Zevra Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited results; amounts below are in millions of dollars unless stated otherwise. Formerly KemPharm, the company changed its name in February 2023. Zevra is a rare-disease company with partnered commercial products and clinical-stage candidates.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue, net | $2.9 | $4.0 |
| Operating expenses | $15.8 | $5.8 |
| Operating loss | $(12.9) | $(1.9) |
| Net loss | $(11.8) | $(1.9) |
| Net loss per share, basic and diluted | $(0.34) | $(0.05) |
| Cash used in operating activities | $4.0 | $3.6 |
- Revenue declined $1.1 million, or about 27%, chiefly because Corium consulting revenue fell $3.2 million; this was partly offset by a $2.1 million increase in arimoclomol Early Access Program revenue.
- Research and development expense rose $5.8 million to $8.8 million, mainly from higher third-party development and personnel costs. Selling, general and administrative expense rose $4.1 million to $6.8 million, mainly from higher professional fees and personnel costs.
- At March 31, cash and cash equivalents were $40.2 million; securities at fair value and short-term certificates of deposit brought cash and investments to approximately $95.3 million. Cash and cash equivalents decreased $25.3 million during the quarter, including $17.6 million of net investment purchases.
- Current assets were $104.3 million and current liabilities $15.6 million. The company reported $12.9 million outstanding on a Wells Fargo margin account, secured by investments. It repaid and closed its $12.8 million Ameris Bank line of credit in January; no balance remained on that facility at quarter-end.
- Total liabilities were $35.2 million, including $10.5 million in current and long-term discount and rebate liabilities associated primarily with French arimoclomol sales.
Material changes and notable items
- Operating expenses increased $10.0 million year over year, and net loss widened by $9.9 million. Higher other income, including interest and investment-related items, partly offset the higher operating loss.
- Q1 revenue included $2.0 million from the French arimoclomol EAP, net of a $1.3 million clawback liability and other adjustments, and $0.6 million under the AZSTARYS license agreement. Corium consulting revenue was $0.2 million; that agreement expired March 31, 2023.
- In April, management determined termination of the KVK collaboration agreement was probable and accrued an estimated $0.9 million settlement in Q1 research and development expense. The filing describes the amount as estimated.
- The company repurchased 665,739 shares for approximately $3.4 million during Q1. Cumulative repurchases under its program were approximately $11.0 million, against authorization of up to $50 million through December 31, 2023.
Outlook, pipeline, and risks
- Management estimated existing cash, cash equivalents, and investments would fund operations into 2026. This estimate excludes projected revenue, including contingent royalties and milestones, and depends on assumptions that may prove incorrect. The company anticipates recurring negative or minimal operating cash flows for at least the next several years and says additional funding may be needed.
- Management expected to resubmit the arimoclomol NDA to the FDA as early as Q3 2023, supported by additional clinical data. The FDA had previously issued a complete response letter on the application in 2021; approval and timing remain uncertain.
- The KP1077 Phase 2 idiopathic hypersomnia trial was underway, with interim efficacy and safety data expected as early as Q3 2023. In May 2023, after quarter-end, the FDA accepted the company’s IND for KP1077 in narcolepsy; Zevra planned to initiate a Phase 1 trial as early as year-end.
- Leadership changed substantially. Richard Pascoe became CEO in January, then resigned effective June 1, 2023; after quarter-end, the company appointed Christal Mickle interim CEO and said it would search for a permanent CEO. Board changes followed a contested director election. The filing identifies executive retention and continuity as risks.
- Other risks include clinical and regulatory uncertainty, dependence on partner payments and EAP sales, uncertain French pricing and rebate estimates, potential need for additional capital and dilution, and exposure of bank deposits above insured limits. Management reported disclosure controls were effective as of March 31, 2023.
Important facts for investors to verify
- Whether the arimoclomol NDA resubmission and FDA review proceed on the stated timetable, and how the agency assesses the supporting evidence.
- KP1077 trial enrollment, interim results, safety, and development milestones in idiopathic hypersomnia and narcolepsy.
- Actual operating cash burn and runway versus management’s estimate, including any new financing, partner receipts, or changes in spending.
- The resolution and final cost of the KVK agreement termination, and the assumptions underlying the French EAP clawback liability.
- Leadership and board succession, and the effect of the expired Corium consulting agreement and changes in partner-derived revenue.