Earnings Call Transcript - CPRX Q3 2021

Operator, Operator

Hello, and welcome to the Catalyst Pharmaceuticals Third Quarter 2021 earnings call and webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ali Grande, CFO. Please go ahead.

Ali Grande, CFO

Good morning everyone, and thank you for joining our conference call to discuss Catalyst's third quarter 2021 financial results and corporate highlights. Leading the call today, we have Patrick McEnany, Chairman and Chief Executive Officer. We are also joined by Steve Miller, Chief Operating Officer and Chief Scientific Officer, and Jeffrey Del Carmen, Chief Commercial Officer. For the Q&A session, we'll also have Dr. Gary Ingenito, Chief Medical and Regulatory Officer. Before we begin, I would like to remind you that in the following comments and in the Q&A session, we will make statements about expected future results which may be forward-looking statements for the purposes of the federal securities laws. These statements relate to our current expectations, estimates, and projections, and are not guarantees of future performance. There will be risks, uncertainties, and assumptions that are difficult to predict, which may not be accurate, especially in light of the effects of COVID-19. Actual results may vary. The forward-looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in our 2020 annual report in Form 10-K. At this time, I would like to turn the call over to Carmen.

Patrick McEnany, CEO

Good morning everyone, and thank you for joining us today for Catalyst's third quarter results and update call. I'm very pleased to report that we delivered record Firdapse revenue results for the third quarter ending September 30th. We generated net Firdapse revenues of $35.9 million, an increase of 23% versus the third quarter of 2020. Pernix revenues for the nine-month period were $99.7 million as compared to $87.9 million for the nine months last year, representing a 13% increase year-over-year. At this time, I anticipate continued organic growth through the end of this year and for the foreseeable future. Net income before income taxes for Q3 2021 was $14.1 million, a 20% increase when compared to $11.7 million for the third quarter of last year. We reported GAAP net income of $10.3 million for the third quarter of this year, or $0.10 per basic and diluted share. We ended the quarter with $174.8 million in cash and short-term investments, further supporting our long-term growth strategy to diversify through reinvestments in our business or external growth opportunities. These results also highlight the strength of our commercial capabilities and resilience as we continue to execute throughout the current environment. We will have more to provide during her financial presentation. Our share purchase program continues with 949,746 shares purchased in the open market during the third quarter. Since inception in March of this year, through the end of the third quarter, we repurchased 1,749,746 shares at an average price of $5.15 per share. Notwithstanding our success in treating many LEMS patients, we have only reached about 25% of the estimated 3,000 U.S. patients. We remain confident in the progress our commercial team is making in evolving the market for the Firdapse brand. We continued to make substantial investments in Firdapse, focusing on expanding reach to targeted healthcare specialists, most recently oncologists and general neurologists, providing resources to help shorten the diagnostic journey for LEMS patients and support patient and healthcare provider education programs. Our focus on commercial execution excellence remains a top priority for us, as well as for the patients we serve. Jeff will provide additional information on our commercial progress shortly. Importantly, we've made substantial investments and advancements related to Firdapse exclusivity and commercial potential in the U.S. Most notably was the receipt of a positive decision from the Eleventh Circuit Court of Appeals supporting the orphan drug exclusivity for Firdapse for treating LEMS patients in the U.S. We are currently extremely pleased with the court's decision. While there is a 45-day period for which an inbox hearing request has been submitted to the court related to the court's decision, we remain confident in our position and look forward to when we can fully recognize our exclusivity. Our priority has always been and will continue to be to address patient needs first. We are well-prepared to do whatever we can to ensure that all LEMS patients will have uninterrupted access to diamino pyridine for treating their condition. We also continue to make important progress in bolstering our intellectual property for Firdapse. Currently, two patents have been issued that extend the life of our intellectual property portfolio to 2034, both of which are listed in the Orange Book. We have additional patents pending to further strengthen the IP portfolio, adding to our commitment to protect the innovation and the product's commercial potential. As we continue to execute our commercial-related initiatives, we're taking a very targeted approach towards our clinical development programs. We are working on expanding the label for Firdapse as we plan to seek U.S. approval to include pediatric LEMS patients, which we believe number around 10 to 15 children. This program further underscores our continued commitment to providing an important treatment option for LEMS patients of all ages. We're also continuing our efforts to expand the global footprint for Firdapse beyond the U.S., Canada, and Japan. Steve will have more to add shortly regarding activities outside of the U.S. In addition, after objectively and thoroughly evaluating the clinical development timeline, regulatory path, and commercial viability for our current initiatives, we have elected to end one program and concentrate our R&D efforts in other areas. We believe having a more focused approach towards our development programs will drive the greatest value for the Company and enable us to better utilize our resources to pursue value-creating opportunities and expand our focus beyond Firdapse. During the quarter, we made considerable progress on our efforts to build a more diversified portfolio that aligns our growth strategy and priorities, including the potential to expand the breadth and depth of our pipeline. With a robust process in place during the third quarter of 2021, we engaged in extensive due diligence activities on a potential acquisition that fits our strategic objectives. However, after a thorough assessment of the acquisition candidate, we elected not to further pursue this opportunity. Coupled with our strong balance sheet, we are in an excellent position to take advantage of opportunities that meet our specified criteria and our commitment to pursue rare disease opportunities. We are very encouraged by our projects that are currently under review. Our quarterly achievements demonstrate continued performance excellence, supported by several key strategic decisions that have positioned Catalyst firmly for the future. We're excited about the path ahead as we continue to execute across all priorities to drive sustainable growth for the long term. Finally, there are a couple of other points worth noting. First, we achieved these results over a period when Catalyst and most of our peers were affected by the Delta variant of COVID-19. As this variant is abating, we are beginning to see a more normalized pattern of practices with healthcare providers and patients. Lastly, while addressing the COVID-19 effects, I want to reiterate that as we have previously stated, our supply chain is rock solid with qualified redundancies throughout our supply chain. Now, I will turn the call over to Jeff Del Carmen, our Chief Commercial Officer, who will provide further highlights of our commercial execution for the quarter.

Jeffrey Del Carmen, Chief Commercial Officer

Thanks, Pat, and good morning everyone. As Pat mentioned, Q3 net Firdapse sales were $35.9 million, which represents 23.1% growth quarter-over-quarter versus the same quarter last year and 6.7% growth versus Q2 2021. We are extremely proud of the continued strong performance by the entire Catalyst organization. Strong net revenue in Q3 was driven primarily by steady new patient enrollments, continued favorable reimbursement dynamics, and stable discontinuation rates. While we continue to see some sporadic COVID-19 related slowdowns in new patient statistics due to delays at the point-of-care between diagnostic testing and initiation of treatment, Q3 new patient enrollments were still 26% higher this quarter versus the same quarter last year and slightly higher than Q2 2021. Our strong patient persistency resulted in continued low 90-day discontinuation rates of less than 15%. In October, net new patients were the highest monthly total in 2021, a result of consistent new Firdapse enrollments, adult LEMS patients restarting Firdapse, and low discontinuation rates. We are proud that around 800 adult LEMS patients have received a Firdapse prescription since launch. However, Catalyst is focused on the significant remaining opportunity to help all adult LEMS patients. We are confident that our continued investment in patient resources will shorten the diagnostic journey for LEMS patients and enable Catalyst to serve the significant number of remaining LEMS patients sooner. Thus far, approximately 3,000 unique undiagnosed potential patients have opted in to receive useful information regarding LEMS, an increase of nearly 1,000 since our last earnings call. Furthermore, we continue to meet key milestones in the development and execution of our oncology LEMS strategy. Approximately 50% of LEMS patients are thought to be tumor LEMS patients, with the vast majority having small cell lung cancer. Therefore, we believe that oncology is a key element of our future growth. After completing a thorough assessment of the market, conducting advisory boards with oncology thought leaders, and ongoing market research, we are excited to launch our non-personal promotion, the Thoracic Oncology campaign in Q4. Engagement with this segment of the market has resulted in early positive indicators that the strategy put into motion will yield more patients with a proper diagnosis of LEMS and accelerate the opportunity to receive treatment for this disease. We continue to partner with key professional societies to provide continuing education for all levels of neuromuscular healthcare providers. We had the opportunity at the recent annual meeting to engage with their constituency and educate clinicians about LEMS in new and innovative ways, helping to identify atypical LEMS adult patients. Through healthcare provider education, we expect more patients will benefit from a correct and timely LEMS diagnosis. Our Catalyst Pathways patient services team remains dedicated to supporting the needs of adult LEMS patients, caregivers, and healthcare professionals, as well as providing educational resources regarding LEMS and Firdapse. In addition, Catalyst Pathways has numerous types of financial assistance programs to help patients with their out-of-pocket costs. Patients enrolled in Catalyst Pathways, including those covered by Medicare, have an average co-pay of less than $2 a month. Prescription approval rates remained over 90% across all payers, government, or private commercial. Catalyst Pathways' patient services team also connects patients, community, and advocacy resources, such as patient support groups. In closing, we are pleased with our performance in Q3 and are excited about the significant opportunity ahead to help all adult LEMS patients. We are confident that the strategies and tactics we have put in place will deliver sustained growth in Q4 and beyond. I want to thank the entire team at Catalyst for their unwavering commitment to the LEMS community. I will now turn the call over to Dr. Steven Miller, our Chief Operating Officer and Chief Scientific Officer for an update on R&D activities.

Steven Miller, Chief Operating Officer and Chief Scientific Officer

Thanks for the commercial update, Jeff. I'll now provide an update on our clinical pipeline and product development efforts. We continue to make important progress with our development programs for Firdapse, including advancing our plans for developing a long-acting formulation of amifampridine phosphate in order to provide an improved dosing experience that is a more convenient option for patients and provides enhanced consistency in its therapeutic effect. Plans are underway to initiate an additional pharmacokinetic study in the first quarter of 2022 to study the drug release and absorption characteristics of the most recent long-acting formulations. Our design efforts have been guided by input from patient and physician panels regarding the desired performance characteristics of a long-acting version of Firdapse. We believe the target characteristics of our long-acting formulation of amifampridine phosphate will address the needs of the LEMS patient community as we continue to execute all our plans to advance this development program. In alignment with our continued commitment to provide a treatment for all LEMS patients, we are now preparing a supplemental NDA submission package for the treatment of pediatric LEMS with Firdapse. We anticipate filing this supplement with the FDA in the first quarter of 2022. Catalyst has all the required data, including all necessary safety data to file a complete submission for this label expansion. The preparation of the supplement is a high priority for Catalyst as we remain committed to advancing our efforts to expand Firdapse so that we may be able to provide all LEMS patients with an approved treatment option. Now, I would like to provide an update on the MuSK-MG program. As previously announced, Catalyst submitted plans, including a protocol for a new clinical trial for the symptomatic treatment of MuSK myasthenia gravis or MuSK-MG, to the agency for their review and comments. Having received the agency's comments, we convened an advisory board meeting during the third quarter consisting of key opinion leaders and experts for input and options for the MuSK-MG development program. This included physicians that had experience using Firdapse to treat MuSK-MG in our most recent trial. After an in-depth evaluation of the feasibility and measurability of study endpoints for this indication, as well as the input from the agency and advisors received, we have concluded that the universal use of Firdapse as a first-line therapy for MuSK-MG is unlikely, and therefore we have decided to pause further development plans at this time. However, for those patients that currently receive Firdapse to treat their MuSK-MG symptoms, we will continue to support them through investigator-initiated programs in accordance with agency regulations. We continue to make invaluable progress in increasing healthcare provider awareness of LEMS through our medical affairs programs. An accredited continuing medical education or CME course about LEMS is now available. To date, over 4,600 mostly healthcare provider learners have viewed the course, and as of this October, 1,338 licensed healthcare providers have taken the CME testing. Our medical science liaisons also recently completed hosting several neuromuscular training sessions from various academic medical centers for another Catalyst-sponsored hands-on training session earlier this month. Previous sessions have received strong positive feedback on their ability to raise awareness among fellows of the diagnostic challenges with LEMS. Now, I would like to provide an update on our ongoing global expansion initiative. As we previously announced in June, we have partnered with Dydo Pharma for the development and commercialization of Firdapse for the treatment of Lambert-Eaton Myasthenic Syndrome in Japan. Dydo has made great strides initiating development activities, including consulting with the Japanese pharmaceuticals and medical devices agency to confirm clinical starting parameters and requirements to obtain regulatory approval. As a result of their efforts, Dydo is preparing their clinical trial notification and anticipates that a small-scale phase 3 clinical trial will be initiated in 2022. Catalyst continues to support Dydo in preparing for the clinical activity by supplying clinical trial materials, as well as collaborating with Dydo in its efforts to obtain required documentation for the Japanese regulatory authorities. We have made significant progress in developing an intellectual property estate to extend the market exclusivity for Firdapse. As of the third quarter of 2021, we have two patents listed for Firdapse in the FDA's Orange Book, which extends the IP portfolio to 2034. We have several other pending patents related to the use of Firdapse filed with the U.S. Patent and Trademark Office and anticipate that they may issue later this year or in early 2022. In addition to the U.S., Firdapse currently has stated exclusivity in Canada out to 2028, and in Japan, we expect Firdapse will be granted 10 years of market exclusivity upon approval in that market. We will continue to seek opportunities to enhance our portfolio estate to further protect market exclusivity for Firdapse and to expand the Firdapse market geographically. During this quarter, we advanced our objectives to expand our portfolio of rare disease treatments beyond Firdapse. As Pat mentioned, we continue to actively evaluate new products or other transactions to broaden Catalyst's product offerings and to enhance our research and development pipeline. Our teams are actively engaged in the process as we look for worthwhile prospects where we can utilize our expertise, resources, and know-how to expand our programs and drive growth. With a very efficient approach in place, we are enthusiastic about the path ahead and confident in our ability to identify the right opportunities to maximize our capabilities and resources. I will now turn the call over to Ali Grande, our Chief Financial Officer, to review our financial results.

Ali Grande, CFO

We're very pleased with our financial results for the third quarter. As reported, we ended the quarter with cash and investments of $174.8 million and no funded debt. We believe this allows us the financial flexibility to advance our programs and support our strategic initiatives for acquiring earlier stage opportunities and innovative technologies to enable growth and value creation. Total net revenues for the third quarter of 2021 were $36 million, a 22.6% increase when compared to total revenues of $29.3 million for Q3 2020. Despite the continued challenges of COVID-19, total Firdapse product revenue net was $35.9 million for the third quarter of 2021 and a 22% increase over the net product revenue of $29.2 million for the same quarter in 2020. Net income before income taxes for Q3 2021 was $14 million, a 20% increase when compared to $11.7 million for Q3 2020. We reported GAAP net income of $10.3 million for Q3 2021, or $0.10 per basic and diluted share. For Q3 2020, we reported GAAP net income of $43.3 million or $0.42 per basic and $0.41 per diluted share. However, these figures are not comparable, as the third quarter of 2020 benefited from the reporting of a one-time non-cash deferred tax asset of approximately $31.6 million upon reversal of the related valuation allowance. Our effective tax rate in the third quarter of 2021 on an annualized basis was 24.3%, compared to 2.8% in the third quarter of 2020. In 2020, we benefited from the use of our federal net operating losses. In 2021 and future periods, we expect that we will benefit from the use of our deferred tax assets primarily relating to state NOLs and orphan drug tax credits, although those are subject to certain limitations, resulting in a more normalized tax rate. Because of the significant effect of the one-time reporting of our deferred tax assets in the third quarter of 2020 compared to the third quarter of 2021, we believe that the non-GAAP measures we presented in yesterday's press release provide a more useful comparison of our results of operations for the third quarter of 2021 versus the third quarter of 2020. Non-GAAP net income for Q3 2021 was $15.6 million or $0.15 per basic and $0.40 per diluted share, which excludes from GAAP net income stock-based compensation expense of $1.5 million, depreciation of $31,000, and the income tax provision of $3.7 million. This compares to non-GAAP net income for Q3 2020 of $13.2 million or $0.30 per basic and $0.12 per diluted share, which excludes from GAAP net income stock-based compensation of $1.5 million, depreciation of $30,000, and an income tax benefit of $31.6 million. The above represents an almost 18% increase in non-GAAP income year-over-year for the third quarter. Net income development expenses were $4.5 million for the third quarter of 2021, compared to $3.7 million for the third quarter of 2020, and expenses remained consistent at 20% and 21% of total operating costs for the third quarter of 2021 and the third quarter of 2020, respectively. We expect that research and development expenses will continue to be substantial in 2021 and beyond as we advance the development of a long-acting formulation for Firdapse and continue our expanded access programs. In addition, we expect R&D will also increase in future periods if we successfully execute on our strategic initiatives to acquire or in-license innovative technology platforms or earlier stage programs. Selling, general and administrative expenses for the third quarter of 2021 totaled $12.2 million compared to $10 million in the third quarter of 2020. SG&A expenses decreased slightly as a percentage of total operating expenses to 55% for the third quarter of 2021, compared to 57% for the third quarter of 2020. We expect that SG&A expenses will continue to be substantial in 2021 as we continue our efforts to increase revenues from Firdapse and take steps to further expand our business. More mutual information and analysis may be found in the Company's quarterly report on Form 10-Q, which was submitted to the Securities and Exchange Commission yesterday, November 9, and can be found on the Investor Relations page of our website at www.catalystpharma.com. And with that, I’ll turn the call back over to Pat.

Patrick McEnany, CEO

Thanks, Ali. Catalyst continues to demonstrate resilience and strong execution in the third quarter of the year, providing us with a very strong foundation for the Company as we make progress on our business development activities and look to build a portfolio of rare disease marketed products and other clinical programs. Finally, I would like to thank all of our employees who each demonstrated a dedication to making a positive impact on patients' lives. This would not happen without their passion and commitment to serving the LEMS community. This ends our prepared remarks, and we will now open the call for questions.

Operator, Operator

Thank you. We will now be conducting our question-and-answer session. A confirmation tone will indicate your line is in the question queue. One moment, please, while we poll for questions. Our first question today is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.

Charles Duncan, Analyst

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

Patrick McEnany, CEO

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

Jeffrey Del Carmen, Chief Commercial Officer

Thanks Charles for the question. We see significant opportunity in 2022 to grow. Specifically when we look at the diagnosed patients that are out there already for LEMS that are not yet on Firdapse. We have enrolled these leads. Many of these physicians are telling us at this point that they're just waiting for these patients to come in and visit before they prescribe. Other things we look at are the oncology and the tumor LEMS patients. We're applying significant resources there to educate HCPs as well as patients on tumor LEMS, the disease, and potential treatments. So, we already are seeing growth right now. I will give you a quick specific here. In 2021, we achieved growth of approximately 12%. So we're seeing growth with the limited resources that we've applied there thus far. And we know all the work that we've done to date this year will generate new patient opportunities for oncology or LEMS patients next year. The other part is you take a look at the other 3,000 patients that are out there. A significant portion of these patients are either undiagnosed or misdiagnosed. So we've applied resources there to help to educate patients, caregivers, and physicians about LEMS and treatments that are available, which will shorten that patient journey. That will open up opportunities for these patients to be served sooner. That's where we've seen significant growth come into 2022.

Charles Duncan, Analyst

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

Patrick McEnany, CEO

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

Steven Miller, Chief Operating Officer and Chief Scientific Officer

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

Charles Duncan, Analyst

Okay, that's very helpful. Appreciate the focus on delivering for patients. Last question is strategy. I'm not sure if you're going to be able to answer this, but I'll give it a shot anyway. You said that you've got your hands with the Eleventh Court of Appeals designation in terms of possible outcomes. What's your sense of being able to say with a definitive statement on the outcome of that, and regarding legal interactions with potential competitors, how would clarity on the outcome, especially a win with that, shape your perspectives on investment in Firdapse, marketing, and the pipeline potential of in-licensing?

Patrick McEnany, CEO

So Charles, as we previously stated, the FDA and the other parties have 45 days from the opinion to seek an inbox hearing or rehearing. That deadline approaches around November 15th. Statistics show that less than 5% of such requests actually get reheard. We don't know what strategies may be incorporated by the opposing side, but that would be the first step. The FDA would require the approval of the Solicitor General's Office to pursue such a request. We believe even if a request is submitted, that it's likely based on the results of the three-judge panel's opinion, which was strongly worded. We think that it is very unlikely that a rehearing would be granted. The other option is to request a hearing by the Supreme Court, but less than 2% of cases that are submitted are actually heard by the Supreme Court. From a commercial and patient advocacy perspective, we're ready at any point for what the decision of the court may be ultimately. We have procedures in place that will ensure a seamless transition for patients, should there be a need for such a transition.

Charles Duncan, Analyst

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

Patrick McEnany, CEO

Thank you, Charles.

Operator, Operator

Your next question today is coming from Scott Henry from ROTCE Capital. Your line is now live.

Scott Henry, Analyst

Thank you, and good morning. Pat, regarding the appellate court question, we can analyze the organic growth of Firdapse and project that over the next few years. If the competitor's product is removed from the market, can you discuss how that would impact our outlook? What additional revenue potential could arise if that situation were to happen? Thank you.

Patrick McEnany, CEO

That's a great question. We're cautious about discussing it too much. Our primary concern is ensuring a smooth transition so that no patient misses a dose of their medication. We believe we are equipped to handle that. In response to how many patients are currently using the competitor's product, we don't have access to that data. However, based on the patient numbers we lost after the competitor’s product was approved, along with some potential growth, we estimate that around 100 to 125 patients are currently using it. We also know that some of these patients are on higher doses than our average, which is about 60 milligrams for adult patients. Those are the metrics we can share at this time, and if we provide guidance early next year, we may be able to offer more specific information.

Scott Henry, Analyst

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

Patrick McEnany, CEO

I think we're seeing some patient migration actually right now, but to a lesser degree. I would expect it would be a fairly large increase over a 30-day to 60-day period.

Scott Henry, Analyst

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

Ali Grande, CFO

So first, with regard to your first question, we expect our tax rate to be more normalized, so we expect it to range at about 21% to 24%. On R&D expenses, while some of our programs are winding down, we do expect to have some ongoing R&D expenses related to future programs that we might pick up, based on our growth strategy.

Patrick McEnany, CEO

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

Ali Grande, CFO

Yes. We also continue to have expenses from our Expanded Access programs and will have some expenses from the inventory and patients that we'll continue to supply.

Scott Henry, Analyst

Okay, great. Thank you for taking the questions.

Operator, Operator

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

Joseph Catanzaro, Analyst

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

Patrick McEnany, CEO

Good question, Joe. Thank you. The issue really came down to when we brought in subject matter experts and our team was able to do a deeper dive. The issue was really about valuation more than anything. The numbers presented in public disclosures, when we dug in deeper, we just couldn't get comfortable with the valuation of the transaction. We spent a lot of time and effort on it, and it took a lot of discipline on our part to walk away. Unfortunately, the biggest challenge until we opened up to other therapeutic areas was finding assets in neuroscience. As you know, we recently decided that we're going to look outside of neurology and everything outside of oncology, which has opened up a greater range of opportunities for us. As you may know, valuations for companies that might have innovative technology have come down a bit since the beginning of this year. So, the time is now to be opportunistic. I think it's a more balanced market at this point.

Joseph Catanzaro, Analyst

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

Patrick McEnany, CEO

Thanks, Joe.

Operator, Operator

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

Joon Lee, Analyst

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

Steven Miller, Chief Operating Officer and Chief Scientific Officer

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

Patrick McEnany, CEO

Could you please repeat the second part of your question?

Joon Lee, Analyst

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

Jeffrey Del Carmen, Chief Commercial Officer

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

Joon Lee, Analyst

It does, thank you.

Operator, Operator

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

Patrick McEnany, CEO

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

Operator, Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.