On May 13, 2021 KemPharm, Inc. (NASDAQ: KMPH), a specialty pharmaceutical company focused on the discovery and development of proprietary prodrugs, reported its financial results for the first quarter ended March 31, 2021 (Press release, KemPharm, MAY 13, 2021, View Source [SID1234580042]).
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"The first quarter of 2021 was nothing short of transformational for KemPharm, highlighted by the FDA approval of AZSTARYS, the completion of our financial restructuring, and the re-listing of our shares on Nasdaq," said Travis C. Mickle, Ph.D., President and Chief Executive Officer of KemPharm. "As a result, we stand today as a company with a solid balance sheet and capital structure that is moving full force with our partners at GPC and Corium to soon launch AZSTARYS as a once-daily product for the treatment of attention deficit hyperactivity disorder (ADHD) in patients age six years and older."
Dr. Mickle continued, "Following the close of the quarter, KemPharm further strengthened its position by agreeing to amend the License Agreement with an affiliate of GPC. We are now eligible to receive up to $590 million in future regulatory and sales milestone payments for AZSTARYS, as well as tiered royalty payments on a product-by-product basis for net sales. This is a significant increase from the original License Agreement and also provides an opportunity to adjust the economics of the License Agreement to optimize investment in the commercial launch of AZSTARYS. Ultimately, we believe this arrangement has the opportunity to produce significant shareholder value based on the market outlook for AZSTARYS."
Dr. Mickle continued, "As we have noted in prior communications, KemPharm believes that the product label for AZSTARYS is potentially best-in-class, with several elements in the label providing clear points of differentiation from other commercially available methylphenidate ADHD products. We were pleased with the recent determination that serdexmethylphenidate (SDX), was classified as a Schedule IV controlled substance by the Drug Enforcement Administration (DEA) following a thorough review by the U.S. Department of Health and Human Services (HHS). SDX comprises 70% of the active pharmaceutical ingredient (API) in AZSTARYS, which is classified as a Schedule II controlled substance. In short, the agencies determined that SDX has a generally low potential for abuse and a lower potential for abuse when compared to d-MPH, a Schedule II controlled substance. Having SDX designated as a Schedule IV controlled substance, we believe, potentially increases AZSTARYS’ appeal among prescribers and patients."
Dr. Mickle concluded, "Further, the Schedule IV classification of SDX is a significant development for our lead clinical product candidate, KP879, an extended-duration, agonist replacement therapy for the treatment of Stimulant Use Disorder (SUD), as SDX is the only API in KP879. We now look forward to initiating the clinical program for KP879 in 2021 after receiving FDA clearance for the Investigational New Drug (IND) application. If approved, KP879 could be a Schedule IV product, and physicians who are treating patients seeking to overcome addictions to cocaine, methamphetamine or other stimulants may be able to prescribe KP879 with the knowledge that the product candidate could have a significantly lower potential for abuse."
Q1 2021 Financial Results:
For Q1 2021, KemPharm reported revenue of $12.1 million, which was primarily derived from a $10 million milestone payment earned upon the AZSTARYS NDA approval and service fee revenue of $2.1 million, as compared to Q4 2020 revenue of $2.4 million, which was derived primarily from service fee revenue. Current consulting arrangements contractually continue through March 2022.
KemPharm’s net loss for Q1 2021 was $10.3 million, or $0.54 per basic share and diluted share, compared to net loss of $5.8 million, or $1.92 per basic and diluted share for the same period in 2020. Net loss for Q1 2021 was driven primarily by a non-cash loss on extinguishment of debt of $16.9 million and net interest expense and other items of $0.4 million, partially offset by operating income of $7.0 million. The net operating income of $7.0 million for Q1 2021 was a change of $10.7 million compared to net operating loss of $3.8 million in the same period in 2020, which was primarily due to an increase in revenue of $10.0 million related to the milestone payment and a net decrease in operating expenses of $0.7 million period over period. The net decrease in operating expenses was primarily due to a decrease in severance expense of $0.8 million and a decrease in general and administrative expenses of $0.4 million, partially offset by an increase in royalty and direct contract acquisition costs of $0.3 million and an increase is research and development expenses of $0.1 million.
As of March 31, 2021, total cash, cash equivalents and restricted cash was $76.0 million, which was an increase of $71.7 million compared to December 31, 2020. The increase was driven by the Company’s multi-phase financial restructure process which was completed during the quarter.
As of March 31, 2021, total shares of common stock outstanding was 28,480,156 shares, and fully diluted common shares outstanding was 38,379,718 shares, which included 9,544,693 shares issuable upon exercise of warrants. In addition, no preferred stock is outstanding as of March 31, 2021.
"KemPharm has emerged from Q1 2021 as a Nasdaq-listed company with no debt and significant cash holdings on the balance sheet," said LaDuane Clifton, KemPharm’s Chief Financial Officer. "We have the resources needed to continue the development of KP879, and we have begun evaluating how to efficiently deploy capital to generate additional value streams for shareholders. There are many opportunities to explore, both internally and externally, and creating long-term value is top of mind."
Conference Call Information:
Interested participants and investors may access the conference call by dialing either:
An audio webcast with slide presentation will be accessible via the Investor Relations section of the Company’s website, View Source An archive of the webcast and presentation will be available for 90 days beginning at approximately 5:30 p.m. ET, on May 13, 2021.
About AZSTARYS:
AZSTARYS is an FDA-approved, once-daily product for the treatment of attention deficit hyperactivity disorder (ADHD) in patients age six years or older. AZSTARYS consists of SDX, KemPharm’s prodrug of d-methylphenidate (d-MPH), co-formulated with immediate release d-MPH.