CATALYST PHARMACEUTICAL PARTNERS, INC. Innovative Biotech Could Be Sitting On Two Blockbuster Drugs

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1 CATALYST PHARMACEUTICAL PARTNERS, INC. Innovative Biotech Could Be Sitting On Two Blockbuster Drugs Rob Goldman May 4, 2010 CATALYST PHARMACEUTICAL PARTNERS, INC. (OTC CPRX - $1.41) Price Target: $5.00 COMPANY SNAPSHOT Rating: Speculative Buy INVESTMENT HIGHLIGHTS Catalyst Pharmaceutical Partners, Inc. is a developmentstage biopharmaceutical company focused on the development and commercialization of prescription drugs targeting diseases of the central nervous system with a focus on the treatment of drug addiction and epilepsy. Catalyst has two products in development, and is currently evaluating the lead product candidate, CPP- 109 (vigabatrin, a GABA aminotransferase inhibitor) for the treatment of cocaine addiction. CPP-109 has been granted "Fast Track" status by the U.S. Food & Drug Administration (FDA) for the treatment of cocaine addiction. Catalyst is also in the early stages of developing CPP-115, another GABA aminotransferase inhibitor for several indications, including epilepsy, neuropathic pain and drug addiction. KEY STATISTICS Price as of 5/3/10 $ Wk High Low $ Est. FD Shares Out. 18.1M Market Capitalization $25.5M 3 Mo Avg Vol 560,000 Exchange NASDAQ:CM COMPANY INFORMATION Catalyst Pharmaceutical Partners, Inc. 355 Alhambra Circle, Suite 1370 Coral Gables FL Melody Carey, Investor Relations mcarey@rxir.com We believe that Catalyst s CPP-109 will emerge as the first FDA approved treatment for cocaine addiction and other stimulant dependence, an estimated billion dollar annual market. The size of the cocaine dependence market and the related financial impact in the U.S. is staggering. A 2009 report by the Office of National Drug Policy states that there are 3.6M chronic cocaine users in the U.S., with 663,000 receiving treatment. The National Institute on Drug Abuse (NIDA) estimates that substance abuse costs the U.S. $484 billion annually. Catalyst s recently announced agreement with NIDA provides major validation for CPP-109. NIDA and Catalyst are collaborating on a CPP-109 Phase IIb safety and efficacy trial, with NIDA and the VA contributing approximately $7.2 million of the $10M cost, and Catalyst contributing approximately $2.8M in resources. Top-line results are expected in 4Q11. Vigabatrin, a novel GABA-AT inhibitor sold as Sabril, has a track record as an effective treatment for epilepsy worldwide. Catalyst has obtained from Brookhaven National Laboratory an exclusive worldwide license for nine patents in the U.S. for all rights to use or sell vigabatrin for the treatment of addiction to cocaine, other addictive drugs and obsessive compulsive disorders such as obesity. Catalyst plans to leverage Sabril s success with a next generation vigabatrin analogue epilepsy and neuropathic pain treatment entering Phase I next year. The current global market is $17B and Catalyst is uniquely positioned to ultimately become a player in this market. In our view, CPRX presents a rare opportunity for investors to invest in a clinical drug firm at the current valuation of a pre-clinical firm. In fact, we believe that Catalyst is sitting on two blockbusters. As CPRX achieves milestones over the next four quarters, the Company s GABA-AT inhibitor platform could be worth $5.00 per share. Further validation in the form of a major 3 rd party pharma development deal may occur, which would turn CPRX into a $10.00 stock overnight. Thus, we rate CPRX a Speculative Buy. Copyright Goldman Small Cap Research, 2010 Page 1 of 8

2 COMPANY OVERVIEW Founded in 2002, Catalyst Pharmaceutical Partners, Inc. is a development-stage biopharmaceutical company focused on the development and commercialization of prescription drugs targeting diseases of the central nervous system with a focus on the treatment of drug addiction and epilepsy. The Company s two products in development are based on vigabatrin, a GABA aminotransferase inhibitor, as Catalyst likely controls all current intellectual property for drugs that have a mechanism of action related to GABA aminotransferase inhibition. The Company has obtained from Brookhaven National Laboratory an exclusive worldwide license for nine patents in the U.S. for all rights to use or sell vigabatrin (CPP- 109) for the treatment of addiction to cocaine, and other addictive drugs. CPP-109 has been granted "Fast Track" status by the U.S. Food & Drug Administration (FDA) for the treatment of cocaine addiction, which indicates that the FDA has recognized that CPP-109 is intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrates the potential to address an unmet medical need. Catalyst also expects to evaluate CPP-109 for the treatment of other addictions and obsessive-compulsive disorders. Following a discovery and subsequent patent of a new and novel class of molecules that were specific inhibitors of the enzyme GABA-AT, Catalyst has licensed this IP from Northwestern University and is in the early stages of developing CPP-115 that could be more potent than vigabatrin, and may have reduced side effects (e.g., visual field defects, or VFDs) compared to those associated with vigabatrin. Catalyst is planning to develop CPP-115 for several indications, including epilepsy, neuropathic pain and drug addiction. One Platform: Two Potential Blockbusters GABA, the most abundant inhibitory neurotransmitter in the brain, inhibits over-excitation of neurons. When GABA binds to a GABA receptor, it raises the action potential threshold of that neuron and inhibits the post-synaptic neuron from firing and triggering the release of neurotransmitters and sending a signal to subsequent neurons. GABA helps induce relaxation and sleep, and contributes to functions such as motor control and vision. An enzyme known as GABA aminotransferase (GABA-AT) is responsible for the eventual breakdown of GABA and helps to balance the inhibitory effects of GABA. Disease states like epilepsy and addiction that result from excessive neuronal activity are treatable by enhancing the amount of endogenous GABA in the brain through the blockade of GABA-AT. Catalyst believes that CPP-109 will emerge as an effective treatment for addictions and CPP-115, will emerge as effective treatments for addiction and epilepsy, as they both increase GABA levels through the inhibition of GABA-AT. In the case of epilepsy, increased GABA decreases the overall excitability by raising the action potential threshold of many neurons. With addiction, increased GABA dampens the perception of pleasure and reward associated with increased levels of dopamine brought about by all drugs of abuse, but most notably by stimulants like cocaine and methamphetamine. Addictive drugs have been shown to block or overwhelm mechanisms involved in the removal of dopamine from synaptic clefts in the mesolimbic pathways of the brain, resulting in highly elevated levels of dopamine available to stimulate receptors and a dramatically heightened sense of pleasure or reward. Vigabatrin, which is marketed worldwide as Sabril by Sanofi-Aventis, its predecessors, and Lundbeck as a treatment for refractory adult epilepsy and as a primary treatment for the management of infantile spasms, also known as West Syndrome. Lundbeck recently received FDA approval to market Sabril in the U.S. Management hopes that future CPP- 109 and CP-115 trials will also exhibit efficacy with even fewer side effects such as visual field defects currently associated with vigabatrin. Due to the mechanism of action in the vigabatrin, management is confident that multiple indications exist for both CPP-109 and CPP-115. These potential indications include: GABA-AT INHIBITION Potential Treatments Drug CPP-109 CPP-115 Indication all addictive substances, OCDs epilepsy, neuropathic pain, addictive substances, other CNS Copyright Goldman Small Cap Research, 2010 Page 2 of 8

3 CPP-109: A Billion-Dollar Market We believe that Catalyst s CPP-109 will emerge as the first FDA approved treatment for cocaine addiction and other stimulant dependence, an estimated billion dollar annual market. The size of the cocaine dependence market and the related financial impact in the U.S. is staggering. A 2009 report by the Office of National Drug Policy states that there are 3.6M chronic cocaine users in the U.S., with 663,000 receiving treatment in In addition, 336,000 methamphetamine and other stimulant users were treated in According to the National Survey on Drug Use and Health, published by the Substance and Mental Health Services Agency, (SAMHSA) that same year, an estimated 20.1 million people in the United States aged 12 or over suffered from dependence on illicit drugs. The National Institute on Drug Abuse (NIDA) estimates that substance abuse costs the U.S. $484 billion annually. Traditional treatments for substance addiction, including alcohol, are centered on behavior modification and therapy. While three FDA-approved drugs (two oral and one injectable) for alcohol are sold and administered in the U.S., these treatments are not long-lasting and high relapse rates occur in those afflicted. A survey conducted by SAMHSA, notes that completion rates in 2000 for outpatient treatment were only 41% for alcohol and 21% for cocaine. For the treatment of cocaine dependence, there was a one-year relapse rate of 69% after 90 days or less of outpatient treatment and 80% after 90 days or less of long-term residential treatment. If a pharmacological treatment for cocaine addiction and/or other stimulant addictions, including methamphetamine, could be used in conjunction with in-patient or outpatient treatment, it would complement and significantly improve the effectiveness of counseling programs. Clearly, the market is huge. Why is cocaine so addictive? Cocaine binds to the dopamine reuptake transporter protein of the pre-synaptic neurons preventing the reuptake and eventual breakdown of dopamine, resulting in enhanced and prolonged stimulation of dopamine on post-synaptic receptors, causing a feeling of prolonged euphoria for the user. Addiction to cocaine is caused by a neurological process called desensitization. When the brain senses an unnaturally high level of dopamine, it responds by reducing the amount of dopamine released and the number of dopamine receptors created. When the cocaine s effect wears off, the user has a lower amount of dopamine and fewer functioning dopamine receptors, which results in a depressed mood. This results in a lowering of mood each time the user takes more of the drug, causing the user to seek additional cocaine to restore even normal feelings, and requiring the user to take an increasing amount of cocaine to achieve the same feeling of euphoria as before. Drug abuse can interfere with the brain s normal balance of neurotransmitter release and reuptake, resulting in addiction. If this balance is not restored, addicted individuals, even after significant periods of abstinence, may be incapable of suppressing cravings or quitting through willpower alone, even with the assistance of professional counseling. The impact of using drugs on our brains is alarming, as evidenced by the images below, as provided by Brookhaven National Laboratory. Human Brain Scans Showing the Effect of Cocaine Use on Brain Metabolism Normal brain Brain metabolism Brain metabolism Metabolism after 10 days cocaine after 100 days cocaine use use Source: Catalyst Pharmaceutical Partners, Inc. website Copyright Goldman Small Cap Research, 2010 Page 3 of 8

4 CPP-109: Clinical Trial Status As noted above, addictive drugs elevate dopamine levels in users, thus creating the feeling of euphoria that cannot be replaced, or even normalized without greater usage. CPP-109 works by indirectly lowering the level of dopamine in the brain through GABA, a neurotransmitter that inhibits the release of dopamine. GABA, however, is broken down by GABA transaminase (GABA-T). CPP-109 works by irreversibly inhibiting GABA-T and raises the GABA level, which then lowers the level of dopamine and turns off the "high." Catalyst has completed three clinical trials in Mexico and two in the U.S. Objectives were proof of concept, safety, dosage, and abstinence from cocaine and/or methamphetamine use. While the results of the five human trials were mostly favorable, the failure to reach statistical significance in the U.S. cocaine trial in the primary endpoint due to poor subject medication compliance has generally depressed the stock. Mexico 1: In 2003 a 20 subject cocaine pilot study Mexico 2: In 2004 a Phase I 30 subject cocaine and/or methamphetamine safety and efficacy study Mexico 3: In 2007 a Phase II trial. First randomized, double-blind, placebo controlled trial in 103 subjects o Primary endpoint met by 18 of 53 completers of abstinence in last 3 weeks of treatment o 14 on vigabatrin vs 4 on placebo (p-value = 0.009). o 3.5 times increase in abstinence over placebo o No adverse effects o Even greater results with alcohol abstinence Results of this trial were published in the November 2009 issue of The American Journal of Psychiatry. In 2007, Catalyst initiated a second randomized, double-blind, placebo-controlled U.S. Phase II clinical trial evaluating the use of CPP-109 in treating patients with addiction to cocaine. The trial enrolled 186 cocaine addicted patients at 11 clinical research centers in the United States. Patients were treated for a period of 12 weeks, with an additional 12 weeks of follow-up. In May 2009, management announced that the top-line data from this trial showed that CPP-109 did not demonstrate statistical significance in the primary endpoint that a significantly larger proportion of CPP-109 treated subjects than placebo-treated subjects were cocaine free during the last two weeks of the treatment period. In September 2009, additional results from this trial were released and evidence collected during the trial indicated that less than 40% of the trial subjects were medication compliant, thus tainting results. Clearly, the method in which this trial was administered hindered any opportunity for a proper CPP-109 efficacy test. Results were recently presented at the American Society for Addiction Medicine meeting, where they were warmly received. It should be noted that while there were no statistically significant differences between active and placebo groups for the protocol-specified primary and secondary efficacy endpoints among the data presented, there were positive and consistent data trends observed in favor of CPP-109 across measures of cocaine abstinence, reduction in cocaine use, and reduction in use days that resembled the Phase II Mexico trial. In fact there were fewer adverse effects in the vigabatrin group than in the placebo. Separately, a proof of concept methamphetamine trial in 57 subjects had similar results favoring vigabatrin, but medication compliance was likely an issue. What s next? Validation of CPP-109 s Potential The Company recently announced that it is collaborating with NIDA on a CPP-109 safety and efficacy Phase IIb trial with NIDA contributing approximately $7.2 million of the $10M cost, and Catalyst contributing approximately $2.8M in resources. This study calls for a 200 subject, 8 site, randomized double-blind placebo-controlled trial, with Catalyst retaining all rights. The trial protocol will be submitted in 3Q10 and management is emphasizing trial oversight guidelines in the protocol submission. We are confident that history will not repeat itself, especially with NIDA on board. Not only does NIDA provide validation for the treatment based on the prior three Mexican human studies and the large body of animal data generated by Brookhaven National Laboratory, but given its experience, it will be able to help ensure medication and oversight compliance. Recruitment is expected to begin during the 3Q10 and top-line results are expected in 4Q11. Management expects that this trial will qualify as an FDA registration trial as part of a future CPP-109 NDA. If successful, the Company would then submit a protocol for what may be its only Phase III trial prior to NDA submission. Thus, potential approval is Copyright Goldman Small Cap Research, 2010 Page 4 of 8

5 roughly 3-4 years away. However, we believe that the body of clinical evidence collected to date, especially the Phase II Mexico results, are enough to attract the interest of a major pharmaceutical firm and we predict a development and milestone deal worth tens of millions initially, will occur in the next months, at the latest. CPP-115: Pre-clinical drug addresses $17 billion market Catalyst s second drug under development, CPP-115, is a treatment for epilepsy and neuropathic pain and like CPP-109, also has the potential to address multiple CNS indications due to the mechanism of action in its technology platform. Epilepsy is one of the world s most common neurological disorders affecting 50 million people worldwide. The disease affects 2.7 million Americans and 200,000 new cases are diagnosed each year in the U.S. The current global market for anti-epileptic drugs is estimated at $17 billion, even though 30% of patients are refractory to existing treatments. In our view, the unique leverage and licensing arrangement with Northwestern University in August 2009 prompts us to believe that this pre-clinical drug has a real shot to not only be a successful treatment for epilepsy but could be a leading treatment. Our thesis is based upon the following: CPP-115 works with the same mechanism of action as vigabatrin (CPP-109). Catalyst s CPP-115 is at least 200 times more potent than CPP-109, based on in-vitro and animal studies. CPP-115 likely has fewer side effects, notably minimal visual field defects. With Sabril already recently given restricted U.S. approval, and its existing sales abroad, CPP-115 could be a patent protected, next generation, replacement for the current treatment. This new class of GABA-AT has 2 composition of matter patents that expire in The inventor of this compound (CPP-115) invented Lyrica ($3B in sales), a neuropathic pain drug. CPP-115 is eligible for a 7-year orphan drug exclusivity in the US and 10-year exclusivity in the EU for several indications. Although at an early stage, Catalyst is placing a major emphasis on the development of CPP-115, given the indications and market potential. Thus, we believe that 2010 will be a turning point for assessing the merits, characteristics and value of this drug. Investors should monitor what we expect will be a series of significant news events. MILESTONES Investors should be prepared to monitor the milestone events for Catalyst over the next 12 months. 2Q10: Present CPP-109 preclinical and clinical data to College on Problems of Drug Dependency 3Q10: Commence Phase IIb CPP-109 study Receive CPP-115 Orphan Drug Designation for Infantile Spasms Launch CPP-109 University of Pennsylvania cocaine/alcohol study Results of CPP-115 Anti convulsant Screening Program evaluation First results of CPP-115 retinal toxicity study 1Q11: CPP-115 Pre-IND meeting with FDA 3Q11: CPP-115 IND and commence US Phase I study 4Q11: Top-line CPP-109 Phase IIb data release We maintain that a development deal for CPP-109, CPP-115, or both drugs could occur in the next months. Copyright Goldman Small Cap Research, 2010 Page 5 of 8

6 CPP ADVANTAGES Catalyst has essentially all IP related to a novel approach to treat both substance addiction and epilepsy. Furthermore, management believes that early tests illustrate multiple indications for these drugs. The mechanism of action for addiction is unique as no single compound has such potential broad applicability. Catalyst s competitors disadvantages are actually the Company s advantages. These include the fact that other compounds are often ineffective at eliminating drug craving and have drug-like characteristics, which could lead to abuse and increasing dosages over time. Because of their addictive liability, they are often controlled substances like the drugs of abuse they are designed to replace. NIDA is a great validation for Catalyst and we expect that the Phase IIb results will be akin to the successful Phase IIa Mexico trial. CPP-115 s dosage, potency, and similarity with Sabril increase the likelihood of ultimate FDA approval success and a development/marketing deal. INVESTMENT RISKS AND COMPETITION In our view, the greatest risk in the near term is that the Phase II results for CPP-109 do not meet primary endpoints or CPP-115 development progress does not occur. We deem it highly unlikely at this stage that such events would occur and even less likely that the development progress for both drugs would be negative. Instead we believe a more tangible risk, and frankly expectation, that not all of the indications for the Company s drugs would meet statistically significant efficacy results. Finally, the last two risks could be either an unfavorable marketing/royalty arrangement, or a slow sales ramp of a potentially approved addiction treatment. Management will also likely need to raise funds in the next 12 months, to be used to fund R&D for all of its drugs under development and for working capital. In our view, all of these risks are consistent with the companies of Catalyst s size and present standing. Thus, investors should closely monitor news and use it as a performance measure since these high-risk shares will remain news-driven for the foreseeable future. VALUATION AND CONCLUSION Based on our analysis, we believe that Catalyst is a uniquely undervalued stock. The Company addresses an unmet need in substance addiction and addresses a huge epilepsy market with clever, proprietary mechanistic actions that should demonstrate solid efficacy and fewer side effects in current and present clinical trials. In our view, the Street has punished the stock due to the poorly administered Phase IIa trial for CPP-109 in the U.S. In our view, with the pending launch of a Phase IIb with NIDA, who is footing most of the bill, negates that misfortune completely. However, the shares reflect the valuation of the pre-clinical CPP-115 only, rather than the prospects of CPP-109 (with a green field situation ahead), and certainly not as a firm with a valuable platform with multiple indications and the same mechanism of action. In our view, this presents a rare opportunity for investors to invest in a clinical drug firm at the current valuation of a preclinical firm. In fact, we believe that Catalyst is sitting on two blockbusters. As CPRX achieves milestones over the next four quarters, the Company s GABA-AT inhibitor platform could be worth $5.00 per share. Further validation in the form of a major 3 rd party pharma development deal may occur, which would turn CPRX into a $10.00 stock overnight. Thus, we rate CPRX a Speculative Buy. Copyright Goldman Small Cap Research, 2010 Page 6 of 8

7 Chart I. Recent Trading History For CPRX (Source: Stockta.com) Copyright Goldman Small Cap Research, 2010 Page 7 of 8

8 Analyst: Robert Goldman Rob Goldman has 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell-side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund. Analyst Certification I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report. Disclaimer This Opportunity Research report was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select product reflects the Firm s internally generated stock ideas while the Opportunity product reflects sponsored research reports. It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. While stocks in the Opportunity format may have a higher risk profile, they typically offer greater upside as well. Goldman Small Cap Research has been compensated by the Company or a related party, in the amount of $7,000 for a three month subscription service. The Firm does not accept any equity compensation. All information contained in this report was provided by the Company. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report or note is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This report does not take into account the investment objectives, financial situation, or particular needs of any particular person. This report does not provide all information material to an investor s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the U.S. Securities and Exchange Commission or with any state securities regulatory authority. ALL INFORMATION IN THIS REPORT IS PROVIDED AS IS WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION. For more information, visit our Disclaimer: Copyright Goldman Small Cap Research, 2010 Page 8 of 8