Business context and reporting period
This is KemPharm, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2022—not a filing identified as Zevra Therapeutics, Inc. The biotechnology company focuses on CNS and rare diseases. Its portfolio includes arimoclomol for Niemann-Pick disease type C (NPC), KP1077 for idiopathic hypersomnia and narcolepsy, and partnered approved products AZSTARYS and APADAZ.
In May 2022, KemPharm acquired Orphazyme’s arimoclomol-related assets and operations through its Danish subsidiary, paying $12.8 million and assuming an estimated $5.2 million French early-access-program reserve liability.
Financial performance and position
Amounts below are in U.S. dollars; financial statement figures were reported in thousands.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue, net | $2.9 million | $2.0 million | $8.1 million | $26.1 million |
| Operating expenses | $9.5 million | $4.2 million | $41.4 million | $15.5 million |
| Operating income (loss) | $(6.6) million | $(2.2) million | $(33.3) million | $10.6 million |
| Net income (loss) | $(6.6) million | $(1.8) million | $(32.5) million | $(5.9) million |
| Basic and diluted loss per share | $(0.19) | $(0.05) | $(0.94) | $(2.16) |
Q3 gross margin was approximately 95% (revenue less cost of revenue). Nine-month operating cash flow was negative $14.3 million, versus positive $11.3 million in 2021; the prior-year inflow included a $16.1 million noncash debt-extinguishment loss adjustment. Investing cash flow was negative $36.7 million and financing cash flow positive $8.6 million. Cash and cash equivalents were $70.1 million; short- and long-term investments totaled $37.3 million, for cash, cash equivalents and investments of approximately $107.4 million.
Total liabilities were $25.8 million, including a $12.8 million Ameris Bank line-of-credit draw and $6.3 million of French-program discount and rebate liabilities. The $20.0 million revolving facility bears interest at SOFR plus 1.60%, matures no later than May 31, 2025, and is secured by pledged deposits. The company reported no convertible notes outstanding.
Material changes versus the prior comparable period
- Q3 revenue rose $0.9 million, primarily from $2.3 million of arimoclomol early-access revenue, partly offset by lower Corium consulting revenue.
- Nine-month revenue fell $17.9 million, mainly because 2021 included larger AZSTARYS license and Corium consulting revenue, including regulatory milestone payments.
- Nine-month R&D expense increased $5.9 million and G&A increased $4.1 million, reflecting higher development, personnel and professional costs.
- Nine-month operating expenses included a one-time $17.7 million acquired in-process R&D charge for arimoclomol. The company’s net loss attributable to common stockholders was lower than in 2021 largely because $54.3 million of deemed dividends and the $16.1 million debt-extinguishment loss recorded in 2021 did not recur.
- Cash and cash equivalents declined $42.3 million from year-end 2021. The company repurchased approximately $7.5 million of shares through September 30, 2022.
Outlook, commentary and risks
Management stated that existing cash, cash equivalents and investments were expected to fund operations into 2026, based on its operating forecast. This estimate excluded projected revenue, including potential royalties and milestones, and is subject to assumptions that may prove incorrect. The filing provides no formal revenue or earnings guidance.
At the time of the filing, management planned to resubmit the arimoclomol NDA to the FDA as early as Q3 2023; the prior sponsor had received an FDA Complete Response Letter in June 2021. The company also planned to initiate a Phase 2 KP1077 trial for IH as early as Q4 2022, following IND clearance, and anticipated a narcolepsy trial thereafter. These are stated plans, not assurances of timing or success.
Key risks include clinical and regulatory uncertainty, reliance on partner payments and early-access sales, uncertainty in estimating the French program’s clawback liability, and the possibility that revenue or financing will not meet operating needs. Management cited COVID-19, inflation, higher interest rates, and geopolitical and regulatory developments as potential sources of disruption. It also cautioned that acquisitions can bring integration costs, liabilities and execution risks. No material legal proceedings or contingency accruals were reported; management said disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Filing identity: Confirm the issuer and security. The supplied filing is for KemPharm, Inc. (Nasdaq: KMPH), while the request names Zevra Therapeutics, Inc.
- Cash runway: Review the forecast assumptions behind management’s estimate of funding into 2026, including the exclusion of projected revenue and the restrictions on pledged deposits.
- Arimoclomol: Track NDA resubmission timing, regulatory requirements, trial or clinical data, and the French reserve/clawback estimate.
- KP1077: Verify IND status, trial starts and results against the development timetable stated in the filing.
- Partner economics and dilution: Assess realized AZSTARYS royalties and milestones, the remaining potential payments, share repurchases, and outstanding warrants and equity awards.