Catalyst Pharmaceuticals Annual Report 2020

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FY2020 Annual Report · Catalyst Pharmaceuticals

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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, 2020
OR

☐

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

Commission File No. 001-33057

CATALYST PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of jurisdiction of
incorporation or organization)

355 Alhambra Circle, Suite 801
Coral Gables, Florida
(Address of principal executive offices)

76-0837053
(IRS Employer
Identification No.)

33134
(Zip Code)

Registrant’s telephone number, including area code: (305) 420-3200
Securities Registered Pursuant to Section 12(b) of the Act.

Title of Each Class

Ticker
Symbol

Common Stock, par value $0.001 per share

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

Name of Exchange
on Which Registered

NASDAQ Capital Market

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if registrant is not required to file reports pursuant to Rule 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐

Non-accelerated filer ☐

Accelerated filer

Smaller reporting company

☒

☐

Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit
report ☒

As of June 30, 2020, 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 $444,887,344.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 103,824,973 shares of common stock,
$0.001 par value per share, were outstanding as of March 11, 2021.
Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2021 annual meeting of stockholders. The proxy statement
with respect to the 2021 annual meeting of stockholders will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2020.

Table of Contents

PART I

Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3.
Item 4.

Legal Proceedings
Mine Safety Disclosure

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Item 8.
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.
Item 12.
Item 13. Certain Relationships and Related Transactions
Item 14.

Executive Compensation
Security Ownership of Certain Beneficial Owners and Management

Principal Accounting Fees and Services

PART IV

Item 15.

Exhibits and Financial Statement Schedules

EXHIBITS FILED WITH FORM 10-K

EX 4.5
EX 23.1
EX 31.1
EX 31.2
EX 32.1
EX 32.2

Description of the Company’s Capital Stock
Consent of Independent Registered Public Accounting Firm
Section 302 Certification of CEO
Section 302 Certification of CFO
Section 906 Certification of CEO
Section 906 Certification of CFO

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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 Pharmaceuticals, Inc., a Delaware
corporation, and its wholly-owned subsidiary, Catalyst Pharmaceuticals Ireland, Ltd., a corporation organized in the Republic of
Ireland.

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 continued successful commercialization of Firdapse® and the development of additional indications for Firdapse® is highly
uncertain. Factors that will affect our success include the uncertainty of:

•

The impact of the COVID-19 pandemic on our business or on the economy generally;

• Whether we will be able to continue to successfully market Firdapse® while maintaining full compliance with applicable

federal and state laws, rules and regulations;

• Whether our estimates of the size of the market for Firdapse® for the treatment of Lambert-Eaton Myasthenic Syndrome

(“LEMS”) will turn out to be accurate;

• Whether we will be able to locate LEMS patients who are undiagnosed or are misdiagnosed with other diseases;

• Whether patients will discontinue from the use of our drug at rates that are higher than historically experienced or are

higher than we project;

• Whether the daily dose taken by patients changes over time and affects our results of operations;

• Whether Firdapse® patients can be successfully titrated to stable therapy;

• Whether we can continue to market Firdapse® on a profitable and cash flow positive basis;

• Whether any revenue guidance that we provide to the public market will turn out to be accurate;

• Whether payors will reimburse for our product at the price that we charge for the product;

•

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

The ability of our distributor and the specialty pharmacies that distribute our product to maintain compliance with
applicable law;

Our ability to maintain compliance with applicable rules relating to our patient assistance programs and our
contributions to 501(c)(3) organizations that support LEMS patients;

The scope of our intellectual property and the outcome of any future challenges or opposition to our intellectual
property, and, conversely, whether any third-party intellectual property presents unanticipated obstacles for Firdapse®;

• Whether our lawsuits against Jacobus and the specialty pharmacy distributing its product for patent infringement will be

successful;

•

The effect on our business and future results of operations arising from the approval by the FDA of Ruzurgi® for the
treatment of pediatric LEMS patients (ages 6 to under 17);

• Whether our appeal of the District Court’s decision in our suit against the United States FDA seeking to vacate the

FDA’s approval of Ruzurgi® will be successful;

• Whether we can continue to compete successfully if the approval of Ruzurgi® is not overturned and Ruzurgi® continues

to be prescribed for off-label use by adult LEMS patients;

• Whether, because of the lower price of Ruzurgi®, payors will require that patients try off-label Ruzurgi® first before they

approve Firdapse® as a treatment for adult LEMS patients;

•

The impact on Firdapse® of adverse changes in potential reimbursement and coverage policies from government and
private payors such as Medicare, Medicaid, insurance companies, health maintenance organizations and other plan
administrators, or the impact of pricing pressures enacted by industry organization, the federal government or the
government of any state, including as a result of increased scrutiny over pharmaceutical pricing or otherwise;

The impact on our business and results of operations of public statements by politicians and a vocal group of LEMS
patients and doctors who object to our pricing of Firdapse®;

Changes in the healthcare industry and the effect of political pressure from and actions by President Biden, Congress
and/or medical professionals seeking to reduce prescription drug costs;

The state of the economy generally and its impact on our business;

Changes to the healthcare industry occasioned by any future changes in laws relating to the pricing of drug products, or
changes in the healthcare industry generally;

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, and whether our trials and studies will be successful;

Our ability to complete any clinical trials and studies that we may undertake on a timely basis and within the budgets we
establish for such trials and studies;

• Whether COVID-19 will further affect the timing and costs of our currently ongoing and contemplated clinical trials;

• Whether Firdapse® will ever be approved for the treatment of any neuromuscular disease other than LEMS;

• Whether we can successfully commercialize Firdapse® in Canada on a profitable basis;

• Whether our suit to overturn the approval of Ruzurgi® in Canada will be successful;

•

The impact on sales of Firdapse® in the United States if an amifampridine product is purchased in Canada for use in the
United States;

• Whether we will be able to successfully complete the clinical trial in Japan that will be required to seek approval to

commercialize Firdapse® in Japan;

• Whether we will be able to obtain approval to commercialize Firdapse® in Japan;

• Whether we can successfully develop, obtain approval of and successfully market a long-acting version of amifapridine;

• Whether our efforts to grow our business beyond Firdapse® through acquisitions of companies or in-licensing of product

opportunities will be successful;

• Whether we will have sufficient capital to finance any such acquisitions;

• Whether our version of generic vigabatrin tablets will ever be approved by the FDA;

•

Even if our version of vigabatrin tablets is approved for commercialization, whether Endo Ventures/Par Pharmaceutical
(our collaborator in this venture) will be successful in marketing the product; and

• Whether we will earn milestone payments on the first commercial sale of vigabatrin tablets and royalties on sales of

generic vigabatrin tablets.

Our current plans and objectives are based on assumptions relating to the continued commercialization of Firdapse® and the
development of additional indications for Firdapse®. 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, chronic diseases. We are currently focusing our efforts on products that treat diseases in the neuromuscular and
neurological space, but we recently decided to expand our strategic focus to include acquiring or in-licensing innovative technology
platforms and earlier stage programs in other rare disease therapeutic categories outside of these spaces. We are dedicated to making a
meaningful impact on the lives of those suffering from rare diseases, and we believe in putting patients first in everything we do.

Impact of the COVID-19 pandemic on our business

The COVID-19 pandemic has resulted, and is expected to continue to result, in significant economic disruption, and has adversely
affected and will likely continue to adversely affect our business. We are actively monitoring the situation and are taking those actions
that may be required by federal, state or local authorities or that we determine are in the best interests of our patients, investigators,
employees and stockholders.

In March 2020, in light of worsening conditions as a result of the pandemic, we implemented a number of safety related initiatives
among our employees, including a travel ban and a work from home policy for all employees. This included our customer-facing
employees, who began working remotely and utilizing telephone and web-based technologies to provide support to patients and their
healthcare providers. We believe that because many healthcare providers have delayed seeing new patients because of the pandemic,
there has been a delay in the diagnosis of new LEMS patients and their initiating therapy, which has slowed our efforts to locate new
patients who could benefit from our therapy. However, we believe that as more healthcare providers resume seeing new patients on a
regular basis, that this aspect of the COVID-19 pandemic on our business will lessen.

Our Firdapse® supply chain remains robust and thus far we have observed no disruptions in the production of Firdapse®. We reiterate
that we are committed to providing patients with the ability to obtain an uninterrupted supply of Firdapse®, and we believe that we
have an adequate supply of Firdapse® to address patients’ needs for the foreseeable future. Further, we are advised by our U.S.
manufacturing partners that they have implemented contingency plans to remain in operation. We are committed to meeting our
patients’ needs for Firdapse® and believe that our supply chain will continue to remain solid and uninterrupted through the COVID-19
outbreak and beyond.

Until such time as the COVID-19 pandemic is over, it will likely adversely impact the timetable of our ongoing and contemplated
clinical trials and studies, and increase the costs of such trials and studies, consistent with the impact that the COVID-19 pandemic has
had on many biopharmaceutical companies.

Strategic Plan for 2021 and Beyond

Our Board of Directors recently approved an expansion in our company’s strategic focus to include acquiring or in-licensing
innovative technology platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases. To
accomplish these new priorities, we are prepared to invest more heavily in research and development, including acquiring earlier stage
opportunities and innovative technology. We believe that this strategic expansion will better position our company to build out a
broader more diversified portfolio of drug candidates that we believe will add greater value to our company over the near and long-
term. However, there can be no assurance that whatever product candidates or technology platforms we acquire, if any, will be
successfully developed.

To spearhead this investment, we have commenced a national search for a key executive to manage this more progressive strategy.
This person will likely be an M.D. or Ph.D. with at least 15-20 years of relevant pharmaceutical experience and experience in
developing innovative drug technology. This person will be responsible for portfolio expansion planning and developing medicines
from discovery through marketing authorizations, as well as strategic leadership across all R&D activities including, direct oversight
of science and clinical research.

Firdapse®

In October 2012, we licensed the North American rights to Firdapse®, a proprietary form of amifampridine phosphate, or chemically
known as 3,4-diaminopyridine phosphate. When we acquired the rights to the product, it had already been granted orphan drug
designation by the Food and Drug Administration (FDA) for the treatment of patients with LEMS, a rare and sometimes fatal
autoimmune disease characterized by muscle weakness. Additionally, in August 2013, we were granted “breakthrough therapy
designation” by the FDA for Firdapse® for the treatment of LEMS. Further, the FDA has granted Orphan Drug Designation for
Firdapse® for the treatment of Myasthenia Gravis (MG).

On November 28, 2018, we received approval from the FDA for Firdapse® 10 mg tablets for the treatment of adult LEMS patients
(ages 17 and above). In January 2019, we launched Firdapse® in the United States, selling through a field force experienced in
neurologic, central nervous system or rare disease products consisting at the time of approximately 20 field personnel, including sales
(Regional Account Managers), patient assistance and insurance navigation support (Patient Access Liaisons), and payor
reimbursement (National Account Managers). We also have a field-based force of six medical science liaisons who are helping
educate the medical communities and patients about LEMS and about our ongoing clinical trial activities evaluating Firdapse® for
other ultra-orphan, neuromuscular diseases. Finally, we are working with several rare disease advocacy organizations (including
Global Genes, the National Organization for Rare Disorders (NORD), and the Myasthenia Gravis Foundation of America) to help
increase awareness and level of support for patients living with LEMS, Anti-MuSK antibody positive myasthenia gravis, or MuSK-
MG, and other neurological diseases, and to provide education for the physicians who treat these rare diseases and the patients they
treat.

In early 2020, we expanded our field sales group by almost one hundred percent and contracted with an experienced inside sales
agency generating leads through telemarketing to targeted physicians. We made these changes to expand our sales efforts beyond the
neuromuscular specialists who regularly treat LEMS patients to reach the roughly 9,000 neurology and neuromuscular healthcare
providers that may be treating an adult LEMS patient who can benefit from Firdapse®. We also continue to make available at no-cost a
LEMS voltage gated calcium channel (VGCC) antibody testing program for use by physicians who suspect that one of their patients
may have LEMS and wish to reach a definitive diagnosis. Further, we are continuing to expand our digital and social media activities
in order to introduce our product and services to potential patients and their healthcare providers.

We are supporting the distribution of Firdapse® through “Catalyst Pathways”™, our personalized treatment support program. “Catalyst
Pathways”™ is a single source for personalized treatment support, education and guidance through the challenging dosing and titration
regimen to an effective therapeutic dose. It also includes distributing the drug through a very small group of exclusive specialty
pharmacies (primarily AnovoRx), which is consistent with the way that most pharmaceutical products for ultra-orphan diseases are
distributed and dispensed to patients. We believe that by using specialty pharmacies in this way, the difficult task of navigating the
health care system is far better for the patient needing treatment for their rare disease and the health care community in general.

In order to help adult LEMS patients afford their medication, we, like other pharmaceutical companies which are marketing drugs for
ultra-orphan conditions, have developed an array of financial assistance programs that are available to reduce patient co-pays and
deductibles to a nominal affordable amount. For eligible patients with commercial coverage, a co-pay assistance program designed to
keep out-of-pocket costs to not more than $10.00 per month is available for all LEMS patients prescribed Firdapse®. We are also
donating, and committing to continue to donate, money to qualified, independent charitable foundations dedicated to providing
assistance to any U.S. LEMS patients in financial need. Subject to compliance with regulatory requirements, our goal is that no LEMS
patient is ever denied access to their medication for financial reasons.

In May 2019, the FDA approved a New Drug Application (NDA) for Ruzurgi®, another version of amifampridine (3,4-DAP), for the
treatment of pediatric LEMS patients (ages 6 to under 17). While the NDA for Ruzurgi® only covers pediatric patients, we believe that
Ruzurgi® is regularly being prescribed off label to adult LEMS patients. We believe that under applicable law, Jacobus is not
permitted to market its amifampridine product to adult LEMS patients in the United States, and we are continuing to aggressively take
all steps available to us to protect Firdapse’s® exclusivity under the Orphan Drug Act. There can be no assurance, however, that we
will be able to stop the off-label prescribing of Ruzurgi® to adult LEMS patients. If Jacobus is able to successfully sell Ruzurgi® off-
label to additional adult LEMS patients, it could have a material adverse effect on our business, financial condition and results of
operations.

We also believe that the FDA’s approval of Ruzurgi® violated our statutory rights and was in multiple other respects arbitrary,
capricious and contrary to law. As a result, in June 2019 we filed suit against the FDA and several related parties challenging this
approval and related drug labeling. Our complaint, which was filed in the federal district court for the Southern District of Florida,
alleged that the FDA’s approval of Ruzurgi® violated multiple provisions of FDA regulations regarding labeling, resulting in
misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated our statutory rights to Orphan Drug
Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and
contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit sought an order setting aside the
FDA’s approval of Ruzurgi®.

On July 30, 2020, the Magistrate Judge considering our lawsuit against the FDA filed a Report and Recommendation in which she
recommended to the District Judge handling the case that she grant the FDA’s and Jacobus’ motions for summary judgment and deny
our motion for summary judgment. On September 29, 2020, the District Judge adopted the Report and Recommendation of the
Magistrate Judge, granted the FDA’s and Jacobus’ motions for summary judgment, and dismissed our case.

authority to effectively eliminate the benefits of exclusivity under the Orphan Drug Act, which we believe will chill the incentive for
drug companies to spend the millions of dollars necessary to develop an orphan drug. As a result, we have appealed the decision to the
Eleventh Circuit Court of Appeals. There can be no assurance of the result of such proceeding.

We are currently developing a long-acting formulation of amifampridine phosphate. A number of candidate formulations have been
prepared, and three of the most promising formulations were evaluated in a pharmacokinetic (PK) study completed during the fourth
quarter of 2020. The results of this first PK study will be used to inform the design and refinement of future product formulations and
additional PK work to be conducted in 2021. We have also completed a number of advisory board meetings with both patients and
doctors in order to establish the optimum target characteristics of the long-acting formulation of amifampridine phosphate that are
desired by the LEMS patient community and treating physicians. There can be no assurance that we will be able to successfully
develop a long-acting formulation of amifampridine phosphate, that any such formulation will be approved by the FDA for marketing,
or that any such formulation will be commercially viable.

On August 10, 2020, we announced the top-line results from our Phase 3 clinical trial (MSK-002) evaluating Firdapse® for the
treatment of adults with MuSK-MG. Our trial was a multi-site, international (United States, Italy and Serbia), double-blind, placebo-
controlled, clinical trial being conducted under a Special Protocol Assessment (SPA) with the FDA. Unfortunately, the MSK-002 trial
did not achieve statistical significance on its primary endpoint or its secondary endpoint. However, we have recently concluded a
detailed analysis of the data from this trial in an effort to understand why the MuSK-MG Phase 3 trial did not meet statistical
significance on its endpoints, even though clinical improvement was observed by patients and investigators during the initial dose-
titration period of the trial and in our previous proof-of-concept trial. We found in our analysis that there was a large degree of
symptom variability during the double-blind withdrawal period. We believe that sources of such variability can be addressed in a
redesigned study that may better demonstrate the efficacy of our drug for the treatment of MuSK-MG.

We plan to present our hypotheses and a revised protocol to the FDA with respect to the MuSK-MG indication for discussion during
the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our protocol design or,
even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence for approval of the
MuSK-MG indication. While we prepare for the meeting with FDA, we also plan to evaluate new clinical trial sites and discuss the
new trial design with investigators. After meeting with the FDA, we will determine whether or not to proceed with a new trial that
incorporates the new trial design.

Our exploratory study, SMA-001 (A Randomized Placebo Controlled Crossover Study to Evaluate the Safety and Efficacy of
Amifampridine Phosphate in Ambulatory Patients with Spinal Muscular Atrophy (SMA) Type 3, met the primary endpoint of a
statistically significant difference for the Hammersmith Functional Motor Scale Expanded (HFMSE). Clinically, however, the effect
was modest. The secondary endpoints were not statistically significant, although several individual quality of life measures
demonstrated a nominally positive statistically significant change. Key opinion leaders with whom we have spoken believed that
Firdapse® needed to show a large clinically significant change if there was the possibility to affect disease progression through
retrograde signaling from enhanced neuromuscular junction function. After considering all of these factors, we have concluded that
the modest results exhibited in this study are unlikely to result in a sufficient modification of disease progression, and, particularly in
light of the fact that there are now three approved disease modifying medications for SMA Type 3, we have decided not to pursue the
SMA Type 3 indication further.

We intend to conduct a proof-of-concept study evaluating Firdapse® as a treatment for Hereditary Neuropathy with Liability to
Pressure Palsies (HNPP). The scientific basis for considering this indication is that leakage of neuron potassium channels is observed
in HNPP. Since Firdapse® is a potassium channel blocker, it may mitigate the pathological effects of the potassium channel leakage in
HNPP patients. There can be no assurance that this proof-of-concept study will be successful.

There can be no assurance that clinical trials of Firdapse® that we undertake in the future will be successful. Further, there can be no
assurance that we will ever be granted the right to commercialize Firdapse® for any additional indications.

Our NDS filing for Firdapse® for the symptomatic treatment of LEMS was approved by Health Canada on July 31, 2020. In August
2020, we entered into a license agreement with KYE Pharmaceuticals (KYE), pursuant to which we licensed the Canadian rights for
Firdapse® for the treatment of LEMS to KYE. Pursuant to the license agreement, KYE is obligated to pay us an up-front payment
based on approval and product supply, data protection milestones based on achievements of sales and regulatory milestones, and a
sharing of defined net sales upon commercialization.

reproductive toxicity data for amifampridine phosphate developed by us. As such, we believe that our data was relied upon to establish
the nonclinical safety profile of Ruzurgi® needed to meet the standards of the Canadian Food and Drugs Act. There can be no
assurance of the results of this proceeding.

In May 2019, we entered into an amendment to our license agreement for Firdapse®. Under the amendment, we have expanded our
commercial territory for Firdapse®, which originally was comprised of North America, to include Japan. Additionally, we have an
option to further expand our territory under the license agreement to include most of Asia, as well as Central and South America, upon
the achievement of certain milestones in Japan. Under the amendment, we will pay royalties on net sales in Japan of a similar
percentage to the royalties that we are currently paying under our original license agreement for North America.

We have met with Japanese regulatory authorities and believe that we have reached an agreement with them as to the scope of the
clinical trial that we will be required to undertake in Japan before we will be permitted to submit an application to the Japanese
regulatory authorities to seek to commercialize Firdapse® for the treatment of LEMS in Japan. We also have applied for orphan drug
designation in Japan for the symptomatic treatment of LEMS. There can be no assurance that we will successfully obtain the right to
commercialize Firdapse® in Japan or obtain orphan drug designation.

All of our patent rights for Firdapse® are derived from our license agreement. In August 2020, the United States Patent and Trademark
Office (USPTO) allowed Patent No. 10,798,893 (the ’893 patent) to our licensor and thereby to us, and the patent issued on October 6,
2020. The patent is directed to the use of suitable doses of amifampridine to treat patients, regardless of the therapeutic indication, that
are slow metabolizers of amifampridine. Any drug product containing amifampridine with a label that states the patented dosing
regimens and doses in the Dosing and Administration section prior to April 7, 2034, the expiration date of the patent, could possibly
infringe this patent. Generic drug product labels would necessarily have to do this, and we intend to take all appropriate actions to
protect our intellectual property.

In that regard, in October 2020, we filed a lawsuit in the U.S. District Court for New Jersey against Jacobus and a lawsuit in the U.S.
District Court for the Western District of Pennsylvania against the specialty pharmacy marketing Ruzurgi®, PantherRx Rare LLC
(PantherRx), for infringement of the ‘893 Patent. The suits have since been combined in the U.S. District Court for New Jersey. The
lawsuit arises from Jacobus’ and PantherRx’s sales and marketing of Ruzurgi® (amifampridine, 10 mg). The lawsuit alleges that the
Ruzurgi® product infringes the ‘893 patent when administered in accordance with its product labeling. The lawsuit seeks damages and
injunctive relief to prevent further marketing of Ruzurgi® in violation of our patent rights.

We are also pursuing additional patent applications for Firdapse® in an effort to further protect our drug product. There can be no
assurance that any additional patents will be issued which provide additional intellectual property protection for our drug product.

There can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future will not
claim that we have infringed on their patents. In the event that our products or technologies infringe or violate the patent or other
proprietary rights of third parties, there is a possibility we may be prevented from pursuing product development, manufacturing or
commercialization of our products that utilize such technologies until the underlying patent dispute is resolved. For example, there
may be patents or patent applications held by others that contain claims that our products or operations might be determined to
infringe or that may be broader than we believe them to be. Given the complexities and uncertainties of patent laws, there can be no
assurance as to the impact that future patent claims against us may have on our business, financial condition, results of operations, or
prospects.

Generic Sabril®

In December 2018, we entered into a definitive agreement with Endo International plc’s subsidiary, Endo Ventures Limited (“Endo”),
for the further development and commercialization of generic Sabril® tablets through Endo’s United States Generic Pharmaceuticals
segment, Par Pharmaceutical. Pursuant to the agreement, in December 2018, we received an up-front payment of $500,000. We will
be entitled to receive a milestone payment of $2.0 million on the commercial launch of the product. Further, we will receive a sharing
of defined net profits upon commercialization and we are obligated to share the costs of certain development expenses.

There can be no assurance that our collaboration with Endo for the development of generic Sabril® (vigabatrin) tablets will be
successful and that if an abbreviated new drug application (ANDA) is approved for vigabatrin tablets in the future, that it will be
profitable to us.

Capital Resources

there can be no assurance that if we need additional funding in the future, whether such funding will be available to us. 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. We are dedicated to making a meaningful impact on the lives of those suffering from rare diseases, and we believe in
putting patients first in everything we do. Specifically, we intend to:

• Commercialize Firdapse® for the treatment of LEMS and other potential neuromuscular diseases and improve disease

awareness. We are currently commercializing Firdapse® in the United States and Canada. A cornerstone of our strategy
is our continuing development of Catalyst Pathways™, our personalized treatment support program, and our development
of the patient assistance programs that are required to further our goal that no LEMS patient be denied access to
Firdapse® for financial reasons within existing legal restrictions. We also hope to develop Firdapse® for the treatment of
other neuromuscular diseases.

•

Seek to develop a long-acting formulation for Firdapse®. We are currently developing a Firdapse® long-acting
formulation that we hope will provide meaningful patient benefits for patients with LEMS and other neuromuscular
indications.

Seek to acquire additional products. While we continue to focus on evaluating Firdapse® for the treatment of other
neuromuscular indications, we have expanded our strategic focus to include acquiring or in-licensing innovative
technology platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases. To
accomplish these new priorities, we are prepared to invest more heavily in research and development, including
acquiring earlier stage opportunities and innovative technology. We believe that this strategic expansion will better
position us to build out a broader more diversified portfolio of drug candidates that we expect will add greater value to
the company over the near and long-term. However, no products have been acquired to date.

•

Seek approval for Firdapse® in Japan. We are currently taking steps to seek approval for Firdapse® in Japan.

Firdapse® Product Overview

Firdapse® is Catalyst’s registered trade name in the United States 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, often abbreviated as 3,4-DAP or DAP. Firdapse® contains the phosphate salt of amifampridine,
hence the name “amifampridine phosphate.” We will refer to our drug by its trade name in the United States (Firdapse®), by the
INN/USAN (amifampridine), or by the specific salt in our product (amifampridine phosphate), throughout this Form 10-K.

Amifampridine has been recommended as the 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 from the European Commission (with the trade name Firdapse®) 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 up to 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, and 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 (LEMS)

Lambert-Eaton Myasthenic Syndrome, or LEMS, is a rare autoimmune neuromuscular 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.

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 reported. Physical exercise and high temperatures tend to worsen
the symptoms. Other symptoms often seen include weakness of the muscles of the mouth, throat, and eyes. Individuals affected with

LEMS also may have a disruption of the autonomic nervous system, including dry mouth, constipation, blurred vision, impaired
sweating, and/or hypotension.

LEMS is managed by treating the symptoms or treating the underlying autoimmune attack on voltage gated calcium channels.
Unapproved 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 to
attempt to remove antibodies from the body. Firdapse® is a symptomatic treatment and does not alter the underlying autoimmune
condition. As a voltage gated potassium blocker, Firdapse® prevents charged potassium atoms 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.

Based on currently available information, we estimate that there are approximately 3,000 LEMS patients in the United States,
approximately 1,500 of which are presently diagnosed and identified and approximately 1,500 of which we believe are undiagnosed or
misdiagnosed. However, until awareness of the disease is increased, it is unlikely that the total number of LEMS patients in the United
States can be determined with better certainty (as is typical of rare diseases), and the actual number of patients in the United States
with LEMS may be higher or lower than our estimate.

Some of the factors that affect the size of the population with a rare disease such as LEMS include the number of patients actually
diagnosed with the disease, the number of patients who are misdiagnosed with other diseases, and the number of patients who are
simply undiagnosed. Additionally, while there is an antibody test that positively identifies patients with LEMS, the test is not
particularly well known or utilized at this time by many neurologists. Further, many LEMS patients who have small cell lung cancer
(SCLC) are not being treated for LEMS because many oncology medical professionals who treat SCLC patients are generally
unfamiliar with how to diagnose and treat LEMS. All of these factors affect the ultimate number of patients who will benefit from
treatment with Firdapse®.

Firdapse® is the only FDA approved, evidence-based therapy for the treatment of LEMS in adults.

Anti-MuSK antibody positive myasthenia gravis (MuSK-MG)

Myasthenia Gravis, or MG, is a chronic autoimmune neuromuscular disorder that is characterized by fluctuating weakness of the
voluntary muscle groups. The prevalence of MG in the United States is estimated to be about 20/100,000 population (equating to an
estimate of approximately 64,000 patients in the United States). However, according to the Myasthenia Gravis Foundation of
America, MG is probably under diagnosed and the prevalence may be higher. For example, patients with MuSK-MG may have focal
or regional weakness and muscle atrophy that are more suggestive of motor neuron or muscle membrane (myopathy) disease. MG
occurs in all races, both genders, and at any age. MG is not thought to be directly inherited (although it occasionally occurs in more
than one member of the same family), nor is it contagious.

The voluntary muscles of the entire body are controlled by nerve impulses that arise in the brain. These nerve impulses travel down
the nerves to the place where the nerves meet the muscle fibers. Nerve fibers do not actually connect with muscle fibers. There is a
space between the nerve ending and muscle fiber; this space is called the neuromuscular junction. When the nerve impulse originating
in the brain arrives at the nerve ending, it releases a chemical called acetylcholine. Acetylcholine travels across the space to the muscle
fiber side of the neuromuscular junction where it attaches to many receptor sites. The muscle contracts when enough of the receptor
sites have been activated by the acetylcholine. In MG, there can be as much as an 80% reduction in the number of these receptor sites.
The reduction in the number of receptor sites is caused by an antibody that destroys or blocks the receptor site. Antibodies are proteins
that play an important role in the immune system. They are normally directed at foreign proteins called antigens that attack the body.
Such foreign proteins include bacteria and viruses. Antibodies help the body to protect itself from these foreign proteins. For reasons
not well understood, the immune system of the person with MG makes antibodies against the receptor sites of the neuromuscular
junction. Abnormal antibodies can be measured in the blood of many people with MG. The antibodies destroy the receptor sites more
rapidly than the body can replace them. Muscle weakness occurs when acetylcholine cannot activate enough receptor sites at the
neuromuscular junction.

About 15% of MG patients test negative for the acetylcholine receptor antibody. These patients have seronegative (SN) MG.
Approximately 40-50% of these patients with SNMG test positive for antibodies against muscle-specific receptor tyrosine kinase
(MuSK), a surface membrane component essential in the development of the neuromuscular junction. These patients are identified as
having MuSK-MG. Anti-MuSK antibodies identify a clinically distinguishable, more severe form of MG. The disease is characterized
by a prominent weakness of the neck, oro-bulbar and sometimes respiratory musculature. Although many patients with MuSK-MG are
presently treated with standard MG treatments such as anticholinesterase inhibitors or immunosuppressants, such patients do not
generally respond adequately to these treatments.

Based on currently available information, we estimate that there are between 3,000 and 4,800 MuSK-MG patients in the United States.
There is currently no drug therapy approved by the FDA for the treatment of MuSK-MG.

Hereditary Neuropathy with Liability to Pressure Palsies

Hereditary Neuropathy with liability to Pressure Palsies (HNPP) is a disorder that affects peripheral nerves. These nerves connect the
brain and spinal cord to muscles and sensory cells that detect touch, pain, and temperature. In people with this disorder, the peripheral
nerves are unusually sensitive to pressure, such as the pressure that occurs when carrying heavy grocery bags, leaning on an elbow, or
sitting without changing position, particularly with crossed legs. These activities would not normally cause sensation problems in
people without the disorder.

Hereditary neuropathy with liability to pressure palsies is characterized by recurrent episodes of numbness, tingling, and loss of
muscle function (palsy) in the region associated with the affected nerve, usually an arm, hand, leg, or foot. An episode can last from
several minutes to several months, but recovery is usually complete. Repeated incidents, however, can cause permanent muscle
weakness or loss of sensation. This disorder is also associated with pain in the limbs, especially the hands.

A pressure palsy episode results from pressure on a single nerve, and any peripheral nerve can be affected. Although episodes often
recur, they can affect different nerves. The most common problem sites involve nerves in the wrists, elbows, and knees. The fingers,
shoulders, hands, feet, and scalp can also be affected. Many people with this disorder experience carpal tunnel syndrome, which
occurs when a nerve in the wrist (the median nerve) is involved. Carpal tunnel syndrome is characterized by numbness, tingling, and
weakness in the hand and fingers. An episode in the hand may affect fine motor activities such as writing, opening jars, and fastening
buttons. An episode of nerve compression in the knee can lead to a condition called foot drop, which makes walking, climbing stairs,
or driving difficult or impossible.

The symptoms of HNPP usually begin during adolescence or early adulthood but may develop anytime from childhood to late
adulthood. Symptoms vary in severity; many people never realize they have the disorder, while some people experience prolonged
disability. HNPP does not affect life expectancy. Based on currently available data, we estimate the prevalence of HNPP in the United
States to be between 2,300 and 5,200 patients.

There is currently no standard medical treatment for HNPP. Management generally involves strategies to avoid or modify positions
(such as leaning on the elbows) and activities that cause symptoms, and using splints or pads on the wrists or arms to avoid pressure
on the nerves. An ankle-foot orthosis may be needed permanently for those with a residual foot drop. Management of pain may
include over-the-counter pain medicines and/or prescription drugs used for peripheral neuropathy.

License Agreement for Firdapse®

On October 26, 2012, we licensed the exclusive North American rights to Firdapse® pursuant to a License Agreement (the “License
Agreement”) between us and BioMarin Pharmaceutical Inc. (‘BioMarin”). Under the License Agreement, we make the following
royalty payments on our net sales of Firdapse®:

• Royalties to the licensor for seven years from the first commercial sale of Firdapse® equal to 7% of net sales (as defined
in the 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; and

• Royalties to the third-party licensor of the rights sublicensed to us for seven years from the first commercial sale of

Firdapse® equal to 7% of net sales (as defined in the License Agreement between BioMarin and the third-party licensor)
in any calendar year for the duration of any pending or issued patents or regulatory exclusivity within a territory and
3.5% for territories in any calendar year in territories without pending or issued patents or regulatory exclusivity.

On May 29, 2019, we entered into an amendment to our License Agreement. Under the amendment, we expanded our commercial
territory for Firdapse®, which originally was comprised of North America, to include Japan. Additionally, we have an option to further
expand our territory under the License Agreement to include most of Asia, as well as Central and South America, upon the
achievement of certain milestones in Japan. Under the amendment, we will pay royalties on net sales in Japan of a similar percentage
to the royalties that we are currently paying under our original License Agreement for North America.

In January 2020, we were advised that BioMarin had sold certain rights under the License Agreement to SERB SA.

We believe that we remain in compliance with our obligations under the License Agreement.

Clinical trials supporting our NDA for Firdapse® for LEMS and approval of our NDA

We conducted two successful Phase 3 double-blind, placebo controlled clinical trials evaluating Firdapse® for the treatment of LEMS.
The results of the first trial published in 2016 in Muscle & Nerve (Muscle Nerve, 2016, 53(5):717-725). The results of the second trial
were published in March 2019 in the Journal of Clinical Neuromuscular Disease (J. Clin Neuromusc Dis 2019; 20:111-119).

In March 2018, we submitted an NDA seeking approval of Firdapse® for the treatment of LEMS. Our NDA was accepted for filing in
May 2018 and, on November 28, 2018, the FDA granted approval of Firdapse® for the treatment of LEMS in adult patients.

Required Post-Approval Studies

As part of the approval of our NDA for Firdapse® for LEMS, the FDA is requiring us to conduct a clinical trial to evaluate the effect of
hepatic impairment on the exposure of amifampridine after oral administration of Firdapse® relative to that in subjects with normal
hepatic function. We have submitted the final protocol and begun screening patients for this trial. We have also established a
pregnancy surveillance program to collect and analyze information for a minimum of ten (10) years on pregnancy complications and
birth outcomes related to Firdapse®. Finally, the FDA required us to perform a second carcinogenicity study of amifampridine
phosphate in mice, which we expect to complete on a timely basis.

Expanded access program

We continue to operate an expanded access program (EAP) that is currently making Firdapse® available to certain patients diagnosed
with CMS or Downbeat Nystagmus (DN). While we are no longer seeking an indication for Firdapse® for the treatment of CMS and
have closed enrollment in the EAP to new CMS and DN patients, we are currently providing Firdapse® to those patients who were
previously enrolled in our EAP.

Prior to the approval of our NDA for Firdapse® for LEMS, adult LEMS patients were also eligible to participate in our EAP program.
We have since migrated the adult LEMS patients previously in our EAP to Catalyst Pathways™ and to commercial Firdapse®.

Sales, Marketing and Distribution

Launch of Firdapse® in January 2019

In January 2019, we launched Firdapse® in the United States through a field force of approximately 20 personnel who are experienced
in neurologic, central nervous system or rare diseases in sales, patient support and payer reimbursement. The sales representatives
(Regional Account Managers) who were part of the field force targeted approximately 1,250 physicians who are either neuromuscular
specialists or general neurologists with a known adult LEMS patient or specific training in neuromuscular diseases. We also utilized
field force Patient Access Liaisons who work with the patients and provider offices to help navigate the insurance landscape, as well
as National Account Managers who work directly with the payors to ensure comprehensive coverage for Firdapse® across the
commercial and governmental plans in the United States. We also have a field-based force of six medical science liaisons who help
educate the medical communities and patients about LEMS and about our company’s ongoing clinical trial activities. Further, we
work closely with several rare disease advocacy organizations (including Global Genes, the National Organization for Rare Disorders
(NORD), and the Myasthenia Gravis Foundation of America) to help increase awareness and the level of support for patients living
with LEMS, MuSK antibody positive myasthenia gravis, and other neuromuscular diseases that may be treatable with Firdapse®, and
to provide education for the physicians who treat these rare diseases and the patients they treat.

In early 2020, we expanded our field sales group by almost one hundred percent and established a partnership with an experienced
inside sales agency generating leads through telemarketing to targeted physicians. Through this expansion of our sales team, we are
working to expand our sales efforts beyond the neuromuscular specialists who regularly treat LEMS patients to reach roughly 9,000
neurology and neuromuscular healthcare providers that might be treating an adult LEMS patient who can benefit from Firdapse®. We
also make available a no-cost LEMS voltage gated calcium channel (VGCC) antibody testing program for physicians who suspect
their patient may have LEMS and wish to reach a definitive diagnosis.

We are supporting the distribution of Firdapse® through “Catalyst Pathways”™, our personalized treatment support program. “Catalyst
Pathways”™ is a single source for personalized treatment support, education and guidance through the challenging dosing and titration
regimen to an effective therapeutic dose. It also includes distributing the drug through a very small group of exclusive specialty
pharmacies (primarily AnovoRx), which is consistent with the way that most pharmaceutical products for ultra-orphan diseases are
distributed and dispensed to patients. By using specialty pharmacies in this way, the difficult task of navigating the health care system
is far better for the patient needing treatment for their rare disease and the health care community in general.

In addition, “Catalyst Pathways”™ is the gateway for our free bridge medication for patients during transitioning from investigational
product while they are waiting for a coverage determination or, later on, for patients whose access is threatened by the bureaucratic

complications arising from a change of insurer. The “Catalyst Pathways”™ program is also the access point for our Patient Assistance
Program, which provides longer-term free medication for those who are uninsured or functionally uninsured with respect to Firdapse®
because they may be unable to obtain coverage from their payer despite having health insurance.

We are continuing efforts on the longer, slower process to identify patients and their physicians who have diagnosed LEMS, but have
not had access, awareness or understanding of this treatment for their rare disease. These patients often do not see their physician
frequently, have many questions about changing treatment(s), and may not perceive the need to change to a new therapy. Further,
we have begun to focus our commercial efforts to locate misdiagnosed and undiagnosed LEMS patients and provide educational and
sales activities to help improve the diagnosis, understanding of the treatment, and information on the prescribing process. We plan to
continue to support LEMS and rare disease patient organizational groups’ efforts to generate awareness and educate patients and
physicians on the diagnosis of LEMS, the impact of the disease, and the support services and treatments available.

Access to Firdapse®

In order to help patients afford their medication, we, like other pharmaceutical companies who are marketing drugs for ultra-orphan
conditions, have developed an array of financial assistance programs that are available to reduce patient co-pays and deductibles to a
nominal affordable amount. For eligible patients with commercial coverage, a co-pay assistance program designed to keep out-of-
pocket costs to $10 or less per month is available for all LEMS patients prescribed Firdapse®. We are also donating, and committing to
continue to donate, money to qualified, independent charitable foundations dedicated to providing assistance to LEMS patients in
financial need. Our goal is to ensure that no LEMS patient is ever denied access to their medication for financial reasons.

To date, Firdapse has been widely covered and reimbursed by private and public payors for the indicated small population of adult
LEMS patients.

FDA approval of Ruzurgi® for pediatric LEMS patients (ages 6 to under 17)

In May 2019, the FDA approved an NDA for Ruzurgi®, Jacobus Pharmaceuticals’ version of amifampridine (3,4-DAP), for the
treatment of pediatric LEMS patients (ages 6 to under 17). We believe that the vast majority of Ruzurgi® sales are to adult LEMS
patients who are being prescribed the drug off label. If Jacobus is able to successfully sell Ruzurgi® off-label to additional adult LEMS
patients, it could have a material adverse effect on our business, financial condition and results of operations.

We believe that the FDA’s approval of Ruzurgi® violated our statutory rights and was in multiple other respects arbitrary, capricious
and contrary to law. As a result, in June 2019 we filed suit against the FDA and several related parties challenging this approval and
related drug labeling. Jacobus later intervened in the case. Our complaint, which was filed in the federal district court for the Southern
District of Florida, alleged that the FDA’s approval of Ruzurgi® violated multiple provisions of FDA regulations regarding labeling,
resulting in misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated our statutory rights to Orphan
Drug Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and
contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit seeks an order vacating the FDA’s
approval of Ruzurgi®.

On July 30, 2020, the Magistrate Judge considering this lawsuit filed a Report and Recommendation in which she recommended to the
District Judge handling the case that she grant the FDA’s and Jacobus’ motions for summary judgment and deny our motion for
summary judgment. On September 29, 2020, the District Judge adopted the Report and Recommendation of the Magistrate Judge,
granted the FDA’s and Jacobus’ motions for summary judgment, and dismissed our case.

We believe that the District Judge’s decision is incorrect as a matter of law and contrary to the plain language of the Orphan Drug Act.
We believe that if the District Judge’s decision to grant summary judgment is correct on the law, it means that the FDA has the
authority to effectively eliminate the benefits of exclusivity under the Orphan Drug Act, which we believe will chill the incentive for
drug companies to spend the millions of dollars necessary to develop an orphan drug. As a result, we have appealed the decision to the
Eleventh Circuit Court of Appeals. There can be no assurance of the result of such proceeding.

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, private commercial
insurance plans and pharmacy benefit management (PBM) plans. Decisions regarding the extent of coverage and the amount of
reimbursement to be provided for Firdapse® are expected to be made on a plan-by-plan, and in some cases, on a patient-by-patient
basis. Particularly given the rarity of LEMS, our experience has been that securing coverage and appropriate reimbursement from
third-party payors requires targeted education and highly skilled insurance navigation experts that have experience with rare disease
launches and medical exception processes at insurance companies to provide patient coverage for important rare disease therapies. To

that end, we have engaged a dedicated team of field-based market access account managers and reimbursement experts as well as a
patient service center staffed with experienced personnel focused on ensuring that clinically-qualified patients have access to our
product.

There can be no assurance, however, as to whether payors will continue to cover our product, and if so, at what level of
reimbursement. Further, there can be no assurance as to whether payors will in the future require that patients try Ruzurgi® before they
are treated with Firdapse®. In that regard, we have advised payors that we will provide free medication to support titration and confirm
patient therapeutic benefit. Further, when necessary, we provide patients with access to therapy at no charge while those patients are
awaiting coverage decisions.

Our efforts to develop Firdapse® as a treatment for additional neuromuscular indications

The current status of our clinical trials evaluating Firdapse® for additional indications is as follows:

MuSK-MG studies

In February 2016, we initiated an investigator-sponsored, randomized, double-blind, placebo-controlled, crossover proof-of-concept
clinical trial evaluating the safety, tolerability and potential efficacy of Firdapse® as a symptomatic treatment for patients with MuSK-
MG. Seven patients participated in this proof-of-concept trial. On March 15, 2017, we reported top-line results from this trial. Both of
the co-primary efficacy endpoints of change from baseline (CFB) in total Quantitative Myasthenia Gravis (QMG) score (p=0.0003)
and CFB in total Myasthenia Gravis Activities of Daily Living (MG-ADL) score (p=0.0006) were statistically and clinically
significant in this trial. Several secondary efficacy measures also achieved statistical significance. Amifampridine phosphate was well
tolerated in this population of patients.

The results of this study were published in SAGE Open Medicine and can be accessed at
https://journals.sagepub.com/doi/pdf/10.1177/2050312118819013.

Subsequently, we engaged in a Phase 3 clinical trial (MSK-002) evaluating Firdapse® for the treatment of adults with MuSK-MG. Our
trial was a multi-site, international (United States, Italy and Serbia), double-blind, placebo-controlled, clinical trial being conducted
under a Special Protocol Assessment (SPA) with the FDA. The trial enrolled more than 60 MuSK antibody positive patients. It also
enrolled more than 10 generalized myasthenia gravis patients who were assessed with the same clinical endpoints. However,
achieving statistical significance in this subgroup of patients was not required.

On August 10, 2020, we announced the top-line results from our Phase 3 clinical trial (MSK-002) evaluating Firdapse® for the
treatment of adults with MuSK-MG. Unfortunately, the MSK-002 trial did not achieve statistical significance on its primary endpoint
or its secondary endpoint, even though clinical improvement was observed by patients and investigators during the initial dose-
titration period of the trial and in the company’s previous proof-of-concept trial. However, we have recently concluded a detailed
analysis of the data from this trial in an effort to understand why the MuSK-MG Phase 3 trial did not meet statistical significance on
its endpoints. We found in our analysis that there was a large degree of symptom variability during the double-blind withdrawal
period. We believe that sources of such variability can be addressed in a redesigned study that may better demonstrate the efficacy of
our drug for the treatment of MuSK-MG.

With respect to the MuSK-MG indication, we plan to present our hypotheses and a revised protocol to the FDA for discussion during
the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our protocol design or,
even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence for approval of the
MuSK-MG indication. While we prepare for the meeting with FDA, we also plan to evaluate new clinical trial sites and discuss the
new trial design with investigators. After meeting with the FDA, we will determine whether or not to proceed with a new trial that
incorporates the new trial design.

Proof-of-concept clinical trial evaluating Firdapse® for the treatment of SMA Type 3

Our exploratory study, SMA-001 (A Randomized Placebo Controlled Crossover Study to Evaluate the Safety and Efficacy of
Amifampridine Phosphate in Ambulatory Patients with Spinal Muscular Atrophy (SMA) Type 3, met the primary endpoint of a
statistically significant difference for the Hammersmith Functional Motor Scale Expanded (HFMSE). Clinically, however, the effect
was modest. The secondary endpoints were not statistically significant, although several individual quality of life measures
demonstrated a positive nominally statistically significant change. Key opinion leaders with whom we have spoken believed that
Firdapse® needed to show a large clinically significant change if there was the possibility to affect disease progression through
retrograde signaling from enhanced neuromuscular junction function. After considering all of these factors, we have concluded that
the modest results exhibited in this study are unlikely to result in a sufficient modification of disease progression, and, particularly in
light of the fact that there are now three approved disease modifying medications for SMA Type 3, we have decided not to pursue the
SMA Type 3 indication further.

HNPP proof-of-concept study

We intend to conduct a proof-of-concept study evaluating Firdapse® as a treatment for Hereditary Neuropathy with Liability to
Pressure Palsies (HNPP). The scientific basis for considering this indication is that leakage of neuron potassium channels is observed
in HNPP. Firdapse is a potassium channel blocker and may mitigate the pathological effects of the potassium channel leakage in
HNPP patients.

HNPP is an autosomal-dominantly inherited peripheral nerve disease caused by a heterozygous deletion of PMP22 gene, leading to a
reduction of PMP22 proteins by 35-50% of normal level, which results in disruption of the myelin sheaths of motor neuron axons.
Patients with HNPP often present with focal sensory and motor deficits. The events may be triggered by mild mechanical
compressions innocuous to healthy humans. In addition, HNPP patients are also afflicted by fatigue. We believe that HNPP affects
about 6,000 patients in the Unites States. There can be no assurance of the results of this trial.

Kennedy’s disease

We had previously reported that we planned to evaluate Firdapse® as a treatment of Kennedy’s disease (spinal bulbar muscular
atrophy). Previously, key opinion leaders had suggested to us that Firdapse® might be an effective treatment for the symptoms of
Kennedy’s disease. However, given the results of the SMA Type 3 proof-of-concept study and the lack of a targeted mechanism of
action for Firdapse® in Kennedy’s disease, we have determined not to pursue this indication further.

Long-acting version of amifampridine phosphate

We have been developing a long-acting formulation of amifampridine phosphate, and our development remains on track. A large
number of candidate formulations were prepared, and three of the most promising formulations were evaluated in a pharmacokinetic
(PK) study completed during the fourth quarter of 2020. The results from this first PK study will be used to inform the design and
refinement of future product formulations in 2021, and additional PK work is also expected to be conducted during 2021. Catalyst has
also completed a number of advisory board meetings with both patients and doctors in order to establish the optimum target
characteristics of a long-acting formulation of amifampridine phosphate that are desired by the LEMS patient community and treating
physicians.

There can be no assurance that we will be able to successfully develop a long-acting formulation of amifampridine phosphate, that any
such formulation will be approved by the FDA for marketing, or that any such formulation will be commercially viable.

Intellectual property and regulatory exclusivity protections for Firdapse®

All of our patent rights for Firdapse® are derived from our license agreement. In August 2020, the United States Patent and Trademark
Office (USPTO) allowed a patent (the ’893 patent) to our licensor and thereby to us, and the patent issued on October 6, 2020. The
patent is directed to the use of suitable doses of amifampridine to treat patients, regardless of the therapeutic indication, that are slow
metabolizers of amifampridine. Any drug product containing amifampridine with a label that states the patented dosing regimens and
doses in the Dosing and Administration section prior to April 7, 2034, the expiration date of the patent, could possibly infringe this
patent. Generic drug product labels would necessarily have to do this, and we intend to take all appropriate actions to protect our
intellectual property.

Further, there can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future
will not claim that we have infringed on their patents. In the event that our products or 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. For example, there may be patents or patent applications held by
others that contain claims that our products or operations might be determined to infringe or that may be broader than we believe them
to be. Given the complexities and uncertainties of patent laws, there can be no assurance as to the impact that future patent claims
against us may have on our business, financial condition, results of operations, or prospects.

Until Firdapse® was approved in November 2018, no drug product containing amifampridine for any indication had been approved by
the FDA such that we received five-year “new chemical entity” exclusivity from the FDA. New chemical entity exclusivity provides a
five-year period of marketing exclusivity for all indications and in the absence of an Orange Book listed patent, precludes a generic
from submitting an abbreviated new drug application (ANDA) until that five year period has expired. Further, when Firdapse® was
approved for the treatment of LEMS patients, we received seven-year orphan drug exclusivity for our product for the treatment of
LEMS.

In light of the FDA’s decision to approve Ruzurgi®, the scope and protections afforded by the exclusivities that we received upon the
approval of our product remain unclear, and our suit against the FDA seeking to undo the approval of Ruzurgi® is our attempt to undo
what we believe was a violation of our statutory right to exclude others from the market. There can be no assurance that we will be
successful in those efforts.

We have licensed the Firdapse® trademark, and the trademark was registered in the United States in March 2015.

Protection of our intellectual property and regulatory exclusivities is a strategic priority for our business. Our ability to protect and use
our intellectual property rights and regulatory exclusivity 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.”

Generic Sabril®

In September 2015, we announced the launch of a program to develop our version of vigabatrin (CPP-109) as a generic version of
Sabril®, which is marketed in the United States by Lundbeck. Lundbeck’s exclusivity for Sabril® expired on April 26, 2018. Vigabatrin
comes in two dosage forms – a powder sachet and a tablet. Par Pharmaceutical brought the first generic version of the powder sachet
to market, and since then several additional generic versions of this product have been approved. However, there is only one approved
generic version of the tablets at this time.

On December 18, 2018, we entered into a definitive agreement with Endo International plc’s subsidiary, Endo Ventures Limited
(“Endo”), for the further development and commercialization of generic Sabril® tablets through Endo’s United States Generic
Pharmaceuticals segment, Par Pharmaceutical. Pursuant to the agreement, in December 2018, we received an up-front payment of
$500,000. We will be entitled to receive a milestone payment of $2.0 million on the commercial launch of the product. Further, we
will receive a sharing of defined net profits upon commercialization and certain expenses for development.

Manufacturing and Supply

We are licensed in Florida as a virtual drug manufacturer, which means that we have no in-house manufacturing capacity and we are
obligated to rely on contract manufacturers and packagers. We have no plans to build or acquire the manufacturing capability needed
to manufacture any of our research materials or commercial products, and we expect that our drug products and drug substances will
be prepared by contractors 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 our products. Because we will use contractors to
manufacture and supply our products, we will be reliant on such contractors. 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 a drug application for one of our
drug candidates to be approved, and there can be no assurance that the contractors we select would pass such an inspection.

We have entered into agreements with a supplier of the active pharmaceutical ingredient (API) contained in Firdapse® for future
requirements and we have contracted with third-party contract manufacturers who are manufacturing Firdapse® tablets for us.

Any significant change that we make for Firdapse® must be approved by the FDA in a supplemental new drug application (sNDA). If
the manufacturing plan and data are insufficient, any sNDA we submit will not be approved. Before an sNDA can be approved, our
manufacturers must also demonstrate compliance with FDA’s current Good Manufacturing Practices (cGMPs) regulations and
policies. Further, even if we receive approval of any sNDAs for Firdapse®, if our manufacturers do not follow cGMPs in the
manufacture of our products, it may delay product launches or shipments and adversely affect our business.

Since we contract with third parties to manufacture our products, our contract manufacturers are 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 direct exposure to environmental issues.

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.

Before the approval of Firdapse®, LEMS was generally treated with unapproved 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 May 2019, we became aware that the FDA had approved an NDA for Jacobus Pharmaceuticals for Ruzurgi®, their version of
amifampridine (3,4-DAP) for the treatment of pediatric LEMS patients (ages 6 to under 17). While we have filed suit against the FDA
to vacate their approval of Ruzurgi®, there can be no assurance as to the outcome of this lawsuit or as to the impact of the approval of
Ruzurgi® on our business, financial condition or results of operations.

Finally, we are aware that amifampridine has been available from compounding pharmacies for many years and may remain available,
even though we have obtained FDA approval of Firdapse®. Compounded amifampridine is likely to be substantially less expensive
than Firdapse®. The Food and Drug Administration Modernization Act of 1997 included a new section, which clarified the status of
pharmacy compounding under Federal law. Under Section 503A, drug products that are lawfully compounded by a pharmacist or
physician for an individual patient may be entitled to exemptions from three key provisions of the FDCA: (1) the adulteration
provision of section 501(a)(2)(B) (concerning FDA’s cGMP regulations); (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 legal requirements. One of these
requirements restricts the universe of bulk drug substances that a compounder may use. Specifically, every bulk drug substance used
in compounding: (1) must comply with an applicable and current USP or NF drug monograph, if one exists, as well as the current USP
chapters 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 “Section 503A bulk substances list 1”). While
the advertising provisions in Section 503A were ruled unconstitutional in part in the United States by the Supreme Court in 2002, the
FDA, since 2013, has aggressively regulated and exercised oversight over the practice of pharmacy compounding following the
compounding incident at the New England Compounding Center in Massachusetts that sickened hundreds and killed over 60
individuals.

In 2013, Congress removed the unconstitutional advertising provisions in Section 503A when it passed the Drug Quality and Security
Act of 2013 (DQSA), Title I (The Compounding Quality Act). The DQSA also created “outsourcing facilities” under Section 503B of
the Federal Food, Drug, and Cosmetic Act, which are drug compounders that voluntarily register with FDA and may produce
compounded formulations for office use (at least one of which must be sterile), but must comply with FDA’s cGMP regulations and
other requirements set forth in Section 503B. Section 503B outsourcing facilities may also only compound from bulk substances if the
product is on FDA’s drug shortage list, or the substance is on FDA’s Section 503B list of bulk substances that may be used in
compounding (i.e., the Section 503B bulk substances list 1”).

While the FDA has been aggressively enforcing Section 503A since its re-enactment, compounders may still compound “near copies”
(but not “essentially copies”) of approved drug products, under Section 503A, so long as the prescriber makes a change to the
compounded formulation that produces for that patient a significant difference between the commercially available drug and the
compounded version. Compounders may also copy commercially available products if they do not do so in “regular or inordinate
amounts.” In January 2018, FDA published a Final Guidance document titled, “Compounded Drug Products That Are Essentially
Copies of a Commercially Available Drug Product Under Section 503A of the Federal Food, Drug, and Cosmetic Act.” This Final
Guidance sets forth FDA’s enforcement policy concerning those compounders that make essentially copies of commercially available
drug products. FDA has defined the term “regular or inordinate” in the Final Guidance to mean: “a drug product that is essentially a
copy of a commercially available drug product is compounded regularly or in inordinate amounts if it is compounded more frequently
than needed to address unanticipated, emergency circumstances, or in more than the small quantities needed to address unanticipated,
emergency circumstances.” FDA has further stated it will not take enforcement action, considering all the facts and circumstances,

against a compounder that compounds less than four “essentially copies” of a commercially available drug product in a calendar
month.

Generic Sabril®

Sabril® is marketed by Lundbeck in the United States for infantile spasms and for refractory complex partial seizures. Lundbeck’s
sales of Sabril® (tablets and sachets) were approximately $195 million in 2018 and $123 million in 2019. One generic version of
Sabril® tablets has been approved to date in the United States, as have numerous generic version of the powder form. We have entered
into a definitive agreement with Endo/Par for the further development and commercialization of generic Sabril® tablets.

Factors affecting competition generally

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

•

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

the demonstrated efficacy, safety and reliability of our drug candidates;

the timing and scope of regulatory approvals;

product acceptance by physicians and other health care providers;

the willingness of payors to reimburse for our product;

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

the availability of capital resources to fund our 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 in 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:

•

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 non-clinical and clinical trial sites that generated the data in support of the NDA; and

FDA review and approval of the NDA.

The testing and approval process requires substantial time, effort and financial resources, and the receipt and timing of any approval is
uncertain.

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 non-clinical 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:

•

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.

In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is
required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access
to such investigational drug.

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 filing it. The FDA may request additional
information rather than file an NDA. In this event, the NDA must be resubmitted with the additional information. The resubmitted
application also is subject to review before the FDA files it. Once the submission is filed, the FDA begins an in-depth substantive
review. The submission of an NDA is also subject to the payment of a substantial application fee (for FDA fiscal year 2021 this fee is
$2,875,842), 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 an annual program fee, which for FDA fiscal year 2021 is $336,432 per prescription drug product. User fees typically
increase annually. 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.

Once an NDA is approved, changes to the conditions of approval, including additional indications, are made by the submission of a
supplement to the NDA. The supplemental NDA, or sNDA, must contain all of the information necessary to support the change. In the
case of a new indication, that information usually consists of at least one clinical trial, and often more. Like an NDA, FDA determines
whether the sNDA is sufficiently complete to permit review before it files the sNDA. FDA then reviews the sNDA. Like an NDA,
FDA can either approve the sNDA or issue a complete response letter outlining the deficiencies in the sNDA.

Special Protocol Assessments

A SPA is a process in which sponsors may request to meet with the FDA to reach agreement on the design and size of certain clinical
trials, clinical studies, or animal trials to determine if they adequately address scientific and regulatory requirements. As part of this
process, sponsors submit specific questions about protocol design and scientific and regulatory requirements. After the FDA
completes the review of a SPA request, the FDA may issue a SPA Letter, including an assessment of the protocol, agreement or non-
agreement with the proposed protocol, and answers to the sponsor’s relevant questions.

A SPA agreement indicates concurrence by the FDA with the adequacy and acceptability of specific critical elements of overall
protocol design (e.g., entry criteria, dose selection, endpoints, and planned analyses). These elements are critical to ensuring that the
trial conducted under the protocol has the potential to support a future submitted application’s ability to meet regulatory requirements
for approval. Feedback on these issues provides the greatest benefit to sponsors in planning late-phase development strategy.
However, a SPA agreement does not indicate FDA concurrence on every protocol detail. Further, the FDA may rescind a SPA if the
director of the FDA reviewing division determines that a substantial scientific issue essential to determining the safety or efficacy of
the drug was identified after the trial began. Thus, a SPA is not binding on the FDA if, for example, the Agency identifies a safety
concern related to the product or its pharmacological class, if the FDA or the scientific community recognizes a paradigm shift in

disease diagnosis or management, if the relevant data or assumptions provided by the sponsor in the SPA submission are found to be
false or misstated, or if the sponsor fails to follow the protocol that was agreed upon with the FDA. The FDA retains significant
latitude and discretion in interpreting the terms of a SPA agreement and the data and results from the applicable clinical trial.

Because an SPA provides for the evaluation of protocols for trials that have not been initiated, the conduct and results of the
subsequent trial are not part of the evaluation. Therefore, the existence of an SPA agreement does not guarantee that the FDA will
accept an NDA, or that the trial results will be adequate to support approval. Those issues are addressed during the review of a
submitted application; however, it is hoped that trial quality will be improved by the SPA process.

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
other 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 with claims covering the
applicant’s product or approved methods of using the product. Upon approval of a drug, each of the patents listed in the application for
the drug are 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 to be bioequivalent 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 (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 applicant has not obtained a right of reference. If the
Section 505(b)(2) applicant can establish that reliance on FDA’s prior findings of safety and effectiveness or published literature is
scientifically appropriate, it may eliminate the need to conduct certain pre-clinical 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.

Abbreviated new drug applications

Generic drugs may enter the market after the approval of an ANDA. The ANDA development process typically does not require new
pre-clinical or clinical studies, but it does typically require one or more bioequivalence studies to show that the ANDA drug is
bioequivalent to the previously approved brand name reference listed drug. Bioequivalence studies compare the bioavailability of the
proposed drug product with that of the approved listed product containing the same active ingredient. Bioavailability is a measure of
the rate and extent to which the active ingredient or active moiety is absorbed from a drug product and becomes available at the site of
action. A demonstration of bioequivalence means that the rate and extent of absorption of the ANDA drug is not significantly different
from the rate and extent of absorption of the brand name reference listed drug when administered at the same molar dose under similar
experimental conditions.

As noted above, generic drug products are generally introduced to the marketplace at the expiration of patent protection and non-
patent market exclusivity for the reference listed drug. However, if an ANDA applicant is the first ANDA applicant to submit an
ANDA containing a Paragraph IV certification, that ANDA may be eligible for a period of generic marketing exclusivity on approval.
This exclusivity, which under certain circumstances must be shared with other ANDA applicants with Paragraph IV certifications,

lasts for 180 days, during which the FDA cannot grant final approval to other ANDA sponsors of an application for a generic
equivalent to the same reference drug. Under certain circumstances, eligibility for 180-day exclusivity may be forfeited.

Various types of changes to an approved ANDA must be requested in a prior approval supplement. In addition, some changes may
only be approved only after new bioequivalence studies are conducted or other requirements are satisfied. In addition, the ANDA
applicant must demonstrate that manufacturing procedures and operations conform to FDA cGMP requirements. Facilities,
procedures, operations, and/or testing of products are subject to periodic inspection by the FDA and other authorities. In addition, the
FDA conducts pre-approval and post-approval reviews and inspections to determine whether the systems and processes are in
compliance with cGMP and other FDA regulations.

There are also user fees for ANDA applicants, sponsors, and manufacturers. For fiscal year 2021, the application fees are $196,868
per ANDA application and the facility fees are $184,022 per domestic finished dosage form facility, $199,022 per foreign finished
dosage form facility, $41,671 per domestic active pharmaceutical ingredient facility, and $56,671 per foreign active pharmaceutical
ingredient facility. In addition, there is a new annual program fee based on the size of the generic drug applicant.

These user fees typically increase each fiscal year (though they decreased slightly for the 2020 fiscal year).

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 United States 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,
private commercial health insurers and PBMs. 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 or
other studies in order to further demonstrate the value 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 (the “Affordable Care
Act”). In fact, there continue to be efforts in Congress to revise the Affordable Care Act and replace it with another law. As a result,
there is great uncertainty as to what changes will be made to United States healthcare laws and there can be no assurance how changes
to those laws may affect our business.

We anticipate that in the United States, 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 could include:

•

controls on government-funded reimbursement for drugs;

•

mandatory rebates or additional charges to manufacturers for their products to be covered on Medicare Part D
formularies;

controls on healthcare providers;

controls on pricing of pharmaceutical products, including the possible reference of the pricing of United States drugs to
non-United States drug pricing for the same product;

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

reform of drug importation laws;

entering into contractual agreements with payors; 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.

Further, the pricing of pharmaceutical products generally, and particularly the pricing of orphan drugs, has recently received scrutiny
from the press, and from members of Congress in both parties. Some members of the medical community and Senator Bernie Sanders
have also made statements in the press on the potential pricing of orphan drugs generally and on the pricing of our product
specifically. The impact of this scrutiny on us and on the pricing of orphan drugs and other pharmaceutical products generally cannot
be determined with any certainty at this time.

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 disease or
condition for a period of seven 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.

The orphan drug exclusivity contained in the ODA has been the subject of recent scrutiny from the press, from some members of
Congress and from some in the medical community, and a recent proposed change to the ODA would limit the availability of the
benefits of the act for drugs that treat more than 200,000 individuals in the United States. There can be no assurance that the
exclusivity granted in ODA to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change
might affect our products, if approved.

Pediatric exclusivity is another type of non-patent exclusivity in the United States 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 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. Actions taken to expedite development may include the following actions, as appropriate:

•

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 non-clinical 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

•

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 disclose the results of their
clinical trials after completion. Disclosure of results of these trials can be delayed in certain circumstances for up to two years after the
date of completion of the clinical trial. 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 patients, 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.

The Centers for Medicare & Medicaid Services (CMS) has issued a final rule that requires manufacturers of approved prescription
drugs to collect and report information on payments or transfers of value to physicians and teaching hospitals, as well as investment
interests held by physicians and their immediate family members. The information reported each year is made publicly available on a
searchable website. Failure to submit required information may result in civil monetary penalties. Beginning in 2022, applicable
manufacturers also will be required to report such information regarding their relationships with physician assistants, nurse
practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants and certified nurse midwives
during the previous year.

In addition, several states now require prescription drug companies to report expenses relating to the marketing and promotion of drug
products, to report gifts and payments to individual physicians in these states and to report certain pricing information, including price
increases. Other states prohibit various other marketing-related activities. Still other states require the posting of information relating
to clinical studies and their outcomes. In addition, California, Connecticut, Nevada, and Massachusetts require pharmaceutical
companies to implement compliance programs and/or marketing codes. Several additional states are considering similar proposals.
Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil
penalties.

Prescription drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription
drug promotion, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in
conjunction with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the
United States Prescription Drug Marketing Act (PDMA), a part of the FDCA. In addition, Title II of the Federal Drug Quality and
Security Act of 2013, known as the Drug Supply Chain Security Act (DSCSA), has imposed new “track and trace” requirements on
the distribution of prescription drug products by manufacturers, distributors, and other entities in the drug supply chain. The DSCSA
requires product identifiers (i.e., serialization) on prescription drug products in order to eventually establish an electronic interoperable
prescription product to system to identify and trace certain prescription drugs distributed in the United States and preempts existing
state drug pedigree laws and regulations on this topic. The DSCSA also establishes new requirements for the licensing of wholesale
distributors and third-party logistic providers, although FDA regulations addressing wholesale distributors and third party logistics
providers have not yet been promulgated. We serialize our product at both the package and homogeneous case level, pass serialization
and required transaction information to our customers, and believe that we comply with all such requirements.

Our Employees

As of March 11, 2021, we had 74 employees, approximately 35 of whom are in our commercial organization, approximately 25 of
whom are in our R&D organization, and the rest of whom are in our G&A organization. We also utilize the services of several
consultants. None of our employees are covered by a collective bargaining agreement. We believe our relationship with our employees
and consultants is good.

Our goal in selecting employees is to retain high quality personnel with substantial prior experience who understand and support our
mission as a company to develop and commercialize innovative therapies for people with rare, debilitating, chronic neuromuscular
and neurological diseases and who are willing to work hard and in a collaborative manner to further that mission.

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

Risk Factors Summary

We are providing the following summary of the risk factors contained in our Form 10-K to enhance the readability and accessibility of
our risk factor disclosures. We encourage our stockholders to carefully review the full risk factors contained in this Form 10-K in
their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially
from our recent results or from our anticipated future results.

Risks related to the commercialization of Firdapse®

• We depend substantially on the commercial success of Firdapse®.

•

Our business may in the future require additional capital.

Our success depends on our ability to continue to successfully commercialize Firdapse®. We are primarily a single
product company with limited commercial experience, which makes it difficult to evaluate our current business, predict
our future prospects and forecast our financial performance and growth.

• We have limited experience as a company in marketing or distributing pharmaceutical products. If we are unable to
expand our marketing capabilities and effectively commercialize Firdapse®, our business, results of operations and
financial condition may be materially adversely affected.

•

Our business is subject to substantial competition.

Our recently adopted strategy of seeking to acquire or in-license innovative technical platforms or earlier stage drug
development programs outside of the neuromuscular disease space may not be successful.

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

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

•

The ongoing COVID-19 pandemic and the worldwide attempts to contain it could harm our business and results of
operations and financial condition and could be adversely impacted by it.

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

•

Business or economic disruptions or global health concerns could seriously harm our development efforts and increase
our costs and expenses.

Risks Related to the Development of Additional Indications for Firdapse®

•

Our efforts may fail.

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

• 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 additional indications.

• We will need to continue to develop and maintain distribution and production capabilities or relationships to be

successful.

•

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

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

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

•

Pressure on drug product third-party payor coverage, reimbursement and pricing may impair our ability to be reimbursed
at prices or on terms sufficient to provide a viable financial outcome.

• We cannot assess the impact on our business of the public concerns expressed by a U.S. Senator and a vocal group of

neuromuscular physicians and patients with LEMS about our pricing of our drug product.

•

Because the target patient populations for Firdapse® 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.

Our internal computer systems, or those of our contract research organizations 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 employees, sales agents and consultants may engage in misconduct or other improper activities, including
noncompliance with regulatory standards and requirements.

Risks Related to Government Regulation

•

The regulatory approval process is lengthy, and we may not be able to obtain all of the regulatory approvals required to
manufacture and commercialize Firdapse® for additional indications.

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.

• 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.

•

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.

Enacted and future legislation or judicial action may increase the difficulty and cost for us to commercialize Firdapse®
on any other drug candidates we develop, and affect the prices we may obtain.

Firdapse® is subject to ongoing regulatory review. If we fail to comply with continuing United States and applicable
foreign regulations, we could lose those approvals, and our business would be severely harmed.

•

If we fail to obtain or subsequently maintain orphan drug exclusivity or regulatory exclusivity for Firdapse® 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 adversely affected.

• We cannot guarantee that the design of, or data collected from, that trial or any of our clinical trials conducted under a

Special Protocol Assessment (SPA) will be sufficient to support filing or approval of an NDA.

•

Our operations and relationships with healthcare providers, healthcare organizations, customers and third-party payors
are subject to applicable anti-bribery, anti-kickback, fraud and abuse, transparency and other healthcare laws and
regulations, which could expose us to, among other things, enforcement actions, criminal sanctions, civil penalties,
contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Risks Related to our Intellectual Property

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

to the license agreements.

•

Our success will depend significantly on our ability to operate without infringing the patents and other proprietary rights
of third parties.

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

property rights.

There are also general risk factors relating to us that you should consider that relate to our business and to our common stock.

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 the commercialization of Firdapse®

We depend substantially on the commercial success of Firdapse®.

Until we launched Firdapse® for the treatment of LEMS in January 2019, we focused all of our efforts on obtaining regulatory
approval for Firdapse® for the treatment of LEMS, on evaluating Firdapse® for the treatment of other neuromuscular diseases
including CMS, MuSK-MG and SMA Type 3, on raising capital, and on recruiting personnel. On November 28, 2018, the FDA
approved our first product, Firdapse® for the treatment of adults with LEMS, which became commercially available in January 2019.
While we reported net income of $75.0 million for fiscal 2020 and $31.9 million for fiscal 2019, we have a prior history of operating
losses in all prior fiscal years of our existence. There can be no assurance that we will remain profitable.

Our business may in the future require additional capital.

We may need to raise additional capital in the future in order to fund our business and generate significant revenue in order to achieve
and maintain profitability. If necessary, we would likely raise additional funds in the future through public or private equity offerings,
debt financings, corporate collaborations, or other means. We may also seek governmental grants to support our clinical and pre-
clinical trials. However, there is no assurance that any such funding will be available, and, even if it is available, whether it will be
available on terms that are favorable to us. 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 debt securities convertible into additional equity could result in dilution to our stockholders.
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.

Our success depends on our ability to continue to successfully commercialize Firdapse®. We are primarily a single product
company with only limited commercial experience, which makes it difficult to evaluate our current business, predict our future
prospects and forecast our financial performance and growth.

We have invested a significant portion of our efforts and financial resources into the development and commercialization of our lead
product, Firdapse®, which was approved by the FDA as a treatment for adults with LEMS on November 28, 2018. Our success
depends on our ability to effectively commercialize Firdapse®, and we expect that the vast majority of our product revenues in the
foreseeable future will be from sales of Firdapse®. Successful commercialization of Firdapse® is subject to many risks. Until we
launched Firdapse®, we had never launched or commercialized a product, and there is no guarantee that we will be able to continue to
be profitable based on our sales of Firdapse®. There are numerous examples of unsuccessful product launches and failures to meet
high expectations of market growth potential, including by pharmaceutical companies with more resources and experience than we
have. The commercial success of Firdapse® depends on the extent to which patients and physicians accept and adopt Firdapse®. For
example, if the expected patient population is smaller than we estimate or if physicians are unwilling to prescribe or patients are
unwilling to take Firdapse®, or if patients discontinue from use of the medication at rates that are higher than we expect, or if payers
decide not to reimburse for our product, the commercial potential of Firdapse® will be limited. Thus, significant uncertainty remains
regarding the ultimate commercial potential of Firdapse®.

Moreover, our ability to effectively generate product revenue from Firdapse® will depend on our ability to, among other things:

•

compete successfully with Ruzurgi®, Jacobus Pharmaceuticals’ version of amifampridine;

be successful in our suit against the FDA seeking to maintain our exclusivity under the Orphan Drug Act for treating
LEMS patients;

educate patients and physicians successfully about efficacy expectations, side effects expectations, and how to
successfully dose and titrate the medication to optimal patient benefit in order to minimize discontinuation due to
perceived lack of efficacy or side effects;

achieve and maintain compliance with regulatory requirements, including those related to our required post-approval
studies, promotion and advertising requirements;

increase awareness for and achieve market acceptance of Firdapse® through our sales and marketing activities and other
arrangements established for the promotion of Firdapse®;

train, deploy, support, and retain a qualified field sales and marketing force;

secure continued formulary approvals for Firdapse® with a substantial number of targeted payors;

ensure that our third-party manufacturers manufacture Firdapse® in sufficient quantities, in compliance with
requirements of the FDA and at acceptable quality and pricing levels, in order to meet commercial demand;

ensure that our third-party manufacturers develop, validate and maintain commercially viable manufacturing processes
that are compliant with current Good Manufacturing Practice (cGMP) regulations;

implement and maintain agreements with wholesalers, distributors and group purchasing organizations on commercially
reasonable terms;

ensure that our entire supply chain efficiently and consistently delivers Firdapse® to our customers;

provide co-pay assistance to help qualified patients with out-of-pocket costs associated with their Firdapse® prescription,
and/or other programs to ensure patient access to our products, educate physicians and patients about the benefits,
administration and use of Firdapse®, and obtain acceptance of Firdapse® as safe and effective by patients and the medical
community;

receive adequate levels of coverage and reimbursement for Firdapse® from commercial health plans and governmental
health programs;

generate positive experience with our Catalyst Pathways™ program in helping patients obtain access to Firdapse® at an
acceptable patient out-of-pocket cost;

maintain quality relationships with patient advocacy groups;

influence the nature of publicity related to our product relative to the publicity related to our competitors’ products; and

obtain regulatory approvals for additional indications for the use of Firdapse® in treating other rare neuromuscular
diseases.

Any disruption in our ability to generate product revenue from the sale of Firdapse® will have a material and adverse impact on our
results of operations.

We have limited experience as a company in marketing or distributing pharmaceutical products. If we are unable to continue to
successfully commercialize Firdapse®, our business, results of operations and financial condition may be materially adversely
affected.

Our strategy is to continue to successfully commercialize Firdapse® in the United States. While we have established our commercial
team and launched our product, we have limited experience commercializing pharmaceutical products as an organization. In order to
successfully market Firdapse®, we must continue to build our sales, marketing, managerial, compliance, and related capabilities or
make arrangements with third parties to perform these services. If we are unable to continue to have adequate sales, marketing, and
distribution capabilities, whether independently or with third parties, we may not be able to appropriately commercialize Firdapse®
and may not become profitable.

There are risks involved both with maintaining our own sales and marketing capabilities, and with entering into arrangements with
third parties to perform these services. For example, any efforts to maintain a direct sales and marketing organization are subject to
numerous risks, including:

•

the expense and time required to recruit, retain, and motivate members of the sales force;

our inability to recruit, retain or motivate adequate numbers of effective marketing personnel and partner marketing
agencies;

the inability to provide adequate training to sales and marketing personnel;

the expense and time required to monitor regulatory compliance;

the inability of sales personnel to obtain access to physicians or convince adequate numbers of physicians to prescribe
any product; and

unforeseen costs and expenses associated with creating an independent sales and marketing organization.

Similarly, as we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue
or the profitability associated with any product revenue may be lower than if we were to market and sell any products that we develop
ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our products or
may be unable to do so on terms that are favorable to us. We may have little control over such third parties, and any of them may fail
to devote the necessary resources and attention to sell and market our products effectively. Moreover, we may be negatively impacted
by other factors outside of our control relating to such third parties, including, but not limited to, their inability to comply with
regulatory requirements. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in
collaboration with third parties, we will not be successful in commercializing our products.

Finally, because we are using a very small group of exclusive specialty pharmacies to distribute our product, if the organizations that
we work with to deliver our drug do not perform in a lawful manner or have issues unrelated to our business, our business could be
adversely affected.

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 us. In addition, we compete against
biotechnology companies, universities, government agencies, and other research institutions in the development of pharmaceutical
products. 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, we may also compete
with respect to manufacturing efficiency and marketing capabilities.

Even with the FDA approval of Firdapse®, the bulk active pharmaceutical ingredient in the drug (i.e., amifampridine) may be used by
compounding pharmacies pursuant to Section 503A of the Federal Food, Drug, and Cosmetic Act because the ingredient is a
component of an FDA-approved drug product, and pharmacies may lawfully compound for individually identified patients under
Section 503A using components of approved drug products. 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.

Our recently adopted strategy of seeking to acquire or in-license innovative technical platforms or earlier stage drug development
programs outside of the neuromuscular disease space may not be successful.

On January 6, 2021, we announced an expansion in our strategic focus to include acquiring or in-licensing innovative technology
platforms and earlier stage programs in other therapeutic categories outside of neuromuscular diseases. We are evaluating
opportunities to in-license or acquire products, product candidates and technologies on a selective and targeted basis. Our business
development efforts may fail to result in our acquiring rights to additional products, product candidates or technologies, or may result
in our consummating transactions with which you do not agree.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate is lengthy and complex, and
we may be unable to in-license or acquire the rights to any such products, product candidates or technologies from third parties for
several reasons. The success of this strategy depends partly upon our ability to identify, select and acquire or in-license promising
product candidates and technologies.

The in-licensing and acquisition of pharmaceutical products is an area characterized by intense competition, and a number of
companies (both more established and early stage biotechnology companies) are also pursuing strategies to in-license or acquire
product candidates or technologies that we may consider attractive. We believe that other companies may be particularly active in
pursuing opportunities to in-license or acquire the same or similar products which we may seek to acquire. More established
companies may have a competitive advantage over us due to their size, cash resources and greater research, preclinical or clinical
development or commercialization capabilities, while earlier stage companies may be more aggressive or have a higher risk tolerance.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to
in-license or acquire the rights to the relevant product candidate or technology on terms that would allow us to make an appropriate
return on our investment. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never
completed, or we may fail to realize the anticipated benefits of such efforts or we may incorrectly judge the value of an acquired or in-
licensed product candidate or technology.

If we are unable to successfully obtain rights to suitable product candidates or technologies, our business, financial condition and
prospects for growth could suffer. In addition, acquisitions and in-licensing arrangements for product candidates and technologies are
inherently risky, and ultimately, if we do not complete an announced acquisition or license transaction or integrate an acquired or
licensed product candidate or technology successfully and in a timely manner, we may not realize the benefits of the acquisition or
license to the extent anticipated and the perception of the effectiveness of our management team and our company may suffer in the
marketplace. In addition, even if we are able to successfully identify, negotiate and execute one or more transactions to acquire or in-
license new product candidates or technologies, our expenses and short-term costs may increase materially and adversely affect our
liquidity.

In addition, acquisitions and in-licenses may entail numerous operational, financial and legal risks, including:

•

exposure to known and unknown liabilities, including possible intellectual property infringement claims, violations of laws, tax
liabilities and commercial disputes;

incurrence of substantial debt, dilutive issuances of securities or depletion of cash to pay for acquisitions;

higher than expected acquisition and integration costs;

difficulty in combining the operations and personnel of any acquired businesses with our operations and personnel;

inability to maintain uniform standards, controls, procedures and policies;

restructuring charges related to eliminating redundancies or disposing of assets as part of any such combination;

large write-offs and difficulties in assessing the relative percentages of in-process research and development expense that can be
immediately written off as compared to the amount that must be amortized over the appropriate life of the asset;

increased amortization expenses or, in the event that we write down the value of acquired assets, impairment losses;

potential failure of the due diligence process to identify significant problems, liabilities or other shortcomings or challenges of
an acquired or licensed product candidate or technology, including problems, liabilities or other shortcomings or challenges with
respect to intellectual property, product quality, revenue recognition or other accounting practices, partner disputes or issues and
other legal and financial contingencies and known and unknown liabilities; and

entry into therapeutic modalities, indications or markets in which we have no or limited direct prior development or commercial
experience and where competitors in such markets have stronger market positions.

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 consolidated 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 and key employees and on our Board of Directors. 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, we have no employment
or retention agreements with any of our other officers or key employees. If we lose the services of any of our existing officers or key
employees, 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.

The ongoing COVID-19 pandemic and the worldwide attempts to contain it could harm our business and results of operations and
financial condition and could be adversely impacted by it.

The ongoing global outbreak of the coronavirus COVID-19, and the various attempts throughout the world to contain it, have created
significant volatility, uncertainty and disruption. The COVID-19 pandemic has had, and may continue to have, significant effects on
our operations. There can be no assurance as to whether and how long these effects will last and whether following the pandemic
whatever trends have occurred will not remain in place and continue to affect our business.

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 that
we believe to be adequate. 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.

Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs
and expenses.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities.
Global health concerns, such as the COVID-19 pandemic, could also result in social, economic, and labor instability in the countries in
which we or the third parties with whom we engage operate. We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial
sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions,
our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.
It is also possible that global health concerns such as the COVID-19 pandemic could disproportionately impact the hospitals and
clinical sites in which we conduct any of our clinical trials, which could have a material adverse effect on our business and our results
of operation and financial condition.

Risks Related to the Development of Additional Indications for Firdapse®

Our efforts may fail.

Development of additional indications for Firdapse® is subject to risks of failure. For example:

•

Firdapse® may be found to be ineffective or unsafe for one or more additional indications, or fail to receive necessary
regulatory approvals;

Firdapse® may not be economical to market or take substantially longer to obtain necessary approvals for additional
indications than anticipated; or

competitors may develop and market equivalent or superior products, including next generation products that act with
the same mechanism of action as Firdapse®.

As a result, our drug development activities may not result in any safe, effective and commercially viable additional indications, and
we may not be able to commercialize our products successfully. For example, for several years, we evaluated Firdapse® for the
treatment of CMS, MuSK-MG and SMA Type 3. However, Firdapse® failed to meet the primary endpoints in a Phase 3 trial for CMS
and we are no longer pursing this indication. Further, and even though we achieved statistical significance in the primary endpoint in
our proof-of-concept trial for SMA Type 3 the lack of robust results in this trial has caused us to decide to no longer pursue this
indication. Finally, our Phase 3 clinical trial (MSK-002) evaluating Firdapse® for the treatment of adults with MuSK-MG did not
achieve statistical significance on its primary endpoint or its secondary endpoint even though clinical improvement was observed by
patients and investigators during the initial dose-titration period of the trial and in the company’s previous proof-of-concept trial. We
plan to redesign a Phase 3 study that may better demonstrate the efficacy of our drug for the treatment of MuSK-MG and discuss it
with FDA during the first half of 2021. However, there can be no assurance that the FDA will either grant a meeting, agree with our
protocol design or, even if the study is successful, accept the results of a single study of a different trial design as sufficient evidence
for approval of the MuSK-MG indication.

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 Firdapse® for additional indications 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:

•

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 review 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;

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;

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 additional indications.

We do not currently have the ability to independently conduct pre-clinical studies or clinical studies and trials, and we typically 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 for us. 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 Firdapse® for additional indications 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 also 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 any additional
indications if these requirements are not met.

We will need to continue to develop and maintain distribution and production capabilities or relationships to be successful.

We are licensed in Florida as a virtual drug manufacturer, which means we have no in-house manufacturing capacity and we will be
obligated to rely on contract manufacturers and packagers. We cannot be sure that we will successfully manufacture any product,
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) requirements 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. In addition, if, during a preapproval inspection or other
inspection of our third-party manufacturers’ facility or facilities, the FDA determines that the facility is not in compliance with cGMP,
any of our marketing applications that lists such facility as a manufacturer may not be approved or approval may be delayed until the
facility comes into compliance with cGMP and completes a successful re-inspection by the FDA.

Any manufacturing problem, natural disaster, or epidemic, 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 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 drugs, it could have a material
adverse effect on our ability to successfully commercialize our drug candidates.

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.

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

We may not be able to successfully increase in a sufficient manner the manufacturing capacity for 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.

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 at prices
or on terms sufficient to provide a viable financial outcome.

The commercial success of Firdapse® will continue to depend substantially on the extent to which the cost of Firdapse® will be paid by
health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government
health administration authorities (such as Medicare and Medicaid), private health coverage insurers and other third-party payors. If
reimbursement is not available, or is available only to limited levels, we may not be able to continue to successfully commercialize
Firdapse®. Even if coverage is provided, the approved reimbursement amount may not be high enough to establish and maintain
pricing sufficient to realize a meaningful return on our investment.

Our ability to commercialize Firdapse® or any other product candidate will depend in large part on the extent to which coverage and
reimbursement for these products and related treatments will be available from government health administration authorities, private
health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health
maintenance organizations, decide which medications they will cover and establish reimbursement levels. The healthcare industry is
acutely focused on cost containment, both in the United States and elsewhere. Government authorities and third-party payors have
attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our
ability to sell our product candidates profitably. These payors may not view our products as cost-effective, and coverage and
reimbursement may not be available to our customers, or may not be sufficient to allow our products, if any, to be marketed on a
competitive basis. Cost-control initiatives could cause us to decrease the price we might establish for products, which could result in
lower than anticipated product revenues. If the prices for our products decrease or if governmental and other third-party payors do not
provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than
the indications for which the drug is approved by the FDA. Moreover, eligibility for reimbursement does not imply that any drug will
be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.
Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used.
Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing
payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new
technologies and are challenging the prices charged. We cannot be sure that coverage will be available for any product candidate that
we commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products
may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they
may be sold at lower prices than in the United States. An inability to promptly obtain coverage and adequate payment rates from both
government-funded and private payors for any of our product candidates for which we obtain marketing approval could have a
material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial
condition.

The pricing of pharmaceutical products, in general, and of specialty drugs, in particular, has been a topic of concern in the United
States Congress, where hearings have been held on the topic, and several bills have been introduced proposing a variety of actions to
restrain the prices of drugs. Former President Trump frequently discussed his intention to reduce drug prices, as has President Biden.
The former Administration solicited public comment on a variety of regulatory proposals to reduce drug prices, and the Department of
Health and Human Services (HHS) published an interim final rule that establishes a Most Favored Nation (MFN) Model for Medicare
Part B drug payment. This regulation would substantially change the drug reimbursement landscape as it bases Medicare Part B
payment for 50 selected drugs on prices in foreign countries instead of average sales price, or ASP. The MFN drug payment amount is
expected to be lower than the current ASP-based payment limit because U.S. drug prices are generally the highest in the world.
Although the MFN Model payment methodology was scheduled to begin on January 1, 2021, it faces uncertain prospects for
implementation. By the end of December 2020, three federal courts had granted orders preventing implementation of the MFN Model
rule. The likelihood of implementation of any of the former Administration reform initiatives is uncertain, particularly in light of the
recent change in administration on January 20, 2021 and the new administration’s silence to date on these issues. We cannot predict
how any such laws or regulations, or new laws or regulations that have yet to be proposed, will affect the pricing of our product, of
orphan drugs generally, or of pharmaceutical products generally.

We cannot assess the impact on our business of the public concerns expressed by a U.S. Senator and a vocal group of
neuromuscular physicians and patients with LEMS about our pricing of our drug product.

In February 2019, we received a letter from Senator Bernie Sanders asking us to justify our pricing decision for Firdapse®. In the
letter, Senator Sanders accuses us of “fleecing” Americans and “immoral exploitation” because of our decision regarding the pricing
of Firdapse®. We responded to Senator Sanders, who issued a public statement in response asking then-FDA Commissioner Scott
Gottlieb to allow pharmacies and manufacturers who were previously making this drug to be permitted to resume providing it.

There can be no assurance as to how these matters will affect our business or results of operations.

We are also aware that the vocal group of neuromuscular physicians and a number of LEMS patients who have raised these issues in
the past are continuing to raise concerns with the pricing of our product and with the appropriateness of the provisions in the Orphan
Drug Act that grant us exclusivity for Firdapse®. A few of these patients continue to say negative things about us to the media, to other
patients, to the FDA, and to politicians. We cannot assess the impact of these activities on our business.

Because the target patient populations for Firdapse® 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® targets 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. Typically, drugs for conditions with
small prevalence have higher prices in order to generate a return on investment, and as a result, the per-patient prices at which we
anticipate we may sell Firdapse® 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, and high per patient prices could drive physicians to seek
out compounding pharmacies to provide compounded amifampridine to fill their prescriptions rather than Firdapse®, thereby lowering
the Firdapse® market share or penetration in the market. 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® for diseases with small patient
populations. Further, even if we obtain significant market share for Firdapse®, because the potential target populations are very small,
we may not be able to maintain profitability despite obtaining such significant market share. 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 organizations 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 organizations 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, sales agents and consultants may engage in misconduct or other improper activities, including noncompliance
with regulatory standards and requirements.

We are exposed to the risk of fraud or other misconduct by our employees, sales agents or consultants. Misconduct could include
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. 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

The regulatory approval process is lengthy, and we may not be able to obtain all of the regulatory approvals required to
manufacture and commercialize Firdapse® for additional indications.

We will not be able to commercialize our products in other countries or for additional indications until we have obtained the requisite
regulatory approvals from applicable governmental authorities. To obtain regulatory approval of a drug candidate for an indication, we
must demonstrate to the satisfaction of the applicable regulatory agency that such drug candidate is safe and effective for that
indication. 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 United States we must show that the facilities used to
manufacture our drug candidates are in compliance with cGMP requirements. 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 candidate is safe and effective for such indications, in which event we would not receive the regulatory
approval required to market it.

The FDA and other regulatory authorities generally approve products for particular indications. Firdapse® 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 or other regulatory
authorities request additional information.

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 future regulatory approval for the sale of our drug candidates for an indication, 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.

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 candidate may not be found to be safe and effective in particular indications and may not be approved by
regulatory authorities for the proposed indication. Further, regulatory authorities and 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, including our expanded access program, such as seizures, weakness or other side
effects that will cause us, regulatory authorities, or IRBs to delay or suspend such trial or study. Moreover, FDA will consider the
data, including safety data, from patients enrolled in our expanded access program in the evaluation of any NDA or sNDA we may
submit for Firdapse®.

In other countries where Firdapse®, 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, orphan conditions. The availability of approved therapies can also make enrollment difficult. 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 in the past and we expect will continue
in the future to test our drug candidates, including Firdapse®. 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.

Clinical trials in orphan diseases are often difficult to enroll given the small number of patients with these diseases. Completion of
orphan clinical trials may take considerably more time than other trials, sometimes years, depending on factors such as type,
complexity, novelty and intended use of a product candidate. As a result of the uncertainties described above, there can be no
assurance that we will meet timelines that we establish for any of our clinical trials.

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 United States. 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:

•

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 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 products
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.

Firdapse® is subject to ongoing regulatory review. If we fail to comply with continuing United States and applicable foreign
regulations, we could lose those approvals, and our business would be severely harmed.

We are and will continue to be subject to continuing regulatory review for our approved products, including the review of our required
nonclinical and clinical post-marketing studies, and other 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.

Our product promotion and advertising are 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 and available scientific data. 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 to all recipients of the misbranded materials. 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 and executives that promote drugs or biologics for
unapproved uses, based on the Federal Food, Drug, and Cosmetic Act, the False Claims Act, and other federal laws governing the
marketing and reimbursement for such products under federally supported healthcare programs such as Medicare and Medicaid.
Monetary penalties in such cases have often been substantial, and civil penalties can include costly mandatory compliance programs
and potential exclusion of a company’s products from federal healthcare programs.

Enacted and future legislation or judicial action may increase the difficulty and cost for us to commercialize Firdapse® or any
other drug candidates we develop, and affect the prices we may obtain.

In the United States, there have been a number of court cases, legislative and regulatory changes, and other potential changes relating
to the healthcare system that restrict or regulate post-approval activities, which may affect our ability to profitably sell Firdapse® or
any other drug candidates 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 reimbursement methodology based on average sales prices for Medicare Part B physician-
administered drugs. In addition, this legislation 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, former 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 Average Manufacturer Price used
by the Medicaid Drug Rebate Program 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 United
States. 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 discount (now 70%, on brand name drugs for Medicare Part D participants in the
coverage gap, or “donut hole.” The Health Care Reform Law increased the Medicaid rebates for line extensions or reformulated drugs,
which could substantially increase our Medicaid rebate rate (in effect limiting reimbursement for these patients).

Beginning in January 2017, former President Trump signed two Executive Orders and other directives designed to delay the
implementation of certain provisions of the Health Care Reform Law or otherwise circumvent some of the requirements for health
insurance mandated by the Health Care Reform Law. These actions include directing applicable federal agencies to waive, defer, grant
exemptions from, or delay the implementation of any provision of the Health Care Reform Law that would impose a fiscal or
regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

On October 13, 2017, an Executive Order was signed terminating the cost sharing subsidies that reimburse insurers under the Health
Care Reform Law. Several state Attorneys Generals filed suit to stop the administration from terminating the subsidies, but their
request for a restraining order was denied by a federal judge in California on October 25, 2017. Further, on June 14, 2018 the United
States Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12.0 billion in
Health Care Reform Law risk corridor payments to third-party payors. The effects of this gap in reimbursement on third-party payors,
the viability of the Health Care Reform Law marketplace, providers, and our business, are not yet known. On December 18, 2019, the
United States Court of Appeals for the Fifth Circuit ruled that the Health Care Reform Law’s individual mandate is unconstitutional
but sent the matter back down to a district court to determine whether that provision can be removed from the rest of the Health Care
Reform Law. On March 2, 2020, the U.S. Supreme Court agreed to review the Fifth Circuit’s ruling, and oral argument was heard on
November 10, 2020, and a decision may not be made until June 2021. President Biden has made statements regarding changes to the
Health Care Reform Law, including possibly revoking some or all of former President Trump’s executive orders. The likelihood of
implementation of any of former President Trump’s reform initiatives is uncertain, particularly in light of the recent change in
administration.

Additionally, in response to controversies regarding pricing of pharmaceutical products, there has been a recent push to propose
legislation, both on state and federal levels, that would require greater disclosure as to the reasoning behind drug prices and, in some
cases, could give state or federal-level commissions the right to impose cost controls on certain drugs. 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. In that regard, President Biden and members of
Congress in both parties have expressed concerns about high drug prices. However, whether and to what extent any such positions will
result in changes of the law, and how any such changes could impact our business, cannot be determined at this time.

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 United States 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®.

If we fail to obtain or subsequently maintain orphan drug exclusivity or regulatory exclusivity for Firdapse® 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 adversely affected.

In the United States, 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 disease or condition for a period of seven
years, with an additional six months of exclusivity if the product also qualifies for pediatric exclusivity. 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.

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, and FDA can approve the same drug for a different patient population. 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.

Finally, there can be no assurance that the exclusivity provisions currently in the law may not be changed in the future and the impact
of any such changes (if made) on us. The orphan drug exclusivity contained in the Orphan Drug Act has been the subject of recent
scrutiny from the press, from some members of Congress and from some in the medical community. There can be no assurance that
the exclusivity granted in the Orphan Drug Act to orphan drugs approved by the FDA will not be modified in the future, and as to how
any such change might affect our products, if approved.

We cannot guarantee that the design of, or data collected from, that trial or any of our clinical trials conducted under a Special
Protocol Assessment (SPA) will be sufficient to support filing or approval of an NDA.

In the context of a Phase 3 clinical trial, the purpose of a SPA is to reach agreement with the FDA on the protocol design and analysis
that will form the primary basis of an efficacy claim: in other words, if the agreed-upon clinical trial protocol is followed, the clinical
trial endpoints are achieved, and there is a favorable risk-benefit profile, the data may serve as the primary basis for an efficacy claim
in support of an NDA. However, FDA may rescind a SPA if the director of the FDA reviewing division determines that a substantial
scientific issue essential to determining the safety or efficacy of the drug was identified after the trial began. Thus, a SPA is not
binding on the FDA if, for example, the Agency identifies a safety concern related to the product or its pharmacological class, if FDA
or the scientific community recognizes a paradigm shift in disease diagnosis or management, if the relevant data or assumptions
provided by the sponsor in the SPA submission are found to be false or misstated, or if the sponsor fails to follow the protocol that was
agreed upon with FDA. In addition, a SPA may be modified with the written agreement of the FDA and the trial sponsor. The FDA
retains significant latitude and discretion in interpreting the terms of a SPA agreement and the data and results from the applicable
clinical trial. Moreover, even if a clinical trial is conducted pursuant to a SPA, that does not mean that the study will be successful or,
even if the study is successful, that the NDA will meet the standard for approval.

Our operations and relationships with healthcare providers, healthcare organizations, customers and third-party payors are
subject to applicable anti-bribery, anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which
could expose us to, among other things, enforcement actions, criminal sanctions, civil penalties, contractual damages, reputational
harm, administrative burdens and diminished profits and future earnings.

Our current and future arrangements with healthcare providers, healthcare organizations, third-party payors, customers, and patients
expose us to broadly applicable anti-bribery, fraud and abuse and other healthcare laws and regulations that may constrain the business
or financial arrangements and relationships through which we research, market, sell and distribute our drug candidates. In addition, we
may be subject to patient data privacy and security regulation by the U.S. federal government and the states and the foreign
governments in which we conduct our business. Restrictions under applicable federal and state anti-bribery and healthcare laws and
regulations include the following:

•

the Federal health care program Anti-Kickback Statute, which prohibits individuals and entities from, among other
things, knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or
in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or
recommendation of, any good or service, for which payment may be made under a federal and state healthcare program
such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific
intent to violate it in order to have committed a violation;

the federal criminal and civil false claims and civil monetary penalties laws, including the federal False Claims Act,
which can be imposed through civil whistleblower or qui tam actions against individuals or entities, prohibits, among
other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are
false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a
false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay
money to the federal government. In addition, certain marketing practices, including off-label promotion, may also
violate false claims laws. Moreover, the government may assert that a claim including items and services resulting from
a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False
Claims Act;

HIPAA, which imposes criminal and civil liability, prohibits, among other things, knowingly and willfully executing, or
attempting to execute a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false statement in connection with the delivery of or
payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does
not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

HIPAA, as amended by HITECH, which impose obligations on certain healthcare providers, health plans, and healthcare
clearinghouses, known as covered entities, as well as their business associates that perform certain services involving the
storage, use or disclosure of individually identifiable health information, including mandatory contractual terms, with
respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and
require notification to affected individuals and regulatory authorities of certain breaches of security of individually
identifiable health information;

the federal legislation commonly referred to as the Physician Payments Sunshine Act, enacted as part of the ACA, and
its implementing regulations, which requires certain manufacturers of covered drugs, devices, biologics and medical
supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with certain
exceptions, to report annually to CMS information related to certain payments and other transfers of value to physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as

•

ownership and investment interests held by the physicians described above and their immediate family members, with
the information made publicly available on a searchable website; effective January 1, 2022, transfers of value to
physician assistants, nurse practitioners or clinical nurse specialists, certified registered nurse anesthetists, and certified
nurse-midwives must also be reported based on information collected during the prior year;

the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and
their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or
improper payments or anything else of value to foreign government officials, employees of public international
organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign
political parties or officials thereof;

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, that may apply to
sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental
third-party payors, including private insurers; and

certain state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to
requiring drug and therapeutic biologics manufacturers to report information related to payments to physicians and other
healthcare providers or marketing expenditures and pricing information, state and local laws that require the registration
of pharmaceutical sales representatives, and state laws governing the privacy and security of health information in
certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA,
thus complicating compliance efforts.

If we or our collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or
regulations, we could be subject to enforcement actions, which could affect our ability to develop, market and sell our products
successfully and could harm our reputation and lead to reduced acceptance of our products by the market. These enforcement actions
include, not only civil and criminal penalties, but also exclusion from participation in government-funded healthcare programs, and
exclusion from eligibility for the award of government contracts for our products.

Efforts to ensure that our current and future business arrangements with third parties comply with applicable healthcare laws and
regulations could involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not
comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other
healthcare laws and regulations. If our operations are found to be in violation of any such requirements, we may be subject to
significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, the
curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in
government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, integrity
oversight and reporting obligations, or reputational harm, any of which could adversely affect our financial results. Although effective
compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely
eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could
divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and
sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.

Risks Related to Our Intellectual Property

We are dependent on our relationships 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® are derived from our license agreement. In August 2020, the United States Patent and Trademark
Office (USPTO) allowed U.S. Patent No. 10,793,893 (the ’893 patent) to our licensor and thereby to us, and the patent issued on
October 6, 2020. The patent is directed to the use of suitable doses of amifampridine to treat patients, regardless of the therapeutic
indication, that are slow metabolizers of amifampridine. Any drug product containing amifampridine with a label that states the
patented dosing regimens and doses in the Dosing and Administration section prior to April 7, 2034, the expiration date of the patent,
could possibly infringe this patent. Generic drug product labels would necessarily have to do this, and we intend to take all appropriate
actions to protect our intellectual property.

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 the licensor. If we violate or fail to perform any term or covenant of the License
Agreement, the licensor 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 the licensor, 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®, and our business, results of operations, financial condition and
prospects would be materially adversely affected.

Our commercial success will depend in large part on our ability to use patents and regulatory exclusivity to exclude others from
competing with our products. The patent position of emerging pharmaceutical companies like us can be highly uncertain and involve
complex legal and technical issues. Until the ’893 patent is interpreted by a court, and unless and until our other pending applications
are granted, we will not know the breadth of protection that they will afford us. Our pending applications, if granted, 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 any Firdapse® patents that ultimately grant so as to compete with us without infringing our
patents. Although granted patents enjoy a presumption of validity, there is a risk that the ’893 patent and any patents resulting from
our ongoing prosecution efforts 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 infringing the patents and other proprietary rights of third
parties.

Further, there can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future
will not claim that we have infringed on their patents. In the event that our products or technologies infringe one or more patents or
violate other proprietary rights of any third parties, we may be prevented from pursuing product development, manufacturing or
commercializing any of our products using such technologies. For example, there may be patents or patent applications held by others
that contain claims that our products or operations might be determined to infringe or that may be broader than we believe them to be.
Given the complexities and uncertainties of patent laws, there can be no assurance as to the impact that future claims of infringement
against us may have on our business, financial condition, results of operations, or prospects.

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

•

we may be preliminarily enjoined from making, using, selling, or offering to sell our allegedly infringing product by a
court of competent jurisdiction in advance of any formal infringement determination;

we may be required to pay substantial financial damages if a court formally decides that our technologies infringe the
third party’s patent(s). Damages can be tripled if the infringement is deemed willful;

we may be required to discontinue or significantly delay developing, marketing, selling and licensing the allegedly
infringing product(s) absent 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

we may need to redesign our product so that it does not infringe the third party’s patent rights, which may not be
possible or could require substantial funds or time and require additional studies.

In addition, our employees, consultants, contractors and others may knowingly or unknowingly use the proprietary information of
others in their work for us or disclose our proprietary information to others. 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 third parties 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. In that
regard, on October 19, 2020, we announced that we have filed a lawsuit in the U.S. District Court for New Jersey against Jacobus and
a lawsuit in the U.S. District Court for the Western District of Pennsylvania against the specialty pharmacy marketing Ruzurgi®,
PantherRx Rare LLC (PantherRx), for infringement of the ‘893 Patent. The suits have since been combined in the U.S. District Court
for New Jersey. The lawsuit arises from Jacobus’ and PantherRx’s sales and marketing of Ruzurgi® (amifampridine, 10 mg). The
lawsuit alleges that the Ruzurgi® product infringes the ‘893 patent when administered in accordance with its product labeling. The
lawsuit seeks damages and injunctive relief to prevent further marketing of Ruzurgi® in violation of our patent rights. Under our
License Agreements, we are responsible for all costs relating to such potential litigation and we have the right to any proceeds

received as a result of such litigation. However, even if we are successful in this or any other litigation we may file, 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 have filed patent applications or have issued patents claiming technology that is also claimed by us in any
of our pending applications, we may be required to participate in interference or derivation proceedings with the third party at the
United States Patent Office. We may also need to participate in proceedings outside the United States, such as an opposition at the
European Patent Office, to determine whether or not a patent issued by the EPO was properly granted. 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.

General Risk Factors Relating 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:

•

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

status of regulatory requirements for approval of our drug candidates;

adverse publicity regarding the pricing of Firdapse®;

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;

changes in financial estimates by securities analysts;

actual or unanticipated variations in operating results;

expiration or termination of licenses (particularly our License Agreement for Firdapse®), 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 for pharmaceutical products 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. Any such litigation that we become
involved in could cause us to incur substantial costs and divert our 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:

•

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, including stockholder supermajority voting
requirements;

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, the board of directors approved the adoption of a stockholder rights plan (“Rights Plan”), which was
amended on September 19, 2016 and further amended on August 28, 2019. The rights will expire on September 20, 2022, unless the
rights are earlier redeemed or exchanged.

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 intent of the 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 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 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
acquirers 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 11, 2021, we had 103,824,973 shares of our common stock outstanding, of which 7,234,820 shares were held by our
officers and directors. We also had outstanding: (i) stock options to purchase an aggregate of 13,888,670 shares at exercise prices
ranging from $0.79 to $6.63 per share (8,625,621 of which are currently exercisable); and (ii) restricted stock units for 235,671 shares
of common stock (none of which are currently vested). Sales of shares, 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.

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. During 2020 we leased approximately 7,800 square
feet of space for which we paid annual rent of approximately $330,000. During May 2020 we amended our office lease to increase our
leased space to approximately 10,700 square feet. The amended lease commenced in early 2021 when construction of the asset was
completed and the space became available for use. Consequently, we will record the effects of the amended lease in Q1 2021.

Item 3.

Legal Proceedings

Ruzurgi®

We believe that the FDA’s approval of Ruzurgi® violated our statutory rights and was in multiple other respects arbitrary, capricious
and contrary to law. As a result, in June 2019 we filed suit against the FDA and several related parties challenging this approval and
related drug labeling. Our complaint, which was filed in the federal district court for the Southern District of Florida, alleged that the
FDA’s approval of Ruzurgi® violated multiple provisions of FDA regulations regarding labeling, resulting in misbranding in violation
of the Federal Food, Drug, and Cosmetic Act (FDCA); violated our statutory rights to Orphan Drug Exclusivity and New Chemical
Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary, capricious, and contrary to law, in violation of the
Administrative Procedure Act. Among other remedies, the suit sought an order setting aside the FDA’s approval of Ruzurgi®.

On August 10, 2020, Health Canada issued a Notice of Compliance (NOC) to Medunik for Ruzurgi® for the treatment of LEMS. We
have since initiated a legal proceeding in Canada seeking judicial review of Health Canada’s decision to issue the NOC for Ruzurgi®
as incorrect and unreasonable under Canadian law. Data protection, per Health Canada regulations, is supposed to prevent Health
Canada from issuing a NOC to a drug that directly or indirectly references an innovative drug’s data, for eight years from the date of
the innovative drug’s approval. The Ruzurgi® Product Monograph clearly references pivotal nonclinical carcinogenicity and
reproductive toxicity data for amifampridine phosphate developed by us. As such, we believe that our data was relied upon to establish
the nonclinical safety profile of Ruzurgi® needed to meet the standards of the Canadian Food and Drugs Act. There can be no
assurance of the results of this proceeding.

Patent Litigation

In that regard, on October 19, 2020, we announced that we have filed a lawsuit in the U.S. District Court for New Jersey against
Jacobus and a lawsuit in the U.S. District Court for the Western District of Pennsylvania against the specialty pharmacy marketing
Ruzurgi®, PantherRx Rare LLC (PantherRx), for infringement of the ‘893 Patent. The suits have since been combined in the U.S.
District Court for New Jersey. The lawsuit arises from Jacobus’ and PantherRx’s sales and marketing of Ruzurgi® (amifampridine, 10
mg). The lawsuit alleges that the Ruzurgi® product infringes the ‘893 patent when administered in accordance with its product
labeling. The lawsuit seeks damages and injunctive relief to prevent further marketing of Ruzurgi® in violation of our patent rights.

Other Litigation

From time to time we may become involved in legal proceedings arising in the ordinary course of business. Other than as set forth
above, 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

Performance Graph

The graph below matches Catalyst Pharmaceuticals, 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 12/31/2015 to 12/31/2020.

*$100 invested on 12/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

Catalyst Pharmaceuticals, Inc.
NASDAQ Composite
Russell MicroCap
NASDAQ Biotechnology

12/16

12/19

12/17

12/18

12/15
100.00 42.86 159.59 78.37 153.06 136.33
100.00 108.87 141.13 137.12 187.44 271.64
100.00 120.37 136.22 118.40 144.96 175.34
100.00 78.65 95.67 87.19 109.08 137.90

12/20

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

Market Information

Our common stock trades on the Nasdaq Capital Market under the symbol “CPRX.” The closing sale price for the common stock on
March 11, 2021 was $3.77. As of March 11, 2021, there were 31 holders of record of our common stock, which includes custodians
who hold our securities for the benefit of others.

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.

Securities Authorized for Issuance under Equity Compensation Plans

The following table presents information as of December 31, 2020 with respect to compensation plans under which shares of our
common stock may be issued.

Plan Category

Equity compensation plans approved by

security holders (1)

Equity compensation plans not approved by

security holders

Total

Equity Compensation Plan Information

Number of securities to be
issued upon exercise of
outstanding options,
warrants, and rights

Weighted-average
exercise price of
outstanding options,
warrants, and rights

Number of securities
remaining available for
equity compensation plans

13,393,669 $

—

13,393,669 $

3.10

—
3.10

1,856,008 (2)

—
1,856,008

Includes our 2014 Stock Incentive Plan and our 2018 Stock Incentive Plan

(1)
(2) Remaining shares are only under our 2018 Stock Incentive Plan

Sales of Unregistered Securities

None.

Issuer Purchases of Unregistered Securities

None.

Item 6.

Selected Financial Data

Not applicable.

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 our
consolidated financial statements and related notes appearing elsewhere in this report. 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 report.

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:

• 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.

•

Basis of Presentation. This section provides information about key accounting estimates and policies that we followed in
preparing our consolidated financial statements for the 2020 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 consolidated financial statements.

•

Results of Operations. This section provides an analysis of our results of operations for the three fiscal years presented in
the accompanying consolidated statements of operations and comprehensive income (loss).

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

Impact of the COVID-19 pandemic on our business

Strategic Plan for 2021 and Beyond

Firdapse®

Our exploratory study, SMA-001 (A Randomized Placebo Controlled Crossover Study to Evaluate the Safety and Efficacy of
Amifampridine Phosphate in Ambulatory Patients with Spinal Muscular Atrophy (SMA) Type 3), met the primary endpoint of a
statistically significant difference for the Hammersmith Functional Motor Scale Expanded (HFMSE). Clinically, however, the effect
was modest. The secondary endpoints were not statistically significant, although several individual quality of life measures
demonstrated a nominally positive statistically significant change. Key opinion leaders with whom we have spoken believed that
Firdapse® needed to show a large clinically significant change if there was the possibility to affect disease progression through
retrograde signaling from enhanced neuromuscular junction function. After considering all of these factors, we have concluded that
the modest results exhibited in this study are unlikely to result in a sufficient modification of disease progression, and, particularly in
light of the fact that there are now three approved disease modifying medications for SMA Type 3, we have decided not to pursue the
SMA Type 3 indication further.

in HNPP. Since Firdapse® is a potassium channel blocker, it may mitigate the pathological effects of the potassium channel leakage in
HNPP patients. There can be no assurance that this proof-of-concept study will be successful.

Generic Sabril®

Capital Resources

At December 31, 2020, we had cash and investments of approximately $140.3 million. Based on our current financial condition and
forecasts of available cash, we believe that we have sufficient funds to support our operations for at least the next 12 months. There
can be no assurance that we will continue to be successful in commercializing Firdapse® or will continue to be profitable. Further,
there can be no assurance that if we need additional funding in the future, whether such funding will be available to us. See “Liquidity
and Capital Resources” below for further information on our liquidity and cash flow.

Basis of Presentation

Revenues.

At December 31, 2020 we continued to generate revenues from product sales of Firdapse® in the U.S. We expect these revenues to
fluctuate in future periods based on our sales of Firdapse®. We received approval from Health Canada on July 31, 2020, for Firdapse®
for the symptomatic treatment of LEMS and as of December 31, 2020, the Company has launched Firdapse® in Canada. At
December 31, 2020 and 2019, we did not generate revenues under our collaborative agreement with Endo. We expect our revenues
from the Endo collaborative agreement to fluctuate in future periods based on our collaborator’s ability to meet various regulatory
milestones set forth in such agreement. At December 31, 2020, we generated revenues of $332,186 from our collaborative agreement
with KYE Pharmaceuticals. We expect our revenue from the KYE collaborative agreement to fluctuate in future periods based on our
collaborator’s ability to market and sell Firdapse® in Canada.

Cost of Sales.

Cost of sales consists of third-party manufacturing costs, freight, royalties, and indirect overhead costs associated with sales of
Firdapse®. Cost of sales may also include period costs related to certain inventory manufacturing services, inventory adjustments
charges, unabsorbed manufacturing and overhead costs, and manufacturing variances. Prior to FDA approval in November 2018, the
cost of manufacturing Firdapse® was expensed, including our build-up of anticipated launch product. This will cause the cost of sales
to appear artificially low as we consumed product manufactured and in process prior to approval, and will continue to do so until we
deplete such product.

Research and Development Expenses.

Our research and development expenses consist of costs incurred for company-sponsored research and development activities, as well
as support for selected investigator-sponsored research. The major components of research and development costs include preclinical
study costs, clinical manufacturing costs, clinical study and trial expenses, insurance coverage for clinical trials, consulting, 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 Firdapse®, CPP-109 (our version of vigabatrin), and formerly CPP-115, and we currently expect that our future
development costs will be attributable principally to the continued development of Firdapse®.

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 our 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
consolidated financial statements to the actual services received and efforts expended. As such, expense accruals related to preclinical
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. Preclinical and clinical study and trial activities require significant up-front expenditures.
We anticipate paying significant portions of a study or trial’s cost before they begin and incurring additional expenditures as the study
or trial progresses and reaches certain milestones.

Selling, General and Administrative Expenses.

During 2019, we actively committed funds to developing our commercialization program for Firdapse® and we have continued to
incur substantial commercialization expenses, including sales, marketing, patient services, patient advocacy and other
commercialization related expenses as we have continued our sales program for Firdapse®.

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

Stock-Based Compensation.

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

Income Taxes.

Our effective income tax rate is the ratio of income tax expense (benefit) over our income (loss) before income taxes.

We incurred operating losses from inception through the three-month period ended March 31, 2019. As of December 31, 2020, and
2019, we had net operating loss carryforwards of approximately $3 million and $45 million, respectively. The net operating loss carry-
forwards at December 31, 2020 will expire at various dates beginning 2035 through 2037. If an ownership change, as defined under
Internal Revenue Code 382, occurs, the use of these carry-forwards may be subject to limitations.

In the third quarter of 2020, we determined that there was sufficient positive evidence to conclude that it is more likely than not that
our additional deferred taxes of approximately $33.0 million are realizable. As a result, we reduced the valuation allowance
accordingly.

Recently Issued Accounting Standards.

For discussion of recently issued accounting standards, please see Note 2, “Basis of Presentation and Significant Accounting Policies,”
in the consolidated financial statements included in this report.

Non-GAAP Financial Measures.

We prepare our consolidated financial statements and notes thereto which accompany this report in accordance with U.S. GAAP. To
supplement our financial results presented on a U.S. GAAP basis, we may use non-GAAP financial measures in our reports filed with
the Commission and/or our communications with investors. Non-GAAP measures are provided as additional information and not as an
alternative to our consolidated 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 measure that we present exclude from the calculation of net income the expense associated with stock-based
compensation. Further, we often report non-GAAP net income (loss) per share, which is calculated by dividing non-GAAP net income
(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 U.S. GAAP
accounting, and investors should read them in conjunction with our financial statements and notes thereto prepared in accordance with
U.S. GAAP. Finally, the non-GAAP measures of net income (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 consolidated financial statements,
which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated 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 consolidated 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 amounts of assets and liabilities reported in our consolidated balance sheets and the amounts reported in our consolidated
statements of comprehensive income (loss) are affected by estimates and assumptions, which are used for, but not limited to, the
accounting for revenue recognition, leases, preclinical study and clinical trial expenses, stock-based compensation and valuation
allowance for deferred tax assets. The accounting policies described below are not intended to be a comprehensive list of all of our
accounting policies but represent the accounting estimates which involve a significant level of estimation uncertainty and have had or
are reasonably likely to have a material impact on our financial condition or results of operations. In many cases, the accounting
treatment of a particular transaction is specifically dictated by U.S. GAAP. There are also areas in which our management’s judgment
in selecting any available alternative would not produce a materially different result. Our consolidated financial statements and the
notes thereto included elsewhere in this report contain accounting policies and other disclosures as required by U.S. GAAP.

Revenue Recognition.

Revenue from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration
for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns,
provider chargebacks and discounts, government rebates, and other incentives, such as voluntary patient assistance, and other
allowances that are offered within contracts with our Customer, payors, and other indirect customers relating to the sale of our
products. These reserves are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of
accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a
customer). These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with
the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements, specific known
market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best
estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts.

The amount of variable consideration which is included in the transaction price may be constrained, and is included in the net sales
price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the
contract will not occur in a future period. Our analyses also contemplated application of the constraint in accordance with the
guidance, under which it determined a material reversal of revenue would not occur in a future period for the estimates as of
December 31, 2020 and 2019 and, therefore, the transaction price was not reduced further during the years ended December 31, 2020
and 2019. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from
our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances
become known. Refer to Note 2, “Basis of Presentation and Significant Accounting Policies,” in the consolidated financial statements
included in this report for further details on revenue recognition.

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 expected life of our stock options awards. For the years
ended December 31, 2020 and 2019, the assumptions used were an estimated annual volatility of 81.4% and 75.5%, expected holding
periods of four and a half years, and risk-free interest rates of 0.24% to 1.64% and 1.51% to 2.53%, respectively.

Valuation Allowance for Deferred Tax Assets.

We assess the need for a valuation allowance against our deferred tax asset each quarter through the review of all available positive
and negative evidence. Deferred tax assets are reduced by a tax valuation allowance when, in the opinion of management, it is more

likely than not that some portion of the deferred tax assets will not be realized. Management’s analysis depends on historical and
projected taxable income. Projected taxable income includes significant assumptions related to revenue, commercial expenses and
research and development activities. In the third quarter of 2020, we determined that there was sufficient positive evidence to
conclude that it is more likely than not that our additional deferred taxes are realizable. As a result, we reduced the valuation
allowance accordingly.

Results of Operations

Years Ended December 31, 2020 and 2019

Revenues.

For the year ended December 31, 2020, we recognized $118.7 million in net revenue from product sales of Firdapse® in the U.S.
compared to $102.3 million for the year ended December 31, 2019. The increase of approximately $16.4 million was due to net price
increases and increases in sales volumes of approximately 9.6%. For the year ended December 31, 2020, we also recognized $332,186
in revenues from collaborative arrangements. We had no revenues from our collaborative arrangements for the year ended
December 31, 2019.

Cost of Sales.

Cost of sales was approximately $17.0 million for the year ended December 31, 2020 compared to $14.8 million for the year ended
December 31, 2019. Cost of sales consisted principally of royalty payments, which are based on net revenue as defined in the
applicable license agreement. Further, cost of sales may be artificially low until we fully utilize product manufactured that was
recorded as expense prior to FDA approval of Firdapse®.

Research and Development Expenses.

Research and development expenses for the years ended December 31, 2020 and 2019 were approximately $16.5 million and
$18.8 million, respectively, and represented approximately 21% and 27% of total operating costs and expenses, respectively. Research
and development expenses for the years ended December 31, 2020 and 2019 were as follows:

For the year ended
December 31,

Change

2020

2019

Research and development expenses
Employee stock-based compensation

$14,911,513 $17,705,156 (2,793,643) (15.8)
39.3

1,137,596

1,585,202

447,606

Total research and development expenses

$16,496,715 $18,842,752 (2,346,037) (12.5)

For the year ended December 31, 2020, research and development expenses decreased approximately $2.3 million compared to the
same period in 2019, primarily attributable to the decreases in medical and regulatory affairs and quality assurance expenses and
expenses from our ongoing clinical trials evaluating Firdapse® for the treatment of MuSK-MG and SMA Type 3, as we closed out
these trials in the latter part of 2020; partly offset by increases in employee stock-based compensation, which is non-cash and relates
to the expense of stock compensation awards to certain employees and stock option awards due to headcount increases.

We expect that research and development expenses will continue to be substantial in 2021 as we begin a proof-of-concept trial for
HNPP, continue our Expanded Access Program, take steps to continue the development of a long-acting formulation of Firdapse®,
continue our regulatory path to seek approval of Firdapse® in Japan and evaluate Firdapse® as a treatment for other neuromuscular
diseases.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the years ended December 31, 2020 and 2019 were approximately $44.2 million and
$36.9 million, respectively, and represented approximately 57% and 52% of total operating costs and expenses for the years ended
December 31, 2020, and 2019, respectively. Selling, general and administrative expenses for the years ended December 31, 2020 and
2019 were as follows:

Selling
General and administrative
Employee stock-based compensation

Total selling, general and administrative expenses

For the year ended
December 31,

2020

2019

Change

$23,567,221 $19,947,916 3,619,305 18.1
15,990,812 14,246,052 1,744,760 12.2
2,687,219 1,988,502 74.0
4,675,721

$44,233,754 $36,881,187 7,352,567 19.9

For the year ended December 31, 2020, selling, general and administrative expenses increased approximately $7.4 million, compared
to the same period in 2019, primarily attributable to the following:

•

increases in selling (commercialization) expenses, which consist primarily of the costs of the expansion of our sales
force and the cost of contracting with a rare-disease experienced inside sales agency;

increases in general and administrative expenses are primarily due to increases in legal cost, including litigation, investor
relations costs and the expansion of our operations and headcount to support our ongoing efforts to increase our net
revenues from sales of Firdapse® partly offset by decrease in 2020 contributions to 501(c)(3) organizations supporting
LEMS patients, due to the accrual in the fourth quarter of 2019 of approximately $1.5 million in pledge contributions
attributable to 2020 activities; and

increases in employee stock-based compensation which is non-cash and relates to the expense of stock option awards to
certain employees and directors and stock option awards due to headcount increases.

We expect that selling, general and administrative expenses will be substantial in future periods as we continue our efforts to increase
our revenues from Firdapse® and take steps to expand our business.

Stock-Based Compensation.

Total stock-based compensation for the years ended December 31, 2020 and 2019 was $6.3 million and $3.8 million, respectively. In
2020, grants were principally of stock options relating to 2020 year-end bonus awards and grants to new employees. In 2019, option
grants were principally for year-end bonus awards and to new employees hired in connection with the launch of Firdapse®.

Other Income, Net.

We reported other income, net in all periods, primarily relating to our investment of our cash and cash equivalents and investments.
The decrease in other income, net for the year ended December 31, 2020 of approximately $1.0 million when compared to the same
period in 2019 is primarily due to lower yields on investments, despite higher invested balances. Other income, net, consists of interest
income, dividend income, and unrealized and realized gain (loss) on trading securities.

Income Taxes.

We incurred net operating losses from inception through the three-month period ended March 31, 2019. As of December 31, 2020,
and 2019, we had net operating loss carryforwards of approximately $3 million and $45 million, respectively, available to reduce
future taxable income. Remaining net operating loss carry-forwards will expire at various dates beginning 2035 and ending in 2037. If
an ownership change, as defined under Internal Revenue Code 382, occurs, the use of these carry-forwards may be subject to
limitations.

We had no uncertain tax positions as of December 31, 2020 and December 31, 2019.

As of December 31, 2019, our deferred tax assets were primarily the result of US net operating loss and tax credit carryforwards and a
full valuation was recorded against our gross deferred tax asset balance. For the year ending December 31, 2020 we recorded a net
valuation release of $41.6 million ($0.40 per basic share and $0.39 per diluted share) on the basis of management’s determination that
it is more likely than not that the amount of its deferred tax assets will be realized.

Net Income (Loss).

Our net income was approximately $75.0 million in the year ended December 31, 2020 ($0.72 per basic and $0.71 per diluted share)
as compared to net income of approximately $31.9 million in the year ended December 31, 2019 ($0.31 per basic and $0.30 per
diluted share).

Non-GAAP Net Income.

Our non-GAAP net income for 2020, which excludes an approximately $6.3 million expense associated with non-cash stock-based
compensation, was approximately $81.2 million ($0.78 per basic and $0.76 per diluted share). Our non-GAAP income for 2019,
which excludes an approximately $3.8 million expense associated with non-cash stock-based compensation, was approximately
$35.7 million ($0.35 per basic and $0.34 per diluted share).

Years Ended December 31, 2019 and 2018

Revenues.

For the year ended December 31, 2019, we recognized $102.3 million in net revenue from product sales of Firdapse®. We had no
revenues from product sales for the year ended December 31, 2018. We had no revenues from our collaborative arrangement in 2019.
We had revenues in 2018 in the amount of $500,000 relating to the up-front payment from Endo in connection with the collaboration
for vigabatrin tablets.

Cost of Sales.

Cost of sales was $14.8 million for the year ended December 31, 2019, compared to $0 for the year ended December 31, 2018. The
increase in cost of sales was entirely attributable to the commercial launch of Firdapse® in January 2019. Cost of sales includes royalty
payments which are based on net revenue as defined in the applicable license agreement.

Research and Development Expenses.

Research and development expenses for the years ended December 31, 2019 and 2018 were approximately $18.8 million and
$19.9 million, respectively, and represented approximately 27% and 56% of total operating costs and expenses for the years ended
December 31, 2019, and 2018 respectively. Research and development expenses for the years ended December 31, 2019 and 2018
were as follows:

For the year ended
December 31,

2019

2018

Change

Research and development expenses
Employee stock-based compensation

Total research and development expenses

$17,705,156 $18,839,974 (1,134,818) (6.0)
5.4

1,079,230

1,137,596

58,366

$18,842,752 $19,919,204 (1,076,452) (5.4)

For the year ended December 31, 2019, research and development expenses decreased approximately $1.1 million compared to same
period in 2018, primarily attributable to a decrease in milestone payments made as part of the settlement agreement with the former
stockholders of Huxley Pharmaceuticals during the third quarter of 2018.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 were approximately $36.9 million and
$15.9 million, respectively, and represented approximately 52% and 44% of total operating costs and expenses for the years ended
December 31, 2019, and 2018 respectively. Selling, general and administrative expenses for the years ended December 31, 2019 and
2018 were as follows:

For the year ended
December 31,

Change

2019

2018

Selling
General and administrative
Employee stock-based compensation

$19,947,916 $

14,246,052 13,404,547
2,471,414
2,687,219

— 19,947,916 100.0
841,505 6.3
215,805 8.7

Total selling, general and administrative expenses

$36,881,187 $15,875,961 21,005,226 132.3

For the year ended December 31, 2019, selling, general and administrative expenses increased approximately $21.0 million, compared
to the same period in 2018, primarily attributable to the following:

•

increases in selling (commercialization) expenses, which consist primarily of commercial systems implementation costs,
hiring of the sales force and supporting personnel, product launch costs, and costs of our market access and market
research efforts (pre-commercial expenses incurred in 2018 in the amount of $6,897,483 before our launch of
commercial Firdapse® were included in general and administrative expenses);

increases in general and administrative costs attributable to the growth of our organization as we have grown from an
R&D company to a commercial stage pharmaceutical company;

contributions to 501(c)(3) organizations supporting LEMS patients, including the accrual in the fourth quarter of 2019 of
approximately $1.5 million in pledge contributions attributable to 2020 activities; and

increases in employee stock-based compensation which is non cash and relates to the expense of stock options awarded
to certain employees, officers and directors.

Stock-Based Compensation.

Total stock-based compensation expense for the years ended December 31, 2019 and 2018 was $3,824,815 and $3,550,644,
respectively. The increase in stock-based compensation for the year ended December 31, 2019, when compared to the same period in
2018, is primarily due to the expense of grants to new employees hired in connection with the launch of Firdapse®.

Other Income, Net.

We reported other income, net in all periods primarily relating to our investment of funds received from offerings of our securities and
product sales. The increase in other income, net for the year ended December 31, 2019 when compared to the same period in 2018 is
primarily due to higher invested balances and higher yields on investments. Other income, net, consists of interest income, dividend
income, and realized gain (loss) on trading securities. For the year ended December 31, 2019, other income, net also includes
$100,000 received as part of a settlement agreement between us and Northwestern University relating to CPP-115. These proceeds
were used fund our drug development activities and our operations.

Income Taxes.

Our effective income tax rate was 4.6% and 0% for the year ended December 31, 2019 and 2018, respectively. Differences in the
effective tax and the statutory federal income tax rate of 21% is driven by state income taxes and anticipated annual permanent
differences, including orphan drug credit expense limitations and other items.

We had no uncertain tax positions as of December 31, 2019 and December 31, 2018. We have a full valuation allowance for our
deferred tax assets at December 31, 2019 and December 31, 2018.

Net Income (Loss).

Our net income was $31,875,337 in the year ended December 31, 2019 ($0.31 per basic and $0.30 per diluted share) as compared to a
net loss of ($34,003,514) in the year ended December 31, 2018 ($0.33 per basic and diluted share).

Non-GAAP Net Income.

Our non-GAAP net income, which excludes for 2019 a $3,824,815 expense associated with stock-based compensation was
$35,700,152 ($0.35 and $0.34, respectively, per basic and diluted share). Our non-GAAP net loss for the year ended December 31,
2018 was $30,452,870 ($0.30 per basic and diluted share), which excludes non-cash stock compensation of $3,550,664.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through multiple public and private offerings of our securities and,
since January 2019, from revenues from product sales of Firdapse®. At December 31, 2020, we had cash and cash equivalents and
investments aggregating $140.3 million and working capital of $136.5 million. At December 31, 2019, we had cash and cash
equivalents and investments aggregating $94.5 million and working capital of $87.3 million. At December 31, 2020, substantially all
of our cash and cash equivalents were deposited with one financial institution, and such balances were in excess of federally insured
limits. Further, as of such date, substantially all such funds were invested in money market accounts, short-term interest bearing
obligations and U.S. Treasuries.

We incurred operating losses through the quarter ended March 31, 2019 and reported operating income for the first time during the
three and six month periods ended June 30, 2019. We expect to continue to spend substantial dollars on our current and future drug
development programs.

Based on forecasts of available cash, we believe that we have sufficient resources to support our currently anticipated operations for at
least the next 12 months from the date of this report. There can be no assurance that we will remain profitable or that we will be able
to obtain any additional funding that we may require in the future.

In the future, we may require additional working capital to support our operations depending on our future success with Firdapse®
sales and whether our results continue to be profitable and cash flow positive. 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:

•

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;

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 level of revenues that we report from sales of Firdapse®;

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 may raise additional funds if required in the future through public or private equity offerings, debt financings, corporate
collaborations or other means. We also may seek governmental grants for a portion of the required funding for our clinical trials and
preclinical trials. We may further seek to raise capital to fund additional product development efforts or product acquisitions, 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 July 23, 2020, we filed a shelf registration statement with the SEC to sell up to $200 million of common stock, preferred stock,
warrants to purchase common stock, debt securities and units consisting of one or more of such securities (the “2020 Shelf
Registration Statement”). The 2020 Shelf Registration Statement (file no. 333-240052) was declared effective by the SEC on July 31,
2020. As of the date of this report, no offerings have been completed under the 2020 Shelf Registration Statement.

Cash Flows.

Net cash provided by operating activities was $45,034,864 and $34,611,473, respectively, for the years ended December 31, 2020 and
2019. During the year ended December 31, 2020, net cash provided by operating activities was primarily attributable to our net
income of $74,983,000, a decrease of $4,549,571 in accounts receivable, net, an increase of $138,573 in accounts payable, and
$7,134,049 net of non-cash expenses. This was partially offset by increases of $3,976,697 in prepaid expenses and other current and
non-current assets and $2,693,808 in inventory and decreases of $1,209,280 in accrued expenses and other liabilities, $919,280 in
operating lease liability and $32,971,264 in non-cash deferred taxes. During the year ended December 31, 2019, net cash provided by
operating activities was primarily attributable to our net income of $31,875,337, increases of $1,780,080 in accounts payable,
$12,540,197 in accrued expenses and other liabilities, and of $3,831,736 of non-cash expenses. This was partially offset by increases
of $10,536,997 in accounts receivable, net, $1,900,780 in inventory, and $2,701,293 in prepaid expenses and other current and non-
current assets and a decrease of $276,807 in operating lease liability.

Net cash used in investing activities was $5,011,398 for the year ended December 31, 2020, consisting primarily of purchases of
investments of $10,000,000 and partially offset by proceeds from sales/maturities of investments of $5,000,000. Net cash provided by
investing activities was $37,224,595 for the year ended December 31, 2019, consisting primarily of proceeds from sales/maturities of
investments of $71,969,365, partially offset by purchases of investments of $34,725,401.

Net cash provided by financing activities during the years ended December 31, 2020 and 2019 was $701,933 and $1,116,242,
respectively, consisting primarily of proceeds from the exercise of options to purchase shares of common stock.

Contractual Obligations and Arrangements.

We have entered into the following contractual arrangements:

•

Payments under our license agreement. We have agreed to pay the following royalties under our license agreement:

Royalties to our licensor for seven years from the first commercial sale of Firdapse® equal to 7% of net
sales (as defined in the 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; and

Royalties to the third-party licensor of the rights sublicensed to us from the first commercial sale of
Firdapse® equal to 7% of net sales (as defined in the License Agreement between BioMarin and the third-
party licensor) in any calendar year for the duration of regulatory exclusivity within a territory and 3.5%
for territories in any calendar year in territories without regulatory exclusivity.

For the year ended December 31, 2020, we recognized an aggregate of approximately $16.3 million of royalties, which
is included in cost of sales in the accompanying consolidated statement of operations and comprehensive income (loss).

•

Employment agreements. We have entered into an employment agreement with our Chief Executive Officer that
required us to make base salary payments of approximately $600,000 in 2020. The agreement expires in November
2022.

Purchase commitment. We have entered into a purchase commitment with our contract manufacturing organization for
approximately $500,000 per year. The agreement expires in December 2023.

Lease for office space. We operate our business in leased office space in Coral Gables, Florida. During 2020, we leased
approximately 7,800 square feet of office space for which we pay annual rent of approximately $330,000. We entered
into an agreement in May 2020 that amended our lease for the office facilities. Under the amended lease, our leased
space will increase from approximately 7,800 square feet of space to approximately 10,700 square feet of space. We
moved into the new space around March 1, 2021 when the space became available for use.

Off-Balance Sheet Arrangements.

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

Caution Concerning Forward-Looking Statements

This report 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.”

•

The impact of the COVID-19 pandemic on our business or on the economy generally;

• Whether we will be able to continue to successfully market Firdapse® while maintaining full compliance with applicable

federal and state laws, rules and regulations;

• Whether our estimates of the size of the market for Firdapse® for the treatment of Lambert-Eaton Myasthenic Syndrome

(“LEMS”) will turn out to be accurate;

• Whether we will be able to locate LEMS patients who are undiagnosed or are misdiagnosed with other diseases;

• Whether patients will discontinue from the use of our drug at rates that are higher than historically experienced or are

higher than we project;

• Whether the daily dose taken by patients changes over time and affects our results of operations;

• Whether Firdapse® patients can be successfully titrated to stable therapy;

• Whether we can continue to market Firdapse® on a profitable and cash flow positive basis;

• Whether any revenue guidance that we provide to the public market will turn out to be accurate;

• Whether payors will reimburse for our product at the price that we charge for the product;

•

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

The ability of our distributor and the specialty pharmacies that distribute our product to maintain compliance with
applicable law;

Our ability to maintain compliance with applicable rules relating to our patient assistance programs and our
contributions to 501(c)(3) organizations that support LEMS patients;

• Whether our lawsuits against Jacobus and the specialty pharmacy distributing its product for patent infringement will be

successful;

•

The effect on our business and future results of operations arising from the approval by the FDA of Ruzurgi® for the
treatment of pediatric LEMS patients (ages 6 to under 17);

• Whether our appeal of the District Court’s decision in our suit against the United States FDA seeking to vacate the

FDA’s approval of Ruzurgi® will be successful;

• Whether we can continue to compete successfully if the approval of Ruzurgi® is not overturned and Ruzurgi® continues

to be prescribed for off-label use by adult LEMS patients;

• Whether, because of the lower price of Ruzurgi®, payors will require that patients try off-label Ruzurgi® first before they

approve Firdapse® as a treatment for adult LEMS patients;

•

The impact on our business and results of operations of public statements by politicians and a vocal group of LEMS
patients and doctors who object to our pricing of Firdapse®;

Changes in the healthcare industry and the effect of political pressure from and actions by President Biden, Congress
and/or medical professionals seeking to reduce prescription drug costs;

The state of the economy generally and its impact on our business;

Changes to the healthcare industry occasioned by any changes in laws relating to the pricing of drug products, or
changes in the healthcare industry generally;

Our ability to complete any clinical trials and studies that we may undertake on a timely basis and within the budgets we
establish for such trials and studies;

• Whether COVID-19 will further affect the timing and costs of our currently ongoing and contemplated clinical trials;

• Whether Firdapse® will ever be approved for the treatment of any neuromuscular disease other than LEMS;

• Whether we can successfully commercialize Firdapse® in Canada on a profitable basis;

• Whether our suit to overturn the approval of Ruzurgi® in Canada will be successful;

•

The impact on sales of Firdapse® in the United States if an amifampridine product is purchased in Canada for use in the
United States;

• Whether we will be able to successfully complete the clinical trial in Japan that will be required to seek approval to

commercialize Firdapse® in Japan;

• Whether we will be able to obtain approval to commercialize Firdapse® in Japan;

• Whether we can successfully develop, obtain approval of and successfully market a long-acting version of amifapridine;

• Whether our efforts to grow our business beyond Firdapse® through acquisitions of companies or in-licensing of product

opportunities will be successful;

• Whether we will have sufficient capital to finance any such acquisitions;

• Whether our version of generic vigabatrin tablets will ever be approved by the FDA;

•

• Whether we will earn milestone payments on the first commercial sale of vigabatrin tablets and royalties on sales of

generic vigabatrin tablets.

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 and short-term investments that are from time to time invested in
highly liquid money market funds, U.S. Treasuries and short-term 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

None.

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, 2020,
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 consolidated 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, 2020 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, 2020.

During the fourth quarter of 2020, 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, our 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 2021 Annual Meeting of Stockholders. Our Proxy Statement for the 2021 Annual Meeting of Stockholders is
expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2020 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

Documents filed as part of this report.

PART IV

The following financial statements of Catalyst Pharmaceuticals, Inc. and Reports of Grant Thornton LLP, independent registered
public accounting firm, are included in this report:

•

Reports of Grant Thornton LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2020 and 2019

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2020, 2019
and 2018

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018

Notes to Consolidated 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.

Exhibits.

Exhibit
Number

2.1

3.1

3.2

3.3

3.4

3.5

3.6

4.1

4.2

4.3

4.4

4.5

Description of Exhibit

Form

File Number

Date of
Filing

Exhibit
Number

Filed
Herewith

Incorporated by Reference

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

S-1 333-136039 9/1/2006

10.9

Certificate of Incorporation

Amendment to Certificate of Incorporation

S-1 333-136039 7/25/2006

3.1

3.2

Amendment to Certificate of Incorporation

DEF 14A 001-33057 3/30/2015 Annex A

Amendment to Certificate of Incorporation

8-K 001-33057 8/21/2020

3.1

By-Laws

Amendment to By-Laws

S-1 333-136039 9/1/2006

8-K 001-33057 11/27/2019

Specimen Stock Certificate for Common Stock

S-1 333-136039 9/1/2006

Rights Agreement between the Company and Continental
Stock Transfer and Trust Company

Amendment to Rights Agreement

Second Amendment to Rights Agreement

Description of the Company’s Capital Stock

8-K 001-33057 9/23/2011

8-K 001-33057 9/19/2016

8-K 001-33057 8/30/2019

3.3

3.1

4.1

10.1(a)+ Employment Agreement between the Company and Patrick J.

10-Q 001-33057 12/15/2006

10.1

McEnany

10.1(b)+

First Amendment to Employment Agreement between the
Company and Patrick J. McEnany

8-K 001-33057 12/23/2008

10.1

10.1(c)+ Second Amendment to Employment Agreement between the

10-Q 001-33057 11/12/2009

10.1

Company and Patrick J. McEnany

10.1(d)+ Third Amendment to Employment Agreement between the

8-K 001-33057 9/15/2011

10.1

Exhibit
Number

Description of Exhibit

Form

File Number

Date of
Filing

Exhibit
Number

Filed
Herewith

Incorporated by Reference

Company and Patrick J. McEnany

10.1(e)+ Fourth Amendment to Employment Agreement between the

8-K 001-33057 8/29/2013

10.1

Company and Patrick J. McEnany

10.1(f)+

Fifth Amendment to Employment Agreement between the
Company and Patrick J. McEnany

10.1(g)+

Sixth Amendment to Employment Agreement between the
Company and Patrick J. McEnany

8-K 001-33057 6/24/2016

10.1

8-K 001-33057 5/31/2018

10.1

10.1(h)+

Seventh Amendment to Employment Agreement between the
Company and Patrick J. McEnany

8-K 001-33057 9/11/2020

10.1

10.2(a)+

2014 Stock Incentive Plan

DEF 14A 001-33057 3/19/2014 Annex A

10.2(b)+ Amendment No. 1 to 2014 Stock Incentive Plan

DEF 14A 001-33057 4/29/2016 Annex A

10.2(c)+ Amendment No. 2 to 2014 Stock Incentive Plan

DEF 14A 001-33057 4/14/2017 Annex A

10.3(a)+

2018 Stock Incentive Plan

DEF 14A 001-33057 4/17/2018 Annex A

10.3(b)+ Amendment No. 1 to 2018 Stock Incentive Plan

DEF 14A 001-33057 7/7/2020 Annex A

10.4(a)

10.4(b)

10.4(c)

10.4(d)

10.4(e)

10.4(f)

10.5

10.6(a)

10.6(b)

10.6(c)

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

First Amendment to Lease Agreement between the Company
and CPT 355 Alhambra Circle, LLC

Second Amendment to Lease Agreement between the
Company and CPT 355 Alhambra Circle, LLC

Third Amendment to Lease Agreement between the Company
and CPT 355 Alhambra Circle, LLC

Fourth Amendment to Lease Agreement between the Company
and PRII 355 Alhambra Circle, LLC

Fifth Amendment to Lease Agreement between the Company
and PRII 355 Alhambra Circle, LLC

License Agreement, dated as of December 13, 2011, among
New York University, the Feinstein Institute for Medical
Research, and the Company

License Agreement, dated as of October 26, 2012, between the
Company and BioMarin

Amendment No. 1 to License Agreement, dated as of April 8,
2014, between the Company and BioMarin

Settlement Agreement, dated effective as of July 26, 2018, by
and among (i) Aceras BioMedical, LLC, in its capacity as
Stockholder Representative for the Former stockholders of
Huxley Pharmaceuticals, Inc., (ii) BioMarin, and (iii) the
Company

10-Q 001-33057 5/14/2007

10.1

10-Q 001-33057 8/15/2011

10.1

8-K 001-33057 2/20/2014

10.1

8-K 001-33057 3/27/2015

10.1

8-K 001-33057 8/17/2018

10.1

8-K 001-33057 5/13/2020

10.1

10-K 001-33057 3/30/2012

10.15

8-K 001-33057 10/31/2012

10.2

8-K 001-33057 4/17/2014

10.1

10-Q 001-33057 8/17/2018

10.1

10.6(d)

Second Amendment to License Agreement, dated May 29,
2019, between the Company and BioMarin

10.7

10.8

Development, License and Commercialization Agreement,
dated effective as of December 18, 2018, by and between
Endo Ventures Limited and the Company

License and Supply Agreement, dated as of August 14, 2020,
by and between KYE Pharmaceuticals, Inc. and the Company

8-K 001-33057 5/30/2019

10.1

8-K 001-33057 12/26/2018

10.1

8-K 001-33057 8/20/2020

10.1

Exhibit
Number

21.1

23.1

31.1

31.2

32.1

32.2

Description of Exhibit

Form

File Number

Date of
Filing

Exhibit
Number

Filed
Herewith

Subsidiaries of the registrant

10-K 001-33057 3/16/2020

21.1

Incorporated by Reference

Consent of Independent Registered Public Accounting Firm

Section 302 CEO Certification

Section 302 CFO Certification

Section 906 CEO Certification

Section 906 CFO Certification

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

104

Cover Page Interactive Data File (formatted as Inline XBRL
and contained in Exhibit 101)

Pursuant to the requirements of Section 13 and 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 15th day of March, 2021.

SIGNATURES

CATALYST PHARMACEUTICALS, 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

/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

Title

Date

Chairman of the Board of Directors, President and Chief

March 15, 2021

Executive Officer (Principal Executive Officer)

Vice President, Treasurer, Chief Financial Officer

March 15, 2021

(Principal Financial Officer and Principal Accounting
Officer)

March 15, 2021

Director

[This Page Intentionally Left Blank]

INDEX TO FINANCIAL STATEMENTS

Years ended December 31, 2020, 2019 and 2018

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

F-2

F-3

F-5

F-6

F-7

F-8

F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Catalyst Pharmaceuticals, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Catalyst Pharmaceuticals, Inc. (a Delaware corporation) and
subsidiary (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, 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)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020, and our report
dated March 15, 2021 expressed an unqualified opinion on those financial statements.

Basis for opinion

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 are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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.

Definition and limitations of internal control over financial reporting

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.

/s/ GRANT THORNTON LLP

Miami, Florida
March 15, 2021

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Catalyst Pharmaceuticals, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Catalyst Pharmaceuticals, Inc. (a Delaware corporation) and
subsidiary (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive
income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2020, 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)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, 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 15, 2021, expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.

As described further in Note 10 to the financial statements, deferred tax assets are reduced by a valuation allowance if, based on the
evaluation of positive and negative evidence, in management’s judgment it is more likely than not that some portion, or all, of the
deferred tax assets will not be realized. Once established, the valuation allowance is released when, based on the evaluation of positive
and negative evidence, management concludes that related deferred tax assets are more likely than not to be realized. During the year
ended December 31, 2020, management concluded that sufficient positive evidence existed to release its valuation allowance related
to its deferred tax assets, resulting in an income tax benefit of $33.1 million for the year ended December 31, 2020. We identified the
evaluation of the realizability of deferred tax assets as a critical audit matter.

The principal considerations for our determination that the evaluation of the realizability of deferred tax assets is a critical audit matter
are the significant judgment by management in determining whether the net deferred tax assets are more likely than not to be realized
in the future, which in turn led to a high degree of auditor judgment and effort in performing procedures and evaluating audit evidence
relating to management’s assessment of the realization of net deferred tax assets.

F-3

Our audit procedures related to the evaluation of the realizability of deferred tax assets included the following, among others.

• We evaluated the design and tested the operating effectiveness of the key controls over the Company’s assessment of all

positive and negative evidence and evaluation of the realizability of deferred tax assets.

• We tested the scheduling and reversal of certain deferred tax assets including start-up costs and tax credits.

• We reviewed management’s assessment of potential net operating loss carryforward limitations.

• We involved our income tax specialists to evaluate the application of tax laws and regulations used in the Company’s

assumptions and calculations.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2006.

Miami, Florida
March 15, 2021

F-4

CATALYST PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS

ASSETS
Current Assets:

Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventory
Prepaid expenses and other current assets

Total current assets

Operating lease right-of-use asset
Property and equipment, net
Deferred tax assets
Deposits

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:

Accounts payable
Accrued expenses and other liabilities

Total current liabilities
Operating lease liability, net of current portion

Total liabilities
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized: none issued and outstanding at

December 31, 2020 and 2019

Common stock, $0.001 par value, 200,000,000 and 150,000,000 shares authorized; 103,781,641

shares and 103,397,033 shares issued and outstanding at December 31, 2020 and 2019,
respectively

Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

December 31,
2020

December 31,
2019

$130,237,109
10,041,068
5,987,426
4,650,600
8,327,771

159,243,974
—
129,800
32,971,264
8,888

$ 89,511,710
5,007,050
10,536,997
1,956,792
4,351,074

111,363,623
793,252
210,467
—
8,888

$192,353,926

$ 112,376,230

$ 4,256,020
18,500,267

22,756,287
—

22,756,287

4,117,447
19,981,295

24,098,742
647,532

24,746,274

—

103,782
223,168,149
(53,705,624)
31,332

103,397
216,205,678
(128,688,624)
9,505

169,597,639

87,629,956

$192,353,926

$ 112,376,230

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

F-5

CATALYST PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Revenues:

Product revenue, net
Revenues from collaborative arrangements

Total revenues

Operating costs and expenses:

Cost of sales
Research and development
Selling, general and administrative

Total operating costs and expenses

Operating income (loss)
Other income, net

Net income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Net income (loss) per share:

Basic

Diluted

Weighted average shares outstanding:

Basic

Diluted

Net income (loss)
Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale securities

Comprehensive income (loss)

Year Ended December 31,

2020

2019

2018

$118,740,617 $102,306,337 $

332,186

—

119,072,803

102,306,337

—
500,000

500,000

17,039,157
16,496,715
44,233,754

14,759,139
18,842,752
36,881,187

—
19,919,204
15,875,961

77,769,626

70,483,078

35,795,165

41,303,177
586,897

31,823,259 (35,295,165)
1,291,651
1,585,774

41,890,074
(33,092,926)

33,409,033 (34,003,514)
—
1,533,696

$ 74,983,000 $ 31,875,337 $ (34,003,514)

0.72 $

0.71 $

0.31 $

0.30 $

(0.33)

103,512,913

102,944,316

102,633,884

106,242,273

106,020,936

102,633,884

$ 74,983,000 $ 31,875,337 $ (34,003,514)

21,827

29,753

(20,248)

$ 75,004,827 $ 31,905,090 $ (34,023,762)

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

F-6

CATALYST PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the years ended December 31, 2020, 2019 and 2018

Balance at December 31,

2017

Issuance of common stock,

net

Issuance of stock options for

services

Exercise of stock options for

common stock

Other comprehensive gain

(loss)

Net income (loss)

Balance at December 31,

2018

Issuance of stock options for

services

Exercise of stock options for

common stock

Amortization of restricted

stock for services

Other comprehensive gain

(loss)

Net income (loss)

Balance at December 31,

2019

Issuance of stock options for

services

Exercise of stock options for

common stock

Amortization of restricted

stock for services

Issuance of common stock

upon vesting of restricted
stock units, net

Other comprehensive gain

(loss)

Net income (loss)

Balance at December 31,

2020

Preferred
Stock

Common Stock

Amount

Additional
Paid-in
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Gain (Loss)

Total

$ — 102,549,498 $ 102,549 $207,421,710 $ (126,560,447) $

— $ 80,963,812

—

3,094

10,546

—

3,535,647

—

186,665

187

297,376

—

10,549

—

3,535,647

—

297,563

—
—

—
(34,003,514)

(20,248)
—

(20,248)
(34,003,514)

— 102,739,257

102,739 211,265,279

(160,563,961)

(20,248)

50,783,809

—

3,780,086

—

657,776

658

1,115,584

—

44,729

—

3,780,086

—

1,116,242

—

44,729

—
—

—
31,875,337

29,753
—

29,753
31,875,337

—

—
—

— 103,397,033

103,397 216,205,678

(128,688,624)

9,505

87,629,956

—

5,694,120

—

281,762

282

757,848

—

566,803

—

102,846

103

(56,300)

—

5,694,120

—

758,130

566,803

—

(56,197)

—
—

—
74,983,000

21,827
—

21,827
74,983,000

$ — 103,781,641 $ 103,782 $223,168,149 $ (53,705,624) $

31,332 $169,597,639

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

F-7

CATALYST PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in)

operating activities:

Depreciation
Amortization of right-of-use asset
Stock-based compensation
Deferred taxes
Change in accrued interest and accretion of discount on investments
(Increase) decrease in:

Accounts receivable, net
Inventory
Prepaid expenses and other current assets and deposits

Increase (decrease) in:

Accounts payable
Accrued expenses and other liabilities
Operating lease liability

Net cash provided by (used in) operating activities

Investing Activities:
Purchases of property and equipment
Purchases of investments
Proceeds from maturities and sales of investments

Net cash provided by (used in) investing activities

Financing Activities:
Payment of employee withholding tax related to stock-based compensation

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents – beginning of period

Cash and cash equivalents – end of period

Supplemental disclosures of cash flow information:
Cash paid for income taxes
Non-cash investing and financing activities:
Unrealized gain (loss) on available-for-sale securities

Year Ended December 31,

2020

2019

2018

$ 74,983,000

$ 31,875,337

$ (34,003,514)

92,065
793,252
6,260,923
(32,971,264)
(12,191)

54,327
243,399
3,824,815
—
(290,805)

4,549,571
(2,693,808)
(3,976,697)

(10,536,997)
(1,900,780)
(2,701,293)

138,573
(1,209,280)
(919,280)

1,780,080
12,540,197
(276,807)

37,978
—
3,550,644
—
(443,139)

—
(56,012)
(476,037)

391,792
4,850,743
—

45,034,864

34,611,473

(26,147,545)

(11,398)
(10,000,000)
5,000,000

(19,369)
(34,725,401)
71,969,365

(92,018)
(36,790,854)
21,800,000

(5,011,398)

37,224,595

(15,082,872)

(56,197)
758,130

701,933

—
1,116,242

1,116,242

(4,448)
297,563

293,115

40,725,399
89,511,710

72,952,310
16,559,400

(40,937,302)
57,496,702

$ 130,237,109

$ 89,511,710

$ 16,559,400

$ 2,785,497

21,827

—

29,753

—

(20,248)

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

F-8

CATALYST PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business.

Catalyst Pharmaceuticals, Inc. and subsidiary (collectively, the “Company”) is a commercial-stage biopharmaceutical company

focused on developing and commercializing innovative therapies for people with rare debilitating, chronic neuromuscular and
neurological diseases, including Lambert-Eaton Myasthenic Syndrome (LEMS) and Anti-MuSK antibody positive myasthenia gravis
(MuSK-MG). The Company (f/k/a Catalyst Pharmaceutical Partners, Inc.) 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.

On November 28, 2018, the U.S. Food and Drug Administration, or FDA, granted approval of Firdapse® for the treatment of

adults with LEMS (ages 17 and above). On January 15, 2019, the Company launched its first product, Firdapse®, in the United States
for the treatment of adults with LEMS.

On August 6, 2020, the Company announced that Canada’s national healthcare regulatory agency, Health Canada, has approved

Firdapse® for the treatment of patients in Canada with LEMS. On October 28, 2020, the Company launched Firdapse® in Canada for
the treatment of patients with LEMS through a license agreement with KYE Pharmaceuticals.

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, raising capital, and selling its product. The Company incurred
operating losses in each period from inception and started reporting operating income during the year ended December 31, 2019. The
Company has been able to fund its cash needs to date through several public and private offerings of its securities and from revenues
from its product sales. See Note 11 (Stockholders’ Equity).

Capital Resources

While there can be no assurance, based on currently available information, the Company estimates that it has sufficient

resources to support its operations for at least the next 12 months from the issuance date of this Form 10-K.

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 drug
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 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.

Risks and Uncertainties

There are many uncertainties regarding the novel coronavirus (COVID-19) pandemic, and the Company is closely monitoring
the impact of the pandemic on all aspects of its business, including how the pandemic is impacting its patients, employees, suppliers,
vendors, business partners, clinical trials, and distribution channels. The Company is unable to predict the impact that COVID-19 will
have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to
assess the evolving impact of the COVID-19 pandemic and make adjustments to its operations as necessary.

Basis of Presentation and Significant Accounting Policies.

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the Company’s accounts and
those of its wholly-owned subsidiary, Catalyst Pharmaceuticals Ireland, Ltd. (“Catalyst Ireland”). All intercompany
accounts and transactions have been eliminated in consolidation. Catalyst Ireland was organized in 2017.

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

F-9

Basis of Presentation and Significant Accounting Policies (continued).

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
and U.S. Treasuries. The Company has substantially all of its cash and cash equivalents deposited with one financial
institution. These amounts exceed federally insured limits.

INVESTMENTS. The Company invests in high credit-quality instruments in order to obtain higher yields on its cash
available for investments. At December 31, 2020, investments consisted of short-term bond funds and U.S. Treasuries.
At December 31, 2019, investments consisted of U.S. Treasuries. Such investments are not insured by the Federal
Deposit Insurance Corporation.

The short-term bond funds and U.S. Treasuries held at December 31, 2020 are classified as available-for-sale securities.
The short-term bond funds are classified as current assets, which reflects management’s intention to use the proceeds
from the sale of these investments to fund the Company’s operations, as necessary. The Company classifies U.S.
Treasuries with stated maturities of greater than three months and less than one year in short-term investments, U.S
Treasuries with stated maturities greater than one year are classified as non-current investments in its consolidated
balance sheets.

The Company records available-for-sale securities at fair value with unrealized gains and losses reported in accumulated
other comprehensive income (loss) in stockholders’ equity. Realized gains and losses are included in other income, net
and are derived using the specific identification method for determining the cost of securities sold. Interest income is
recognized when earned and is included in other income, net in the consolidated statements of operations and
comprehensive income (loss). The Company recognizes a charge when the declines in the fair value below the amortized
cost basis of its available-for-sale securities are judged to be other-than-temporary. The Company considers various
factors in determining whether to recognize an other-than-temporary charge, including whether the Company intends to
sell the security or whether it is more likely than not that the Company would be required to sell the security before
recovery of the amortized cost basis. The Company has not recorded any other-than-temporary impairment charges on
its available-for-sale securities. See Note 3 (Investments).

The Company previously owned a short-term bond fund that was classified as trading securities. Trading securities are
recorded at fair value based on the closing market price of the security. For trading securities, the Company recognized
realized gains and losses and unrealized gains and losses to earnings. At December 31, 2020 and 2019, there were no
investments classified as trading securities, as the Company sold its interest in the short-term bond fund classified as
trading securities in 2019. There was no realized or unrealized gain (loss) on trading securities for the year ended
December 31, 2020. Realized losses on trading securities during the years ended December 31, 2019 and 2018 were
$80,045 and $0, respectively. Unrealized gain (loss) on trading securities was $0 and ($29,430) for the years ended
December 31, 2019 and 2018, respectively, and is included in other income, net in the accompanying consolidated
statements of operations.

ACCOUNTS RECEIVABLE, NET. Accounts receivable are recorded net of customer allowance for distribution fees,
trade discounts, prompt payment discounts, chargebacks and expected credit losses. Allowances for distribution fees,
trade discounts, prompt payment discounts and chargebacks are based on contractual terms. The Company estimates the
allowance for expected credit losses based on existing contractual payment terms, actual payment patterns of its
customer and customer circumstances. At December 31, 2020 and 2019, the Company determined that an allowance for
expected credit losses was not required. No accounts were written off during the periods presented.

INVENTORY. Inventories are stated at the lower of cost or net realizable value. Inventories consist of raw materials,
work-in-process and finished goods. Costs to be capitalized as inventories primarily include third party manufacturing
costs and other overhead costs. Cost is determined using a standard cost method, which approximates actual cost, and
assumes a first-in, first out (FIFO) flow of goods. The Company began capitalizing inventories post FDA approval of
Firdapse® on November 28, 2018 as the related costs were expected to be recoverable through the commercialization of
the product. Costs incurred prior to the FDA approval of Firdapse® were recorded as research and development expenses
in prior years’ consolidated statements of operations and comprehensive income (loss). If information becomes available
that suggests that inventories may not be realizable, the Company may be required to expense a portion or all of the
previously capitalized inventories. As of December 31, 2020 and 2019, inventory consisted mainly of work-in-process
and finished goods.

F-10

Basis of Presentation and Significant Accounting Policies (continued).

Products that have been approved by the FDA or other regulatory authorities, such as Firdapse®, are also used in clinical
programs to assess the safety and efficacy of the products for usage in treating diseases that have not been approved by
the FDA or other regulatory authorities. The form of Firdapse® utilized for both commercial and clinical programs is
identical and, as a result, the inventory has an “alternative future use” as defined in authoritative guidance. Raw
materials associated with clinical development programs are included in inventory and charged to research and
development expense when the product enters the research and development process and no longer can be used for
commercial purposes and, therefore, does not have an “alternative future use”.

The Company evaluates for potential excess inventory by analyzing current and future product demand relative to the
remaining product shelf life. The Company builds demand forecasts by considering factors such as, but not limited to,
overall market potential, market share, market acceptance, and patient usage.

PREPAID EXPENSES AND OTHER CURRENT ASSETS. Prepaid expenses and other current assets consist
primarily of prepaid manufacturing, prepaid tax, prepaid insurance, prepaid subscription fees, prepaid research fees,
prepaid commercialization expenses, and amounts due from collaborative arrangements. Prepaid research fees consist of
advances for the Company’s product development activities, including contracts for pre-clinical studies, clinical trials
and studies, regulatory affairs and consulting. Prepaid manufacturing consists of advances for the Company’s drug
manufacturing activities. Such advances are recorded as expense as the related goods are received or the related services
are performed.

PROPERTY AND EQUIPMENT, NET. 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. Leasehold improvements are amortized on a straight-line basis over the term of the lease or the
estimated life of the improvement, whichever is shorter. Useful lives generally range from three to five years for
computer equipment to five years for furniture and equipment, and from four to seven years for leasehold improvements.
Expenditures for repairs and maintenance are charged to expenses as incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company’s financial instruments consist of cash and cash
equivalents, investments, accounts receivable, accounts payable, and accrued expenses and other liabilities. At
December 31, 2020 and 2019, 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).

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.

F-11

Basis of Presentation and Significant Accounting Policies (continued).

Cash and cash equivalents:
Money market funds

U.S. Treasuries

Short-term investments:
Short-term bond funds

Cash and cash equivalents:
Money market funds

U.S. Treasuries

Short-term investments:
U.S. Treasuries

Fair Value Measurements at Reporting Date Using

Balances as of
December 31,
2020

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

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

$ 15,673,626

$ 104,994,400

15,673,626

—

$ 10,041,068

10,041,068

—

104,994,400

—

Balances as of
December 31,
2019

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

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

$ 23,963,617

$ 59,932,200

5,007,050

23,963,617

—

59,932,200

5,007,050

—

k. OPERATING LEASES. The Company determines if an arrangement is a lease at inception. Operating leases are

included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on its
consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the
present value of the future minimum lease payments over the lease term at commencement date. As the Company’s
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information
available at commencement date in determining the present value of future payments. The operating lease ROU asset
also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company’s
lease terms do not include options to extend or terminate the lease as it is not reasonably certain that it will exercise these
options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The
Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

REVENUE RECOGNITION. The Company recognizes revenue when its customer obtains title of the promised goods,
in an amount that reflects the consideration to which the Company expects to be entitled in exchange for these goods.
The Company had no contracts with customers until the FDA approved Firdapse® in November 2018. Subsequent to
receiving FDA approval, the Company entered into an arrangement with one distributor (the “Customer”), which is the
exclusive distributor of Firdapse® in the United States. The Customer subsequently resells Firdapse® to a small group of
exclusive specialty pharmacies (“SPs”) whose dispensing activities for patients with specific payors may result in
government-mandated or privately negotiated rebate obligations for the Company with respect to the purchase of
Firdapse®.

To determine revenue recognition for arrangements that are within the scope of Accounting Standards Codification
(“ASC”) Topic 606 – Revenue from Contracts with Customers (“Topic 606”), the Company performs the following five
steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine
the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize
revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to
arrangements that meet the definition of a contract under Topic 606, including when it is probable that the Company will
collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract
inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or
services promised within each contract and determines those that are performance obligations and assesses whether each
promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is
allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For a complete
discussion of accounting for product revenue, see Product Revenue, Net below.

F-12

Basis of Presentation and Significant Accounting Policies (continued).

The Company also may generate revenues from payments received under a collaborative agreement. Collaborative
agreement payments may include nonrefundable fees at the inception of the agreements, contingent payments for
specific achievements designated in the collaborative agreements, and/or net profit-sharing payments on sales of
products resulting from a collaborative arrangement. For a complete discussion of accounting for collaborative
arrangements, see Revenues from Collaborative Arrangements below.

Product Revenue, Net: The Company sells Firdapse® to the Customer (its exclusive distributor) who subsequently
resells Firdapse® to both a small group of SPs who have exclusive contracts with the Company to distribute the
Company’s products to patients and potentially to medical centers or hospitals on an emergency basis. In addition to the
distribution agreement with its Customer, the Company enters into arrangements with health care providers and payors
that provide for government-mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to
the purchase of the Company’s products.

The Company recognizes revenue on product sales when the Customer obtains control of the Company’s product, which
occurs at a point in time (upon delivery or upon dispense to patient). Product revenue is recorded net of applicable
reserves for variable consideration, including discounts and allowances. The Company’s payment terms range between
15 and 30 days.

Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are
recorded in cost of sales.

If taxes should be collected from the Customer relating to product sales and remitted to governmental authorities, they
will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred, if the
expected amortization period of the asset that the Company would have recognized is one year or less. However, no such
costs were incurred during the years ended December 31, 2020 and 2019.

During the years ended December 31, 2020 and 2019, all of the Company’s sales of Firdapse® in the United States were
to its Customer.

Reserves for Variable Consideration: Revenue from product sales are recorded at the net sales price (transaction
price), which includes estimates of variable consideration for which reserves are established. Components of variable
consideration include trade discounts and allowances, prompt payment discounts, product returns, provider chargebacks
and discounts, government rebates, and other incentives, such as voluntary patient assistance, and other allowances that
are offered within contracts between the Company and its Customer, payors, and other indirect customers relating to the
Company’s sale of its products. These reserves, as detailed below, are based on the amounts earned, or to be claimed on
the related sales, and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a
current liability (if the amount is payable to a party other than a customer).

These estimates take into consideration a range of possible outcomes which are probability-weighted in accordance with
the expected value method in Topic 606 for relevant factors such as current contractual and statutory requirements,
specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall,
these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the
terms of the respective underlying contracts.

The amount of variable consideration which is included in the transaction price may be constrained, and is included in
the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue
recognized under the contract will not occur in a future period. The Company’s analyses also contemplates application
of the constraint in accordance with the guidance, under which it determined a material reversal of revenue would not
occur in a future period for the estimates detailed below as of December 31, 2020 and, therefore, the transaction price
was not reduced further during the years ended December 31, 2020 and 2019. Actual amounts of consideration
ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s
estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period
such variances become known.

F-13

Basis of Presentation and Significant Accounting Policies (continued).

Trade Discounts and Allowances: The Company provides its Customer with a discount that is explicitly stated in its
contract and is recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, the
Company receives sales order management, data and distribution services from the Customer. To the extent the services
received are distinct from the sale of Firdapse® to the Customer, these payments are classified in selling, general and
administrative expenses in the Company’s consolidated statement of operations and comprehensive income (loss).
However, if the Company has determined such services received to date are not distinct from the Company’s sale of
products to the Customer, these payments have been recorded as a reduction of revenue within the consolidated
statement of operations and comprehensive income (loss) through December 31, 2020 and 2019, as well as a reduction
to accounts receivable, net on the consolidated balance sheets.

Prompt Payment Discounts: The Company provides its customer with prompt payment discounts which may result in
adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined
period. The prompt payment discount reserve is based on actual net sales and contractual discount rates. Reserves for
prompt payment discounts are included in accounts receivable, net on the consolidated balance sheets.

Funded Co-pay Assistance Program: The Company contracts with a third-party to manage the co-pay assistance
program intended to provide financial assistance to qualified commercially-insured patients. The calculation of the
accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to
receive associated with Firdapse® that has been recognized as revenue, but remains in the distribution channel at the end
of each reporting period. These payments are considered payable to the third-party vendor and the related reserve is
recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the
establishment of a current liability which is included in accrued expenses and other current liabilities in the consolidated
balance sheets.

Product Returns: Consistent with industry practice, the Company offers the SPs and its distributor limited product
return rights for damaged and expiring product, provided it is within a specified period around the product expiration
date as set forth in the applicable individual distribution agreement. The Company estimates the amount of its product
sales that may be returned by its Customer and records this estimate as a reduction of revenue in the period the related
product revenue is recognized. The Company currently estimates product return liabilities using available industry data
and its own sales information, including its visibility into the inventory remaining in the distribution channel. The
Company has an insignificant amount of returns to date and believes that returns of its products will continue to be
minimal.

Provider Chargebacks and Discounts: Chargebacks for fees and discounts to providers represent the estimated
obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than
the list prices charged to the Customer who directly purchases the product from the Company. The Customer charges the
Company for the difference between what they pay for the product and the ultimate selling price to the qualified
healthcare providers. These reserves are established in the same period that the related revenue is recognized, resulting
in a reduction of product revenue, net and accounts receivable, net. Chargeback amounts are generally determined at the
time of resale to the qualified healthcare provider by the Customer, and the Company generally issues credits for such
amounts within a few weeks of the Customer’s notification to the Company of the resale. Reserves for chargebacks
consist principally of chargebacks that the Customer has claimed, but for which the Company has not yet issued a credit.

Government Rebates: The Company is subject to discount obligations under state Medicaid programs and Medicare.
These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product
revenue and the establishment of a current liability which is included in accrued expenses and other current liabilities on
the consolidated balance sheets. For Medicare, the Company also estimates the number of patients in the prescription
drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The
Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid
or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims
that will be made for product that has been recognized as revenue, but which remains in the distribution channel
inventories at the end of each reporting period.

F-14

Basis of Presentation and Significant Accounting Policies (continued).

Bridge and Patient Assistance Programs: The Company provides free Firdapse® to uninsured patients who satisfy pre-
established criteria for either the Bridge Program or the Patient Assistance Program. Patients who meet the Bridge
Program eligibility criteria and are transitioning from investigational product while they are waiting for a coverage
determination, or later, for patients whose access is threatened by the complications arising from a change of insurer may
receive a temporary supply of free Firdapse® while the Company is determining the patient’s third-party insurance,
prescription drug benefit or other third-party coverage for Firdapse®. The Patient Assistance Program provides free
Firdapse® for longer periods of time for those who are uninsured or functionally uninsured with respect to Firdapse®
because they are unable to obtain coverage from their payor despite having health insurance, to the extent allowed by
applicable law. The Company does not recognize any revenue related to these free products and the associated costs are
classified in selling, general and administrative expenses in the Company’s consolidated statements of operations and
comprehensive income (loss).

Revenues from Collaborative Arrangements: The Company has entered into collaboration agreements for the further
development and commercialization of generic Sabril® (vigabatrin) tablets as well as the commercialization of Firdapse®
in Canada. Pursuant to the terms of these agreements, collaborators could be required to make various payments to the
Company, including upfront license fees, milestone payments based on achievement of regulatory approvals, and
royalties or net-profit sharing payments on sales of products resulting from the collaborative agreement.

Nonrefundable upfront license fees are recognized upon receipt or over time based on a determination of whether access
to the Company’s intellectual property is throughout the license period, or whether the right is provided as the
intellectual property exists as the point in time in which the license is granted. In the third quarter of 2020, an upfront fee
was earned under the collaboration agreement for the commercialization of Firdapse® in Canada.

The collaborative agreements provide for milestone payments upon achievement of development and regulatory events.
The Company accounts for milestone payments as variable consideration in accordance with Topic 606. The Company
recognizes sales-based royalties or net profit-sharing when the later of (a) the subsequent sale occurs, or (b) the
performance obligation to which the sales-based royalty or net profit-sharing has been satisfied.

In arrangements where the Company does not deem the collaborator to be a customer, payments to and from the
collaborator are presented in the statement of operations based on the nature of the Company’s business operations, the
nature of the arrangement, including the contractual terms, and the nature of the payments.

Under the arrangements, the Company will receive profit-sharing reports 60 days after quarter end from one
collaborator, and within nine days after quarter end from the other collaborator. Since the Company will receive these
reports 60 days after quarter end, profit-sharing revenue from sales of collaboration products by the Company’s
collaborator will be recognized in the quarter following the quarter in which the corresponding sales occurred. In
instances where profit-sharing reports are received within nine days after quarter end, revenue from sales of
collaboration products by the Company’s collaborator will be recognized in the quarter in which the sales occurred. For
the year ended December 31, 2020, there was profit-sharing revenue of approximately $33,000 from sales of the
collaborative product in Canada. For the years ended December 31, 2019 and 2018, there was no profit-sharing revenue
from sales of the collaborative product.

Refer to Note 7 (Collaborative Arrangements), for further discussion on the Company’s collaborative arrangements.

m. 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.

STOCK-BASED COMPENSATION. The Company recognizes expense in the consolidated statements of operations
and comprehensive income (loss) for the fair value of all stock-based payments to employees, directors 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
one to three years. Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

F-15

Basis of Presentation and Significant Accounting Policies (continued).

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

The Company sells its product in the United States through an exclusive distributor (its Customer) to specialty
pharmacies. Therefore, its distributor and specialty pharmacies account for all of its trade receivables and net product
revenues. The creditworthiness of its Customer is continuously monitored, and the Company has internal policies
regarding customer credit limits. The Company estimates an allowance for expected credit loss primarily based on the
credit worthiness of its Customer, historical payment patterns, aging of receivable balances and general economic
conditions.

The Company currently has a single product with limited commercial sales experience, which makes it difficult to
evaluate its current business, predict its future prospects and forecast financial performance and growth. The Company
has invested a significant portion of its efforts and financial resources in the development and commercialization of the
lead product, Firdapse®, and expects Firdapse® to constitute virtually all of product revenue for the foreseeable future.
The Company’s success depends on its ability to continue to effectively commercialize Firdapse®.

The Company relies exclusively on third parties to formulate and manufacture Firdapse® and its drug candidates. The
commercialization of Firdapse® and any other drug candidates, if approved, could be stopped, delayed or made less
profitable if those third parties fail to provide sufficient quantities of product or fail to do so at acceptable quality levels
or prices. The Company does not intend to establish its own manufacturing facilities. The Company is using the same
third-party contractors to manufacture, supply, store and distribute drug supplies for clinical trials and for the
commercialization of Firdapse®. If the Company is unable to continue its relationships with one or more of these third-
party contractors, it could experience delays in the development or commercialization efforts as it locates and qualifies
new manufacturers. The Company intends to rely on one or more third-party contractors to manufacture the commercial
supply of its drugs.

p. ROYALTIES. Royalties incurred in connection with the Company’s license agreement, as disclosed in Note 9

(Agreements), are expensed to cost of sales as revenue from product sales is recognized.

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 the financial reporting and tax
basis 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 2017. 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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making
several changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the limitation on
the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing
the amount of net operating loss carryforwards that corporations can use to offset taxable income.

The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision.

F-16

Basis of Presentation and Significant Accounting Policies (continued).

COMPREHENSIVE INCOME (LOSS). U.S. GAAP requires 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. The Company’s
comprehensive income (loss) is shown on the consolidated statements of operations and comprehensive income (loss)
for the years ended December 31, 2020, 2019, and 2018, and is comprised of net unrealized gains (losses) on the
Company’s available-for-sale securities.

NET INCOME (LOSS) PER COMMON SHARE. Basic net 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. With
regard to common stock subject to vesting requirements, the calculation includes only the vested portion of such stock.

Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number
of common shares outstanding, increased by the assumed conversion of other potentially dilutive securities during the
period.

The following table reconciles basic and diluted weighted average common shares:

Basic weighted average common shares outstanding
Effect of dilutive securities

Diluted weighted average common shares

outstanding

For the Years Ended
December 31,

2020
103,512,913
2,729,360

2019
102,944,316
3,076,620

2018
102,633,884
—

106,242,273

106,020,936

102,633,884

Outstanding common stock equivalents totaling approximately 7.1 million and 4.6 million, were excluded from the
calculation of diluted net income (loss) per common share for the years ended December 31, 2020 and 2019,
respectively, as their effect would be anti-dilutive. For the year ended December 31, 2018, approximately 10.5 million
shares of outstanding stock options were excluded from the calculation of diluted net loss per common share because a
net loss was reported in this period and therefore their effect was anti-dilutive. Potentially dilutive options to purchase
common stock as of December 31, 2020, 2019 and 2018 had exercise prices ranging from $0.79 to $3.95, $0.79 to $4.20
and $0.79 to $4.64, respectively.

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

u. RECLASSIFICATIONS. Certain prior year amounts in the consolidated financial statements have been reclassified to

conform to the current year presentation.

RECENTLY ISSUED ACCOUNTING STANDARDS.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), which amends ASC 808
to clarify when transactions between participants in a collaborative arrangement under ASC 808 are within the scope of
ASU 2014-09 (codified in ASC 606). The amendments require the application of ASC 606 existing guidance to
determine the units of account that are distinct in a collaborative arrangement for purposes of identifying transactions
with customers. If a unit of account within the collaborative arrangement is distinct and is with a customer, an entity
shall apply the guidance in Topic 606 to that unit of account. In a transaction between collaborative participants, an
entity is precluded by ASU 2018-18 from presenting a transaction together with “revenue from contracts with
customers” unless the unit of account is within the scope of ASC 606 and the entity applies the guidance in ASC 606 to
such unit of account. The Company adopted the new standard on January 1, 2020. The Company has a collaboration
agreement with Endo Ventures Limited (Endo). See Note 7 (Collaborative Arrangement). However, these amendments
did not have an impact on the Company’s consolidated financial statements, as Endo does not meet the definition of a
customer.

F-17

Basis of Presentation and Significant Accounting Policies (continued).

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of
Credit Losses on Financial Instruments. The standard amends the impairment model by requiring entities to use a
forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other
instruments that aren’t measured at fair value through net income. For available-for-sale debt securities, entities will be
required to recognize an allowance for credit losses rather than a reduction in carrying value of the asset. Entities will no
longer be permitted to consider the length of time that fair value has been less than amortized cost when evaluating when
credit losses should be recognized. The Company adopted the new standard on January 1, 2020. The adoption of this
standard did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic
350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a
Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred
in a hosting arrangement that is a services contract with the requirements for capitalizing implementation costs incurred
to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).
Accordingly, the amendments in this update require an entity in a hosting arrangement that is a service contract to follow
the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service
contract and which costs to expense. The Company adopted the new standard on January 1, 2020 and applied
prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a
material impact on the Company’s consolidated financial statements.

The Securities and Exchange Commission, or SEC, issued a final rule on November 19, 2020, adopting amendments to
Regulation S-K to modernize, simplify and enhance certain disclosure requirements. The amendments reflect a
principles-based, registrant-specific approach to disclosure intended to enhance the focus of financial disclosures on
material information for the benefit of investors, while simplifying compliance efforts for registrants. Registrants are
required to comply with the rule beginning with the first fiscal year ending on or after August 9, 2021, or the mandatory
compliance date. Although registrants are not required to apply the amended rules until the mandatory compliance date,
they may comply with the final amendments any time after the effective date, so long as disclosure responsive to an
amended item is provided in its entirety. The Company early adopted these amendments, effective for this report.

In December 2019, the FASB issued ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes, a new
standard intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach
for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of
deferred tax liabilities for outside basis differences. The new standard also simplifies aspects of the accounting for
franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-
up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and
interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made
prospectively, with some changes to be made retrospectively. The Company is evaluating the impact of the standard on
its financial condition and results of operations.

F-18

Investments.

Available-for-sale investments by security type were as follows:

At December 31, 2020:
U.S. Treasuries - Cash equivalents
Bond Funds - ST

Total

At December 31, 2019:
U.S. Treasuries - Cash equivalents
U.S. Treasuries - ST

Total

Estimated
Fair Value

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Amortized
Cost

$ 104,994,400
10,041,068

$ 2,709
28,623

$ —
—

$ 104,991,691
10,012,445

$ 115,035,468

$ 31,332

$ —

$ 115,004,136

$ 59,932,200
5,007,050

$ 2,042
7,463

$ —
—

$ 59,930,158
4,999,587

$ 64,939,250

$ 9,505

$ —

$ 64,929,745

There were no realized gains or losses from available-for-sale securities for the years ended December 31, 2020, 2019 or 2018.

The Company did not hold any securities in an unrealized loss position for more than 12 months as of December 31, 2020.

The estimated fair values of available-for-sale securities at December 31, 2020, by contractual maturity, are summarized as

follows:

Due in one year or less

2020
$ 115,035,468

Prepaid Expenses and Other Current Assets.

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

Prepaid manufacturing costs
Prepaid tax
Prepaid insurance
Prepaid subscriptions fees
Prepaid research fees
Prepaid commercialization expenses
Due from collaborative arrangements
Other

2020
$ 3,327,610
1,368,464
1,285,104
729,065
453,034
199,095
436,784
528,615

2019
$ 1,526,013
—
1,263,129
501,251
481,057
62,959
—
516,665

Total prepaid expenses and other current assets

$ 8,327,771

$ 4,351,074

F-19

5. Operating Leases.

The Company has operating lease agreements for its corporate office. The leases include options to extend the leases for up to 1

year and options to terminate the lease within 1 year. There are no obligations under finance leases.

The Company entered into an agreement in May 2020 that amended its lease for its office facilities. Under the amended lease,

the Company’s leased space will increase from approximately 7,800 square feet of space to approximately 10,700 square feet of space.
The amended lease commenced in early 2021 when construction of the asset was completed and space became available for use.
Consequently, the Company will record the effects of the amended lease during Q1 2021 which will be material to the Company’s
consolidated financial statements. The lease disclosures for the year ended December 31, 2020 in these financial statements have been
adjusted for the modification of the current lease. The components of lease expense for the old leased space were as follows:

Operating lease cost

Supplemental cash flow information related to leases was as follows:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows
Right-of-use assets obtained in exchange for lease obligations:

Operating leases

Supplemental balance sheet information related to leases was as follows:

Operating lease right-of-use assets

Other current liabilities
Operating lease liabilities, net of current portion

Total operating lease liabilities

Weighted average remaining lease term
Weighted average discount rate

Remaining payments of lease liabilities as of December 31, 2020 were as follows:

2021
2022

Total lease payments

Less imputed interest

Total

For the Year
Ended December 31,
2020
261,736

December 31, 2020

339,605

55,801

December 31, 2020
—
$

28,772
—

28,772

0.1 years

3.68%

$28,860
—

28,860
(88)

$28,772

Rent expense was $278,753, $318,346 and $242,155 for the years ended December 31, 2020, 2019 and 2018.

F-20

Accrued Expenses and Other Liabilities.

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

Accrued preclinical and clinical trial expenses
Accrued professional fees
Accrued compensation and benefits
Accrued license fees
Accrued purchases
Accrued contributions
Operating lease liability
Accrued variable consideration
Accrued income tax
Other

2020
$
584,502
1,883,880
3,991,056
10,372,642
258,067
310,000
28,772
964,316
—
107,032

2019
$ 1,183,513
1,241,526
3,064,645
8,751,991
1,313,310
1,535,000
300,518
884,764
1,533,696
172,332

Current accrued expenses and other liabilities

18,500,267

19,981,295

Lease liability – non-current

Non-current accrued expenses and other liabilities

—

647,532

Total accrued expenses and other liabilities

$ 18,500,267

$ 20,628,827

Collaborative Arrangements.

In December 2018, the Company entered into a collaboration and license agreement (Collaboration) with Endo, for the further

development and commercialization of generic Sabril® (vigabatrin) tablets through Endo’s U.S. Generic Pharmaceuticals segment,
doing business as Par Pharmaceutical.

Under the Collaboration, Endo assumes all development, manufacturing, clinical, regulatory, sales and marketing costs under

the collaboration, while the Company is responsible for exercising commercially reasonable efforts to develop, or cause the
development of, a final finished, stable dosage form of generic Sabril® tablets.

Under the terms of the Collaboration, the Company has received an up-front payment, and will receive a milestone payment,

and a sharing of defined net profits upon commercialization from Endo consisting of a mid-double-digit percent of net sales of generic
Sabril®. The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its
terms, the collaboration continues in effect until the date that is ten years following the commercial launch of the product.

The collaborative agreement provides for a $2.0 million milestone payment on the commercial launch of the product by Par. As

of December 31, 2020, 2019, and 2018, no milestone payments have been earned.

Revenues from collaborative arrangement with Endo for years ended December 31, 2020, 2019, and 2018 were $0, $0 and
$500,000 (for upfront license fees). Total expenses incurred, net, in connection with the collaborative agreement with Endo for years
ended December 31, 2020, 2019, and 2018 were approximately $4,254, $65,061 and $0, respectively. These expenses have been
included in research and development expenses in the accompanying consolidated statements of operations and comprehensive
income (loss).

In August 2020, the Company entered into a collaboration and license agreement with KYE Pharmaceuticals Inc (KYE), for the

commercialization of Firdapse® in Canada.

Under the agreement, KYE assumes all selling and marketing costs under the collaboration, while the Company is responsible

for supply of Firdapse® based on the collaboration partner’s purchase orders.

Under the terms of the agreement, the Company will receive an up-front payment, received payment upon transfer of Marketing
Authorization and delivery of commercial product, received payment for supply of Firdapse®, will receive milestone payments, and a
sharing of defined net profits upon commercialization from KYE consisting of a mid-double-digit percent of net sales of Firdapse®.
The Company has also agreed to a sharing of certain development expenses. Unless terminated earlier in accordance with its terms,
the collaboration continues in effect until the date that is ten years following the commercial launch of the product in Canada.

F-21

Collaborative Arrangements (continued).

Revenues from arrangement with KYE for the year ended December 31, 2020 were approximately $332,000. Total expenses
incurred, net, in connection with the agreement with KYE for the year ended December 31, 2020 were approximately $257,500. These
expenses have been included in selling, general and administrative expenses in the accompanying consolidated statements of
operations and comprehensive income (loss).

The agreement provides for event-based payments subject to achievement of specified development, regulatory and sales-based

milestones.

Commitments and Contingencies.

In 2018, the Company became aware that certain patents granted to Northwestern University (which patents have been licensed

by Northwestern to a third party) for a new GABA aminotransferase inhibitor were developed from CPP-115, which had previously
been licensed to the Company by Northwestern. As a result, on October 26, 2018, the Company terminated the license agreement for
CPP-115 and commenced an arbitration proceeding against Northwestern seeking damages for alleged breaches of the license
agreement. Shortly thereafter, Northwestern filed counterclaims against the Company in the arbitration action seeking damages for
alleged breaches by the Company of the license agreement. On May 21, 2019, the Company entered into a settlement agreement with
Northwestern that resolved all pending disputes between the parties with no admission of liability by either party, released all claims
of liability or wrongdoing between the Company and Northwestern, and dismissed the pending arbitration. Under the settlement
agreement, the Company received a $100,000 payment on May 21, 2019, which is reported as income in other income, net in the
consolidated statement of operations and comprehensive income (loss). The Company is also entitled to receive certain contingent
compensation that will be reported when and if received.

In May 2019, the FDA approved a New Drug Application (NDA) for Jacobus Pharmaceuticals for Ruzurgi®, their version of
amifampridine (3,4-DAP), for the treatment of pediatric LEMS patients (ages 6 to under 17). The Company believes that Jacobus is
offering Ruzurgi® at a lower price than the Company is offering Firdapse®. While the NDA for Ruzurgi® only covers pediatric patients,
the Company believes that Ruzurgi® is being prescribed off label to adult LEMS patients. If Jacobus is able to successfully sell
Ruzurgi® off-label to adult LEMS patients, it could have a material adverse effect on the Company’s business, financial condition and
results of operations.

The Company believes that the FDA’s approval of Ruzurgi® violated its statutory rights and was in multiple other respects
arbitrary, capricious and contrary to law. As a result, in June 2019 the Company filed suit against the FDA and several related parties
challenging this approval and related drug labeling. The Company’s complaint, which was filed in the federal district court for the
Southern District of Florida, alleged that the FDA’s approval of Ruzurgi® violated multiple provisions of FDA regulations regarding
labeling, resulting in misbranding in violation of the Federal Food, Drug, and Cosmetic Act (FDCA); violated its statutory rights to
Orphan Drug Exclusivity and New Chemical Entity Exclusivity under the FDCA; and was in multiple other respects arbitrary,
capricious, and contrary to law, in violation of the Administrative Procedure Act. Among other remedies, the suit sought an order
vacating the FDA’s approval of Ruzurgi®. Jacobus has intervened in the case.

On July 30, 2020, the Magistrate Judge considering the Company’s lawsuit against the FDA filed a Report and

Recommendation in which she recommended to the District Judge handling the case that she grant the FDA’s and Jacobus’ motions
for summary judgment and deny the Company’s motion for summary judgment. On September 29, 2020, the District Judge adopted
the Report and Recommendation of the Magistrate Judge, granted the FDA’s and Jacobus’s motions for summary judgment, and
dismissed the Company’s case. The Company has appealed the decision to the Eleventh Circuit Court of Appeals. There can be no
assurance as to the outcome of this lawsuit.

On August 10, 2020, Health Canada issued a Notice of Compliance (NOC) to Medunik for Ruzurgi® for the treatment of LEMS.

The Company has since initiated a legal proceeding in Canada seeking judicial review of Health Canada’s decision to issue the NOC
for Ruzurgi® as incorrect and unreasonable under Canadian law. Data protection, per Health Canada regulations, is supposed to
prevent Health Canada from issuing a NOC to a drug that directly or indirectly references an innovative drug’s data, for eight years
from the date of the innovative drug’s approval. The Ruzurgi® Product Monograph clearly references pivotal nonclinical
carcinogenicity and reproductive toxicity data for amifampridine phosphate developed by the Company. As such, the Company
believes that its data was relied upon to establish the nonclinical safety profile of Ruzurgi® needed to meet the standards of the
Canadian Food and Drugs Act. There can be no assurance of the result of this proceeding.

Additionally, from time to time the Company may become involved in legal proceedings arising in the ordinary course of

business. Except as set forth above, the Company believes that there is no other litigation pending at this time that could have,
individually or in the aggregate, a material adverse effect on its results of operations, financial condition or cash flows.

F-22

Agreements.

LICENSE AGREEMENT WITH BIOMARIN (FIRDAPSE®). On October 26, 2012, the Company entered into a
license agreement with BioMarin Pharmaceutical, Inc. (BioMarin) for the North American rights to Firdapse®. Under the
license agreement, the Company pays: (i) royalties to the licensor for seven years from the first commercial sale of
Firdapse® equal to 7% of net sales (as defined in the 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; and
(ii) royalties to the third-party licensor of the rights sublicensed to the Company for seven years from the first
commercial sale of Firdapse® equal to 7% of net sales (as defined in the license agreement between BioMarin and the
third-party licensor) in any calendar year for the duration of any regulatory exclusivity within a territory and 3.5% for
territories in any calendar year in territories without regulatory exclusivity.

On May 29, 2019, the Company entered into an amendment to its license agreement for Firdapse®. Under the
amendment, the Company has expanded its commercial territory for Firdapse®, which originally was comprised of North
America, to include Japan. Additionally, the Company has an option to further expand its territory under the license
agreement to include most of Asia, as well as Central and South America, upon the achievement of certain milestones in
Japan. Under the amendment, the Company will pay royalties on net sales in Japan of a similar percentage to the
royalties that the Company is currently paying under its original license agreement for North America.

In January 2020, the Company was advised that BioMarin has transferred certain rights under the license agreement to
SERB S.A.

b. AGREEMENTS FOR DRUG MANUFACTURING, DEVELOPMENT, PRECLINICAL AND CLINICAL

STUDIES. The Company has entered into agreements with contract manufacturers for the manufacture of commercial
drug and 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, most of 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.

10.

Income Taxes.

The Company is subject to income taxes in the U.S. federal jurisdiction and various states jurisdictions.

For the year ended December 31, 2018, due to the Company’s historical operating losses and the inability to recognize any

income tax benefit, there was no provision for income taxes presented in these financial statements for that respective period.
Commencing in 2019, the Company has recorded income taxes on their pretax income using an effective tax rate.

The income tax expense (benefit) for the years ended December 31, 2020, 2019, and 2018 consists of:

Current
Deferred

2020
$
(121,662)
(32,971,264)

2019
$ 1,533,696
—

$ (33,092,926)

$ 1,533,696

2018

—
—

—

The reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate of 21% to amounts

included in the statements of operations is as follows:

Statutory rate
State tax
Valuation allowance
Tax credit
Other

2018

2019

2020
21.0% 21.0% 21.0%
2.2% 6.5% 4.2%
(99.4)% (20.9)% (25.9)%
(2.4)% (2.5)% 1.4%
(0.4)% 0.5% (0.7)%

(79.0)% 4.6% 0.0%

F-23

10.

Income Taxes (continued).

Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryovers and the temporary

differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax
purposes. Significant components of the Company’s deferred tax assets as of December 31, 2020 and 2019 are as follows:

Net operating loss
Start-up costs
Tax credits
Deferred compensation
Inventory
Prepaid expenses
Other

Gross deferred tax asset

Valuation allowance

Net deferred tax assets

2020
$ 2,319,848
11,203,034
15,615,681
3,889,133
212,045
(398,979)
130,502

2019
$ 10,645,128
12,894,926
14,320,860
3,183,767
229,050
—
355,023

32,971,264

41,628,754

—

(41,628,754)

$ 32,971,264

—

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. As of

December 31, 2020, the Company determined that there is sufficient positive evidence to conclude that it is more likely than not that
the above deferred taxes of approximately $33.0 million are realizable. Accordingly, the Company has released the full valuation
allowance for deferred tax assets including net operating loss and tax credit carryover as of December 31, 2020. The valuation
allowance released over the course of the year ended December 31, 2020 was $41.6 million.

At December 31, 2020 and 2019, respectively, the Company had federal net operating loss carryforwards of approximately
$3 million and $45 million available to reduce future taxable income. The federal net operating loss carryforwards are expected to be
utilized within the next year. Additionally, at December 31, 2020 and 2019, respectively, the Company had state net operating loss
carryforwards of approximately $42 million and $52 million available to reduce future Florida taxable income. The state net operating
loss carryforwards will expire at various dates beginning in 2033.

During 2020, the Company completed an analysis to determine whether, as a result of prior ownership changes, the utilization of
certain net operating loss and orphan drug tax credit carryforwards would be subject to annual limitations under Sections 382 and 383
of the Internal Revenue Code and similar state provisions. In this analysis, the Company determined that the total net operating loss
and orphan drug tax credit carryforwards are fully utilizable. Thus, the deferred tax assets were adjusted accordingly.

Beginning in 2010, the Company has received several orphan drug designations by the FDA for products currently under

development. The orphan drug designations allow the Company to claim increased federal tax credits for certain research and
development activities. The orphan drug credit carryforwards will expire at various dates beginning in 2031.

No interest or penalties were accrued through December 31, 2020. The Company’s policy is to recognize any related interest or

penalties in income tax expense. The Company is not currently under income tax examinations by any tax authorities.

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, 2020 and 2019.

No shares of preferred stock were outstanding at December 31, 2020 and 2019.

Common Stock

On August 20, 2020, the Company’s stockholders approved an increase in the Company’s authorized common stock par value

$0.001 per share, from 150,000,000 shares to 200,000,000 shares. At December 31, 2020 and 2019, 103,781,641 and 103,397,033
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-24

11. Stockholders’ Equity (continued).

2020 Shelf Registration Statement

On July 23, 2020, the Company filed a shelf registration statement with the SEC to sell up to $200 million of common stock,

preferred stock, warrants to purchase common stock, debt securities and units consisting of one or more of such securities (the “2020
Shelf Registration Statement”). The 2020 Shelf Registration Statement (file no. 333-240052) was declared effective by the SEC on
July 31, 2020. As of the date of this report, no offerings have been completed under the Company’s 2020 Shelf Registration
Statement.

Stockholder Rights Plan

On September 20, 2011, the Board of Directors approved the Company’s adoption of a Stockholder Rights Plan. Under the
Stockholders’ Rights 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.

The Rights 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.

On September 19, 2016, the Board of Directors unanimously approved, and on the same date the Company entered into
Amendment No. 1 to the Stockholders Rights Plan (the “Amendment”). Under the terms of the Amendment, the outside expiration
date of the rights plan was extended to September 20, 2019. Additionally, as part of the Amendment, the Board adopted a Certificate
of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company to increase the number of
shares of Series A Junior Participating Preferred Stock of the Company available for issuance under the Rights Plan from 500,000
shares to 1.5 million shares.

On August 28, 2019, the Board of Directors unanimously adopted Amendment No. 2 to the Stockholders’ Rights Plan further

extending the outside expiration date of the rights plan to September 20, 2022.

12. Stock Compensation.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded stock-based compensation expense as follows:

Research and development
Selling, general and administrative

Total stock-based compensation

2020
$ 1,585,202
4,675,721

2019
$ 1,137,596
2,687,219

2018
$ 1,079,230
2,471,414

$ 6,260,923

$ 3,824,815

$ 3,550,644

The Company may issue stock options, restricted stock, stock appreciation rights and restricted stock units (collectively, the
“Awards”) to employees, directors, and consultants of the Company under the 2014 and 2018 Stock Incentive Plans (the 2014 Plan
and the 2018 Plan or collectively, the Plans). At December 31, 2020, no shares remain available for future issuance under the 2014
Plan. Under the 2018 Plan, 10,000,000 shares were reserved for issuance and as of December 31, 2020, 1,856,008 shares remain
available for future issuance.

F-25

12. Stock Compensation (continued).

Stock Options

The Company has granted stock options to employees, officers, directors, 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 1 to 3 years of continuous service
and have contractual terms of 7 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 years ended December 31, 2020, 2019, and 2018, options to purchase 281,762, 654,332 and 186,665 shares,

respectively, of the Company’s common stock were exercised with gross proceeds to the Company of $758,130, $1,116,242, and
$297,563, respectively. During the years ended December 31, 2020 and 2018, no options to purchase shares of the Company’s
common stock were exercised on a “cashless” basis. During the year ended December 31, 2019, options to purchase 6,666 shares of
the Company’s common stock were exercised on a “cashless” basis, resulting in the issuance of an aggregate of 3,444 shares of the
Company’s common stock.

During the years ended December 31, 2020, 2019, and 2018 the Company recorded non-cash stock-based compensation

expense related to stock options totaling $5,694,120, $3,780,086, and $3,535,647, respectively.

During the years ended December 31, 2020, 2019, and 2018, the Company granted seven-year options to purchase an aggregate

of 2,715,000, 2,183,500 and 5,882,500 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 Plans for the year ended December 31, 2020 is summarized as follows:

Outstanding at beginning of year

Granted
Exercised or released
Forfeited or cancelled
Expired

Outstanding at end of year

Exercisable at end of year

Number of
Options

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual Term
(in years)

Aggregate
Intrinsic Value

11,478,334 $
2,715,000
(281,762)
(160,668)
(357,235)

13,393,669 $

7,926,136 $

2.95
3.75
2.69
3.84
3.38

3.10

2.64

4.42 $ 8,237,645

3.38 $ 7,381,601

Other information pertaining to stock option activity during the years ended December 31, 2020, 2019, and 2018 was as follows:

2020

2019

2018

Weighted–average fair value of granted stock options
Total fair value of vested stock options
Total intrinsic value of exercised stock options

2.33 $

1.93
$
$5,311,616 $3,864,995 $2,193,294
$ 325,102 $1,899,862 $ 274,864

2.69 $

As of December 31, 2020, there was approximately $10.02 million 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
2.35 years.

F-26

12. Stock Compensation (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. Forfeitures are recognized as a
reduction of stock-based compensation expense as they occur.

Assumptions used during the years were as follows:

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

Restricted Stock Units

December 31, 2020
0.24% to 1.64%
4.5 years
80.5% to 83.7%
—%
—%

December 31, 2019
1.51% to 2.53%
4.5 years
75.5%
—%
—%

December 31, 2018
2.09% to 2.88%
0 to 7 years
82%
—%
—%

Under the 2018 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-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. Restricted stock unit activity during 2020 was as follows:

2020

Nonvested balance at beginning of year

Granted
Vested
Forfeited

Nonvested balance at end of year

235,671 $

Weighted Average
Grant Date Fair
Value

Number of
Restricted
Stock Units
352,500 $
30,000
(117,495)
(29,334)

4.64
4.70
4.64
4.64

4.65

During the year ended December 31, 2019, 352,500 restricted stock units were granted and outstanding and there were no vested

or forfeited shares. There was no restricted stock unit activity during 2018.

During the year ended December 31, 2020 and 2019, the Company recorded non-cash stock-based compensation expense
related to restricted stock units totaling $566,803 and $44,729, respectively. No stock-based compensation related to restricted stocks
was recorded during 2018.

Common Stock

No shares of common stock were granted during the year ended December 31, 2020 or 2019. During the year ended
December 31, 2018, the Company granted 3,094 net shares of common stock to an employee as compensation. The Company
recorded stock-based compensation related to common stock issued to an employee totaling approximately $15,000, during the year
ended December 31, 2018.

F-27

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, 2020, 2019, and 2018, the Company’s matching contributions were approximately
$465,000, $268,000 and $123,000, respectively.

F-28