Kempharm Q3 2015 Conference Call

| About: KemPharm (KMPH)

Summary

This is the Kempharm Q3 2015 conference call, provided for investors' reference.

Although some information is outdated, it may provide some clues as to future direction.

Transcribed from the audio recording (no longer available on site).

Start Time: 16:30

End Time: 16:50

KemPharm, Inc. (NASDAQ:KMPH)

Q3 2015 KemPharm Inc Earnings Conference Call

November 12, 2015, 16:30 PM ET

Executives

Travis C. Mickle - President, CEO and Chairman; Co-Founder

R. LaDuane Clifton - CFO

Jason Rando - Tiberend Strategic Advisors, Inc.

Analysts

Tyler Van Buren - Cowen & Company

Randall Stanicky - RBC Capital (James C. Chen)

John Newman - Canaccord Genuity

Rohit Vanjani - Oppenheimer & Co.

Operator

Good day, ladies and gentlemen, and welcome to the KemPharm 3Q '15 corporate update conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require operator assistance during the conference, please press the star then the zero on your touchtone telephone.

I would now like to introduce your host for today's conference, Mister Jason Rando. Sir, you may begin.

Jason Rando

Good afternoon everyone, and thank you for joining our call today. At this time, I would like to remind our listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time, including, but not limited to, statements about KemPharm's expectations regarding future operating results.

Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws. Information contained in the forward-looking statements is management's beliefs based on current expectations and is subject to change, and actual results may differ materially from forward-looking statements. KemPharm disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward looking statements to reflect future events or developments, except as required by law.

There is more complete information regarding forward-looking statements, risks, and uncertainties in the reports KemPharm files with the FCC. These documents are available on KemPharm's website at www.kemphram.com under the Investor Relations section, and we encourage you to review these documents carefully.

This afternoon, Travis Mickle, President and CEO, will provide a corporate and clinical development update after which LaDuane Clifton, CFO, will review KemPhram's third-quarter 2015 financial results. We will then end today's call with a question-and-answer session. I will now turn the call over to Travis.

Travis C. Mickle

Thanks, Jason. And welcome everyone. Again, I appreciate your time this afternoon as we provide for you again another quarterly update on KemPharm and what's going on here. As many of you know, there's been a lot that's happened since our last quarterly update, including the completion of our abuse liability program for KP201 with acetaminophen. And the focus then as well on our pipeline with some relatively near-term milestones related to that pipeline.

As many of you are aware, we completed the second intranasal abuse liability study and with that concluded our planned studies that will go into our NDA for KP201. That particular NDA is right on track to be filed this quarter. That study in particular demonstrated the positive benefits of KP201 in our final, to-be-marketed formulation with acetaminophen. To summarize the entire program I'm going to give a very general overview of what was already provided in detail in the press release. Essentially, epidemiological data that we presented at Pain Week this year suggests that hydrocodone combination products are abused at high rates and may be considered a gateway to other opioids or illicit drugs. KP201 with acetaminophen differentiates itself from other immediate-release hydrocodone combination products by changing its absorption and pharmacokinetic pattern as these methods or routes of administration escalate in severity. That is to say, as individual progress in drug abuse, they typically start with relatively low oral doses and escalate from there. KP201 may mitigate the risk of ingesting too much orally. It may also show that additional lower risk of intranasal abuse, as well as demonstrating, as we announced last quarter, highly tamper-resistant properties beyond that of the current technologies. Additionally, when somebody removes the KP201 from the tablet itself, it even has an better abuse-deterrent profile than the combination product together. All of these properties in total present a clearly differentiated product from other hydrocodone products that may be the next step in safer abuse-deterrent technologies.

As I mentioned before, I don't think there's any other approach that has seen the data that we presented so far for KP201 in its totality. Interestingly, we still believe that KP201 may be further differentiated from other opioids as we explore clinical studies in both overdose potential and respiratory depression over the coming months. Turning now to our pipeline, we also announced that we would be exploring and pursuing the immediate release KP201 without acetaminophen. That product was added to our pipeline with a potential NDA date as soon as 2017. This type of immediate-release hydrocodone product currently does not exist in the current medical space and provides an unmet medical need by itself, let alone one with the robust safety and abuse-deterrent features of the prodrug related to KP201.

We are still right on track to provide proof of concept data for KP511, our prodrug of hydromorphone. That's our next product in our pipeline with now an anticipated NDA date to be filed in 2018. We also anticipate in the second half of 2016 that we will be announcing proof-of-concept data for KP415, our prodrug methylphenidate now in the ADHD space. And additionally, we've announced that that NDA is anticipated for 2019. We're also focused on an immediate-release version of oxycodone named KP606 that we plan to have proof of concept for in 2017 and an NDA matching that of KP415 now in 2019.

This really represents at least one new NDA product every year starting in 2017, and a great opportunity for KemPharm and its pipeline. We also announced earlier in the same press release we believe we also have an additional pre-clinical candidate to add to our list by year-end. Our discovery team has made tremendous efforts and we'll adding additional pre-clinical candidates.

As you can see, KemPharm has made tremendous progress in 2015, especially over the last quarter and the NDA submission milestone is still in front of us. Anticipated data and milestones in 2016 may exceed the progress that we actually made in this year as we push ahead with KP201 towards approval and marketing and ultimately focused the rest of our attention on our robust product pipeline.

That's my summary of the results that we had since our last update. I'm gonna turn it over now to LaDuane Clifton so he can provide you with the financial update.

R. LaDuane Clifton

Thank you, Travis, and good afternoon everybody. KemPharm's net loss for the three months ended September 30th was 9.7 million dollars or 68 cents per share compared to a net loss of 7.1 million for the same quarter last year. The increase period over period is directly related to our increase in research and development cost related to KP201/APAP, as well as KP511 and KP415 as we look to increase those items and prepare as Travis mentioned. We also saw an increase in general and administrative cost associated with an increase in head count.

As of September 30th, KemPharm had cash and cash equivalents of 59 million, which sequentially from Q2 represents a use of cash of about 5.2 million. And again, this is in direct support of our R&D activities. Thank you.

Travis C. Mickle

Thanks, LaDuane. Just to sum up prior to taking any questions. Again, tremendous amount of progress that we have made we believe here at KemPharm since our last update and really we're looking forward to providing additional updates in the near future about KP201, our pipeline, and additional opportunities that we believe both of those present for investors. So, I believe now would be a good time that we can actually take some questions.

Operator

Thank you, ladies and gentlemen. If you have a question at this time please press the star, then the one key on the your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. One moment for questions. And our first question comes from Tyler Van Buren of Cowen and Company. Your line is now open. Please, go ahead.

Tyler Van Buren

Hi there. Just a few questions. First on KP201. I understand you guys are still deciding about the potential scheduling going with the FDA's you know, kind of guidance where they let you just accept scheduling or potentially going for a better scheduling. I was hoping to I guess, better understand when you plan to make that decision by, as well as getting an update on the commercial activities and your thoughts on building out your own sales force versus potentially leveraging someone else's infrastructure. And then kind of the second topic is on the 415 program with proof-of-concept data next year. Travis, clearly you've got an interesting background in this area with Vyvanse. So, curious to maybe just hear some kind of comparison between your past experience and what you all plan to do with this program as well. Thanks.

Travis C. Mickle

So, I'll take the first question there about the scheduling. That decision will have to be made and included in the NDA. So, of course, given its importance to the company and the program we will plan to announce what schedule we've determined makes the most sense for KP201 at the time of NDA submission. The second question regarding the marketing plan. Again, this is very much still on track. You know, Tracy Woody was hired back in February to build the commercial efforts internally at KemPharm. She's our chief commercial officer. And again, there's a dual path there potentially looking at out-licensed opportunities or other outsourced opportunities for that program, as well as building our own internal effort in order to prepare for the potential approval and launch of that product.

And then, as far as 415 could you just repeat your question for me again there, Tyler?

Tyler Van Buren

Yeah. Just curious. I just want you to reiterate kind of the strategy behind that program. What would make it you know, potentially more interesting than the methylphenidate products on the market and kind of what you're hoping to see with the proof of concept data? And just curious if there's any kind of similarities to your previous experience with Vyvanse?

Travis C. Mickle

Well, there certainly is a lot of similarities with Vyvanse. And especially as we move further towards that proof of concept. As far as the data, we hope to see in the proof of concept would be adequate-release. It doesn't have to be bioequivalent. We're trying to be better than currently methylphenidate products. And by showing that we have a steady release or a reliable release with lower variability between our patients, as well as a 13-hour duration of action. So, there's a lot of things we can do post-proof-of-concept in order to get those to play out. And I think our experiences here would play very well with that.

Our strategy would be to, essentially, to provide for those patients that can only take methylphenidate because they can't switch over to Vyvanse... to provide those methylphenidate patients with a Vyvanse-type product that provides them with a 13-hour duration of action and a reliable PK profile that leads to reliable therapy.

Tyler Van Buren

Great. Thanks so much.

Operator

Thank you. And our next question comes from Randall Stanicky of RBC Capital Markets. Your line is now open. Please, go ahead.

James C. Chen

Hi. It's James Chen on for Randall. Can you talk about the patent-state strategy for the other candidates you were looking at the APAP-free formulation of KP201 and the IR oxycodone of KP606 and some of the timelines expected around those?

Travis C. Mickle

Sure. I mean, our patent-state strategy has been very consistent. And fortunately for KemPharm, we aren't reliant on a formulation or method of use-type patents. Our claims are all composition-of-matter based claims. So, really it will follow the same strategy as we have with KP201. Here, the immediate release product of KP201 without acetaminophen will rely on the same patents, again, that are in place already that run until 2031 for those products. But you can expect to get additional patents and patent life out of additional data we may achieve with those products.

As far as the immediate release oxycodone, again, that's a novel composition. We don't have issued patents yet. We do have pending patent applications with those. Again, those are all focused on the composition-of-matter. Based on the filing dates of last year we would expect them, once issued, to last at least through 2035.

James C. Chen

Got it. Thanks. And perhaps one more. Can you just talk about what you see in terms of the -remind us of the competitive landscape for KP201 and what you're seeing out there for abuse-deterrent candidates for IR hydrocodone/APAP. Thanks.

Travis C. Mickle

The only thing that I think that we've seen that pops up recently is that Teva has announced that they have an immediate-release hydrocodone/APAP with abuse-deterrent properties. We're unsure if that's formulation-based. I'm fairly certain it's not prodrug based. We're not sure again what the data looks like for that particular product, but Teva did announce that they plan to have an NDA next year for that product.

James C. Chen

Okay. All right. Thank you.

Operator

Thank you. And our next question comes from John Newman of Canaccord Genuity. Your line is now open. Please, go ahead.

John Newman

Hi, guys. I'm joining the call a bit late here so I apologize if these questions have been answered already. But Travis, maybe, can you talk a little bit about what types of claims you would look to seek in label for the IR-hydrocodone product? And also, just the general discussion that you will have with the FDA on the topics. I know you had these discussion before all the way back to the time, um, when you were at New River, so you were familiar with how they think, but I'm just curious as to what you might look for and what types of discussions you might have in general with them.

Travis C. Mickle

So, let me just see if I understood your question. You want to know about what types of label claims we may get for KP201/APAP?

John Newman

Yes. Just what types of claims you would request or you would discuss with the agency.

Travis C. Mickle

Yeah. I think we feel very strongly that category I, again, focused on tamper and tamper-resistant properties of the product. Certainly, KP201 qualifies for that. We've exceeded the bar by orders of magnitude over what current formulation technologies can demonstrate. Category II again, focused on pharmacokinetic properties. We feel very strongly that that's a possibility here. We've had interactions in the past and know that the data's very robust. So, I think the company has announced, it's in our press release as well, that category I and II are great opportunities. Category III, that will be more of a discussion. We have the data to present. It's whether or not they believe the studies were designed with a proper end points and if they don't need no further elucidation from that. So, I mean, that's a possibility, but it's not really something that we're banking on. And I think really category I and II are really differentiating the product anyway. And all of these discussions are data-driven. So, the data itself you know, really does stand out, the totality of the evidence for KP201 that it's showing differentiation over the current hydrocodone products. That really will be the evidence the agency relies on to provide that label claim.

John Newman

Okay. Great. And then if could sneak in one more? Do you have a sense as to when we might see some additional data on these studies that you've run for KP201, if you might be presenting those studies in full at a medical meeting next year, perhaps more data on the intranasal studies?

Travis C. Mickle

Yes. We will plan to present that data at one of the pain conferences next year. I'm not sure when those will happen, but that is our current plan.

John Newman

Great. Thank you.

Operator

Thank you. And our next question comes from Rohit Vanjani of Oppenheimer. Your line is now open. Please, go ahead.

Rohit Vanjani

Hi, Travis. Afternoon, thanks for taking the questions. Last time I think you said you were at a high level in terms of planning those clinical studies. You had submitted some stuff to the FDA. Has the FDA gotten back to you? You got a list of questions and protocols that they had to review. Have you heard back from that submission?

Travis C. Mickle

We have not yet.

Rohit Vanjani

Okay. And so, you were at a high level of planning those clinical studies. Is the FDA the gating factor there, or do you know now what those trials would look like, or what the cost would be?

Travis C. Mickle

Well, we're actually digging down into the weeds of what the trial cost would be because the agency's input won't really change the design, just the tweaks and nuances around each study. So, we should have that hopefully by year end.

Rohit Vanjani

Okay. And then last time I think you also said you were still doing work around what the market would look like for KP201/APAP. Are you still doing that work or is that work complete?

Travis C. Mickle

That will be ongoing and I'm certain of the updates in the future about what our commercial plan will be.

Rohit Vanjani

Okay. And then from the A02 study last time, can you now report what the percent decrease in Cmax in the intranasal KP201/APAP versus Norco was? The delay in Tmax and the overall reduction in the AUC? Or is that going to be reserved for a pain conference submission?

Travis C. Mickle

Yeah, I think you answered your own question. We'll probably reserve all the details for those studies for those presentations.

Rohit Vanjani

And then the last one for me is the cash. I think at the outset of the IPO you'd said it was going to go through mid- to end-2016 timeframe. Is that still good or will the two post-NDA studies change that outlook?

Travis C. Mickle

No, that will not change the outlook. We still have cash to take us through the end of 2016. So, that picture is not changed.

Rohit Vanjani

Okay. Great. Thanks for taking the questions.

Operator

Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Mister Travis Mickle for closing remarks.

Travis C. Mickle

Again, thanks everyone for attending today's call and I appreciate all the great questions that the analysts have provided. Additional color to some of the points that I made as well. Looking forward to give our next update and looking forward to filing the NDA as quickly as humanly possible. Thanks everyone.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.

Disclosure: I am/we are long KMPH.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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