on our current financial condition and forecasts of available cash, we believe that we have sufficient funding
to support our operations through the end of 2016. However, we will require additional funding to support our
operations beyond the end of 2016. There can be no assurance that we will obtain additional funding or that we will
ever be in a position to commercialize any of our product candidates. See "Liquidity and Capital Resources" below
for further information on our liquidity and cash flow.

Basis of presentation

Revenues – government grant

We are a development stage company and have no revenues from product sales to date. We will not have revenues
from product sales until such time as we receive approval of our product candidates, successfully commercialize our
products or enter into a licensing agreement which may include up-front licensing fees, of which there can be no
assurance.

Research and development expenses

Our research and development expenses consist of costs incurred for company-sponsored research and development
activities. The major components of research and development costs include pre-clinical study costs, clinical
manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, consulting, scientific
advisors and other third-party costs, salaries and employee benefits, stock-based compensation expense, supplies
and materials and allocations of various overhead costs related to our product development efforts. To date, all of
our research and development resources have been devoted to the development of CPP-109, CPP-115 and
Firdapse(cid:140), and we expect this to continue for the foreseeable future. Costs incurred in connection with research and
development activities are expensed as incurred.

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

Selling and marketing expenses

We do not currently have any selling expenses. During 2014, we have begun to incur costs relating to our future sales
and marketing efforts, as we move closer to the potential commercialization of Firdapse(cid:140). Our plan is to put in place
over the next year the personnel that will help us develop both a sales force and a patient advocacy and assistance
program so that we are in a position to commence our selling efforts immediately if we are successful in obtaining an
approval of any NDA that we may file for Firdapse(cid:140), of which there can be no assurance.

General and administrative expenses

Our general and administrative expenses consist primarily of salaries and personnel expenses for accounting,
corporate and administrative functions. Other costs include administrative facility costs, regulatory fees, and
professional fees for legal, information technology, accounting and consulting services.

Stock-based compensation

We recognize expense for the fair value of all stock-based awards to employees, directors, scientific advisors and
consultants in accordance with U.S. generally accepted accounting principles. For stock options we use the Black-
Scholes option valuation model in calculating the fair value of the awards.

Warrants Liability

We issued warrants to purchase shares of our common stock as part of the equity financing completed in October
2011.
In accordance with U.S. generally accepted accounting principles, we have recorded the fair value of the
warrants as a liability in the accompanying balance sheets at December 31, 2014 and 2013 using a Black-Scholes
option-pricing model. We remeasure the fair value of the warrants liability at each reporting date until the warrants
are exercised or have expired. Changes in the fair value of the warrants liability are reported in the statements of
operations as income or expense. The fair value of the warrants liability is subject to significant fluctuation based on
changes in the inputs to the Black-Scholes option-pricing model, including our common stock price, expected
volatility, expected term, the risk-free interest rate and dividend yield. The market price for our common stock has
been and may continue to be volatile. Consequently, future fluctuations in the price of our common stock may cause
significant increases or decreases in the fair value of the warrants.

Income taxes

We have incurred operating losses since inception. As of December 31, 2014 and 2013, we had net operating loss
carryforwards of approximately $40,604,000 and $30,675,000, respectively. Our net deferred tax asset has a 100%
valuation allowance as of December 31, 2014 and 2013, as we believe it is more likely than not that the deferred tax

asset will not be realized. The net operating loss carry-forwards will expire at various dates beginning 2025 through
2034. If an ownership change, as defined under Internal Revenue Code 382, occurs, the use of these carry-forwards
may be subject to limitations.

As required by ASC 740, Income Taxes, we recognize the financial statement benefit of a tax position only after
determining that the relevant tax authority would more likely than not sustain the position following an audit. For
tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the
largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority.

Recent Accounting Pronouncements

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915):Elimination of Certain
Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation. The amendments in this ASU include: i) eliminating the requirement to present inception-to-date
information on the statements of income, cash flows, and shareholders’ equity, ii) eliminating the need to label the
financial statements as those of a development stage entity, iii) eliminating the need to disclose a description of the
development stage activities in which the entity is engaged, and iv) eliminating the requirement to disclose in the
first year in which the entity is no longer a development stage entity that in prior years it had been in the
development stage. The amendments in ASU No. 2014-10 are effective for public companies for annual and interim
reporting periods beginning after December 15, 2014. Early adoption is permitted. The Company has early adopted
ASU No. 2014-10, beginning with the interim period ended June 30, 2014.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern
(Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.The
amendments in this ASU, require management to assess a company’s ability to continue as a going concern and to
provide related disclosures in certain circumstances. The guidance will be effective for the annual period ending
after December 15, 2016 and subsequent interim and annual periods thereafter. The Company is currently evaluating
the impact of this accounting standard update on its financial statements.

Non-GAAP Financial Measures

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

The non-GAAP financial measures that we often present exclude from the calculation of net loss the expense (or the
income) associated with the change in fair value of the liability-classified warrants. Further, we often report non-
GAAP net loss per share, which is calculated by dividing non-GAAP net loss by the weighted average common
shares outstanding.

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

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial
statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The
preparation of these financial statements requires us to make judgments, estimates, and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements, as well as the reported revenue and expenses during the reporting periods. We continually
evaluate our judgments, estimates and assumptions. We base our estimates on the terms of underlying agreements,
our expected course of development, historical experience and other factors we believe are reasonable based on the
circumstances, the results of which form our management’s basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The accounting policies described below are not intended to be a comprehensive list of all of our accounting
policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally
accepted accounting principles, or GAAP. There are also areas in which our management’s judgment in selecting
any available alternative would not produce a materially different result. Our financial statements and the notes
thereto included elsewhere in this report contain accounting policies and other disclosures as required by GAAP.

Pre-clinical study and clinical trial expenses

Research and development expenditures are charged to operations as incurred. Our expenses related to pre-clinical
and clinical trials are based on actual and estimated costs of the services received and efforts expended pursuant to
contracts with multiple research institutions and any CRO that conducts and manages our clinical trials. The
financial terms of these agreements are subject to negotiation and will vary from contract to contract and may result
in uneven payment flows. Generally, these agreements will set forth the scope of the work to be performed at a fixed
fee or unit price. Payments under these contracts will depend on factors such as the successful enrollment of patients
or the completion of clinical trial milestones. Expenses related to clinical trials generally are accrued based on
contracted amounts applied to the level of patient enrollment and activity according to the protocol. If timelines or
contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we would
be required to modify estimates accordingly on a prospective basis.

Warrants Liability

We have issued warrants to purchase our common stock that may require us to purchase unexercised warrants for a
cash amount equal to their fair value following the announcement of specified events defined as Fundamental
Transactions (Fundamental Transactions) involving the Company, which is deemed to occur if we are acquired in
an all cash transaction or by a company that is not listed on a national securities exchange, or when the common
stock is no longer listed on a national securities exchange. The cash settlement provisions require use of the Black-
Scholes model in calculating the cash payment value in the event of a Fundamental Transaction. As a consequence
of these provisions, the warrants are classified as a liability on our balance sheets. The cash settlement value at the
time of any future Fundamental Transaction will depend upon the value of the following inputs at that time: the
price per share of our common stock, the volatility of our common stock, the expected term of the warrants, the risk-
free interest rate based on U.S. Treasury security yields, and our dividend yield. The fair value of the warrants is
determined using a Black-Scholes model. The valuation of warrants is subjective and is affected by changes in
inputs to the valuation model including the price per share of our common stock, the historical volatility of our stock
price, risk-free rates based on U.S. Treasury security yields, the expected term of the warrants and our dividend
yield. Changes in these assumptions can materially affect the fair value estimate. We could ultimately incur amounts
to settle the warrant at a cash settlement value that is significantly different than the carrying value of the liability on
our financial statements. We will continue to classify the fair value of the warrants as a liability until the warrants
are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a
liability. Changes in the fair value of the common stock warrants liability are recognized as income or loss in the
changes in fair value of warrants liability line in the statement of operations.

Stock-based compensation

We recognize stock-based compensation for the fair value of all share-based payments, including grants of stock
options and restricted stock units. For stock options, we use the Black-Scholes option valuation model to determine
the fair value of stock options on the date of grant. This model derives the fair value of stock options based on
certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate and
dividend yield. Expected volatility is based on reviews of historical volatility of our common stock. The estimated
expected option life is based upon the simplified method. Under this method, the expected option life is presumed to
be the mid-point between the vesting date and the end of the contractual term. We will continue to use the simplified
method until we have sufficient historical exercise data to estimate the expected life of the options. The risk-free
interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the estimated expected life of
our stock options awards. For the years ended December 31, 2014, 2013 and 2012, the assumptions used were an
estimated annual volatility of 115%, 137% and 120% average expected holding periods of three to seven years, three
years and three to five years, and risk-free interest rates of 1.18% to 2.03%, 0.45% to 0.53% and 0.28% to 0.66%,
respectively.

Results of Operations

Years Ended December 31, 2014 and 2013

Revenues

We had no revenues for the year ended December 31, 2014 or 2013.

Research and Development Expenses

Year

2014
2013

Amount

Change from Prior Year

Percentage of Total Operating
Costs and Expenses

$10,117,774
$ 8,096,774

25.0%
204.4%

69.3%
78.5%

Our expenses, excluding stock-based compensation, for research and development for the year ended December 31,
2014 increased substantially compared to amounts expended in the 2013 fiscal year. Research and development
expenses in 2014 consisted mainly of costs related to our Phase 3 trial of Firdapse(cid:140), cost relating to pre-clinical and
clinical testing on both Firdapse(cid:140) and CPP-115, costs related to the launch and operation of the Firdapse(cid:140)
Expanded Access Program, costs relating to the manufacturing of Firdapse(cid:140), and our share of the costs of the joint
studies being conducted with BioMarin. During 2013, our research and development expenses primarily related to our
Phase 3 trial of Firdapse(cid:140) and our continuing pre-clinical and clinical testing on Firdapse(cid:140) and CPP-115.

We expect that research and development expenses will increase in fiscal 2015 compared to fiscal 2014 as we
continue our currently planned research and development activities, including the completion of all testing required to
submit an NDA for Firdapse(cid:140), costs relating to our currently anticipated submission of an NDA for Firdapse(cid:140) in
the third quarter of 2015, costs relating to the operation of the Firdapse(cid:140) Expanded Access Program and costs related
to the Phase 1b trial for CPP-115.

In our research and development activities for 2014 and 2013, we recorded stock-based compensation relating to the
value of stock options granted to certain employees. The amount of stock-based compensation recorded in 2014 and
2013 relating to our research and development activities was $133,862 and $84,728, respectively. The weighted-
average grant-date fair value of the stock options granted in 2014 and 2013 was $2.45 and $0.48, respectively.

Selling and Marketing Expenses

We had no selling expenses during 2014 and 2013. We have begun to incur pre-commercialization costs, tied to our
preparation for future sales and marketing efforts, as we move closer to the potential commercialization of

Firdapse(cid:140). These costs are for personnel, and their related activities, to develop both a sales force and a patient
advocacy and assistance program so that we are in a position to commence our selling efforts at such time as we are
successful in obtaining an approval of any NDA that we may file for Firdapse(cid:140), of which there can be no
assurance. Pre-commercialization costs have been included in general and administrative expenses.

General and Administrative Expenses

Year

2014
2013

Amount

Change from Prior Year

Percentage of Total Operating
Costs and Expenses

$4,473,654
$2,214,884

102.2%
( 13.5%)

30.7%
21.5%

The increase in general and administrative expenses for the year ended December 31, 2014 when compared to the
same period in 2013 was primarily due to increases in payroll (based on both increased headcount and increased
salaries and benefits, including stock-based compensation), substantially increased consulting and marketing
expenses, relating to our pre-commercialization efforts for Firdapse(cid:140) during 2014, and an increase in professional
fees and investor relations expenses. We expect that general and administrative costs will increase in future periods as
we expand our operations and headcount in preparation for the potential future commercialization of Firdapse(cid:140).

Stock-Based Compensation

We issued stock options and other share-based payments to several of our employees, directors, and consultants in
2014 and 2013. Total stock-based compensation expense for the years ended December 31, 2014 and 2013 was
$777,969 and $175,855, respectively. The Company regularly grants non-cash stock based compensation to
directors and employees as part of their compensation packages. No such grant was done during 2013; consequently,
the 2013 expense represents mostly amortization expense for prior year grants and a few grants to new employees.
The 2014 increase in expense from the prior year is mostly due to additional expense related to the August 2014
annual grant to employees and directors.

Change in fair value of warrants liability

In connection with the October 2011 equity offering, we issued warrants to purchase an aggregate of 1,523,370
shares of common stock. The fair value of the warrants is recorded in the liability section of the balance sheet and
was estimated at $2.8 million and $1.8 million at December 31, 2014 and 2013, respectively. The fair value of the
warrants liability is determined at the end of each reporting period with the resulting gains or losses recorded as the
change in fair value of warrant liability in the statements of operations. For the years ended December 31, 2014 and
2013, we recognized losses of $993,866 and $1,890,359 respectively, in connection with the change in the fair value
of the warrants liability. The losses during 2014 and 2013 were principally a result of the increase in our stock price.
We believe that future changes in the fair value of the warrants liability will be due primarily to future fluctuations
in the value of our common stock.

Other Income, net

We reported other income, net in all periods relating to our investment of funds received from offerings of our
securities. Other income, net consists of interest income, dividend income and unrealized and realized gain (loss) on
trading securities. The increase in other income, net for the year ended December 31, 2014 as compared to the year
ended December 31, 2013 was principally due to higher average investment balances from the proceeds of our
offerings, partially offset by lower interest rates. These proceeds were used to fund our product-development

activities and our operations. Substantially all such funds were invested in short-term interest bearing obligations
and short-term bond funds.

Income taxes

We have incurred net operating losses since inception. Consequently, we have applied a 100% valuation allowance
against our deferred tax asset as we believe that it is more likely than not that the deferred tax asset will not be
realized.

Net Loss

Our net loss was $15,509,061 in the year ended December 31, 2014 ($0.24 per basic and diluted share), as compared
to $12,154,596 in the year ended December 31, 2013 ($0.27 per basic and diluted share).

Non-GAAP Net Loss

Our non-GAAP net loss per share, which excludes for 2014 a $993,866 loss associated with the change in the fair
value of liability-classified warrants and excludes for 2013 a $1,890,359 loss associated with the change in the fair
value of liability-classified warrants, was $14,515,195 (or $0.23 per basic and diluted share) for 2014, compared to a
non-GAAP net loss of $10,264,237 (or $0.23 per basic and diluted share) for 2013.

Years Ended December 31, 2013 and 2012

Revenues

We had no revenues for the year ended December 31, 2013 or 2012.

Research and Development Expenses

Year

2013
2012

Amount

Change from Prior Year

Percentage of Total Operating
Costs and Expenses

$8,096,774
$2,659,597

204.4%
(21.4%)

78.5%
50.9%

Our expenses, excluding stock based compensation, for research and development for the year ended December 31,
2013 increased substantially compared to amounts expended in the same period in 2012. During 2013, we continued
our Phase 3 trial of Firdapse(cid:140) and performed pre-clinical testing on Firdapse(cid:140) and on CPP-115. During the first
months of 2013, BioMarin completed the transfer of the management and oversight of the currently ongoing Phase 3
trial for Firdapse(cid:140) for the treatment of LEMS to us. In connection with such transfer, we retained a CRO and hired
additional personnel to provide day-to-day oversight of the Phase 3 trial, including identifying and contracting with an
additional 15 clinical sites throughout the United States, Europe and South America. Such efforts increased the
number of total clinical sites for our Phase 3 trial from 7, upon transfer of the Phase 3 trial to us, to 22 at the end of
2013. Expenses in the comparable period in 2012 included expenses related to our Phase 1(a) clinical trial safety
study for CPP-115 and our NIDA/VA Phase 2(b) clinical trial evaluating CPP-109 for use in the treatment of cocaine
addiction, which was completed during 2012. In addition, since we licensed Firdapse(cid:140) in October 2012, the
comparable period includes only approximately two months of expenses for the development of Firdapse(cid:140).

In our research and development activities for 2013 and 2012, we recorded stock-based compensation relating to the
value of stock options granted to certain employees. The amount of stock-based compensation recorded in 2013 and
2012 relating to our research and development activities was $84,728 and $100,221, respectively. The weighted-
average grant-date fair value of the stock options granted in 2013 and 2012 was $0.48 and $0.32, respectively.

Selling and Marketing Expenses

We had no selling and marketing expenses during 2013 and 2012. We expect we will begin to incur costs tied to our
future sales and marketing efforts during the 2014 fiscal year as we move closer to the potential commercialization
of Firdapse(cid:140). Our plan is to put in place over the next year the personnel that will help us develop both a sales force
and a patient advocacy and assistance program so that we are in a position to commence our selling efforts
immediately if we are successful in obtaining an approval of any NDA that we may file for Firdapse(cid:140), of which
there can be no assurance.

General and Administrative Expenses

Year

2013
2012

Amount

Change from Prior Year

Percentage of Total Operating
Costs and Expenses

$2,214,884
$2,561,543

(13.5%)
(5.1%)

21.5%
49.1%

legal, accounting and
General and administrative expenses include, among other expenses, office expenses,
consulting fees and travel expenses for our administrative employees, consultants and members of our Board.
Included in general and administrative expenses in the years 2013 and 2012, was stock-based compensation of
$91,127 and $239,818, respectively. The decrease in general and administrative expenses for the year ended
December 31, 2013 when compared to the same period in 2012 is primarily due to decreases in director
compensation, travel expenses and stock-based compensation expense partially offset by increases in professional
fees.

Stock-Based Compensation

We issued stock options to several of our employees, directors, and consultants in 2013 and 2012. Total stock-based
compensation expense for the years ended December 31, 2013 and 2012 was $175,855 and $340,039, respectively.

Change in fair value of warrants liability

In connection with the October 2011 equity offering, we issued warrants to purchase an aggregate of 1,523,370
shares of common stock. The fair value of the warrants is recorded in the liability section of the balance sheet and
was estimated at $1.8 million and $0.5 million at December 31, 2013 and 2012, respectively. The fair value of the
warrants liability is determined at the end of each reporting period with the resulting gains or losses recorded as the
change in fair value of warrant liability in the statements of operations. For the years ended December 31, 2013 and
2012, we recognized a loss of $1,890,359 and a gain of $1,129,778, respectively, due to the change in the fair value
of the warrants liability. The loss during 2013 was principally a result of the increase in our stock price between
December 31, 2012 and December 31, 2013, and the gain during 2012 was principally a result of the decrease of our
stock price between December 31, 2011 and December 31, 2012.

Other Income, net

We reported other income in all periods relating to our investment of funds received from offerings of our securities.
Other income consists of interest income, dividend income and unrealized and realized gain (loss) on trading
securities. The increased in other income for the year ended December 31, 2013 as compared to the year ended
December 31, 2012 was due to higher average investment balances from the proceeds of our registered direct
offerings, partially offset by lower interest rates. These proceeds were used to fund our product-development
activities and our operations. Substantially all such funds were invested in short-term interest bearing obligations
and short-term bond funds.

Income taxes

Net Loss

Our net loss was $12,154,596 in the year ended December 31, 2013 ($0.27 per basic and diluted share) as compared
to $4,076,386 in the year ended December 31, 2012 ($0.14 per basic and diluted share).

Non-GAAP Net Loss

Our non-GAAP net loss per share, which excludes for 2013 a $1,890,359 loss associated with the change in the fair
value of liability-classified warrants and excludes for 2012 a $1,129,778 gain associated with the change in the fair
value of liability-classified warrants, was $10,264,237 (or $0.23 per basic and diluted share) for 2013, compared to a
non-GAAP net loss per share of $5,206,164 (or $0.17 per basic and diluted share) for 2012.

Liquidity and Capital Resources

Our historical capital resource requirements have been the funding of working capital and pre-clinical and clinical
testing of our product candidates. We have historically funded all of our requirements from equity issuances,
government grants, and an investment by a strategic purchaser.

Since our inception, we have financed our operations primarily with the net proceeds of three private placements, an
initial public offering (IPO), a secondary public offering and nine registered direct public offerings under our
effective shelf registration statements. At December 31, 2014, we had cash and cash equivalents, certificates of
deposit and short-term investments aggregating $39,275,123 and working capital of $37,972,795, as compared to
cash and cash equivalents, certificates of deposit and short-term investments aggregating $23,710,596 and working
capital of $23,180,429 at December 31, 2013. At December 31, 2014 substantially all of our cash and cash
equivalents were deposited with one financial institution and our short-term investments were invested in certificates
of deposit and a high-quality short-term bond fund. Throughout 2014, we had cash balances at certain financial
institutions in excess of federally insured limits.

We have to date incurred operating losses, and we expect these losses to increase substantially in the future as we
expand our drug development programs and prepare for the commercialization of our drug candidates. We anticipate
using current cash on hand to finance these activities. It will likely be some time before we obtain the necessary
regulatory approvals to commercialize one or more of our product candidates in the United States.

We currently believe that we have the cash resources to support our operations through the end of 2016. These
expectations are based on current information available to us. If our costs are greater than we expect, our
assumptions may not prove to be accurate.

At the present time, we will require additional funding for future studies or trials and to pay future milestone
payments that we may be obligated to make. We will also require additional working capital to support our
operations beyond 2016. There can be no assurance as to the amount of any such funding that will be required for
these purposes or whether any such funding will be available to us when it is required.

In that regard, our future funding requirements will depend on many factors, including:

(cid:120)

the scope, rate of progress and cost of our clinical trials and other product development activities;

future clinical trial results;

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

(cid:120)

the cost and timing of regulatory approvals;

the cost and delays in product development as a result of any changes in regulatory oversight applicable to
our products;

the cost and timing of establishing sales, marketing and distribution capabilities;

the effect of competition and market developments;

the cost of filing and potentially prosecuting, defending and enforcing any patent claims and other
intellectual property rights; and

the extent to which we acquire or invest in other products.

We plan to raise additional funds to support our product development activities and working capital requirements
through public or private equity offerings, corporate collaborations or other means. We also intend to seek
governmental grants for a portion of the required funding for our clinical trials and pre-clinical trials. We may also
seek to raise capital to fund additional product development efforts even if we have sufficient funds for our planned
operations. Any sale by us of additional equity or convertible debt securities could result in dilution to our
stockholders. There can be no assurance that any such required additional funding will be available to us at all or
available on terms acceptable to us. Further, to the extent that we raise additional funds through collaborative
arrangements, it may be necessary to relinquish some rights to our technologies or grant sublicenses on terms that
are not favorable to us. If we are not able to secure additional funding when needed, we may have to delay, reduce
the scope of or eliminate one or more research and development programs, which could have an adverse effect on
our business.

On January 31, 2014, we filed a shelf registration statement with the SEC to sell up to $100 million of common
stock. This shelf registration statement was declared effective on March 19, 2014. We have completed two
offerings under this shelf registration statement:

(cid:120) On April 3, 2014, we raised net proceeds of approximately $26.7 million from the sale of 13,023,750 shares of

our common stock; and

(cid:120) On February 4, 2015, we raised net proceeds of approximately $34.7 million from the sale of 11,500,000 shares

of our common stock.

On December 3, 2010 we filed a shelf registration statement with the SEC to sell up to $30 million of common
stock. This shelf registration was declared effective by the SEC on December 15, 2010. On September 5, 2013, we
filed a registration statement on Form S-3MEF to register an additional $2.6 million of securities under the
December 3, 2010 registration statement. We completed four registered direct public offerings to institutional
investors under this shelf registration statement:

(cid:120) On March 8, 2011, we raised net proceeds of approximately $2.2 million from the sale of 2,259,943 shares of

our common stock;

(cid:120) On October 28, 2011, we raised net proceeds of approximately $3.2 million from the sale of 3,046,740 shares of
our common stock and five-year warrants to purchase 1,523,370 shares of our common stock at an exercise
price of $1.30 per share;

(cid:120) On August 28, 2012 we raised net proceeds of approximately $5.5 million from the sale of 4,000,000 shares of
our common stock and five-year warrants to purchase 1,200,000 shares of our common stock at an exercise
price of $2.08 per share; and

(cid:120) On September 5, 2013 we raised net proceeds of approximately $14.1 million from the sale of 8,800,000 shares

of our common stock.

On May 24, 2012, we sold 6,000,000 shares of our common stock, together with common stock purchase warrants
to purchase 6,000,000 shares of the Company’s common stock, at a price of $0.80 per share and corresponding
warrant. These securities were issued pursuant to a Form S-1 registration statement that became effective on
May 23, 2012. The Company received gross proceeds of approximately $4.8 million from this offering, before
underwriting commission and other expenses totaling approximately $795,000. The May 2012 warrants expire five
years from their date of issuance and have an exercise price of $1.04 per share.

Contractual obligations and arrangements

As of December 31, 2014, we had the following contractual obligations. Further, we may owe in the future certain
milestone or royalty payment obligations (as described below). Since we are not currently able to determine when or
if these milestones will be achieved, or when or if the events triggering payment of the obligations will occur, they
are not included in the following table.

Operating lease obligations
License obligations

Payments Due by Period

Total
$ 310,988
150,000

Less than 1
year
$103,902
150,000

1-3 years

$ 207,086
--

4-5 years
$

--
--

After 5
years
--
--

Total

$ 460,988

$ 253,902

$ 207,086

We have entered into the following contractual arrangements:

(cid:120) Payments to BioMarin and others under our license agreement. We have agreed: (i) to pay BioMarin royalties
for seven years from the first commercial sale of Firdapse(cid:140) equal to 7% of net sales (as defined in our license
agreement) in North America for any calendar year for sales up to $100 million, and 10% of net sales in North
America in any calendar year in excess of $100 million; (ii) to pay to the third-party licensor of the rights
sublicensed to us royalty payments for seven years from the first commercial sale of Firdapse(cid:140) equal to 7% of
net sales (as defined in the license agreement between BioMarin and the third-party licensor) in any calendar
year; and (iii) to pay certain milestone payments that BioMarin is obligated to pay (approximately $2.6 million
of which will be due upon acceptance by the FDA of a filing of an NDA for Firdapse(cid:140) for the treatment
of LEMS, and approximately $7.2 million of which will be due on the unconditional approval by the FDA of an
NDA for Firdapse(cid:140) for the treatment of LEMS). We have also agreed to share in the cost of certain post-
marketing studies that are being conducted by BioMarin.

(cid:120) Payments for Firdapse(cid:140) development. Based on current available information, we estimate that the total product
development costs for Firdapse(cid:140), excluding third-party milestone payments, will be approximately $25 million.
At December 31, 2014, we had paid approximately $13.9 million of this amount and had prepaid research fees
of approximately $566,000, accounts payable of approximately $1,441,000 and accrued liabilities of
approximately $352,000 in the accompanying balance sheet in connection with related agreements. Under our
license agreement with BioMarin, we were obligated to complete our Phase III trial of Firdapse(cid:140) during the
two years following the date of the license agreement (October 26, 2012), which condition was satisfied during
the third quarter of 2014.

(cid:120)

Payments to Northwestern University under our license agreement. Under our license agreement with
Northwestern, we have paid to date $251,590, had accrued liabilities of $115,000, at December 31, 2014 in the
accompanying balance sheet, and owe certain milestone payments in future years if we do not cancel the license
agreement. The next milestone payment of $150,000 is due on the earlier of August 27, 2015 or the successful
completion of the first Phase 2 trial of CPP-115.

Employment agreements. We have entered into an employment agreement with our Chief Executive Officer that
requires us to make base salary payments of approximately $453,000 in 2015. The agreement expires in
November 2016.

(cid:120)

Lease for office space. We currently operate our business in leased office space in Coral Gables, Florida. We
currently lease approximately 2,600 square feet of office space for which we pay annual rent of approximately
$96,000.

Previous Dispute with Brookhaven

We previously had a license agreement with Brookhaven under which we licensed several patents relating to the use
of vigabatrin for the treatment of addiction and obsessive compulsive disorders. Under the license agreement, we
were obligated, among other obligations, to reimburse Brookhaven for certain patent related expenses, beginning on
the filing of an NDA for CPP-109 (which did not occur). In that regard, Brookhaven had previously advised us that
they believed we owed them approximately $1.3 million in patent related expenses as of December 31, 2012. We,
on the other hand, believed that if we became obligated to reimburse patent related expenses under the license
agreement, that we would only be liable to Brookhaven for approximately $166,000.

On November 8, 2013, effective October 1, 2013, we entered into a termination agreement with Brookhaven under
which our license agreement with Brookhaven was cancelled and we exchanged mutual general releases with
Brookhaven. As part of the general releases contained in the termination agreement, Brookhaven expressly released
us from any future obligation under the license agreement to reimburse them for any patent related expenses.

Off-Balance Sheet Arrangements

We currently have no debt or capital leases. We have operating leases for our office facilities. We do not have any
off-balance sheet arrangements as such term is defined in rules promulgated by the SEC.

Cash Flows

Net cash used in operating activities was $12,941,783 and $9,875,674, respectively, for the years ended December
31, 2014 and 2013. During the year ended December 31, 2014, net cash used in operating activities was primarily
attributable to our net loss of $15,509,061, and an increase of $2,943,256 in prepaid expenses and other current
assets and deposits, which were partially offset with increases of $963,421 in accounts payable, and $2,748,704 in
accrued expenses and liabilities, and a loss of $993,866 of non-cash expense for the change in fair value of warrants
liability. The loss included an additional $804,543 of non-cash expenses. Such additional non-cash expenses consist
of depreciation and stock-based compensation expense.

Net cash used in investing activities was $8,741,030 and $7,496,801, respectively, for 2014 and 2013. For 2014 and
2013 such funds were used primarily for purchases of short-term investments and capital expenditures relating to
computer equipment and furniture and equipment, partially offset by proceeds from certificates of deposit.

Net cash provided by financing activities was $28,563,633 and $18,178,494, respectively, for 2014 and 2013.
During 2014 and 2013, net cash from financing activities consisted mainly of the net proceeds from the sale of
shares of common stock in underwritten and registered direct public offerings under our registration statements, as
well as proceeds from exercise of warrants. Such funds have been used to fund our research and development costs
and our general and administrative costs.

Caution Concerning Forward-Looking Statements

Some of the statements in this Form 10-K are “forward-looking statements”, as that term is defined in the Private
Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, plans or
objectives for future operations and anticipated results of operations. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, “believes”, “anticipates”, “proposes”, “plans”, “expects”, “intends”, “may”, and other similar
expressions are intended to identify forward-looking statements. Such statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements made in this Form 10-K are based on current expectations that involve
numerous risks and uncertainties.

The successful development of our product candidates is highly uncertain. We cannot reasonably estimate or know
the nature, timing, or estimated expenses of the efforts necessary to complete the development of, or the period in
which material net cash inflows are expected to commence due to the numerous risks and uncertainties associated
with developing such products, including the uncertainty of:

(cid:120)

our estimates regarding anticipated capital requirements and our need for additional financing;

the scope, rate of progress and expense of our clinical trials and studies, pre-clinical studies, proof-of-

concept studies, and our other drug development activities;

our ability to complete our trials and studies on a timely basis and within the budgets we establish for

such trials and studies;

whether our trials and studies will be successful;

the results of our clinical studies and trials, pre-clinical studies, proof-of-concept studies, and our
other development activities, and the number of such studies and trials that will be required for us
to seek and obtain approval of new drug applications, or NDAs, for our drug candidates;

whether the third parties that assist us in our trials and studies perform as anticipated and within the

budgets established for their activities;

the ability of our third-party suppliers and contract manufacturers to maintain compliance with

current Good Manufacturing Processes (cGMP);

whether any of our drug candidates will ever be approved for commercialization;

the risk that another pharmaceutical company will receive an approval for its formulation of 3,4-
diaminopyridine (3,4-DAP) for the treatment of Lambert-Eaton Myasthenic Syndrome (LEMS)
before we do;

even if one or more of our drug candidates is approved for commercialization, whether we will be

able to successfully commercialize those products;

whether we will ever be able to achieve sustained profitability;

our estimates of the pricing of our drug candidates if approved and the size of the market for such

drug candidates;

third-party payor reimbursement for any of our drug candidates that are commercialized;

the market adoption of any of our drug candidates approved for commercialization by physicians and

patients;

our ability to obtain a sufficient commercial supply of our products;

our ability to successfully obtain additional indications for our drug candidates beyond those which

may initially be approved;

the impact on sales of our products by others that are competitive to our products;

if one or more of our products are approved for commercialization, the cost, timing or estimated

completion of any post-marketing studies that we are obligated to complete;

(cid:120)

our expectations regarding licensing, acquisitions or strategic relationships;

changes in the laws and regulations affecting our business;

whether we can successfully protect any of our drug candidates under intellectual property laws;

the expense of filing, and potentially prosecuting, defending and enforcing any patent claims and

other intellectual property rights;

whether the settlement that we have reached of the claims brought against us in the class action

lawsuit will be approved;

our ability to develop a sales force to commercialize any products as to which we may obtain the right

to commercialize;

our ability to attract and retain skilled employees;

security breaches of our computer systems, or the computer systems of our contractors and/or

vendors;

the impact of employee or consultant misconduct; and

changes in general economic conditions and interest rates.

Our current plans and objectives are based on assumptions relating to the development of our current product
candidates. Although we believe that our assumptions are reasonable, any of our assumptions could prove
inaccurate. In light of the significant uncertainties inherent in the forward-looking statements made herein, which
reflect our views only as of the date of this report, you should not place undue reliance upon such statements. We
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of changes in the value of market risk-sensitive instruments caused by fluctuations in
interest rates, foreign exchange rates and commodity prices. Changes in these factors could cause fluctuations in our
results of operations and cash flows.

Our exposure to interest rate risk is currently confined to our cash, certificates of deposit and short-term investments
that are from time to time invested in highly liquid money market funds, short-term certificates of deposit and short-
term, high-quality bond funds. The primary objective of our investment activities is to preserve our capital to fund
operations. We also seek to maximize income from our investments without assuming significant risk. We do not
use derivative financial instruments in our investment portfolio. Our cash and investments policy emphasizes
liquidity and preservation of principal over other portfolio considerations.

Item 8.

Financial Statements and Supplementary Data

See the list of financial statements filed with this report under Item 15 below.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.

Controls and Procedures

Disclosure Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e)
and 15(d)-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), means controls and other
procedures of a company that are designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the
company’s management, including its principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.

Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of
December 31, 2014, our disclosure controls and procedures were effective to ensure that the information required to
be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended,
was recorded, processed, summarized or reported within the time periods specified in the rules and regulations of the
SEC, and include controls and procedures designed to ensure that information required to be disclosed by us in such
reports was accumulated and communicated to management, including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required disclosures.

Management’s Annual Assessment of Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as
such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with authorizations of our
management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial
statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements prepared for external purposes in accordance with
generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our principal executive officer and our principal financial officer,
management conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December 31, 2014 based on the 2013 framework in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and in accordance with the interpretive
guidance issued by the SEC in Release No. 34-55929. Based on that evaluation, management concluded that our
internal control over financial reporting was effective as of December 31, 2014.

During the fourth quarter of 2014, there were no changes in our internal control over financial reporting, as defined
in Rule 13a-15(f) under the Securities and Exchange Act of 1934 that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial reporting.

Our independent registered public accounting firm, Grant Thornton LLP, has issued a report on our internal control
over financial reporting, which is included in Item 15 of this Annual Report on Form 10-K.

Item 9B.

Other Information

Not applicable.

Item 10.

Directors and Executive Officers of the Registrant

PART III

The information required by this item will be contained in our definitive proxy statement, or Proxy
Statement, to be filed with the SEC in connection with our 2015 Annual Meeting of Stockholders. Our Proxy
Statement for the 2015 Annual Meeting of Stockholders is expected to be filed not later than 120 days after the end
of our fiscal year ended December 31, 2014 and is incorporated into this report by this reference.

We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, and to
all of our other officers, directors, employees and agents. The code of ethics is available on our website at
www.catalystpharma.com. We intend to disclose future amendments to, or waivers from, certain provisions of our
code of ethics on the above website within five business days following the date of such amendment or waiver.

Item 11.

Executive Compensation

The information required by this item will be set forth in the Proxy Statement and is incorporated into this

report by this reference.

Item 12.

Security Ownership of Certain Beneficial Owners and Management

The information required by this item will be set forth in the Proxy Statement and is incorporated into this

report by this reference.

Item 13.

Certain Relationships and Related Transactions

The information required by this item will be set forth in the Proxy Statement and is incorporated into this

report by this reference.

Item 14.

Principal Accounting Fees and Services

The information required by this item will be set forth in the Proxy Statement and is incorporated into this

report by this reference.

Item 15.

Exhibits and Financial Statement Schedules

(a)

Documents filed as part of this report.

PART IV

The following financial statements of Catalyst Pharmaceutical Partners, Inc. and Report of Grant

Thornton LLP, independent registered public accounting firm, are included in this report:

(cid:120)

Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2014 and 2013

Statements of Operations for the years ended December 31, 2014, 2013 and 2012

Statement of Stockholders' Equity for the period December 31, 2011 until December 31, 2014

Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012.

Notes to Financial Statements

List of financial statement schedules. All schedules are omitted because they are not applicable or

the required information is shown in the financial statements or notes thereto.

List of exhibits required by Item 601 of Regulation S-K. See part (b) below.

(b)

Exhibits.

Exhibit No.

Description of Exhibit

2.1

3.1

3.2

3.3

4.1

4.2

4.3

4.4

4.5

10.1 +

10.2 +

10.3 +

Agreement and Plan of Merger, dated August 14, 2006, between the Company and Catalyst
Pharmaceutical Partners, Inc., a Florida corporation(1)

Certificate of Incorporation(1)

Amendment to Certificate of Incorporation(1)

By-laws(1)

Specimen stock certificate for common stock(1)

Rights Agreement between the Company and Continental Stock Transfer and Trust Company(10)

Form of Warrant to Purchase Common Stock issued in our October 2011 offering; (11)

Form of Warrant to Purchase Common Stock issued in our May 2012 offering (14)

Form of Warrant to Purchase Common Stock issued in our August 2012 offering (15)

Employment Agreement between the Company and Patrick J. McEnany(2)

Amendment to Employment Agreement between the Company and Patrick J. McEnany(4)

Amendment to Employment Agreement between the Company and Patrick J. McEnany(6)

Exhibit No.

Description of Exhibit

10.4 +

10.5+

10.6 +

10.7 +

10.8+

10.9+

10.10+

10.11+

10.12+

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

23.1

31.1

31.2

32.1

32.2

Amendment to Employment Agreement between the Company and Patrick J. McEnany(9)

Amendment to Employment Agreement between the Company and Patrick J. McEnany (17)

Stock Option Agreement between the Company and Patrick J. McEnany(1)

Stock Option Agreement between the Company and Hubert Huckel(1)

Agreement between the Company and Charles Gorodetzky(1)

2006 Stock Incentive Plan(1)

Amendment No. 1 to 2006 Stock Incentive Plan (7)

Amendment No. 2 to 2006 Stock Incentive Plan (13)

2014 Stock Incentive Plan (20)

License Agreement between the Company and Northwestern University(5)

Lease Agreement between the Company and 355 Alhambra Plaza, Ltd.(3)

First Amendment to Lease Agreement between the Company and 355 Alhambra Plaza, Ltd. (8)

License Agreement among the Company, New York University, and The Feinstein Institute for
Medical Research (12)

Convertible Promissory Note and Note Purchase Agreement, dated as of October 26, 2012,
between the Company and BioMarin Pharmaceutical, Inc. (16)

License Agreement, dated as of October 26, 2012, between the Company and BioMarin
Pharmaceutical, Inc. (16)

Amendment No, 1 to License Agreement, dated April 8, 2014, between the Company and
BioMarin Pharmaceutical, Inc. (21)

Termination Agreement, dated effective October 1, 2013, between the Company and Brookhaven
Science Associates, LLC (18)

Second Amendment to Lease, dated as of February 4, 2014, between the Company and 355
Alhambra Circle LLC (19)

Consent of Independent Registered Public Accounting Firm*

Section 302 CEO Certification*

Section 302 CFO Certification*

Section 906 CEO Certification*

Section 906 CFO Certification*

Exhibit No.

Description of Exhibit

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

Filed by reference to the Company’s Registration Statement on Form S-1 (File No. 333-136039)

Filed by reference to the Company’s Form 10-Q for the period ended September 30, 2006

Filed by reference to the Company's Form 10-Q for the period ended June 30, 2007

Filed by reference to the Company’s Form 8-K dated December 23, 2008

Filed by reference to the Company’s Form 8-K dated September 2, 2009

Filed by reference to the Company’s Form 10-Q for the period ended September 30, 2009

Filed by reference to the Company's 2011 Annual Meeting Proxy Statement dated April 11, 2011

Filed by reference to the Company's Form 10-Q for the period ended June 30, 2011

Filed by reference to the Company's Form 8-K dated September 14, 2011

Filed by reference to the Company's Form 8-K dated September 20, 2011

Filed by reference to the Company's Form 8-K dated October 28, 2011

Filed by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2011.

Filed by reference to the Company's 2012 Annual Meeting Proxy Statement dated April 17, 2012

Filed by reference to the Company's Registration Statement on Form S-1 (File No. 333-180617)

Filed by reference to the Company's Form 8-K dated August 28, 2012

Filed by reference to the Company's Form 8-K dated October 26, 2012

Filed by reference to the Company's Form 8-K dated August 28, 2013

Filed by reference to the Company's Form 10-Q for the period ended September 30, 2013

Filed by reference to the Company's Form 8-K dated February 20, 2014

Filed by reference to the Company's Form 8-K dated March 4, 2014

Filed by reference to the Company's Form 8-K dated April 17, 2014

Filed herewith

Management contract or compensatory plan

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has caused this Annual Report on Form 10-K to be signed by the undersigned, thereunto duly authorized, this 13 day
of March, 2015.

CATALYST PHARMACEUTICAL PARTNERS, INC.

By:

/s/ Patrick J. McEnany
Patrick J. McEnany, Chairman,
President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the

following persons, in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Patrick J. McEnany_________
Patrick J. McEnany

/s/ Alicia Grande_____________
Alicia Grande

/s/ Charles B. O’Keeffe________
Charles B. O’Keeffe

/s/ Philip H. Coelho___________
Philip H. Coelho

/s/ David S. Tierney, M.D.______
David S. Tierney, M.D.

/s/ Donald A. Denkhaus________
Donald A. Denkhaus

/s/ Richard Daly______________
Richard Daly

March 13, 2015

Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)

Vice President, Treasurer, Chief
Financial Officer (Principal Financial
Officer and Principal Accounting
Officer)

Director

INDEX TO FINANCIAL STATEMENTS

Years ended December 31, 2014, 2013, and 2012

Reports of independent registered public accounting firm

Balance sheets

Statements of operations

Statement of stockholders’ equity

Statements of cash flows

Notes to financial statements

F-2

F-4

F-5

F-6

F-7

F-8

F-1

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Catalyst Pharmaceutical Partners, Inc.

We have audited the internal control over financial reporting of Catalyst Pharmaceutical Partners, Inc. (the
“Company”) as of December 31, 2014, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying
Management’s Annual Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2014, based on criteria established in the 2013 Internal Control—Integrated Framework issued
by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the financial statements of the Company as of and for the year ended December 31, 2014, and our report
dated March 13, 2015 expressed an unqualified opinion on those financial statements.

/s/ Grant Thornton LLP

Miami, Florida
March 13, 2015

F-2

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Catalyst Pharmaceutical Partners, Inc.

We have audited the accompanying balance sheets of Catalyst Pharmaceutical Partners, Inc. (the “Company”) as of
December 31, 2014 and 2013, and the related statements of operations, stockholders’ equity, and cash flows for each
of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of Catalyst Pharmaceutical Partners, Inc. as of December 31, 2014 and 2013, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting
principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria
established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 13, 2015 expressed an unqualified
opinion thereon.

/s/ Grant Thornton LLP

Miami, Florida
March 13, 2015

F-3

CATALYST PHARMACEUTICAL PARTNERS, INC.
BALANCE SHEETS

ASSETS

December 31,
2014

December 31,
2013

Current Assets:

Cash and cash equivalents
Certificates of deposit
Short-term investments
Prepaid expenses and other current assets

Total current assets
Property and equipment, net
Deposits

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable
Accrued expenses and other liabilities

Total current liabilities

Accrued expenses and other liabilities, non-current
Warrants liability, at fair value
Total liabilities

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized: none

issued and outstanding at December 31, 2014 and 2013

Common stock, $0.001 par value, 100,000,000 shares authorized;

69,119,092 shares and 54,132,937 shares issued and outstanding
at December 31, 2014 and 2013, respectively

Additional paid-in capital
Accumulated deficit

Total stockholders’ equity
Total liabilities and stockholders’ equity

9,096,778
3,715,383
26,462,962
4,552,698
43,827,821
71,377
8,888
43,908,086

1,814,210
4,040,816
5,855,026

15,839
2,794,891
8,665,756

69,119
105,015,871
(69,842,660)
35,242,330
43,908,086

2,215,958
4,011,576
17,483,062
1,609,442
25,320,038
40,628
8,888
25,369,554

850,789
1,288,820
2,139,609

19,131
1,819,562
3,978,302

54,133
75,670,718
(54,333,599)
21,391,252
25,369,554

The accompanying notes are an integral part of these financial statements.

F-4

CATALYST PHARMACEUTICAL PARTNERS, INC.
STATEMENTS OF OPERATIONS

Revenues
Operating costs and expenses:
Research and development
General and administrative

Total operating costs and expenses

2014

Year Ended December 31,
2013

2012

---

10,117,774
4,473,654
14,591,428

8,096,774
2,214,884
10,311,658

2,659,597
2,561,543
5,221,140

(5,221,140)
14,976
1,129,778
(4,076,386)
---
$ (4,076,386)
(0.14)
$
30,033,108

Loss from operations
Other income, net
Change in fair value of warrants liability
Loss before income taxes
Provision for income taxes
Net loss
Net loss per share - basic and diluted
Weighted average shares outstanding – basic and diluted

(14,591,428)
76,233
(993,866)
(15,509,061)
---
$(15,509,061)
(0.24)
$
64,142,534

(10,311,658)
47,421
(1,890,359)
(12,154,596)
---
$(12,154,596)
(0.27)
$
45,452,447

The accompanying notes are an integral part of these financial statements.

F-5

CATALYST PHARMACEUTICAL PARTNERS, INC.
STATEMENT OF STOCKHOLDERS’ EQUITY
for the years ended December 31, 2014, 2013 and 2012

Balance at December 31, 2011
Issuance of common stock, net
Issuance of stock options for services
Issuance of common stock and warrants,

net

Issuance of common stock upon note

conversion

Net loss

Balance at December 31, 2012
Issuance of common stock, net
Issuance of stock options for services
Exercise of warrants for common stock
Net loss
Balance at December 31, 2013
Issuance of common stock, net
Issuance of stock options for services
Amortization of restricted stock for services
Exercise of warrants for common stock
Exercise of stock options for common

Preferred
Stock

— $
—
—

Common
Stock
24,701
53

—

Additional
Paid-In
Capital
41,838,614
33,071
340,039

—

—
—
—
—
—
—
—
—
—
—
—
—

10,000

9,554,640

6,667
—
41,421
8,850
—
3,862
—
54,133
13,024
—
—
1,262

4,993,333

—

56,759,697
14,086,344
175,855
4,648,822

—

75,670,718
26,712,106
767,838
10,131
1,333,778

stock
Net loss
Balance at December 31, 2014

—
—
— $

700
—
69,119

521,300

—

105,015,871

Accumulated
Deficit
$ (38,102,617)

—
—

—

(4,076,386)
(42,179,003)

—
—
—

(12,154,596)
(54,333,599)

—
—
—
—

—

(15,509,061)
$ (69,842,660)

Total
3,760,698
33,124
340,039

9,564,640

5,000,000
(4,076,386)
14,622,115
14,095,194
175,855
4,652,684
(12,154,596)
21,391,252
26,725,130
767,838
10,131
1,335,040

522,000
(15,509,061)
35,242,330

The accompanying notes are an integral part of these financial statements.

F-6

CATALYST PHARMACEUTICAL PARTNERS, INC.
STATEMENTS OF CASH FLOWS

Operating Activities:
Net loss
Adjustments to reconcile net loss to net

cash used in operating activities:

Depreciation
Stock-based compensation
Change in fair value of warrants liability
(Increase) decrease in:

2014

Year Ended December 31,
2013

2012

$(15,509,061)

$(12,154,596)

$(4,076,386)

26,574
777,969
993,866

22,483
175,855
1,890,359

10,889
340,039
(1,129,778)

Prepaid expenses and other current assets and deposits

(2,943,256)

(299,972)

(1,110,354)

Increase (decrease) in:
Accounts payable
Accrued expenses and other liabilities

Net cash used in operating activities

Investing Activities:
Capital expenditures
Purchase of short-term investments
Proceeds (purchase) of certificates of

deposit

Net cash used in investing activities

Financing Activities:
Proceeds from issuance of common

stock and warrants, net

Proceeds from issuance of convertible

promissory note

Proceeds from exercise of warrants
Proceeds from exercise of options
Net cash provided by financing

activities

963,421
2,748,704
(12,941,783)

(514,874)
1,005,071
(9,875,674)

1,101,729
(276,505)
(5,140,366)

(57,323)
(8,979,900)

296,193
(8,741,030)

(9,432)
(9,978,618)

2,491,249
(7,496,801)

(52,382)
(7,504,444)

(6,502,825)
(14,059,651)

26,725,130

14,071,694

9,564,640

--
1,316,503
522,000

--
4,083,300
23,500

5,000,000
16,249
--

28,563,633

18,178,494

14,580,889

Net increase (decrease) in cash and cash equivalents

6,880,820

806,019

(4,619,128)

Cash and cash equivalents –

beginning of period

2,215,958

1,409,939

6,029,067

Cash and cash equivalents –

end of period

$ 9,096,778

$ 2,215,958

$ 1,409,939

Non-cash investing and financing activities:
Exercise of liability classified warrants for common stock
Conversion of note to common stock

$
$

18,537
--

$
$

569,384
--

16,875
$
$ 5,000,000

The accompanying notes are an integral part of these financial statements.

F-7

CATALYST PHARMACEUTICAL PARTNERS, INC.
NOTES TO FINANCIAL STATEMENTS

Organization and Description of Business

Catalyst Pharmaceutical Partners, Inc. (the “Company”) is a development-stage biopharmaceutical company
focused on the development and commercialization of prescription drugs targeting rare (orphan) neurological
diseases and disorders,
including Lambert-Eaton Myasthenic Syndrome (LEMS) and infantile spasms. The
Company was incorporated in Delaware in July 2006. It is the successor by merger to Catalyst Pharmaceutical
Partners, Inc., a Florida corporation, which commenced operations in January 2002.

Since inception, the Company has devoted substantially all of its efforts to business planning, research and
development, recruiting management and technical staff, acquiring operating assets and raising capital. The
Company's primary focus is on the development and commercialization of its drug candidates. The Company has
incurred operating losses in each period from inception through December 31, 2014. The Company has been able to
fund its cash needs to date through several public and private offerings of its common stock and warrants, through
government grants, and through an investment by a strategic purchaser. See Note 11.

Capital Resources

On January 31, 2014, the Company filed a Shelf Registration Statement on Form S-3 (the 2014 Shelf
Registration Statement) with the U.S. Securities and Exchange Commission (SEC) to sell up to $100 million of
common stock. This registration statement (file No. 333-193699) was declared effective by the SEC on March 19,
2014. On April 3, 2014, the Company sold 13,023,750 shares of its common stock in an underwritten public offering
under the 2014 Shelf Registration Statement, raising net proceeds of approximately $26.7 million. Subsequent to
year end, on February 4, 2015, the Company sold 11,500,000 shares of its common stock in an underwritten public
offering under the 2014 Shelf Registration Statement, raising net proceeds of approximately $34.7 million (See Note
11). While there can be no assurance, based on currently available information, the Company estimates that it
currently has sufficient working capital to support its operations through the end of 2016. The Company will require
additional capital to support its operations in periods after 2016.

The Company may raise required funds in the future through public or private equity offerings, debt
financings, corporate collaborations, governmental research grants or other means. The Company may also seek to
raise new capital to fund additional product development efforts, even if it has sufficient funds for its planned
operations. Any sale by the Company of additional equity or convertible debt securities could result in dilution to the
Company’s current stockholders. There can be no assurance that any such required additional funding will be
available to the Company at all or available on terms acceptable to the Company. Further, to the extent that the
Company raises additional funds through collaborative arrangements, it may be necessary to relinquish some rights
to the Company’s drug candidates or grant sublicenses on terms that are not favorable to the Company. If the
Company is not able to secure additional funding when needed, the Company may have to delay, reduce the scope
of, or eliminate one or more research and development programs, which could have an adverse effect on the
Company’s business.

Basis of Presentation and Significant Accounting Policies

USE OF ESTIMATES. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ from
those estimates.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid instruments,
purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents
consist mainly of money market funds. The Company has substantially all of its cash and cash
equivalents deposited with one financial institution.

F-8

Basis of Presentation and Significant Accounting Policies (continued)

CERTIFICATES OF DEPOSIT. The certificates of deposit were issued by a banking institution and
are recorded at cost plus accrued interest. The original maturity was greater than three months but did
not exceed one year. Interest income is recorded in the statement of operations as it is earned. Carrying
value at December 31, 2014 and 2013 approximates fair value.

SHORT-TERM INVESTMENTS. The Company invests in short-term investments in high credit-
quality funds in order to obtain higher yields on its cash available for investments. As of December 31,
2014 and 2013 short-term investments consisted of a short-term bond fund. Such investments are not
insured by the Federal Deposit Insurance Corporation. Short-term investments at December 31, 2014
and 2013 were considered trading securities. Trading securities are recorded at fair value based on the
closing market price of the security. For trading securities, the Company recognizes realized gains and
losses and unrealized gains and losses to earnings. Unrealized and realized losses on trading securities
for the years ended December 31, 2014 and 2013 were nominal and are included in other income, net in
the accompanying statements of operations.

PREPAID EXPENSES AND OTHER CURRENT ASSETS. Prepaid expenses and other current
assets consist primarily of insurance recoverable, prepaid research fees, prepaid insurance and prepaid
subscription fees. Insurance recoverable relates to the securities class action lawsuit proposed settlement
to be paid by the Company’s insurance carrier. Prepaid research fees consist of advances for the
Company’s product development activities, including drug manufacturing, contracts for pre-clinical
studies, clinical trials and studies, regulatory affairs and consulting. Such advances are recorded as
expense as the related goods are received or the related services are performed.

PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Depreciation is
calculated to amortize the depreciable assets over their useful lives using the straight-line method and
commences when the asset is placed in service. Useful lives generally range from three years for
computer equipment to three to six years for furniture and equipment. Expenditures for repairs and
maintenance are charged to expenses as incurred.

OPERATING LEASES. The Company recognizes lease expense on a straight-line basis over the
initial lease term. For leases that contain rent holidays, escalation clauses or tenant improvement
allowances, the Company recognizes rent expense on a straight-line basis and records the difference
between the rent expense and rental amount payable as deferred rent. As of December 31, 2014 and
2013, the Company had $19,997 and $21,877, respectively, of deferred rent in accrued expenses and
other liabilities.

FAIR VALUE OF FINANCIAL INSTRUMENTS.The Company’s financial instruments consist of
cash and cash equivalents, certificates of deposit, short-term investments, accounts payable and accrued
expenses and other liabilities, and warrants liability. At December 31, 2014 and 2013, the fair value of
these instruments approximated their carrying value.

FAIR VALUE MEASUREMENTS.Current Financial Accounting Standards Board (FASB) fair value
guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement.
Therefore, a fair value measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability. As a basis for considering market participant
assumptions in fair value measurements, current FASB guidance establishes a fair value hierarchy that
distinguishes between market participant assumptions based on market data obtained from sources
independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the
hierarchy) and the reporting entity’s own assumptions that it believes market participants would use in
pricing assets or liabilities (unobservable inputs classified within Level 3 of the hierarchy).

F-9

Basis of Presentation and Significant Accounting Policies (continued)

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that
the Company has the ability to access at the measurement date. Level 2 inputs are inputs other than
quoted prices included in Level 1 that are observable for the asset or liability, either directly or
indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets,
as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest
rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level
3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own
assumptions, as there is little, if any, related market activity. In instances where the determination of the
fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in
the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its entirety. The Company’s assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgment, and
considers factors specific to the asset or liability.

Fair Value Measurements at Reporting Date Using

Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
7,053,310
--
26,462,962
--

$
$
$
$

Significant
Other
Observable
Inputs
(Level 2)

$
--
$ 3,715,383
--
$
--
$

Significant
Unobservable
Inputs
(Level 3)

--
--
--
2,794,891

$
$
$
$

Fair Value Measurements at Reporting Date Using

Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)

25,693
--
17,483,062
--

$
$
$
$

Significant
Other
Observable
Inputs
(Level 2)

$
--
$ 4,011,576
--
$
--
$

Significant
Unobservable
Inputs
(Level 3)

--
--
--
1,819,562

$
$
$
$

Balances as of
December 31,
2014

7,053,310
3,715,383
26,462,962
2,794,891

Balances as of
December 31,
2013

25,693
4,011,576
17,483,062
1,819,562

Money market funds
Certificates of deposit
Short-term investments
Warrants liability

$
$
$
$

Money market funds
Certificates of deposit
Short-term investments
Warrants liability

$
$
$
$

j. WARRANTS LIABILITY. In October 2011, the Company issued 1,523,370 warrants (the 2011
warrants) to purchase shares of the Company’s common stock in connection with a registered direct
offering under the 2010 Shelf Registration Statement. The Company accounted for these warrants as a
liability measured at fair value due to a provision included in the warrants agreement that provides the
warrants holders with an option to require the Company (or its successor) to purchase their warrants for
cash in an amount equal to their Black-Scholes Option Pricing Model (the Black-Scholes Model) value,
in the event that certain fundamental transactions, as defined, occur. The fair value of the warrants
liability is estimated using the Black-Scholes Model which requires inputs such as the expected term of
the warrants, share price volatility and risk-free interest rate. These assumptions are reviewed on a
quarterly basis and changes in the estimated fair value of the outstanding warrants are recognized each
reporting period in the “Change in fair value of warrants liability” line in the statements of operations.
As of December 31, 2014 and 2013, 1,242,174 and 1,254,870, respectively, of the 2011 warrants
remained outstanding.

RESEARCH AND DEVELOPMENT. Costs incurred in connection with research and development
activities are expensed as incurred. These costs consist of direct and indirect costs associated with
specific projects as well as fees paid to various entities that perform research related services for the
Company.

F-10

Basis of Presentation and Significant Accounting Policies (continued)

STOCK-BASED COMPENSATION. The Company recognizes expense in the statement of
operations for the fair value of all stock-based payments to employees, directors, scientific advisors and
consultants, including grants of stock options and other share-based awards. For stock options, the
Company uses the Black-Scholes option valuation model, the single-option award approach and the
straight-line attribution method. Using this approach, compensation cost is amortized on a straight-line
basis over the vesting period of each respective stock option, generally three to seven years. The
Company estimates forfeitures and adjusts this estimate periodically based on actual forfeitures.

the years ended December 31, 2014, 2013 and 2012,

For
compensation expense as follows:

the Company recorded stock-based

Research and development
General and administrative
Total stock-based compensation

2014
133,862
644,107
777,969

2013
84,728
91,127
175,855

2012
100,221
239,818
340,039

m. CONCENTRATION OF CREDIT RISK. The financial instruments that potentially subject the
Company to concentration of credit risk are cash equivalents (i.e. money market funds), short-term
investments and certificates of deposit. The Company places its cash equivalents with high-credit
quality financial institutions. These amounts at times may exceed federally insured limits. The Company
has not experienced any credit losses in these accounts.

INCOME TAXES. The Company utilizes the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and
laws that will be in effect when the differences are expected to reverse. A valuation allowance is
provided when it is more likely than not that some portion or all of a deferred tax asset will not be
realized.

The Company recognizes the financial statement benefit of a tax position only after determining that the
relevant tax authority would more likely than not sustain the position following an audit. For tax
positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements
is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate
settlement with the relevant tax authority.

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions.
Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and
regulations and require significant judgment to apply. The Company is not subject to U.S. federal, state
and local
tax examinations by tax authorities for years before 2010. If the Company were to
subsequently record an unrecognized tax benefit, associated penalties and tax related interest expense
would be reported as a component of income tax expense.

COMPREHENSIVE INCOME (LOSS).U.S. generally accepted accounting principles require that all
components of comprehensive income (loss) be reported in the financial statements in the period in
which they are recognized. Comprehensive income (loss) is net income (loss), plus certain other items
that are recorded directly into stockholders’ equity. For all periods presented, the Company’s net loss
equals comprehensive loss, since the Company has no items which are considered other comprehensive
income (loss).

F-11

Basis of Presentation and Significant Accounting Policies (continued)

NET INCOME (LOSS) PER SHARE. Basic income (loss) per share is computed by dividing net
income (loss) for the period by the weighted average number of common shares outstanding during the
period. Diluted income (loss) per share is computed by dividing net income (loss) for the period by the
weighted average number of common shares outstanding during the period, plus the dilutive effect of
common stock equivalents, such as convertible preferred stock, stock options and restricted stock units.
For all periods presented, all common stock equivalents were excluded because their inclusion would
have been anti-dilutive. The potential shares, which are excluded from the determination of basic and
diluted net loss per share as their effect is anti-dilutive, are as follows, for the years ended December 31,
2014, 2013 and 2012:

Options to purchase common stock
Warrants to purchase common stock
Unvested restricted stock
Potential equivalent common stock excluded

2014
3,884,610
3,585,924
80,000
7,550,534

2013
3,428,906
4,848,620
--
8,277,526

2012
3,650,535
8,710,870
--
12,361,405

Potentially dilutive options to purchase common stock as of December 31, 2014 have exercise prices
ranging from $0.47 to $3.12. Potentially dilutive options to purchase common stock as of December 31,
2013 and 2012 have exercise prices ranging from $0.47 to $6.00. Potentially dilutive warrants to
purchase common stock as of December 31, 2014, 2013 and 2012 have exercise prices ranging from
$1.04 to $2.08.

SEGMENT INFORMATION. Management has determined that
reportable segment, which is the development and commercialization of pharmaceutical products.

the Company operates in one

RECLASSIFICATIONS. Certain prior year amounts in the financial statements have been reclassified
to conform to the current year presentation.

RECENTLY ISSUED ACCOUNTING STANDARDS.
In June 2014, the FASB issued ASU No.
2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
to Variable Interest Entities Guidance in Topic 810,
Including an Amendment
Requirements,
Consolidation. The amendments in this ASU include:
to present
inception-to-date information on the statements of income, cash flows, and shareholders’ equity, ii)
eliminating the need to label the financial statements as those of a development stage entity, iii)
eliminating the need to disclose a description of the development stage activities in which the entity is
engaged, and iv) eliminating the requirement to disclose in the first year in which the entity is no longer
a development stage entity that in prior years it had been in the development stage. The amendments in
ASU No. 2014-10 are effective for public companies for annual and interim reporting periods beginning
after December 15, 2014. Early adoption is permitted. The Company has early adopted ASU No. 2014-
10, beginning with the interim period ended June 30, 2014.

i) eliminating the requirement

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going
Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern. The amendments in this ASU, require management to assess a company’s ability to
continue as a going concern and to provide related disclosures in certain circumstances. The guidance
will be effective for the annual period ending after December 15, 2016 and subsequent interim and
annual periods thereafter. The Company is currently evaluating the impact of this accounting standard
update on its financial statements.

F-12

3. Warrants Liability, at Fair Value

The Company allocated approximately $1.3 million of proceeds from its October 2011 registered direct
offering to the fair value of common stock purchase warrants issued in connection with the offering that are
classified as a liability (the 2011 warrants). The 2011 warrants are classified as a liability because of
provisions in such warrants that allow for the net cash settlement of such warrants in the event of certain
fundamental transactions (as defined in the warrant agreement). The valuation of the 2011 warrants is
determined using the Black-Scholes Model. This model uses inputs such as the underlying price of the shares
issued when the warrant is exercised, volatility, risk free interest rate and expected life of the instrument. The
Company has determined that the 2011 warrants liability should be classified within Level 3 of the fair value
hierarchy by evaluating each input for the Black-Scholes Model against the fair value hierarchy criteria and
using the lowest level of input as the basis for the fair value classification. There are six inputs: closing price
of the Company’s common stock on the day of evaluation; the exercise price of the warrants; the remaining
term of the warrants; the volatility of the Company’s common stock; annual rate of dividends; and the risk
free rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily
observable in the warrants agreement. The annual rate of dividends is based on the Company’s historical
practice of not granting dividends. The closing price of the Company’s common stock would fall under Level
1 of the fair value hierarchy as it is a quoted price in an active market. The risk free rate of return is a Level 2
input, while the historical volatility is a Level 3 input in accordance with the fair value accounting guidance.
Since the lowest level input is a Level 3, the Company determined the 2011 warrants liability is most
appropriately classified within Level 3 of the fair value hierarchy. This liability is subject to fair value mark-
to-market adjustment each reporting period. The calculated value of the 2011 warrants liability was
determined using the Black-Scholes option-pricing model with the following assumptions:

Risk free interest rate
Expected term
Expected volatility
Expected dividend yield
Expected forfeiture rate

December 31, 2014
0.81%
2.34 years
112%
0%
0%

December 31, 2013
0.94%
3.34 years
108%
0%
0%

The following table rolls forward the fair value of the Company’s warrants liability activity for the years

ended December 31, 2014, 2013 and 2012:

Fair value, beginning of period
Issuance of warrants
Exercise of warrants
Change in fair value
Fair value, end of period

2014
$ 1,819,562
—
(18,537)
993,866
$ 2,794,891

2013
498,587

—

(569,384)
1,890,359
$ 1,819,562

2012
$ 1,645,240

—
(16,875)
(1,129,778)
498,587

During 2014, 12,696 of the 2011 warrants were exercised, with proceeds to the Company of $16,504. During
2013, 256,000 of the 2011 warrants were exercised, with proceeds to the Company of $332,800. During 2012,
12,500 of the 2011 warrants were exercised with proceeds to the Company of $16,249. The Company recognizes
the change in the fair value of the warrants liability as a non-operating income or loss in the accompanying
statements of operations.

F-13

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following as of December 31:

Insurance recoverable (see Note 7)
Prepaid research fees
Prepaid insurance
Prepaid subscriptions fees
Prepaid offering costs
Prepaid rent
Other
Total prepaid expenses

2014
$ 3,500,000
571,428
385,496
30,495
20,029
10,870
34,380
$ 4,552,698

2013

—
1,334,149
219,651
24,643
—
7,848
23,151
$ 1,609,442

Property and Equipment

Property and equipment, net consists of the following as of December 31:

Computer equipment
Furniture and equipment

Less: Accumulated depreciation

Total property and equipment, net

2014
95,754
88,816
184,570
(113,193)
71,377

2013
81,551
51,523
133,074
(92,446)
40,628

Depreciation expense was $26,574, $22,483 and $10,889, respectively, for the years ended December 31,

2014, 2013 and 2012.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following as of December 31:

Accrued settlement liability (see Note 7)
Accrued pre-clinical and clinical trial expenses
Accrued professional fees
Accrued compensation and benefits
Accrued license fees
Deferred rent
Other

Current accrued expenses and other liabilities

Deferred rent—non-current

Non-current accrued expenses and other liabilities

Total accrued expenses and other liabilities

2014
$ 3,500,000
333,928
43,973
31,956
115,000
4,158
11,801
4,040,816
15,839
15,839
$ 4,056,655

2013

—

1,083,749
117,240
14,539
65,000
2,746
5,546
1,288,820
19,131
19,131
$ 1,307,951

The accrued settlement liability of $3,500,000 as of December 31, 2014 is related to the securities class action
lawsuit proposed settlement, as disclosed with more particularity in Note 7. The proposed settlement amount is
expected to be paid for and covered by the Company’s insurance carrier; therefore, there is a corresponding
insurance recoverable recorded in “Prepaid Expenses and Other Current Assets” in the accompanying balance sheet
as of December 31, 2014.

F-14

Commitments and Contingencies

The Company has contracted with drug manufacturers and other vendors,

including clinical research
organizations (CRO) overseeing the clinical trials of the Company’s drug candidates, to assist in the execution of the
Company’s pre-clinical and clinical trials, analysis, and the preparation of material necessary for the future
submission of new drug applications (NDA’s) with the U.S. Food and Drug Administration (FDA). The contracts
are cancelable at any time, but obligate the Company to reimburse the providers for any time or costs incurred
through the date of termination.

The Company has executed a noncancellable operating lease agreement for its corporate office. The lease has
free and escalating rent payment provisions. The Company recognizes rent expense under such lease on a straight-
line basis over the term of the lease. As of December 31, 2014, future minimum lease payments under the operating
lease agreement are as follows:

2015
2016
2017

103,902
107,010
100,076
310,988

During June 2011, in connection with the renewal of the corporate office lease, the Company entered into the
first amendment to the lease. The amendment extends the original lease term for five years and relocated the
Company into another space within the same building. During February 2014, the Company entered into the second
amendment of the lease for an additional contiguous space under substantially the same terms. The corporate office
lease is cancellable upon the payment of an early termination penalty during 2015. The lease provides for fixed
increases in minimum annual rent payments, as well as rent free periods. The total amount of rental payments due
over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The
differences between rent expense recorded and the amount paid is credited or charged to accrued expenses and other
liabilities in the accompanying balance sheets. Rent expense was $90,163, $69,930 and $65,310, respectively, for
the years ended December 31, 2014, 2013 and 2012. The Company’s office lease expires in November 2017.

Securities Class Action Lawsuit

In October 2013 and November 2013, three securities class action lawsuits were filed against the Company
and certain of its executive officers and directors seeking unspecified damages in the U.S. District Court for the
Southern District of Florida (the Court). These complaints, which were substantially identical, purported to state a
claim for violation of federal securities laws on behalf of a class of those who purchased the Company’s common
stock between October 31, 2012 and October 18, 2013. Two of the cases were voluntarily dismissed by the plaintiffs
and the Court granted the Company’s motion to dismiss on the third case on January 3, 2014. However, the Court
granted leave to the plaintiffs to file an amended complaint within 20 days.

On January 23, 2014, the plaintiffs filed an amended complaint against the Company and one of its
executive officers seeking unspecified damages. The amended complaint purports to state a claim for alleged
misrepresentations regarding the development of Firdapse(cid:140) on behalf of a class of those who purchased shares of the
Company’s common stock between August 27, 2013 and October 18, 2013. In February 2014, the Company filed a
motion to dismiss the amended complaint, which was granted in part and denied in part by the Court. Subsequently, on
September 29, 2014, the Court certified a class consisting of all persons or entities that purchased shares of the
Company's common stock during the period from August 27, 2013, through October 18, 2013 (the Class Period), and
who did not sell such securities prior to October 18, 2013 (excluding: defendants; any entities affiliated with the
Company, the present and former officers and directors of the Company or any subsidiary or affiliate thereof;
members of such excluded persons’ immediate families and their legal representatives, heirs, successors or assigns;
and any entity in which any excluded person has or had a controlling interest).

F-15

Commitments and Contingencies (continued)

Following a mediation in mid-October conducted by an independent mediator, the Company entered into a
memorandum of understanding (MOU) with the lead plaintiffs in the class action lawsuit to settle the lawsuit. The
settlement was then reduced to a formal stipulation of settlement between the parties to the lawsuit, which was filed
with the Court on November 21, 2014. The settlement was preliminarily approved by the Court in December 3,
2014, and a final hearing to determine the fairness of the settlement has been scheduled for March 16, 2015.

In connection with the settlement, the Company will pay $3.5 million in return for a dismissal and release
of all claims against the defendants. The settlement amount has been placed in escrow by the Company's insurance
carrier, subject to final Court approval of the settlement. Under the proposed settlement, the defendants, and various
of their related persons and entities, will receive a full release of all claims that were or could have been brought in
the action, as well as all claims that arise out of, are based upon, or relate to the allegations, transactions, facts,
representations, omissions or other matters involved in the action related in any way to the purchase or acquisition of
the Company's securities by class members during the class period.

The proposed settlement contains no admission of any liability or wrongdoing on the part of the defendants,
each of whom continues to deny all of the allegations against each of them and believes that the claims are without
merit. Because the full amount of the proposed settlement payment is expected to be paid by the Company's
insurance carrier, the settlement is not expected to have a material adverse effect on the Company's financial
position or results of operations. There can be no assurance that the settlement will be approved by the Court.

Obligations under capital leases are not significant.

For commitments related to the Company’s license agreements with BioMarin (defined below) and

Northwestern (defined below), see Note 8.

Agreements

LICENSE AGREEMENT WITH BROOKHAVEN. The Company had a license agreement with
Brookhaven Science Associates, LLC, as operator of Brookhaven National Laboratory under contract
with the United States Department of Energy (“Brookhaven”), whereby the Company had obtained an
exclusive license for several patents and patent applications in the U.S. and outside the U.S. relating to
the use of vigabatrin as a treatment for cocaine and other addictions and obsessive-compulsive
disorders. This license agreement ran concurrently with the term of the last to expire of the licensed
patents, the last of which currently expires in 2023. The Company paid a fee to obtain the license in the
amount of $50,000. Under the license agreement, the Company agreed to pay Brookhaven certain
milestones and to reimburse them for certain patent related expenses.

On November 8, 2013, effective October 1, 2013,
the Company and Brookhaven entered into a
termination agreement cancelling the license agreement. As part of that agreement, the Company and
Brookhaven entered into mutual releases, including a release from any further obligation for the
Company to reimburse Brookhaven for any of Brookhaven’s patent related expenses.

LICENSE AGREEMENT WITH NORTHWESTERN UNIVERSITY. On August 27, 2009, the
Company entered into a license agreement with Northwestern University (Northwestern), under which it
acquired worldwide rights to commercialize new GABA aminotransferase inhibitors and derivatives of
vigabatrin that have been discovered by Northwestern. Under the terms of the license agreement,
Northwestern granted the Company an exclusive worldwide license to certain composition of matter
patents related to the new class of inhibitors and a patent application relating to derivatives of
vigabatrin. The Company has identified and designated the lead compound under this license as CPP-
115.

F-16

Agreements (continued)

Under the license agreement with Northwestern, the Company is responsible for continued research and
development of any resulting product candidates. As of December 31, 2014, the Company had paid
Northwestern $251,590 in connection with the license and had accrued license fees of $115,000 and
$65,000 as of December 31, 2014 and 2013, respectively, in the accompanying balance sheets for
expenses, maintenance fees and milestones. In addition, the Company is obligated to pay certain
milestone payments in future years relating to clinical development activities with respect to CPP-115,
and royalties on any products resulting from the license agreement. The next milestone payment of
$150,000 is due on the earlier of successful completion of the first Phase 2 clinical trial for CPP-115 or
August 27, 2015.

LICENSE AGREEMENT WITH NEW YORK UNIVERSITY AND THE FEINSTEIN
INSTITUTE FOR MEDICAL RESEARCH. On December 13, 2011, the Company entered into a
license agreement with New York University (NYU) and the Feinstein Institute for Medical Research
(FIMR) under which it acquired worldwide rights to commercialize GABA aminotransferase inhibitors
in the treatment for Tourette Syndrome. The Company is obligated to pay certain milestone payments in
future years relating to clinical development activities and royalties on any products resulting from the
license agreement.

LICENSE AGREEMENT WITH BIOMARIN. On October 26, 2012, the Company entered into a
strategic collaboration with BioMarin Pharmaceutical, Inc. (BioMarin) for Firdapse(cid:140). The key
components of the collaboration include: (i) the Company licensed the exclusive North American rights
to Firdapse(cid:140) pursuant to a License Agreement, dated as of October 26, 2012 (the License Agreement)
between the Company and BioMarin, and (ii) BioMarin made a $5,000,000 investment in the Company
pursuant to the terms of a Convertible Promissory Note and Note Purchase Agreement, dated as of
October 26, 2012 (the Investment Agreement). The Investment Agreement provides that the Company
will use the $5 million solely for the purpose of developing Firdapse(cid:140).

As part of the License Agreement, the Company took over a Phase 3 Trial previously being conducted
by BioMarin and is obligated to use its diligent efforts to seek to obtain regulatory approval for and to
commercialize Firdapse(cid:140) in the United States. The Company was obligated to use diligent efforts to
complete the double-blind treatment phase of the Phase 3 Trial within 24 months of entering into the
License Agreement, and BioMarin had the right to terminate the License Agreement if such treatment
phase had not been completed in such 24-month period (unless the Company was using diligent effort to
pursue the completion of such treatment phase and had spent at least $5 million in connection with the
conduct of the Phase 3 Trial during such 24 month period, which condition has been satisfied during the
third quarter of 2014. ). On September 29, 2014, the Company announced positive top-line results from
its Phase 3 Trial of Firdapse(cid:140) for the symptomatic treatment of LEMS. Both co-primary endpoints,
quantitative myasthenia gravis score (QMG) and subject global
impression (SGI) demonstrated
statistical significance, as did a secondary endpoint for the physician’s clinical global impression of
improvement (CGI-I).

As part of the License Agreement, the Company agreed: (i) to pay BioMarin royalties for seven years
from the first commercial sale of Firdapse(cid:140) equal to 7% of net sales (as defined in our license
agreement) in North America for any calendar year for sales up to $100 million, and 10% of net sales in
North America in any calendar year in excess of $100 million; (ii) to pay to the third-party licensor of
the rights sublicensed to us royalty payments for seven years from the first commercial sale of
Firdapse(cid:140) equal to 7% of net sales (as defined in the license agreement between BioMarin and the
third-party licensor) in any calendar year; and (iii) to pay certain milestone payments that BioMarin is
obligated to pay (approximately $2.6 million of which will be due upon acceptance by the FDA of a
filing of an NDA for Firdapse(cid:140) for the treatment of LEMS, and approximately $7.2 million of which
will be due on the unconditional approval by the FDA of an NDA for Firdapse(cid:140) for the treatment of
LEMS). The Company also agreed to share in the cost of certain post-marketing studies being
conducted by BioMarin, and, as of December 31, 2014, the Company had paid BioMarin $3.1 million
related to expenses in connection with Firdapse(cid:140) studies and trials.

F-17

Agreements (continued)

On April 15, 2014, effective as of April 8, 2014, the Company and BioMarin entered into Amendment
No. 1 to the License Agreement, amending in certain respects the License Agreement, dated October 26,
2012, between the Company and BioMarin. The amendment related to purchases of additional product
by the Company from BioMarin, the sharing of data between the parties with respect to clinical trials
and studies undertaken by each party and the payment terms for certain joint studies.

AGREEMENTS FOR DRUG DEVELOPMENT, PRE-CLINICAL AND CLINICAL STUDIES.
The Company has entered into agreements with contract manufacturers for the manufacture of drug and
study placebo for the Company’s trials and studies, with contract research organizations (CRO) to
conduct and monitor the Company’s trials and studies and with various entities for laboratories and
other testing related to the Company’s trials and studies. The contractual terms of the agreements vary,
but most require certain advances as well as payments based on the achievement of milestones. Further,
these agreements are cancellable at any time, but obligate the Company to reimburse the providers for
any time or costs incurred through the date of termination.

Related Party Transactions

The Company has entered into consulting agreements with one of the Company’s officers and members of the
Company’s Scientific Advisory Board. During the years ended December 31, 2014, 2013 and 2012, the Company
paid approximately $10,000, $10,000 and $42,000, respectively, in consulting fees to related parties.

The Company has an employment agreement with its Chief Executive Officer. Under this agreement, the CEO
will receive an annual base salary of approximately $453,000 in 2015, and may earn bonus compensation of up to
50% of his salary based on performance. This agreement expires in November 2016.

10.

Income Taxes

As of December 31, 2014 and 2013, the Company had deferred tax assets of approximately $24,895,000and
$19,387,000, respectively, of which approximately $22,898,000 and $17,685,000 represent United States federal
and state net operating loss carryforwards and start-up costs. The remaining temporary differences represent non-
deductible stock option and equity expense. The related deferred tax asset has a 100% valuation allowance as of
December 31, 2014 and 2013, as the Company believes it is more likely than not that the deferred tax asset will not
be realized. The change in valuation allowance was approximately $5,508,000, $3,796,000 and $2,151,000 in 2014,
2013 and 2012, respectively. There are no other significant temporary differences. The net operating loss carry-
forwards of approximately $40,604,000 as of December 31, 2014 will expire at various dates beginning in 2025 and
ending in 2034. If an ownership change, as defined under Internal Revenue Code Section 382, occurs, the use of
these carry-forwards may be subject to limitation. The effective tax rate of 0% in all periods presented differs from
the statutory rate of 35% due to the valuation allowance and because the Company had no taxable income.

11.

Stockholders’ Equity

Preferred Stock

The Company has 5,000,000 shares of authorized preferred stock, $0.001 par value per share at December 31,

2014 and 2013. No shares of preferred stock were outstanding at December 31, 2014 and 2013.

Common Stock

The Company has 100,000,000 shares of authorized common stock with a par value of $0.001 per share. At
December 31, 2014 and 2013, 69,119,092 and 54,132,937 shares, respectively, of common stock were issued and
outstanding. Each holder of common stock is entitled to one vote of each share of common stock held of record on
all matters on which stockholders generally are entitled to vote.

F-18

11. Stockholders’ Equity (continued)

2010 Shelf Registration Statement

On December 3, 2010, the Company filed a Shelf Registration Statement on Form S-3 (the 2010 Shelf
Registration Statement) with the SEC to sell up to $30 million of common stock and common stock purchase
warrants. This registration statement (file No. 333-170945) was declared effective by the SEC on December 15,
2010. The Company has to date conducted the following sales of its securities under the 2010 Shelf Registration
Statement:

(a) On March 8, 2011, the Company filed a prospectus supplement and offered for sale to institutional
investors 2,259,943 shares of its common stock at a price of $1.12 per share and received gross proceeds
of approximately $2.5 million, before underwriting commission and incurred expenses of approximately
$300,000.

(b) On October 28, 2011, the Company filed a prospectus supplement and offered for sale to institutional
investors 3,046,740 shares of its common stock together with common stock purchase warrants to
purchase 1,523,370 shares of the Company’s common stock at a price of $1.15 per share and
corresponding warrant and received gross proceeds of approximately $3.5 million, before underwriting
commission and other expenses totaling approximately $335,000. The warrants issued in this offering,
which expire on April 28, 2017 and have an exercise price of $1.30 per share, have been accounted for
as a liability. See Note 3.

(c) On August 28, 2012, the Company filed a prospectus supplement and offered for sale to institutional
investors 4,000,000 shares of its common stock together with common stock purchase warrants to
purchase 1,200,000 shares of the Company’s common stock at a price of $1.50 per share and
corresponding warrant and received gross proceeds of approximately $6.0 million, before underwriting
commission and other expenses totaling approximately $440,000. These warrants, which will expire on
August 28, 2017 and have an exercise price of $2.08 per share, have been accounted for as equity
instruments, since they do not contain features (such as cash settlement or anti-dilution features) that
would preclude the Company from accounting for these warrants as equity.

(d) On September 5, 2013, the Company filed a prospectus supplement and offered for sale to institutional
investors 8,800,000 shares of its common stock at a price of $1.72 per share and received gross proceeds
of approximately $15.1 million before underwriting commissions and incurred expenses of
approximately $1,064,000.

The Company has no further availability under the 2010 Shelf Registration Statement.

2012 Form S-1 Registration Statement

On May 24, 2012, the Company sold 6,000,000 shares of its common stock together with common stock
purchase warrants to purchase 6,000,000 shares of the Company’s common stock, at a price of $0.80 per share and
corresponding warrant. These securities were issued pursuant to a Form S-1 registration statement that became
effective on May 23, 2012 (file no. 333-180617). The Company received gross proceeds of approximately $4.8
million from this offering, before underwriting commission and other expenses totaling approximately $795,000.
The May 2012 warrants, which expire five years from their date of issuance and have an exercise price of $1.04 per
share, have been accounted for as equity instruments, since they do not contain features (such as net cash settlement
or anti-dilution features) that would preclude the Company from accounting for these warrants as equity.

F-19

11. Stockholders’ Equity (continued)

2014 Shelf Registration Statement

On January 31, 2014, the Company filed a Shelf Registration Statement on Form S-3 (the 2014 Shelf
Registration Statement) with the SEC to sell up to $100 million of shares of common stock. This registration
statement (file No. 333-193699) was declared effective by the SEC on March 19, 2014. The Company has to date
conducted the following sales of its securities under the 2014 Shelf Registration Statement:

(a) On April 3, 2014, the Company filed a prospectus supplement and offered for sale 13,023,750 shares of its
common stock at a price of $2.21 per share in an underwritten public offering. The Company received
gross proceeds in the public offering of approximately $28.8 million before underwriting commission and
incurred expenses of approximately $2.1 million.

(b) Subsequent to year end, on February 4, 2015, the Company filed a prospectus supplement and offered for
sale 11,500,000 shares of its common stock at a price of $3.25 per share in an underwritten public offering.
The Company received gross proceeds in the public offering of approximately $37.4 million before
underwriting commission and incurred expenses of approximately $2.7 million. (See Note 15).

Following the February 2015 offering, there is approximately $33.8 million available for future sale under the
2014 Shelf Registration Statement. If the Company's public float (the market value of its common stock held by
non-affiliate stockholders) falls below $75 million, the Company will be subject to a further limitation under which
it can sell no more than one-third (1/3) of its public float during any 12-month period. Further, the number of shares
that the Company can sell at any one time may be limited under certain circumstances to 20% of the outstanding
common stock under applicable NASDAQ marketplace rules.

Warrant Exercises

During the years ended December 31, 2014 and 2013, the Company issued an aggregate of 1,262,696 and
3,862,250 shares of its authorized but unissued common stock upon the exercise of previously issued common stock
purchase warrants, raising gross proceeds of $1,316,503 and $4,083,300, respectively.

BioMarin convertible promissory note automatic conversion into common stock shares

On October 26, 2012, the Company entered into a note purchase agreement with BioMarin, pursuant to which
the Company issued BioMarin a convertible promissory note in the principal amount of $5 million. (See Note 8).
The $5 million note automatically converted into 6,666,667 shares of the Company’s common stock (at a price of
$0.75 per share) on December 10, 2012.

Stockholder Rights Plan

On September 20, 2011, the Board of Directors approved the Company’s adoption of a Stockholder Rights
Plan. Under the Plan, a dividend of one preferred share purchase right (a Right) was declared for each share of
common stock of the Company that was outstanding on October 7, 2011. Each Right entitles the holder to purchase
from the Company one one-hundredth of a share of Series A Junior Preferred Stock at a purchase price of $7.80,
subject to adjustment.

F-20

11.

Stockholders’ Equity (continued)

The Rights will trade automatically with the common stock and will not be exercisable until a person or group
has become an “acquiring person” by acquiring 17.5% or more of the Company’s outstanding common stock, or a
person or group commences, or publicly announces a tender offer that will result in such a person or group owning
17.5% or more of the Company’s outstanding common stock. Upon announcement that any person or group has
become an acquiring person, each Right will entitle all rightholders (other than the acquiring person) to purchase, for
the exercise price of $7.80, a number of shares of the Company’s common stock having a market value equal to
twice the exercise price. Rightholders would also be entitled to purchase common stock of the acquiring person
having a value of twice the exercise price if, after a person had become an acquiring person, the Company were to
enter into certain mergers or other transactions. If any person becomes an acquiring person, the Board of Directors
may, at its option and subject to certain limitations, exchange one share of common stock for each Right.

The Rights have certain anti-takeover effects, in that they would cause substantial dilution to a person or
group that attempts to acquire a significant interest in the Company on terms not approved by the Board of
Directors. In the event that the Board of Directors determines a transaction to be in the best interests of the Company
and its stockholders, the Board of Directors may redeem the Rights for $0.001 per share at any time prior to a person
or group becoming an acquiring person. The Rights will expire on September 20, 2016, unless earlier redeemed or
exchanged.

12.

Stock Compensation Plans

The Company issues options, restricted stock, stock appreciation rights and restricted stock units (collectively,
the “Awards”) to employees, directors, consultants and scientific advisors of the Company under the 2006 and 2014
Stock Incentive Plans (the 2006 Plan and the 2014 Plan or collectively, the Plans). Prior to July 2006, the Company
granted options pursuant to written agreements to purchase an aggregate of 2,352,254 shares of common stock. At
December 31, 2014, no shares remain available for future issuance under the 2006 Plan. On February 27, 2014, the
Company’s Board of Directors approved the adoption of the “Catalyst Pharmaceutical Partners, Inc. 2014 Stock
Incentive Plan”. The 2014 Plan became effective upon stockholder approval of the 2014 Plan at the Company’s
2014 Annual Meeting of Stockholders held on May 15, 2014. Under the Plan, 4,000,000 shares were reserved for
issuance under the 2014 Plan and as of December 31, 2014, 2,640,000 shares remain available for future issuance
under the 2014 Plan.

Stock Options

The Company has granted stock options to employees, officers, directors, scientific advisors and consultants
generally at exercise prices equal to the market price of the common stock at grant date. Option awards generally
vest over a period of 2 to 4 years of continuous service and have contractual terms from 5 to 10 years. Certain
awards provide for accelerated vesting if there is a change in control. The Company issues new shares as shares are
required to be delivered upon exercise of outstanding stock options.

During the year ended December 31, 2014, options to purchase 580,000 shares of the Company’s common
stock were exercised with proceeds of $522,000. Further, during the year ended December 31, 2014, options to
purchase 185,000 shares of the Company’s common stock were exercised on a “cashless” basis, resulting in the
issuance of an aggregate of 119,709 shares of the Company’s common stock.

During the year ended December 31, 2013, options to purchase 50,000 shares of the Company’s common

stock were exercised with proceeds of $23,500.

During the years ended December 31, 2014, 2013 and 2012 the Company recorded non-cash stock-based

compensation expense related to stock options totaling $767,838, $175,855 and $340,039, respectively.

F-21

12.

Stock Compensation Plans (continued)

During the year ended December 31, 2014, the Company granted five and seven-year options to purchase an
aggregate of 1,305,000 shares of the Company’s common stock to certain of the Company’s officers, employees,
directors, and consultants. During the years ended December 31, 2013 and 2012, the Company granted five-year
options to purchase an aggregate of 115,000 shares and 975,000 shares, respectively, of the Company’s common
stock to certain of the Company’s officers, employees, directors and consultants.

Stock option activity under the Company’s written stock option agreements and the Plans for the year ended

December 31, 2014 is summarized as follows:

Outstanding at beginning of year

Granted
Exercised
Forfeited or cancelled
Expired

Outstanding at end of year
Exercisable at end of year

Number of
Options
3,428,906
1,305,000
(765,000)
(50,000)
(34,296)
3,884,610
2,687,943

Weighted
Average
Exercise
Price

$
$

0.80
3.08
0.90
2.71
3.28
1.50
0.86

Weighted
Average
Remaining
Contractual
Term (in years)

Aggregate
Intrinsic
Value

3.29
1.91

$ 5,897,040
$ 5,703,106

Other information pertaining to stock option activity during the years ended December 31, 2014, 2013 and

2012 was as follows:

Weighted–average fair value of granted stock options
Total fair value of vested stock options
Total intrinsic value of exercised stock options

2014

2.41
$
$ 409,476
$1,339,100

2013

0.48
$
$ 166,633
$ 17,975

2012

0.32
$
$ 348,815
40,050
$

The following table summarizes information about the Company’s options outstanding at December 31, 2014:

Range of
Exercise
Prices

$0.47
$0.69
$0.85
$1.07- $1.09
$2.34- $2.35
$3.03- $3.12

Number
Outstanding
1,000,000
729,610
40,000
860,000
30,000
1,225,000
3,884,610

Options Outstanding

Weighted
Average
Remaining
Contractual
Life (Years)
2.97
0.17
3.39
1.48
4.39
6.67
3.29

Weighted
Average
Exercise
Price

$0.47
$0.69
$0.85
$1.08
$2.35
$3.12
$1.50

Options Exercisable
Weighted
Average
Remaining
Contractual
Life (Years)
2.95
0.17
3.39
1.48
4.24
6.66
1.91

Weighted
Average
Exercise
Price

$0.47
$0.69
$0.85
$1.08
$2.34
$3.12
$0.86

Number
Exercisable
950,000
729,610
13,333
860,000
10,000
125,000
2,687,943

As of December 31, 2014, there was approximately $2,400,000 of unrecognized compensation expense related
to non-vested stock option awards granted under the Plans. That cost is expected to be recognized over a weighted
average period of approximately 2.5 years.

F-22

12.

Stock Compensation Plans (continued)

The Company utilizes the Black-Scholes option-pricing model to determine the fair value of stock options on
the date of grant. This model derives the fair value of stock options based on certain assumptions related to the
expected stock price volatility, expected option life, risk-free interest rate and dividend yield. Expected volatility is
based on reviews of historical volatility of the Company’s common stock. The estimated expected option life is
based upon estimated employee exercise patterns and considers whether and the extent to which the options are in-
the-money. The Company estimates the expected option life for options granted to employees and directors based
upon the simplified method. Under this method, the expected life is presumed to be the mid-point between the
vesting date and the end of the contractual term. The Company will continue to use the simplified method until it has
sufficient historical exercise data to estimate the expected life of the options. The risk-free interest rate assumption is
based upon the U.S. Treasury yield curve appropriate for the estimated life of the stock options awards. The
expected dividend rate is zero. Stock–based compensation expense also includes an estimate, which the Company
makes at grant date, of the number of awards that are expected to be forfeited. The Company revises this estimate in
subsequent periods if actual forfeitures differ from those estimates.

Assumptions used during the years were as follows:

Risk free interest rate
Expected term
Expected volatility
Expected dividend yield
Expected forfeiture rate

Year ended December 31,

2014
1.18% to 2.03%
3 to 7 years
115%
-- %
-- %

2013
0.45% to 0.53%
3 years
137%
-- %
-- %

2012

0.28% to 0.66%
3 to 5 years
120%
-- %
-- %

Restricted Stock Units

Under the 2014 Plan, participants may be granted restricted stock units, each of which represents a
conditional right to receive shares of common stock in the future. The restricted stock units granted under this plan
generally vest ratably over a three to four-year period. Upon vesting, the restricted stock units will convert into an
equivalent number of shares of common stock. The amount of expense relating to the restricted stock units is based
on the closing market price of the Company's common stock on the date of grant and is amortized on a straight-line
basis over the requisite service period. There was no restricted stock unit activity during 2013 or 2012. Restricted
stock unit activity during 2014 was as follows:

Nonvested balance at beginning of year

Granted
Vested
Forfeited

Nonvested balance at end of year

2014

Number
of
Restricted
Stock Units

Weighted
Average Grant
Date Fair
Value

—
80,000
—
—
80,000

—
2.83
—
—
2.83

During the years ended December 31, 2014, 2013 and 2012, the Company recorded non-cash stock-based

compensation expense related to restricted stock units totaling $10,131, $0 and $0, respectively.

F-23

13. Benefit Plan

The Company maintains an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code
covering all eligible employees. Subject to certain dollar limits, eligible employees may contribute up to 15% of
their pre-tax annual compensation to the plan. The Company has elected to make discretionary matching
contributions of employee contributions up to 4% of an employee’s gross salary. For the years ended December 31,
2014, 2013 and 2012, the Company’s matching contributions were approximately $44,000, $30,000 and $28,000,
respectively.

14. Quarterly Financial Information (unaudited)

The following table presents unaudited supplemental quarterly financial information for the years ended

December 31, 2014 and 2013:

Revenues
Loss from operations
Change in fair value of warrants

liability

Net loss
Loss per share —basic and diluted

Revenues
Loss from operations
Change in fair value of warrants

liability

Net loss
Loss per share —basic and diluted

March 31,
2014

—
(3,508,365)

(335,514)
(3,811,119)
(0.07)

March 31,
2013

—
(1,705,430)

(45,326)
(1,744,289)
(0.04)

Quarter Ended

June 30,
2014

$
—
(2,990,173)

(223,591)
(3,198,020)
(0.05)
$

September 30,
2014

—
(4,109,029)

(906,787)
(5,009,892)
(0.07)

December 31,
2014

—
(3,983,861)

472,026
(3,490,030)
(0.05)

Quarter Ended

June 30,
2013

—
$
(2,653,529)

(498,587)
(3,143,590)
(0.08)
$

September 30,
2013

—
(3,245,776)

(2,676,601)
(5,912,059)
(0.13)

December 31,
2013

—
(2,706,923)

1,330,155
(1,354,658)
(0.03)

Quarterly basic and diluted net loss per common share were computed independently for each quarter and do

not necessarily total to the full year basic and diluted net loss per common share.

15.

Subsequent Event

Subsequent to year end, on February 4, 2015, the Company filed a prospectus supplement and offered for sale
11,500,000 shares of its common stock at a price of $3.25 per share in an underwritten public offering. The
Company received gross proceeds in the public offering of approximately $37.4 million before underwriting
commission and incurred expenses of approximately $2.7 million. (See Note 11).

Subsequent to year-end, the Company issued an aggregate of 152,174 shares of its authorized but unissued
common stock upon the exercise of previously issued common stock purchase warrants that were issued in October
2011, raising gross proceeds of approximately $198,000. Additionally, subsequent to year end, stock options to
purchase 829,608 shares of the Company’s common stock were exercised on a “cashless” basis, resulting in the
issuance of an aggregate of 673,583 shares of the Company’s common stock.

F-24

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blank

Catalyst is Committed to Changing the Lives

of Patients With Rare, Debilitating Diseases

• Successfully completing the

largest phase 3 clinical trial in

LEMS patients

• Introduced the Firdapse Expanded

Access Program (EAP) for patient

suffering with LEMS or CMS

• Catalyst continues to provide

strong support to both patient

and professional associations

including AANEM, AAN, ANA,

MDA and NORD

Example of the Firdapse EAP

patient announcement as seen

in MDA Quest Magazine

Corporate Directory

BOARD OF DIRECTORS

MANAGEMENT TEAM

ANNUAL MEETING

Patrick J. McEnany
Chairman of the Board, President,
Chief Executive Officer and
Co-Founder
Catalyst Pharmaceutical Partners, Inc.

Philip H. Coelho
President and Chief Executive Officer
Synergenesis Inc.

Richard Daly
Former President
AstraZeneca US Diabetes

Donald A. Denkhaus
Chairman and Chief Financial Officer
The Kitchen, LLC

Charles B. O'Keeffe
Lead Independent Director
Professor, Pharmacology,
Epidemiology and Community Health
Virginia Commonwealth University

David S. Tierney, MD
Chief Executive Officer
Icon Bioscience, Inc.

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

The annual meeting of stockholders will
be held on Thursday, May 21, 2015 at
9:00 a.m., local time, at:

Hyatt Regency Coral Gables
50 Alhambra Plaza
Coral Gables, Florida 33134

INVESTOR INFORMATION

Recent press releases and other
Catalyst Pharmaceutical Partners
information are available without charge
on Catalyst’s website at
www.catalystpharma.com
or by written request to:

Catalyst Pharmaceutical Partners, Inc.
355 Alhambra Circle, Suite 1500
Coral Gables, FL 33134
(305) 529-2522
(305) 529-0933 fax
Email:agrande@catalystpharma.com

STOCK LISTING

Catalyst’s common stock trades on the
Nasdaq Capital Market under the
symbol CPRX.

TRANSFER AGENT

Continental Stock Transfer
17 Battery Place
New York, NY 10004
(212) 509-4000

Steven R. Miller, PhD
Chief Operating Officer
and Chief Scientific Officer

Alicia Grande, CPA, CMA
Vice President, Treasurer and
Chief Financial Officer

David D. Muth
Executive Vice President and
Chief Commercial Officer

M. Douglas Winship
Vice President of Regulatory
Operations

Bernardo Mosquera, M.D.
Vice President of Clinical
Operations

David J. Caponera
Vice President, Patient Advocacy and
Reimbursement

Charles W. Gorodetzky, MD, PhD
Chief Medical Officer

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Grant Thornton LLP
Miami, Florida

CORPORATE COUNSEL

Akerman LLP
Miami, Florida

355 Alhambra Circle
Suite 1500
Coral Gables, FL 33134
(305) 529-2522
(305) 529-0933 fax