Financial Data and Key Metrics Changes - For Q4 2020, the company reported revenue of $2.4 million, an increase of $0.5 million compared to Q3 2020 [22] - The net loss for Q4 2020 was $4.9 million, or $1.07 per share, compared to a net loss of $6 million, or $2.90 per share, in Q4 2019 [24] - Full-year 2020 revenue was $13.3 million, up from $12.8 million in 2019, with a net loss of $12.8 million compared to $24.5 million in 2019 [26] Business Line Data and Key Metrics Changes - The revenue for Q4 2020 was primarily composed of services revenue under the Corium consulting arrangement [22] - R&D expenses for Q4 2020 were $3.1 million, while G&A expenses were $2.5 million, maintaining the same expense posture as previous years [25] Market Data and Key Metrics Changes - The ADHD market is valued at $17.5 billion, with the company believing its product can meet key advantages over existing methylphenidate-based products [18] Company Strategy and Development Direction - The company has completed a multi-phase financial restructuring, resulting in approximately $94 million in growth proceeds and the elimination of all debt [20][21] - The company aims to optimize the value of its product AZSTARYS and is exploring new assets for potential acquisition to create shareholder value [68][69] Management's Comments on Operating Environment and Future Outlook - Management expressed excitement about the approval of AZSTARYS and its potential impact on the company's future [8][12] - The company believes there is a disconnect between its current market valuation and the potential value from the AZSTARYS approval [48][52] Other Important Information - The company regained its listing on the NASDAQ Capital Market in January 2021 and reported total cash of $77.6 million as of March 10, 2021 [30][31] Q&A Session Summary Question: Clarification on fully diluted shares outstanding after restructuring - The number of fully diluted shares outstanding is 38.6 million, including 9.6 million of preferred stock [36] Question: Current market cap and cash position - The current cash position is $77.6 million, with a market cap of approximately $283 million based on shares outstanding [39] Question: Commercialization plans for AZSTARYS - The company believes it has an excellent label for AZSTARYS and is confident in Corium's commercialization strategy [46] Question: Disconnect between current evaluation and potential value from AZSTARYS approval - Management encouraged investors to compare the labels of AZSTARYS with existing products to understand its potential market share [50][52] Question: Capital deployment and potential new assets - The company is looking at new assets that add value and will continue to support the development of its existing products [68][69]

Part I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) KemPharm is a specialty pharmaceutical company developing prodrugs using its LAT® technology for ADHD, SUD, and IH, with key FDA-approved products AZSTARYS™ and APADAZ® commercialized through partnerships - KemPharm is a specialty pharmaceutical company using its proprietary Ligand Activated Therapy (LAT®) technology to develop prodrugs for ADHD, Stimulant Use Disorder (SUD), and Idiopathic Hypersomnia (IH)[20](index=20&type=chunk) - On March 2, 2021, the FDA approved AZSTARYS™, a once-daily product for treating ADHD in patients aged six and older. Commercialization will be led by Corium, with availability expected as early as the second half of 2021[21](index=21&type=chunk) - The company has a collaboration and license agreement with Commave Therapeutics SA for the development and commercialization of AZSTARYS and other product candidates containing serdexmethylphenidate (SDX)[20](index=20&type=chunk)[23](index=23&type=chunk) - KemPharm has a commercial partnership with KVK-Tech, Inc. for APADAZ®, an FDA-approved immediate-release product for the short-term management of acute pain[20](index=20&type=chunk)[24](index=24&type=chunk) [Our Product Candidates and Approved Products](index=8&type=section&id=Our%20Product%20Candidates%20and%20Approved%20Products) This section outlines KemPharm's pipeline, including FDA-approved AZSTARYS™ and APADAZ®, and candidates like KP879 for SUD and KP1077 for IH KemPharm Product Pipeline Summary | Product Candidate / Product | Parent Drug (Effect Profile) | Indication | Status | Next Milestone | | :--- | :--- | :--- | :--- | :--- | | **AZSTARYS** (Partnered) | Methylphenidate (ER) | ADHD | FDA Approved | Commercial Launch - as early as H2 2021 | | **KP484** (Partnered) | Methylphenidate (ER) | ADHD | Clinical | Initiation of Pivotal Efficacy Trial - TBD by Partner | | **KP879*** | Methylphenidate (ER) | SUD | Clinical | Initiation of Clinical Program - 2021 | | **KP1077** | Prodrug | IH | Preclinical | Pre-IND Meeting - H1 2021 | - AZSTARYS and KP484 are extended-duration methylphenidate products for ADHD, utilizing the prodrug serdexmethylphenidate (SDX). AZSTARYS received FDA approval on March 2, 2021[37](index=37&type=chunk)[38](index=38&type=chunk) - KP879 is a d-methylphenidate prodrug candidate for Stimulant Use Disorder (SUD). An IND was filed in December 2020, and the clinical program is expected to begin in 2021[50](index=50&type=chunk) - APADAZ, an immediate-release combination of benzhydrocodone and acetaminophen, was approved by the FDA in February 2018 for short-term acute pain management[54](index=54&type=chunk) [Intellectual Property](index=13&type=section&id=Intellectual%20Property) KemPharm maintains a robust intellectual property portfolio with numerous active U.S. and foreign patents, protecting its LAT technology and product candidates - As of December 31, 2020, KemPharm holds **48 active U.S. patents** and **78 active foreign patents**, with terms extending to dates between 2030 and 2037[62](index=62&type=chunk) - The company has **13 pending patent applications in the U.S.** and **28 pending foreign applications**. Its patent portfolio provides protection in key jurisdictions including the U.S., Europe, China, and Japan[62](index=62&type=chunk) - The company also relies on trade secret protection and confidentiality agreements to protect its proprietary LAT technology and other know-how[65](index=65&type=chunk) [Commercialization](index=14&type=section&id=Commercialization) Commercialization efforts for AZSTARYS and APADAZ are led by partners Corium and KVK-Tech respectively, with potential for future in-house or collaborative sales for other candidates - Corium, Inc. will lead the commercialization of AZSTARYS in the U.S., with an expected launch as early as the second half of 2021[67](index=67&type=chunk) - KVK-Tech, Inc. is responsible for the commercialization of APADAZ in the U.S. A regional pilot launch began in Alabama in December 2020[24](index=24&type=chunk)[68](index=68&type=chunk) - For other product candidates, KemPharm may form collaborations or build its own sales and marketing organization, depending on the product and market opportunity[69](index=69&type=chunk) [Research and Development](index=14&type=section&id=Research%20and%20Development) Research and development expenses significantly decreased in 2020, with Commave responsible for reimbursing development costs for licensed product candidates Research and Development Expenses | Year | R&D Expense (in millions) | | :--- | :--- | | 2020 | $8.8 | | 2019 | $19.4 | - Under the KP415 License Agreement, Commave is responsible for reimbursing KemPharm for all development, commercialization, and regulatory expenses for licensed product candidates, subject to certain limitations[70](index=70&type=chunk) [Government Regulation](index=17&type=section&id=Government%20Regulation) The company's products are subject to extensive FDA and DEA regulations, often utilizing the 505(b)(2) pathway, and are primarily classified as Schedule II controlled substances - The company's products are subject to substantial regulation by the FDA, DEA, and other federal and state authorities, covering development, manufacturing, marketing, and distribution[86](index=86&type=chunk)[87](index=87&type=chunk) - KemPharm often utilizes the 505(b)(2) NDA pathway, which allows reliance on the FDA's previous findings of safety and effectiveness for approved drugs, potentially reducing development time and cost[97](index=97&type=chunk)[98](index=98&type=chunk) - Most of the company's products, including APADAZ and AZSTARYS, are regulated as Schedule II controlled substances by the DEA, subjecting them to strict registration, security, recordkeeping, and quota requirements[125](index=125&type=chunk)[126](index=126&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including uncertain commercial success of products, a history of net losses, reliance on third parties for operations, DEA controlled substance regulations, and intellectual property challenges - The commercial success of AZSTARYS and APADAZ is not guaranteed and depends on the efforts of collaboration partners Commave and KVK, respectively. Failure to successfully commercialize these products would harm the business[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - The company has a history of significant recurring negative net operating cash flows, with an accumulated deficit of **$258.5 million** as of December 31, 2020, and may need additional funding to continue operations[210](index=210&type=chunk)[218](index=218&type=chunk) - KemPharm relies on third parties for manufacturing and clinical trials, which introduces risks related to regulatory compliance (cGMP, GCP), supply chain disruptions, and performance failures by these contractors[233](index=233&type=chunk)[240](index=240&type=chunk) - The company's products contain controlled substances (Schedule II), making them subject to strict regulation by the DEA, including production quotas, which could limit commercial supply[194](index=194&type=chunk)[195](index=195&type=chunk) - Intellectual property risks include the inability to obtain or maintain patent protection, potential infringement lawsuits, and challenges to the validity of existing patents, which could impair the company's ability to commercialize its products[263](index=263&type=chunk)[277](index=277&type=chunk) [Item 2. Properties](index=83&type=section&id=Item%202.%20Properties) KemPharm leases its headquarters in Celebration, Florida, along with additional laboratory and office spaces in Iowa, Virginia, and North Carolina - The company's headquarters is approximately **17,000 square feet** of leased office space in Celebration, Florida, with leases expiring in August 2025 and February 2026[418](index=418&type=chunk) - Additional leased facilities include laboratory space in Coralville, Iowa and Blacksburg, Virginia, and office space in Chapel Hill, North Carolina[418](index=418&type=chunk) [Item 3. Legal Proceedings](index=83&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no pending litigation expected to have a material adverse effect on its financial condition or operations - The company states there is no pending litigation that is reasonably expected to have a material adverse effect on its results of operations or financial condition[419](index=419&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=84&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) KemPharm's common stock is listed on Nasdaq under 'KMPH', with approximately 134 record holders as of December 31, 2020, and no history or future plans for cash dividends - The company's common stock is listed on The Nasdaq Capital Market with the ticker symbol **"KMPH"**[423](index=423&type=chunk) - As of December 31, 2020, there were approximately **134 holders of record** of the common stock[424](index=424&type=chunk) - The company has never declared or paid cash dividends and intends to retain future earnings to fund business growth[425](index=425&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=85&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) KemPharm significantly reduced its net loss in 2020 due to decreased R&D expenses, and post-period financing activities in early 2021 substantially strengthened its financial position, extending cash runway through Q1 2024 Results of Operations Comparison (2020 vs. 2019) | Metric (in thousands) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $13,288 | $12,839 | $449 | | **Research and development** | $8,843 | $19,415 | ($10,572) | | **General and administrative** | $7,921 | $10,816 | ($2,895) | | **Loss from operations** | ($5,609) | ($20,337) | $14,728 | | **Net loss** | ($12,760) | ($24,522) | $11,762 | - The decrease in net loss for 2020 was primarily driven by a **$10.6 million reduction** in research and development expenses[489](index=489&type=chunk)[492](index=492&type=chunk) - In January and February 2021, the company executed several key financial transactions: a reverse stock split, relisting on Nasdaq, a public offering raising **$52.4 million**, a warrant exercise inducement raising **$44.0 million**, and a full payoff of its approximately **$7.6 million** remaining debt[438](index=438&type=chunk)[449](index=449&type=chunk)[452](index=452&type=chunk)[454](index=454&type=chunk) - Management believes that cash on hand following the early 2021 financing activities is sufficient to fund operations through at least the first quarter of 2024[563](index=563&type=chunk) [Item 9A. Controls and Procedures](index=111&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were effective as of December 31, 2020, with a notable change being the engagement of a third-party financial accounting advisory firm - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[592](index=592&type=chunk) - Management concluded that the company's internal controls over financial reporting were effective as of December 31, 2020, based on the COSO framework[594](index=594&type=chunk) - A material change in internal controls during the most recent fiscal quarter was the engagement of a third-party financial accounting advisory firm for as-needed professional services[597](index=597&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=113&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section presents KemPharm's audited financial statements for 2020 and 2019, including balance sheets, statements of operations, and cash flows, along with the independent auditor's report Balance Sheet Summary (as of Dec 31, 2020) | Metric (in thousands) | Amount | | :--- | :--- | | **Total Current Assets** | $8,382 | | **Total Assets** | $11,209 | | **Total Current Liabilities** | $7,536 | | **Total Liabilities** | $77,621 | | **Total Stockholders' Deficit** | ($66,412) | Statement of Operations Summary (Year ended Dec 31, 2020) | Metric (in thousands) | Amount | | :--- | :--- | | **Revenue** | $13,288 | | **Total Operating Expenses** | $18,897 | | **Loss from Operations** | ($5,609) | | **Net Loss** | ($12,760) | Cash Flow Summary (Year ended Dec 31, 2020) | Metric (in thousands) | Amount | | :--- | :--- | | **Net cash used in operating activities** | ($1,939) | | **Net cash (used in) provided by investing activities** | ($33) | | **Net cash provided by financing activities** | $2,739 | | **Net increase in cash** | $767 |

KemPharm, Inc. (KMPH) Q3 2020 Earnings Conference Call October 29, 2020 4:30 PM ET Company Participants Jason Rando - Tiberend Strategic Advisors, Inc. Travis Mickle - President and Chief Executive Officer LaDuane Clifton - Chief Financial Officer Conference Call Participants Oren Livnat - H.C. Wainwright & Co., LLC Operator Good afternoon, ladies and gentlemen, and welcome to KemPharm Q3 2020 Corporate Update Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission File No. 001-36913 KemPharm, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 20-5894398 (State or Other Jurisdiction of ...

KemPharm, Inc. (KMPH) Q2 2020 Results Conference Call August 12, 2020 4:30 PM ET Company Participants Jason Rando - Tiberend Strategic Advisors, Inc. Travis Mickle - President & CEO LaDuane Clifton - CFO Conference Call Participants Oren Livnat - H.C. Wainwright Operator Ladies and gentlemen, thank you for standing by and welcome to the KemPharm Q2 2020 Corporate Update Conference Call. At this time, all participants’ lines are in a listen-only mode. After the speakers’ presentation, there will be a quest ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission File No. 001-36913 KemPharm, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 20-5894398 (State or Other Jurisdiction of Inco ...

```markdown PART I — FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents KemPharm, Inc.'s unaudited condensed financial statements, including balance sheets, statements of operations, stockholders' deficit, and cash flows for the periods ended March 31, 2020, and December 31, 2019, along with detailed notes on business description, accounting policies, debt, equity, and other financial instruments [Condensed Balance Sheets](index=4&type=section&id=CONDENSED%20BALANCE%20SHEETS%20AS%20OF%20MARCH%2031%2C%202020%20%28UNAUDITED%29%20AND%20DECEMBER%2031%2C%202019) | Metric | March 31, 2020 (unaudited, in thousands) | December 31, 2019 (in thousands) | | :--------------------------------- | :-------------------------- | :------------------ | | Total Assets | $8,885 thousand | $10,507 thousand | | Total Current Assets | $5,511 thousand | $6,634 thousand | | Total Current Liabilities | $75,559 thousand | $5,431 thousand | | Current portion of convertible notes | $68,606 thousand | — | | Total Stockholders' Deficit | $(68,675) thousand | $(74,456) thousand | - Total assets decreased from **$10,507 thousand** at December 31, 2019, to **$8,885 thousand** at March 31, 2020[10](index=10&type=chunk) - Current liabilities significantly increased from **$5,431 thousand** to **$75,559 thousand**, primarily due to **$68,606 thousand** in convertible notes becoming a current portion[10](index=10&type=chunk) [Unaudited Condensed Statements of Operations](index=5&type=section&id=UNAUDITED%20CONDENSED%20STATEMENTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20MARCH%2031%2C%202020%20AND%202019) | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $2,089 thousand | $— | | Operating expenses | $5,864 thousand | $11,369 thousand | | Loss from operations | $(3,775) thousand | $(11,369) thousand | | Net loss | $(5,754) thousand | $(12,291) thousand | | Basic and diluted net loss per share | $(0.12) | $(0.46) | - The company reported revenue of **$2,089 thousand** for the three months ended March 31, 2020, compared to no revenue in the prior-year period[12](index=12&type=chunk) - Net loss significantly decreased from **$(12,291) thousand** in Q1 2019 to **$(5,754) thousand** in Q1 2020[12](index=12&type=chunk) [Unaudited Condensed Statements of Stockholders' Deficit](index=6&type=section&id=UNAUDITED%20CONDENSED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20DEFICIT%20FOR%20THE%20THREE%20MONTHS%20ENDED%20MARCH%2031%2C%202020%20AND%202019) | Metric | Balance as of January 1, 2020 (in thousands) | Balance as of March 31, 2020 (in thousands) | | :---------------------------------------------- | :---------------------------- | :--------------------------- | | Total Stockholders' Deficit | $(74,456) thousand | $(68,675) thousand | | Net loss | — | $(5,754) thousand | | Stock-based compensation expense | — | $1,029 thousand | | Issuance of common stock in connection with Deerfield Optional Conversion Feature | — | $9,600 thousand | - The total stockholders' deficit improved from **$(74,456) thousand** at January 1, 2020, to **$(68,675) thousand** at March 31, 2020[14](index=14&type=chunk) - Issuance of common stock related to the Deerfield Optional Conversion Feature contributed **$9,600 thousand** to equity during Q1 2020[14](index=14&type=chunk) [Unaudited Condensed Statements of Cash Flows](index=7&type=section&id=UNAUDITED%20CONDENSED%20STATEMENTS%20OF%20CASH%20FLOWS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20MARCH%2031%2C%202020%20AND%202019) | Cash Flow Activity | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(2,022) thousand | $(11,066) thousand | | Net cash (used in) provided by investing activities | $(11) thousand | $3,243 thousand | | Net cash provided by financing activities | $1,020 thousand | $2,670 thousand | | Net decrease in cash, cash equivalents and restricted cash | $(1,013) thousand | $(5,153) thousand | - Net cash used in operating activities significantly decreased from **$(11,066) thousand** in Q1 2019 to **$(2,022) thousand** in Q1 2020[16](index=16&type=chunk) - Investing activities shifted from providing **$3,243 thousand** in Q1 2019 (due to marketable securities maturities) to using **$(11) thousand** in Q1 2020 (due to property and equipment purchases)[16](index=16&type=chunk)[242](index=242&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=8&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20FINANCIAL%20STATEMENTS) [A. Description of Business and Basis of Presentation](index=8&type=section&id=A.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) KemPharm, Inc. is a specialty pharmaceutical company focused on developing proprietary prodrugs using its Ligand Activated Therapy (LAT®) technology, primarily for ADHD and stimulant use disorder, facing significant going concern risks exacerbated by the COVID-19 pandemic, but secured a **$0.8 million** PPP Loan in April 2020 - KemPharm, Inc. is a specialty pharmaceutical company focused on the discovery and development of proprietary prodrugs to treat serious medical conditions through its proprietary Ligand Activated Therapy ("LAT®") technology[18](index=18&type=chunk) - The company's product candidate pipeline is focused on ADHD (KP415, KP484) and stimulant use disorder ("SUD") (KP879)[18](index=18&type=chunk) - Management believes conditions raise substantial doubt about the Company's ability to continue as a going concern within the next twelve months due to recurring negative operating cash flows, a stockholders' deficit, and insufficient cash resources[21](index=21&type=chunk)[22](index=22&type=chunk) - The COVID-19 pandemic may make it more difficult to enroll patients in future clinical trials, cause delays in regulatory approval (including KP415 NDA review), and impact the ability to achieve milestone payments from license agreements[25](index=25&type=chunk) - On April 23, 2020, the Company received proceeds of **$0.8 million** from a PPP Loan under the CARES Act, intended for payroll, lease, and utility payments, with a portion potentially forgivable[26](index=26&type=chunk)[27](index=27&type=chunk) [B. Summary of Significant Accounting Policies](index=13&type=section&id=B.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines KemPharm's key accounting policies, including the use of estimates, reclassifications, and detailed revenue recognition practices under ASC 606, specifically addressing multiple-performance obligations, licensing agreements like KP415, and the adoption of new accounting standards - The Company uses estimates and assumptions in preparing financial statements, including for revenue recognition, useful lives of assets, lease rates, stock-based compensation, and fair value of derivative and warrant liabilities[41](index=41&type=chunk)[42](index=42&type=chunk) - Revenue recognition commenced in the third quarter of 2019, primarily from the KP415 License Agreement[44](index=44&type=chunk)[157](index=157&type=chunk) - For the three months ended March 31, 2020, the Company recognized **$2.1 million** in revenue from the KP415 License Agreement, consisting of **$1.6 million** for consulting services and **$0.5 million** for reimbursement of out-of-pocket third-party research and development costs[62](index=62&type=chunk)[188](index=188&type=chunk) - Approximately **$2.8 million** of incremental costs incurred in obtaining the KP415 License Agreement were capitalized and are being amortized as revenue is recognized[62](index=62&type=chunk) - The adoption of ASU 2016-13 (Credit Losses) and ASU 2018-13 (Fair Value Measurement Disclosures) did not have a material impact on the Company's financial statements and disclosures[66](index=66&type=chunk)[67](index=67&type=chunk) [C. Debt Obligations](index=19&type=section&id=C.%20Debt%20Obligations) This section details KemPharm's convertible debt, including the Deerfield Convertible Note, December 2019 Notes, and January 2020 Note, outlining their principal amounts, interest rates, conversion features, and amendments, along with the PPP Loan received in April 2020 | Debt Obligation | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------------- | :---------------------------- | :------------------------------- | | Deerfield Convertible Note | $7,100 | $6,981 | | 2021 Notes | — | $3,000 | | December 2019 Notes | $60,789 | $70,218 | | January 2020 Note | $3,037 | — | | Total outstanding principal | $70,926 | $80,199 | | Less: debt issuance costs and discounts | $(2,320) | $(2,856) | | Convertible notes, net | $68,606 | $77,343 | - The Deerfield Convertible Note's interest rate was reduced to **6.75%**, and loan payments were deferred until March 31, 2021[71](index=71&type=chunk) - All outstanding 2021 Notes were exchanged in multiple transactions (October 2018, December 2019, January 2020) for common stock or senior secured convertible promissory notes[84](index=84&type=chunk)[98](index=98&type=chunk)[112](index=112&type=chunk) - As of March 31, 2020, Deerfield Lenders converted **$10.8 million** of principal under the December 2019 Notes into **18,000,000** shares of common stock[108](index=108&type=chunk) - On April 23, 2020, the Company received a **$0.8 million** PPP Loan under the CARES Act, with a **1.0%** annual interest rate and deferred payments for six months, with a portion potentially forgivable[116](index=116&type=chunk)[117](index=117&type=chunk) [D. Commitments and Contingencies](index=28&type=section&id=D.%20Commitments%20and%20Contingencies) This section states that KemPharm is involved in routine legal proceedings but has not made any accruals for commitments and contingencies as of March 31, 2020, or December 31, 2019, as no probable liabilities could be reasonably estimated - As of March 31, 2020, and December 31, 2019, no accruals have been made related to commitments and contingencies, as no probable liabilities could be reasonably estimated[119](index=119&type=chunk) [E. Preferred Stock and Warrants](index=28&type=section&id=E.%20Preferred%20Stock%20and%20Warrants) This section outlines the authorized, issued, and outstanding preferred stock (Series A, B-1, B-2) and their conversion into common stock, noting that as of March 31, 2020, all previously issued preferred shares had been converted, resulting in no outstanding preferred stock - As of March 31, 2020, and December 31, 2019, no shares of Series A, B-1, or B-2 Preferred Stock were outstanding, as all issued shares had been converted into common stock[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) - **9,577** shares of Series A Preferred Stock were converted into an aggregate of **3,192,333** shares of common stock[121](index=121&type=chunk) - **1,576** shares of Series B-1 Preferred Stock were converted into **1,659,996** shares of common stock[122](index=122&type=chunk) [F. Common Stock and Warrants](index=29&type=section&id=F.%20Common%20Stock%20and%20Warrants) This section details the company's common stock activity, including issuances under equity lines of credit and conversions, leading to a significant increase in outstanding shares, and describes the accounting treatment for the Deerfield Warrant and KVK Warrant, which are classified as liabilities and measured at fair value | Metric | December 31, 2019 | March 31, 2020 | | :---------------------------------------------- | :---------------- | :------------- | | Common stock issued and outstanding | 36,350,785 | 56,760,111 | - Common stock issued during Q1 2020 included **4,308,637** shares under an equity line of credit and **16,000,000** shares from the Deerfield Optional Conversion Feature[124](index=124&type=chunk) - The Deerfield Warrant (to purchase **1,923,077** common shares at **$5.85/share**) remains classified as a liability and is recorded at fair value each reporting period, with changes reflected in the statements of operations[126](index=126&type=chunk)[127](index=127&type=chunk) - The KVK Warrant (to purchase up to **500,000** common shares at **$2.30/share**) is recorded as a derivative liability at fair value, with changes accounted for as fair value adjustments[128](index=128&type=chunk)[129](index=129&type=chunk) [G. Stock-Based Compensation](index=31&type=section&id=G.%20Stock-Based%20Compensation) This section details the stock-based compensation expense for the three months ended March 31, 2020, and 2019, allocated across research and development, general and administrative, and severance expenses, also noting the automatic increase in shares reserved under the 2014 Equity Incentive Plan | Expense Category | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :--------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Research and development | $246 | $433 | | General and administrative | $363 | $857 | | Severance expense | $420 | $— | | Total stock-based compensation expense | $1,029 | $1,290 | - Total stock-based compensation expense decreased from **$1,290 thousand** in Q1 2019 to **$1,029 thousand** in Q1 2020[134](index=134&type=chunk) - Severance expense in Q1 2020 included **$420 thousand** in stock compensation related to the acceleration of vesting for the chief business officer's termination[134](index=134&type=chunk)[146](index=146&type=chunk) - The number of shares reserved for issuance under the 2014 Plan automatically increased by **1,454,031** shares on January 1, 2020[132](index=132&type=chunk) [H. Fair Value of Financial Instruments](index=32&type=section&id=H.%20Fair%20Value%20of%20Financial%20Instruments) This section describes the company's fair value measurement framework, using a three-tier hierarchy, and provides fair value estimates for its convertible notes and warrant liabilities, highlighting that these instruments are primarily classified as Level 3 due to unobservable inputs, with changes in fair value impacting the statements of operations - The company uses a three-tier fair value hierarchy (Level 1, 2, 3) to classify and disclose assets and liabilities measured at fair value[135](index=135&type=chunk)[139](index=139&type=chunk) | Financial Instrument | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------- | :---------------------------- | :------------------------------- | | Deerfield Convertible Note | $6,100 | $6,000 | | December 2019 Notes | $52,200 | $57,000 | | January 2020 Note | $2,600 | — | | 2021 Notes | — | $2,400 | | Derivative and Warrant Liability | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------------- | :---------------------------- | :------------------------------- | | Deerfield Warrant liability | $38 | $77 | | Embedded Warrant Put Option | — | $19 | | KVK Warrant liability | $6 | $24 | | Total liabilities (Level 3) | $44 | $120 | - The Deerfield Convertible Note, December 2019 Notes, and January 2020 Note are classified as Level 3 fair value measurements, valued using a Tsiveriotis-Fernandes model[137](index=137&type=chunk) - Changes in the fair value of derivative and warrant liabilities are recorded as fair value adjustments in the statements of operations[141](index=141&type=chunk)[142](index=142&type=chunk) [I. Net Loss Per Share](index=35&type=section&id=I.%20Net%20Loss%20Per%20Share) This section explains the calculation of net loss per share using the two-class method, noting that basic and diluted net loss per share were identical for all periods presented because potentially dilutive items had an anti-dilutive effect due to the company's net loss - Basic and diluted net loss per share were the same for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company's net loss[145](index=145&type=chunk) | Securities Excluded from Diluted EPS Calculation | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :----------------------------------------------- | :-------------------------------- | :-------------------------------- | | Deerfield Convertible Note | 1,233,973 | 1,166,998 | | December 2019 Notes | 19,943,828 | — | | Awards under equity incentive plans | 6,323,822 | 5,117,655 | | Common stock warrants | 2,423,077 | 2,527,763 | | Total securities excluded | 30,451,374 | 14,405,932 | [J. Severance Expense](index=35&type=section&id=J.%20Severance%20Expense) This section details the severance expense recognized for the three months ended March 31, 2020, primarily due to the termination of the chief business officer, which included both personnel-related charges and stock compensation from accelerated vesting - Severance expense of **$0.8 million** was recognized for the three months ended March 31, 2020, due to the termination of the chief business officer in February 2020[146](index=146&type=chunk)[192](index=192&type=chunk) - The **$0.8 million** severance expense comprised **$0.4 million** of personnel and other related charges and **$0.4 million** of stock compensation expense related to accelerated vesting[146](index=146&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) - No severance expense was recognized for the three months ended March 31, 2019[146](index=146&type=chunk)[193](index=193&type=chunk) [K. Leases](index=36&type=section&id=K.%20Leases) This section provides details on KemPharm's operating and finance leases for office space and equipment, outlining lease costs, cash flow impacts, and balance sheet information, including right-of-use assets and lease liabilities, as of March 31, 2020, and December 31, 2019 | Lease Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :--------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total lease costs | $186 | $213 | | Balance Sheet Item | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--------------------------- | :---------------------------- | :------------------------------- | | Operating lease right-of-use assets | $1,451 | $1,537 | | Total operating lease liabilities | $2,137 | $2,185 | - The company has operating and finance leases with remaining terms of **1 to 6 years**, some including extension or termination options[148](index=148&type=chunk) - In February 2020, the Company agreed to sublease office space in Florida, under a non-cancelable operating lease expiring in February 2026[148](index=148&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=38&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on KemPharm's financial condition and operational results, including an overview of its business, product pipeline, third-party agreements, and a detailed comparison of financial performance, also addressing liquidity, capital resources, off-balance sheet arrangements, and critical accounting policies, emphasizing the company's going concern risk and the impact of the COVID-19 pandemic [Overview](index=40&type=section&id=Overview) KemPharm is a specialty pharmaceutical company focused on proprietary prodrugs using LAT® technology, with a pipeline in ADHD and SUD, whose recurring negative cash flows, accumulated deficit, and net working capital deficit raise substantial doubt about its ability to continue as a going concern - KemPharm is a specialty pharmaceutical company focused on proprietary prodrugs using LAT® technology, with a pipeline in ADHD (KP415, KP484) and SUD (KP879)[156](index=156&type=chunk) - The company's only expected revenue sources are payments from license agreements with KVK (APADAZ) and Commave (KP415, KP484), and other future arrangements[157](index=157&type=chunk)[161](index=161&type=chunk) | Metric | March 31, 2020 (in millions) | March 31, 2019 (in millions) | | :----------------------------------- | :--------------------------- | :--------------------------- | | Negative cash flows from operations | $(2.0) | $(11.1) | | Accumulated deficit | $(251.5) | — | | Net working capital (current assets less current liabilities) deficit | $(70.0) | — | - Recurring negative cash flows, accumulated deficit, and net working capital deficit raise substantial doubt about the company's ability to continue as a going concern, necessitating additional financing[161](index=161&type=chunk) [Our Product Candidates and Approved Products](index=42&type=section&id=Our%20Product%20Candidates%20and%20Approved%20Products) | Product Candidate / Product | Indication | Development Status | Key Milestone / Status | | :-------------------------- | :--------- | :----------------- | :--------------------- | | KP415 (Partnered) | ADHD | Clinical | Potential PDUFA Date - March 2021; FDA accepted NDA in May 2020 | | KP484 (Partnered) | ADHD | Clinical | Initiation of Pivotal Efficacy Trial - 2021 | | KP879 (Optioned) | SUD | Preclinical | IND Submission - 2021 | | APADAZ (Partnered) | Pain | FDA Approved | Tracking Payor Contracts and TRx's - 2020 | - The company intends to seek approval for both KP415 and KP484 under the 505(b)(2) NDA pathway[165](index=165&type=chunk) [Third-Party Agreements](index=43&type=section&id=Third-Party%20Agreements) - **APADAZ License Agreement (KVK Tech, Inc.):** Granted exclusive license to KVK for APADAZ commercialization in the U.S. KVK agreed to pay an estimated **$3.4 million** (including a **$2.0 million** Initial Adoption Milestone payment) and up to **$53.0 million** in sales milestones. Profit sharing ranges from **30%** to **50%** for KemPharm[167](index=167&type=chunk)[168](index=168&type=chunk) - **KP415 License Agreement (Commave Therapeutics SA):** Granted exclusive worldwide license for KP415, KP484, and other SDX/d-MPH candidates. Commave paid a **$10.0 million** upfront payment and agreed to pay up to **$63.0 million** in regulatory milestones (including **$5.0 million** for KP415 NDA acceptance) and up to **$420.0 million** in U.S. sales milestones. Tiered royalty payments range from high single digits to mid-twenties of Net Sales in the U.S[172](index=172&type=chunk)[174](index=174&type=chunk) - **JMI Agreement (Johnson Matthey, Inc.):** Exclusive supply agreement for benzhydrocodone (API for APADAZ) for clinical trials and commercial sale, with royalty payments on net sales[179](index=179&type=chunk)[180](index=180&type=chunk) - **Aquestive Therapeutics Agreement:** Aquestive has the right to receive **10%** of any value generated by KP415, KP484, or KP879, including royalties or milestone payments[184](index=184&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | Period-to-Period Change (in thousands) | | :---------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------------------------------- | | Revenue | $2,089 | $— | $2,089 | | Royalty and direct contract acquisition costs | $663 | $— | $663 | | Research and development | $2,126 | $8,531 | $(6,405) | | General and administrative | $2,245 | $2,838 | $(593) | | Severance expense | $830 | $— | $830 | | Total operating expenses | $5,864 | $11,369 | $(5,505) | | Loss from operations | $(3,775) | $(11,369) | $7,594 | | Net loss | $(5,754) | $(12,291) | $6,537 | - Net loss decreased by **$6.5 million**, from **$12.3 million** in Q1 2019 to **$5.8 million** in Q1 2020, primarily due to a **$7.6 million** decrease in loss from operations[187](index=187&type=chunk) - Revenue of **$2.1 million** in Q1 2020 was comprised of consulting fees (**$1.6 million**) and R&D reimbursements (**$0.5 million**) from the KP415 License Agreement[188](index=188&type=chunk) - Research and development expenses decreased by **$6.4 million**, mainly due to lower net third-party R&D costs[190](index=190&type=chunk) - Severance expense of **$0.8 million** was recognized in Q1 2020 due to the termination of the chief business officer[192](index=192&type=chunk)[193](index=193&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2020, the company had cash and cash equivalents of **$2.4 million** and restricted cash of **$0.2 million**[195](index=195&type=chunk) - Current cash resources are expected to fund operating expenses and capital investment requirements only into, but not through, the first quarter of 2021, raising substantial doubt about the company's ability to continue as a going concern[245](index=245&type=chunk)[253](index=253&type=chunk) - The amount of securities the company can sell under its current S-3 registration statement is limited to approximately **$6.8 million** as of March 31, 2020, due to market value restrictions[197](index=197&type=chunk)[255](index=255&type=chunk) - The COVID-19 pandemic creates significant uncertainty regarding liquidity, operations, clinical trials, and the ability to achieve milestones from license agreements[203](index=203&type=chunk)[248](index=248&type=chunk) - On April 23, 2020, the company received a **$0.8 million** PPP Loan, with potential for forgiveness, to support payroll and other operating expenses[204](index=204&type=chunk)[205](index=205&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - Total convertible notes outstanding as of March 31, 2020, amounted to **$70.9 million**[206](index=206&type=chunk) | Cash Flow Activity | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash used in operating activities | $(2,022) | $(11,066) | | Net cash (used in) provided by investing activities | $(11) | $3,243 | | Net cash provided by financing activities | $1,020 | $2,670 | | Net decrease in cash, cash equivalents and restricted cash | $(1,013) | $(5,153) | [Off-Balance Sheet Arrangements](index=59&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company did not have any off-balance sheet arrangements during the periods presented[257](index=257&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=59&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) - The company's critical accounting policies have not materially changed from those described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019[259](index=259&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=59&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - This item is not applicable[260](index=260&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=59&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of KemPharm's disclosure controls and procedures, which were deemed effective with the exception of a material weakness identified in internal control over financial reporting related to non-routine transactions, with remediation efforts ongoing - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of March 31, 2020, with the exception of a material weakness[262](index=262&type=chunk)[264](index=264&type=chunk) - A material weakness was identified as of December 31, 2019, regarding ineffective controls over non-routine transactions, which led to misstatements corrected prior to the 2019 10-K filing[263](index=263&type=chunk) - Remediation efforts are in process to improve the precision of internal controls related to calculations and conclusions for non-routine transactions[264](index=264&type=chunk) PART II — OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=61&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that KemPharm is involved in routine legal proceedings but does not anticipate any pending litigation to have a material adverse effect on its financial condition or results of operations - The company believes there is no litigation pending that would reasonably be expected to have a material adverse effect on its results of operations or financial condition[267](index=267&type=chunk) [ITEM 1A. RISK FACTORS](index=61&type=section&id=ITEM%201A.%20RISK%20FACTORS) This comprehensive section outlines various risks facing KemPharm, including significant financial challenges, product development and regulatory hurdles, dependence on third parties, intellectual property concerns, commercialization risks, the impact of the COVID-19 pandemic, and risks associated with common stock ownership and public company status [Risks Related to Our Financial Position and Capital Needs](index=61&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) - The company requires substantial additional funding beyond Q1 2021, as existing resources are insufficient to fund ongoing operations[270](index=270&type=chunk) - The auditor's opinion and financial statements include explanatory paragraphs raising substantial doubt about the company's ability to continue as a going concern[272](index=272&type=chunk) - A material weakness in internal controls over financial reporting was identified for FY2019, specifically regarding ineffective controls over non-routine transactions[273](index=273&type=chunk) - The company has incurred significant operating losses since inception, with an accumulated deficit of **$251.5 million** as of March 31, 2020[277](index=277&type=chunk) - The COVID-19 pandemic poses significant risks to liquidity, operations, clinical trials, and the ability to achieve milestones from license agreements[283](index=283&type=chunk) - The company received a **$0.8 million** Paycheck Protection Program (PPP) loan, but forgiveness is not guaranteed, and the application could face future scrutiny[290](index=290&type=chunk)[291](index=291&type=chunk)[292](index=292&type=chunk) - The ability to issue securities under the current S-3 shelf registration statement is limited to approximately **$6.8 million** as of March 31, 2020, due to market value restrictions[300](index=300&type=chunk) [Risks Related to the Development of Our Product Candidates](index=71&type=section&id=Risks%20Related%20to%20the%20Development%20of%20Our%20Product%20Candidates) - The company's innovative prodrug development approach using LAT technology may not lead to marketable products[304](index=304&type=chunk) - Failure to obtain required regulatory approvals for product candidates would limit revenue generation and future capital[305](index=305&type=chunk)[306](index=306&type=chunk) - Clinical drug development is a lengthy, expensive, and uncertain process with a high risk of failure at any stage[330](index=330&type=chunk) - Pursuing the 505(b)(2) NDA pathway for product candidates may increase the risk of patent infringement suits and regulatory delays[319](index=319&type=chunk)[335](index=335&type=chunk) - APADAZ and future opioid product candidates are subject to mandatory Risk Evaluation and Mitigation Strategy (REMS) programs, which could increase commercialization costs and liabilities[338](index=338&type=chunk)[339](index=339&type=chunk) - Product candidates containing controlled substances are subject to DEA regulation, including a quota system, which could limit their availability and commercialization[341](index=341&type=chunk)[345](index=345&type=chunk) - Delays or difficulties in enrolling subjects in clinical trials could delay or prevent regulatory approvals[348](index=348&type=chunk) [Risks Related to Our Dependence on Third Parties](index=86&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) - The company relies on third parties, such as Contract Research Organizations (CROs), to conduct clinical trials, which reduces control and poses risks of delays or unsatisfactory performance[355](index=355&type=chunk)[357](index=357&type=chunk) - Reliance on sole-source third-party manufacturers for bulk drug substances (benzhydrocodone and SDX) increases the risk of insufficient quantities, acceptable cost, or quality, potentially delaying development or commercialization[362](index=362&type=chunk)[368](index=368&type=chunk) - Collaborations with KVK (for APADAZ) and Commave (for KP415 and KP484) may not be successful, and the company has limited control over the resources and efforts dedicated by these collaborators[369](index=369&type=chunk)[370](index=370&type=chunk)[373](index=373&type=chunk) - Provisions in agreements with Aquestive and Commave, as well as the Deerfield Facility Agreement, may inhibit the company's ability to enter into future collaborations or specified transactions[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk) [Risks Related to Our Intellectual Property](index=92&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - Inability to obtain and maintain trade secret or patent protection for LAT technology, APADAZ, KP415, KP484, and other product candidates could allow competitors to commercialize similar products[384](index=384&type=chunk)[388](index=388&type=chunk) - The patent prosecution process is expensive, time-consuming, and uncertain, with risks that pending applications may not result in issued patents or that existing patents may be challenged or narrowed[386](index=386&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk) - The company may become involved in lawsuits to protect or enforce its intellectual property, which can be expensive, time-consuming, and unsuccessful, potentially leading to invalidation of patents or inability to commercialize products[396](index=396&type=chunk)[397](index=397&type=chunk)[399](index=399&type=chunk) - There is a risk of third parties alleging misappropriation of intellectual property or claiming ownership of the company's intellectual property, potentially leading to litigation and loss of valuable rights[408](index=408&type=chunk)[409](index=409&type=chunk) - Failure to protect the confidentiality of trade secrets could harm the company's business and competitive position[413](index=413&type=chunk)[415](index=415&type=chunk) [Risks Related to the Commercialization of Our Partnered Product and Product Candidates](index=99&type=section&id=Risks%20Related%20to%20the%20Commercialization%20of%20Our%20Partnered%20Product%20and%20Product%20Candidates) - Inability to establish effective sales, marketing, and distribution capabilities, either independently or through collaborations, could hinder the commercial success of approved product candidates[418](index=418&type=chunk)[419](index=419&type=chunk) - APADAZ and any approved product candidates may fail to achieve sufficient market acceptance by physicians, patients, and third-party payors, impacting revenue generation[421](index=421&type=chunk) - The company faces substantial competition from pharmaceutical and biotechnology companies with greater resources and experience, potentially leading to more effective or cheaper competing products[423](index=423&type=chunk)[427](index=427&type=chunk) - There is a risk of not obtaining five-year New Chemical Entity (NCE) or three-year regulatory exclusivity, or that such exclusivity may not effectively block all competitors[432](index=432&type=chunk)[434](index=434&type=chunk) - Approved products may be subject to unfavorable pricing regulations, third-party coverage, and reimbursement policies, which could limit profitability[436](index=436&type=chunk)[437](index=437&type=chunk) - Engaging in improper marketing or promotion of products could lead to enforcement actions, fines, and reputational damage[440](index=440&type=chunk)[441](index=441&type=chunk) - Product liability lawsuits could result in substantial liabilities, limit commercialization, and divert management's attention[443](index=443&type=chunk) - International operations expose the company to various risks, including differing regulatory requirements, price controls, and reduced intellectual property protection[446](index=446&type=chunk) [Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters](index=107&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20of%20Our%20Product%20Candidates%20and%20Other%20Legal%20Compliance%20Matters) - Failure to obtain marketing approval in international jurisdictions would prevent APADAZ and other product candidates from being marketed abroad[447](index=447&type=chunk) - APADAZ and any approved product candidates are subject to post-marketing restrictions, potential recalls, or market withdrawal, with penalties for non-compliance with regulatory requirements[449](index=449&type=chunk)[454](index=454&type=chunk) - The company is exposed to risks of misconduct by employees, contractors, and collaborators, including non-compliance with FDA regulations and healthcare fraud and abuse laws, potentially leading to significant sanctions[456](index=456&type=chunk) - Relationships with healthcare professionals, investigators, consultants, customers, and third-party payors are subject to anti-kickback, fraud and abuse, false claims, and other healthcare laws, which could expose the company to penalties[458](index=458&type=chunk)[461](index=461&type=chunk) - Recently enacted and future legislation, such as the ACA and other healthcare reform measures, may increase the difficulty and cost of obtaining marketing approval and commercializing products, affecting pricing[462](index=462&type=chunk)[463](index=463&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk) - Governments outside the United States tend to impose strict price controls, which could adversely affect revenue[474](index=474&type=chunk) - Failure to comply with environmental, health, and safety laws and regulations could result in fines or penalties[475](index=475&type=chunk) - Computer system failures or data security breaches could lead to unauthorized access, disclosure of non-public information, fines, litigation, and disruption of drug development programs[478](index=478&type=chunk)[479](index=479&type=chunk)[485](index=485&type=chunk) [Risks Related to Employee Matters and Managing Our Growth](index=119&type=section&id=Risks%20Related%20to%20Employee%20Matters%20and%20Managing%20Our%20Growth) - The company's future success is highly dependent on its ability to retain key executives and attract, retain, and motivate qualified scientific, clinical, manufacturing, and sales and marketing personnel[487](index=487&type=chunk)[488](index=488&type=chunk) - Loss of executive officers or other key employees could impede research, development, and commercialization objectives[488](index=488&type=chunk) [Risks Related to Ownership of Our Common Stock and Our Status as a Public Company](index=120&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock%20and%20Our%20Status%20as%20a%20Public%20Company) - An active trading market for the company's common stock may not be sustained, and the trading price is likely to be volatile, potentially leading to substantial losses for investors[490](index=490&type=chunk)[491](index=491&type=chunk) - Failure to maintain compliance with Nasdaq listing requirements could result in delisting, negatively impacting stock price and access to capital markets[494](index=494&type=chunk)[496](index=496&type=chunk)[497](index=497&type=chunk)[499](index=499&type=chunk) - Anti-dilution protections on outstanding warrants and convertible securities, if triggered, may cause substantial dilution to stockholders' investments[502](index=502&type=chunk) - Future sales and issuances of equity and debt, including conversions of senior secured convertible promissory notes, could result in additional dilution to stockholders[504](index=504&type=chunk)[508](index=508&type=chunk) - The accounting method for embedded derivatives in the Deerfield Warrant and convertible notes could cause significant volatility in reported financial results[511](index=511&type=chunk) - Anti-takeover provisions in the certificate of incorporation, bylaws, Delaware law, and certain contracts might discourage, delay, or prevent a change in control[515](index=515&type=chunk)[517](index=517&type=chunk) - The certificate of incorporation's exclusive forum provision could limit stockholders' ability to obtain a favorable judicial forum for disputes[520](index=520&type=chunk) - As an 'emerging growth company,' reduced disclosure and governance requirements may make the common stock less attractive to investors[521](index=521&type=chunk)[522](index=522&type=chunk) - The company may not be able to utilize a significant portion of its net operating loss carryforwards, which could adversely affect profitability[525](index=525&type=chunk) - Failure to maintain proper and effective internal controls could impair the ability to produce accurate financial statements on a timely basis[528](index=528&type=chunk)[530](index=530&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=130&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section confirms that there were no unregistered sales of equity securities or issuer purchases of equity securities during the reporting period - No recent sales of unregistered securities[536](index=536&type=chunk) - No issuer purchases of equity securities[537](index=537&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=130&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there are no defaults upon senior securities applicable to the company - This item is not applicable[538](index=538&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=130&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that there are no mine safety disclosures applicable to the company - This item is not applicable[539](index=539&type=chunk) [ITEM 5. OTHER INFORMATION](index=130&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section provides details regarding the company's 2020 annual meeting of stockholders, including its scheduled date and deadlines for submitting stockholder proposals - The 2020 annual meeting of stockholders is scheduled for June 19, 2020[540](index=540&type=chunk) - The deadline for submitting stockholder proposals for inclusion in the 2020 Annual Meeting proxy statement was April 23, 2020[540](index=540&type=chunk) [ITEM 6. EXHIBITS](index=131&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Form 10-Q, including corporate organizational documents, debt agreements, equity-related agreements, and certifications - Exhibits include the Amended and Restated Certificate of Incorporation, various Certificates of Designation for Preferred Stock, Amended and Restated Bylaws, Senior Secured Convertible Note, Registration Rights Agreement, Purchase Agreement, and certifications[542](index=542&type=chunk) [SIGNATURES](index=133&type=section&id=SIGNATURES) This section contains the required signatures of the company's principal executive and financial officers, certifying the accuracy and completeness of the Form 10-Q - The report was signed by Travis C. Mickle, Ph.D., President and Chief Executive Officer, and R. LaDuane Clifton, CPA, Chief Financial Officer, Secretary and Treasurer, on May 13, 2020[546](index=546&type=chunk) ```

Financial Data and Key Metrics Changes - For Q1 2020, KemPharm reported $2.1 million in services revenue, an increase from $1.4 million in Q4 2019, marking the third consecutive quarter of revenue [28] - The net loss for Q1 2020 was $5.8 million, or $0.12 per share, a significant improvement compared to a net loss of $12.3 million, or $0.46 per share, in Q1 2019 [29] - Total cash as of March 31, 2020, was $2.5 million, a decrease of $1.1 million from December 31, 2019 [31] - Total debt decreased to $68.6 million from $77.3 million at the end of 2019, primarily due to an exchange agreement with Deerfield [32] Business Line Data and Key Metrics Changes - Development services revenue from partners GPC and Corium has been a consistent contributor, highlighting the value of KemPharm's partnerships [8] - APADAZ, in collaboration with KVK, has made progress in a challenging opioid market, with 19 states adding its authorized generic form to their Medicaid preferred drug lists [25][26] Market Data and Key Metrics Changes - The ADHD market presents significant unmet needs, particularly in duration of action, onset of action, and potential for abuse, which KP415 aims to address [17] - KP415 is positioned as a methylphenidate version of Vyvanse, with potential features that may surpass those of Vyvanse [15] Company Strategy and Development Direction - The acceptance of the KP415 NDA by the FDA is a critical milestone, triggering a $5 million payment from GPC [7] - The company is focused on balancing cash management, risk, and potential dilution while preparing for the commercial launch of KP415 [43][44] - KemPharm is exploring collaborations for new prodrugs with Deerfield, aiming to add value through R&D cost coverage and licensing opportunities [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the potential of KP415 and its commercial partner Corium, emphasizing the importance of the upcoming PDUFA date [40][45] - The company acknowledges the risks associated with the current market conditions and the ongoing COVID-19 pandemic but remains optimistic about future revenue opportunities [46] Other Important Information - As of May 12, 2020, KemPharm has not regained compliance with NASDAQ listing requirements, particularly concerning market capitalization and bid price [35][36] - The company plans to transition to the OTC market if delisting occurs, aiming to minimize disruption in trading [37] Q&A Session Summary Question: What is holding back discussions about the KP415 asset? - Management indicated that discussions were managed by GPC until the NDA acceptance, and Corium is now evaluating opportunities [52] Question: What processes were pursued to maximize chances for the best label? - No additional analyses were conducted; the NDA was based on existing data packages [54] Question: Can you provide estimates for the approval milestone? - The potential milestone ranges from $0 to $58 million, depending on approval outcomes [56]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 001-36913 KemPharm, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 20-5894398 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identifi ...

KemPharm, Inc. (KMPH) Q3 2019 Earnings Conference Call November 14, 2019 5:30 PM ET Company Participants Jason Rando - Tiberend Strategic Advisors, Inc. Travis Mickle - President & CEO LaDuane Clifton - CFO Rusty Johnson - Chief Business Officer Conference Call Participants Daniel Busby - RBC Capital Markets Oren Livnat - H.C. Wainwright Scott Henry - ROTH Capital Partners Operator Ladies and gentlemen, thank you for standing by and welcome to KemPharm’s Third Quarter 2019 Corporate Update. At this time, al ...