Business context and reporting period
The supplied filing is KemPharm, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2022, filed May 12, 2022. The request metadata names Zevra Therapeutics, Inc.; the filing text identifies the registrant as KemPharm, Inc. (Nasdaq: KMPH), so confirm the filing is for the intended company.
KemPharm is a specialty pharmaceutical company developing prodrugs for CNS and rare diseases. AZSTARYS, its approved ADHD product, is commercialized in the U.S. by Corium under a license arrangement. KP1077 is in development for idiopathic hypersomnia (IH) and narcolepsy; KP879 is a candidate for stimulant use disorder.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and where noted.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $3.965 | $12.117 |
| Operating expenses | $5.824 | $5.157 |
| Operating income (loss) | $(1.859) | $6.960 |
| Net loss | $(1.864) | $(10.296) |
| Net loss attributable to common stockholders | $(1.864) | $(47.740) |
| Basic and diluted loss per share | $(0.05) | $(2.49) |
| Operating cash flow | $(3.485) | $(2.586) |
Revenue fell 67% year over year, mainly because Q1 2021 included a $10.0 million KP415 license milestone; higher Corium consulting revenue, including a $2.0 million ADLARITY approval milestone, partly offset the decline. Operating expenses rose $0.667 million, with higher R&D and general and administrative costs. Operating margin was approximately negative 47% versus positive 57% in Q1 2021; no gross margin is presented.
At March 31, 2022, cash and cash equivalents were $100.242 million, current marketable securities $1.338 million, and long-term investments $17.564 million; management reported these resources together as $119.1 million. Total current assets were $105.780 million and current liabilities $2.945 million. Total liabilities were $4.207 million. The company reported no convertible notes outstanding; operating lease liabilities were $1.500 million. Cash, cash equivalents and restricted cash decreased $12.134 million during the quarter. Cash used in investing was $3.848 million, while financing used $4.801 million, primarily for share repurchases.
Material changes, outlook and risks
- The prior-year comparison included a $16.9 million debt-extinguishment loss and a $37.4 million deemed dividend, neither of which recurred in Q1 2022. These items explain much of the year-over-year improvement in loss attributable to common stockholders; the company’s operating result nevertheless moved from income to loss.
- The company repurchased 589,792 shares in Q1 for approximately $4.7 million. Cumulative repurchases under the $50 million program were 909,953 shares for approximately $7.5 million, leaving $42.5 million authorized as of March 31.
- Management said existing cash, cash equivalents and long-term investments were expected to fund operations through and beyond 2025. That estimate excludes projected revenue, including royalties and milestone payments, and depends on assumptions that may not hold. The company expects negative or minimal operating cash flow for several years and may seek equity, debt, or strategic funding.
- After quarter-end, on May 5, 2022, the company announced submission of an IND for KP1077 in IH. Subject to FDA clearance, it planned a U.S. Phase 2 IH trial as early as the second half of 2022, with a narcolepsy trial anticipated afterward. The filing also reports final KP879 Phase 1 data: 240 mg and 360 mg doses were described as well tolerated, with dose-related d-MPH exposure.
- Key uncertainties include clinical and regulatory outcomes, ability to earn future license royalties or milestones, commercialization of partnered products, access to additional financing, and potential COVID-19 effects on trials, approvals and funding. No material changes to the prior annual-report risk factors were reported. The company reported no material pending litigation and no contingency accruals.
Important facts to verify
- Confirm the registrant mismatch: the supplied filing is for KemPharm, Inc. (KMPH), not a company identified in the request metadata as Zevra Therapeutics, Inc.
- Review the assumptions behind management’s “through and beyond 2025” cash runway, particularly its exclusion of projected revenue and dependence on future milestones and royalties.
- Track KP1077 IND clearance and trial start, and confirm subsequent clinical milestones against the plans stated in this filing.
- Check the timing and variability of AZSTARYS royalties and milestones, and the extent of remaining Corium consulting revenue; the filing says nearly all consulting services under that agreement had been recognized by quarter-end.
- Monitor share repurchases and potential dilution from outstanding warrants and equity awards; the filing lists 12.6 million common shares reserved for future issuance.