Entering text into the input field will update the search result below

KemPharm: A Biotech Short Squeeze, Reality To Set In When Momentum Dies Out

Mar. 05, 2021 11:18 AM ETZevra Therapeutics, Inc. (ZVRA)71 Comments
BiotechValley Insights profile picture
BiotechValley Insights


  • BiotechValley Insights is initiating coverage of KMPH with a "Bearish" rating.
  • Retail investors raided the short sellers and successfully created a short squeeze.
  • The approval of KP415 exhausts the company's largest catalyst, and I do not see any material new catalysts any time soon.
  • I think the momentum will die out when the expectations hit reality. At this point, KMPH is a viable short candidate.
  • I have doubts about KMPH's success during the commercialization stage.

Source: YCharts

BiotechValley Insights is initiating coverage of KMPH with a "Bearish" rating.

KemPharm (KMPH) had a remarkable rally over the last few months. This was mostly driven by retail interest and Wallstreetbets raiders going after short-sellers. It is amusing to see many retail traders calling every stock a "short squeeze candidate" and pilling in and causing a massive rally. Sometimes they can be successful for a short period of time. However, the true fundamental value of the company prevails in the end.

The company successfully got their ADHD drug KP415 approved by the FDA today, and the speculators made handsome returns this morning. KMPH surrendered 30% of morning gains around lunchtime as many investors took profit. In this article, I will explore what I am going to do next and why.

Company Background

KemPharm is a US-based small-cap biotech company with a market cap of ~USD$200M. The company is developing several clinical assets targeting ADHD, stimulant use disorder (SUD), and idiopathic hypersomnia.

Source: Company IR Presentation

KemPharm's most advanced asset is KP415, which received the FDA's stamp of approval for ADHD yesterday. In my view, KP415 drives 95% of the value of the company, and I don't see the company having other material catalysts anytime soon. So the million-dollar question is, who is driving the momentum and what is the true fundamental of the company.

Source: Seeking Alpha Ownership Database

Another interesting fact that I have noticed is that 89% of the float is driven by retail investors.

Source: Fintel 13f database

According to Fintel, many institutional investors cashed out during January's monster rally. This indicates that many retail investors with a short-term view have piled into this ticker during the last few weeks. Based on my observation, retail-driven momentum rallies are usually short-lived. Now, the next area to explore is

This article was written by

BiotechValley Insights profile picture
We publish unbiased long/short trade ideas. Please follow our Twitter page: https://twitter.com/biotechvalley_i

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Biotechvalley Insights is not a registered investment advisor. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on our Site constitutes a solicitation, recommendation, endorsement, or offer by Biotechvalley Insights or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (71)

The stock is up 50% from the time of your publication. I just want to understand if you still think this is a viable short candidate ? 😂😂
BiotechValley Insights profile picture
@calross83 I am not shorting now. It was 13 dollar when I wrote and it went down to 8 dollar. If you followed my recommendation you probably made lots of money. You welcome.
Agamemnus profile picture
@BiotechValley Insights Pfft. You were talking about the market for the drug, and they haven't even started selling.
@BiotechValley Insights the price at publication say 10.05 not $13 and anyone who tried to short this stock probably lost money. Your whole piece was clickbait and it has aged poorly my friend.
So... better PK curve, better safety data, but won't compete. Yeah. Okay.
geronimoslaststandnext profile picture
thank you for the article. looks like shorts at 70% of the float. thinking there is room to run
@geronimoslaststandnext There's no evidence of a 70% percent short interest and people need to stop repeating it. From what I can tell it's based on junk Fintel data from when there were 4mil shares outstanding....that number currently stands at 28mil. There are plenty of legitimate reasons to own this stock, but short interest isn't one of them.
@Deuce Almighty finviz shows the s/i at 71%
@Greenbeanz Sorry, I meant Finviz not Fintel. The data is wrong. Finviz shows 4.54mil shares outstanding, when the current number per the latest earnings conference call is 28mil, with potential to increase to 38mil when outstanding warrants are taken into account. I don't doubt that 3mil shares are still shorted but that put s/i closer to 11%.
15 Mar. 2021
Thank you for shorting. Squeeze is gonna blow the rocket through the roof
If every article was presented with the sole purpose of not pissing off the long shareholders you would end up with just another non fundamentally based piece of propaganda. If you disagree entirely with this analyst then present your own piece of work.
sliman21 profile picture
Drug approved, plenty of cash huge short position. Time to go in.
After reading this I won't be renewing on alpha... this is garbage..
Agamemnus profile picture
@Wray2167 They need to really ramp up their review system.
These guys are always wrong. They just write to create their own opportunities. Just go back and read their previous articles. How's that $52 Altimmune PT?

"Biotechvalley Insights is upgrading ALT's rating to "Very Bullish" from a "Bullish" rating with a 12 month TP of US$52.
Altimmune's (ALT) valuation is at a discount after the recent sell-off, and the fundamental picture has improved with more clarity around manufacturing."
squashy profile picture
Someone please contact SA to fix the price of the stock!
ICARUS A M profile picture
So much conviction that the author doesn’t even have a short position 🙄.

Have a large position here and am going to be patient. The risk to the upside is not priced in currently.
Gurnet Point capital/ Corium is loaded with ex Shire executives that turned Vyvanse into a $3billion per year drug. They know exactly what they are doing.
I believe they will launch around the summer of 2021.. they are just waiting on final DEA scheduling to come back before launching (usually takes place within 90 days of approval)
Up to $48 million dollar milestone payment will be sent to kempharm from partner Corium/ GPC within 30 days. (The FDA approval triggered the milestone).
squashy profile picture
Why is this showing a price of 21 cents on my app?
yuout7 profile picture
@squashy Mine also....??
Appreciate Analyst writing his views. Reader should always keeps in mind that views are history representation and not future predictions. They don't know what they don't know. For example how do we know even if this rate was reduced to promote more institutional buys after FDA approval. Anything is possible right !! :) .. View can also be part of the play !!
Intellectually disingenuous thesis given the preponderance of facts to the contrary. This article ... LoL
mailman1961 profile picture
You are relying on inaccurate information for institutional ownership. I suggest you strike that entire section from your article. Once you have read the 1,000 pages that comprise the SEC documents filed in connection with the reorganization of this company in January and February with the securities and exchange commission you will realize that both the seeking alpha ownership database and Fintel are not up to date. Institutions who have taken a position of less that 4.99% of a company's outstanding shares are not required to report their positions until 45 days after the end of the calendar quarter they initiated the position. So any tute that met this description will not publish this until May 15. The 6 tutes that sold all their positions in that fintel screen shot all did so prior to 12/31 and I looked up Iowa State Bank as it was an easy one for me to dig deeper on and it was a grand total of 2,750 shares. OMG pull the fire alarm. I suspect the rest are similar. The IPF purchase for example was 1,250 shares. Auctus and Emprey own 1.6M combined and have reported because their positions were greater than 5%. Hopefully this was an oversight on your part and not intentional.
@mailman1961 - look forward to reading the authors response.
mailman1961 profile picture
@Coboblack yep; cant wait - he is showing the institutional dynamics prior to 12/31 which were crappy - company flipped a switch on 1/14...so he is either knowingly using outdated info to push an argument or has not done his dd close enough or just simply does not understanding SEC reporting rules...in any manner its not accurate..we wont have an absolute understanding of the tute situation until 5/15
You seem to be missing a very important factor here. Kempharm has $468 million in milestones left on Azstarys. Corium is the company that is brining the drug to market and is using many of the members from Vyvanse's original team. You are asserting that a company with a market cap $200+ million less than potential milestones is a viable candidate to short. They also have enough cash on hand to operate well into 2022 (and 0 debt) without the milestone payments or revenue from their currently approved and new to market drug Apadaz. They are working on getting a $48 million payment released from Corium based on labeling and have a cash burn rate of a little over $1 million per quarter. I think shorting any stock that could potentially earn twice its current market cap in revenue on an approved drug that will hit the market in a few months is very risky.
AppleFarmBioInsightUnlimited profile picture
Where can I go to read more about this? Is there a Biotech Valley Insights website I can go to? lol
BiotechValley Insights profile picture
@AppleFarmBioInsightUnlimited Thanks for your comment. I think you can go to KMPH's website and read more about their clinical data.
Not to take shots but there is a lot of flawed analysis here. You assume that a methylphenidate prodrug won’t make a major impact in the market but Vyvanse is the most prescribed Adhd medication as an amphetamine prodrug.

Also, it’s widely know that psychiatrists widely prefer methylphenidate for adolescents as opposed to amphetamines.

Here’s where your thesis completely fails. Insurance coverage. Vyvanse is a branded medication that is on almost every insurance formulary. Mydayis is a 13 hour amphetamine also but it’s not covered by any plans. The reason for that mydayis has a comparable generic on the market(adderall xr). Two 13 hour amphetamine drugs and only one is covered. That’s because Vyvanse’s status as a prodrug gives it the chemical name lisdexamphetamine. There are no generic alternatives for lisdexamphetamine. That is how a branded medication became the most prescribed by a wide margin. Insurance companies could not prevent it from being prescribed.

So back to your comparison of KP415 to Concerta. Concerta is not covered on most insurance plans as there is a generic form available. KP415, like Vyvanse, will be covered because it is not methylphenidate, it is serdexmedthylphenidate. And because of that, it has no suitable generic alternatives.

So your comparison to concerta. Is really where your thesis fails. It’s only comparable to Vyvanse, which given its status in the market has not had any trouble getting doctors to prescribe it. Doctors and parents and insurers like the fact that they can’t be abused. And as previously mentioned, methylphenidate drugs are prefers for children which are the largest consumer base here. Essentially, the success of Vyvanse has disproven your thesis. Short at your own risk because when KP415 is commercially available, doctors will make it their first-line option for children.
@Rsc1128 excellent summary. Ontop of this analysis, people much rather prefer the brand product. A lot of time the generic just doesn’t work. When I worked for a pharmacy people would go back to their doctor to make sure the doctor wrote that they just take the brand product. So people are probably going to want KP415, and not any other generics. If anything this isn’t going to take competition away from concerta or other brands of methylphenidate. It’s going to take it from generic forms of methylphenidate.
BiotechValley Insights profile picture
@DinoMcnuggets If you worked in a pharmacy you would know that J&J matches the price of generic products through coupons. They are not charging the full brand name price. The fact that generic alternatives available limits KP415 and other brand name product's pricing power. Also, J&J's aggressive marketing and long-term data of Concerta is another big hurdle KP415 will need to overcome. This is why KP415 will generate sales analogous to another boring generic.
Agamemnus profile picture
@BiotechValley Insights KP415, not KMP415. Also, no, because it is better.
Wsb bans small cap stock posts, unless we’re referring to all retail as wsb
@BiotechValley Insights now click your own link and realize every single post in that Google search is removed and the user was banned
BiotechValley Insights profile picture
@Efficientenzyme I don't see banned posts. What do you mean? It was one of the highly mentioned stock few days ago.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.