Catalyst Pharmaceuticals Inc (NASDAQ:CPRX) just announced that it is carrying forward with a special protocol assessment (SPA) for its lead asset, Firdapse, for the treatment of Lambert-Eaton myasthenic syndrome (LEMS), in the second of two planned phase 3 investigations that will underpin a new drug application for the treatment. The company is up on the news, and this isn’t too surprising, as the general market assessment of an SPA is that it is positive for a drug’s chances of getting an FDA green light come PDUFA.

This isn’t a out of place assessment, but there are a couple of key things worth noting about Catalyst’s announcement that might weigh in on any potential investment thesis.

First, a little bit of an introduction.

The drug has been available in Europe since 2009, and Catalyst is licensing it from BioMarin in a deal which saw the latter take a $5 million stake in the former. It has had a pretty long-winded development pathway, and along the way, has received a complete response letter (CRM) from the FDA, based on the agency determining that one of the trials on which a previously filed application was incomplete, and in turn, that Catalyst needed to conduct further investigation in order to submit a complete NDA.

With the drug already approved, it seems that efficacy shouldn’t be too much of a problem, but the FDA is notoriously tough on these sorts of conditions, and the data that came out of the first of the above mentioned two phase 3 trials was far from perfect. The numbers showed a statistically significant improvement over placebo for the drug, but the trial setup is a little unusual, and statistical significance was only just met. Specifically, it was a crossover trial that had all patients take the drug and then move on to either an active administration schedule or placebo. The numbers used to define response were – instead of taken from the active arm – taken from the placebo arm, measuring adverse events from the latter and comparing these to the former.

The SPA that has now been agreed will see a replication of the first phase 3 trial in pretty much every aspect but one – patients won’t crossover from treatment. Instead, there will be one active and one placebo arm, each of which will receive their respective treatment (or sham) from day one.

Now, theoretically, this should widen the impact of the active arm over placebo, but this is not guaranteed. Markets are trading up on Catalyst in their interpretation of the SPA as essentially saying the FDA will allow an approval if the company can replicate its previous phase 3. With the above-mentioned difference in place, however, there is a degree of uncertainty that would otherwise not exist if the company had gone for a straightforward crossover. We understand why it hasn’t, but the risk exists nonetheless.

So what are we looking for going forward?

Well, the co-primary endpoints for the trial are the same as previous, so we are looking for a slower deterioration in the active arm than in the control arm over the measurement period. Specifically, deterioration as measured by the change in what’s called the quantitative myasthenia gravis score, or QMG, at day 14, for the first co primary, and the change in subject global impression, or SGI, at day 14.

We’d also like to see some solid statistical significance.

In the first of the two above endpoints, stat sig was far less convincing than in the second. If the company can build on this in the upcoming second phase 3, we’ll be far more convinced of the likelihood of an approval going forward.

As a side note, there have been concerns that the drug is too similar to a drug that has been offered for free for more than twenty years; a drug called 3,4-Dap, which is owned and distributed by a company called Jacobus Pharmaceuticals. It’s not FDA approved, and so can’t be prescribed in the US, but the ethics of what will no doubt prove to be a premium priced treatment if Firdapse does pick up approval may weigh on sentiment longer term.

All said, the company is up, and probably rightly so since it now has a clear path to approval, but it’s far from out of the woods.