Zevra Therapeutics(US:ZVRA)2021-03-12 02:46Part I Item 1. Business 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 - 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 202121 - 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)2023 - KemPharm has a commercial partnership with KVK-Tech, Inc. for APADAZ®, an FDA-approved immediate-release product for the short-term management of acute pain2024 Our Product Candidates and Approved Products 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, 20213738 - 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 202150 - APADAZ, an immediate-release combination of benzhydrocodone and acetaminophen, was approved by the FDA in February 2018 for short-term acute pain management54 Intellectual Property 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 203762 - 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 Japan62 - The company also relies on trade secret protection and confidentiality agreements to protect its proprietary LAT technology and other know-how65 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 202167 - KVK-Tech, Inc. is responsible for the commercialization of APADAZ in the U.S. A regional pilot launch began in Alabama in December 20202468 - For other product candidates, KemPharm may form collaborations or build its own sales and marketing organization, depending on the product and market opportunity69 Research and Development 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 limitations70 Government Regulation 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 distribution8687 - 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 cost9798 - 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 requirements125126 Item 1A. Risk Factors 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 business157158159 - 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 operations210218 - 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 contractors233240 - 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 supply194195 - 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 products263277 Item 2. Properties 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 2026418 - Additional leased facilities include laboratory space in Coralville, Iowa and Blacksburg, Virginia, and office space in Chapel Hill, North Carolina418 Item 3. Legal Proceedings 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 condition419 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 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 - As of December 31, 2020, there were approximately 134 holders of record of the common stock424 - The company has never declared or paid cash dividends and intends to retain future earnings to fund business growth425 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 expenses489492 - 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 debt438449452454 - Management believes that cash on hand following the early 2021 financing activities is sufficient to fund operations through at least the first quarter of 2024563 Item 9A. Controls and Procedures 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, 2020592 - Management concluded that the company's internal controls over financial reporting were effective as of December 31, 2020, based on the COSO framework594 - 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 services597 Part IV Item 15. Exhibits and Financial Statement Schedules 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 |