Zevra Therapeutics, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 7, 2023. The company changed its name from KemPharm, Inc. to Zevra Therapeutics, Inc. on February 21, 2023. This summary covers the full fiscal year, not Q4 alone.
Business context
Zevra is a rare-disease and central nervous system drug developer. Its portfolio includes arimoclomol for Niemann-Pick disease type C (NPC), KP1077 for idiopathic hypersomnia (IH) and planned development in narcolepsy, and KP879 for stimulant use disorder. Approved products AZSTARYS and APADAZ are commercialized by partners; the company reported minimal commercial revenue from its approved products.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $10.5 million | $28.7 million |
| Cost of revenue | $0.3 million | $2.1 million |
| Research and development | $19.6 million | $10.2 million |
| General and administrative | $15.3 million | $8.7 million |
| Acquired in-process R&D expense | $17.7 million | — |
| Operating income (loss) | $(42.5) million | $7.7 million |
| Net income (loss) | $(41.5) million | $(8.6) million |
| Net loss per share, basic and diluted | $(1.20) | $(2.11) |
| Cash from (used in) operations | $(18.7) million | $10.4 million |
FY2022 revenue fell $18.2 million, primarily because AZSTARYS-related revenue declined about $20.1 million and consulting and reimbursement revenue also decreased; higher arimoclomol early-access program (EAP) sales partly offset the declines. The 2021 operating result included revenue and a $16.1 million debt-extinguishment loss below operating income; 2021 net loss attributable to common stockholders was $62.9 million after a $54.3 million deemed dividend.
At year-end, cash and cash equivalents were $65.5 million; fair-value securities were $16.9 million, and certificates of deposit and other short-term investments totaled $20.5 million. Management reported cash, cash equivalents and investments of $102.9 million. A $20.0 million certificate-of-deposit balance was pledged as collateral for the Ameris Bank revolver, limiting its availability. The company had drawn $12.8 million on that $20.0 million facility, due May 2025, at SOFR plus 1.60%. It reported total liabilities of $29.7 million, including the revolver and $5.0 million of operating lease liabilities. No dividend was declared.
Management estimated existing cash, cash equivalents and long-term investments would fund operations into 2026, excluding projected revenue. The estimate depends on assumptions and does not assure that partner payments or other revenue will materialize. On January 31, 2023, the company repaid the $12.8 million Ameris draw; a $12.8 million Wells Fargo margin-account borrowing had been entered into on January 26.
Material changes, outlook and key risks
- R&D expense rose $9.5 million, reflecting increased spending on arimoclomol and KP1077, among other programs. G&A rose $6.6 million. The $17.7 million acquired IPR&D charge followed the May 2022 arimoclomol asset acquisition.
- For arimoclomol, the FDA had issued a complete response letter in June 2021 on the prior sponsor’s NDA. Zevra planned to resubmit an updated NDA as early as Q3 2023, supported by additional analyses, including four-year open-label data. Approval and timing remained uncertain.
- KP1077’s Phase 2 IH study began in December 2022. Interim safety and efficacy data were expected as early as Q3 2023, with top-line data expected by year-end 2023. Management also planned to submit a narcolepsy IND as early as Q2 2023.
- Arimoclomol was being supplied through EAPs in the U.S. and parts of Europe. FY2022 French EAP revenue was $4.8 million net of a $3.8 million clawback liability; total estimated French EAP reserve liability was $9.0 million at year-end, including the $5.2 million liability assumed in the acquisition. Management warned that ending the EAP before commercial availability could materially harm the business.
- AZSTARYS revenue recognized under its license agreement was $0.9 million in 2022 versus $20.9 million in 2021. The agreement provides for royalties and potential future regulatory and sales milestones, but future amounts depend on partner performance and achievement of conditions. APADAZ had limited prescriber adoption; no material APADAZ commercial revenue value is clearly stated in the filing text.
- Key risks include recurring losses and operating cash outflows, dependence on additional funding and partner revenue, clinical and regulatory uncertainty, controlled-substance regulation, reliance on contract manufacturers, reimbursement and pricing pressure, and potential dilution from outstanding warrants and equity awards. At year-end, 4.25 million common-stock warrants were outstanding and 12.55 million shares were reserved for future issuance.
- Management reported disclosure controls and internal control over financial reporting were effective as of year-end. The auditor did not attest to internal control effectiveness. The financial statements received unqualified audit opinions; the 2022 audit highlighted the judgment involved in accounting for the arimoclomol asset purchase and valuing its IPR&D asset.
- After year-end, the company disclosed a CEO transition: Richard Pascoe became CEO in January 2023, and former CEO Travis Mickle was to receive transition benefits and provide consulting services. A stockholder also gave notice of an intention to nominate directors for the 2023 annual meeting.
Most important facts for investors to verify
- Whether arimoclomol’s additional analyses support a complete NDA resubmission and whether the FDA accepts and ultimately approves it.
- Actual cash burn, the availability of unrestricted liquidity after pledged deposits, and the assumptions behind the stated runway into 2026.
- Updates to French EAP pricing negotiations, clawback estimates and the $9.0 million reserve liability, as well as continuity of EAP access.
- AZSTARYS partner sales, royalty receipts and milestone prospects, and any measurable commercial progress for APADAZ.
- KP1077 Phase 2 enrollment, interim and top-line results, and timing of the planned narcolepsy program.
- Potential dilution and financial effects from warrants, equity plans, share repurchases, and the post-year-end Wells Fargo borrowing.