There are so many things to be excited about at KemPharm, especially with what we have just seen for data from KP511. But, given my background with Vyvanse, I would say that we are very excited with the KP415 data.
Certainly the ADHD market represents a large market opportunity but additionally, the data could lead to the first, truly differentiated new treatment option in the stimulant space since Vyvanse. Essentially, we have seen both potential patient benefits with better onset of action, duration of action, and robustness of effect as well as safety benefits related to the potential for a lower abuse liability.
Part 3 answers three questions: "what is KP415?", "what can it mean for KemPharm?", and "what information do we have about KP415's known characteristics and potential benefits?".
Dex Versus Levo
When we talk about methylphenidate, we actually talk about two different molecules: levomethylphenidate, and dexmethylphenidate (dex for brevity), which is a flipped "mirror image" (or enantiomer) of levomethylphenidate (levo).
Different formulations have different ratios of levo and dex. In KP415's case, it's all dex.
The act of flipping the molecules actually makes dex 10 times more powerful than levo! This demonstrates the concept that making seemingly small changes to drug formulations can create very large differences.
What Could KP415 Mean For KemPharm?
KP415 consists of instant-release dex and slow-release dex (the "prodrug"). The instant release version is just regular dex, and the slow-release version is dex combined with another molecule; over time, enzymes cleave them back into separate molecules. This combination allows KP415 to "provide both a rapid onset of d-MPH as well as sustained d-MPH concentrations throughout the day".
Consider that KemPharm's market cap has recently been at or below $100m. According to IQVIA, 2017 ADHD extended-release stimulant sales were at least $9B in the US; it seems that the stock market values KemPharm on the basis of NEOS Therapeutics valuation metrics, but this is ridiculously short-sighted...:
NEOS produces chewable stimulants where the one advantage is some convenience for children and parents. But, according to my research, KemPharm's KP415 would provide: (1) extremely low abuse liability, (2) a quick effect that could work within minutes, (3) a long-lasting, smooth, and consistent effect, (4) significantly less insomnia than Vyvanse and other amphetamines, and (5) low inter-patient variability. For these five reasons, I believe that KP415 can become a superior choice to that of most (or possibly all) other ADHD drugs on the market.
In Part 2, we have seen that superior products very quickly take large amounts of market share — within a few years. There is no reason why KP415, if even some of the above qualities are borne out, cannot do the same.
Vyvanse, developed by KemPharm's current CEO, Dr. Mickle, is likely to generate ~$2.2B in 2018 revenues in the United States. KP415 could supplant Vyvanse for a significant fraction of users. It could also supplant extended-release amphetamines and other methylphenidates on the market.
To sustain a $1B valuation, in today's stock market, a 15-25 P/E might be appropriate. This means net income of $40m to $67m. If KemPharm collects net royalties for KP415 equivalent to 50% of revenues, and spends $20m on SG&A, it would therefore need $120m to $174m in revenues to attain that $1B valuation, or between just 1.3% and 1.9% of a $9B market.
Note that in the above calculation, I'm not even counting the ~$700m market that Apadaz could take a substantial share in, or the value creation of further R&D in the three different therapeutic categories of pain, ADHD, and central nervous system disorders. Neither am I counting the indication of Tourette's with ADHD (a rare disease).
I will leave it up to the reader to calculate what a company with similar sales to that of Vyvanse ($2.2B yearly in the US), under a 50% net royalty and 20 P/E scenario, would be worth... and this does not count the (albeit relatively much smaller) potential revenue from the rest of the world.
Advantage 1: Extremely Low Abuse Liability
In 2001, Scott Gottlieb (the current FDA Commissioner), wrote this in Methylphenidate works by increasing dopamine levels:
The researchers said that a drug must reach the brain very quickly for it to become addictive. On average, it takes an oral dose of methylphenidate about an hour to have an effect on the brain, which prevents the drug from causing the “high” produced by most drugs that stimulate dopamine. Methylphenidate could become addictive, however, when tablets are crushed and then either snorted or injected, which allows the drug to reach the brain more rapidly.
Thus, taking significantly bigger doses or injecting dopamine could cause addiction problems, as Dr. Gottlieb writes above. However, when taken as directed, methylphenidate has been shown to be not addictive: stimulants only become significantly addictive for (1) those who take wildly incorrect doses, or (2) those without ADHD symptoms taking stimulants for the purposes of a recreational high or to achieve a temporary mental performance enhancement.
The addiction consequences of overdosing or mis-prescribing is therefore a salient selling factor for both doctors and parents, especially in light of the more visible opioid addiction epidemic today.
In Part 2, I discussed how Vyvanse's low abuse potential was a decent selling point for doctors and parents: prodrugs like Vyvanse limit uptake speed because drug release speed is controlled by enzyme cleavage; since these enzymes only become available at a limited rate, even large concentrations of Vyvanse are "inert" until cleaved.
Still, there are various chemical ways one can cleave Vyvanse (or any prodrug) faster, so it still has some abuse potential, and even though it has taken over 20% of the market since 2007, the other 80% is still very abusable. Thus, even when accounting for upticks in prescription growth rate among children, abuse rates haven't really moderated much (see chart here), although, of course, they might have been even higher without Vyvanse's invention.
Unintentional and Intentional Abuse: The Numbers
In a study covering the years 2000 through 2014 entitled Pediatric ADHD Medication Exposures Reported to US Poison Control Centers, King, Casavant, Spiller, et al. write:
Greater use of ADHD medications increases the risk of adverse outcomes from intentional and unintentional exposures. In 2015, US poison control centers (PCCs) received ˃25800 calls involving exposures to amphetamine and methylphenidate, which are 2 medications used in the treatment of ADHD. The number of emergency department visits involving ADHD stimulant medication exposures among individuals of all ages increased 134% from 2005 to 2010. Researchers of a 2013 study estimated that the annual cost of US hospital admissions because of unintentional ADHD medication exposures is as much as $24 million.
And, as the figure below shows, there is a good amount of intentional abuse among teenagers. Note that these numbers are a 15-year average, and the number of prescriptions skyrocketed between 2000 and 2017, so it is now likely much higher:
If I was a parent, I would want as much reassurance as possible that dosing errors didn't cause sudden problems; if I was a doctor, I wouldn't want to prescribe the drug to someone faking symptoms just to get high. I definitely wouldn't want this to happen:
Ritalin had a powerful effect on Lee. 'He was like something out of The Exorcist, or Damian in The Omen. He stabbed his brother in the foot with scissors. I was frightened to go to sleep sometimes,' recalled his mother. 'He used to demand the pills and was definitely addicted. I find it incredible they're giving a class A drug to a five-year-old.' In desperation, Millar took Lee off Ritalin and he suffered severe withdrawal symptoms before settling down.
But have no fear, KP415 is here! How does KP415's prodrug fare, when injected by recreational drug abusers?
The data that we see from KemPharm's abuse liability trial is that the prodrug abuse liability, in terms of Drug Liking, is exactly the same as placebo. As stated by KemPharm's CEO,
In direct comparison, the IV data collected for KP415 prodrug are by far best in class for any ADHD-indicated stimulant treatment. Vyvanse is also a stimulant prodrug that underwent a similar IV HAP study prior to approval. These results essentially demonstrate that while Vyvanse has a lower and delayed Drug Liking Effect, Drug Liking was present and significant, as well as much higher than placebo. On the other hand, KP415 prodrug is nearly equivalent to a saline injection.
As the public discourse about stimulant (and now opioid) abuse continues, the "incredible" best-in-class abuse liability results will offer a compelling selling point to both parents and doctors.
Advantage 2: Rapid Effect
Vyvanse was designed, partly, to limit abuse. It does not have an instant-release component, perhaps due to one or both of these reasons:
- Shire (SHPG) might want to re-patent a new formulation to extend patent life.
- New River (the developer) did not want to negate the perceived abuse reduction benefit.
But that lack of an instant-release component means that Vyvanse works only one to two hours after ingestion, as opposed to, say, within 20-40 minutes. Of course, two pills could be taken at once, but the effect would not be well characterized, and it would become a convenience problem.
KP415, by contrast, does have an instant release component: this does slightly increase the abuse potential of the drug, but that is canceled out by the near-zero abuse liability of the prodrug component. The instant release-component creates a marketable benefit and an advantage against Vyvanse and other drugs (click here for a detailed explanation of the graph):
We can see in the graph above that Vyvanse peaks at about 3 hours, while KP415 achieves the same effective concentration (click here to check my math) at about 45 minutes.
(Of course, again, we are using some amount of magic here, and this is just pharmacokinetics. Actual efficacy equivalents would in practice be calculated via experience [trial-and-error], and drugs have different delays in how the brain responds to them that I might not have accounted for.)
Examining SKAMP-C and PEMP test scores, from the upcoming KP415 efficacy trial results, will help. I will elaborate on how we can evaluate that data slightly later in the article.
Advantages 3 And 4: A Long-Lasting, Smooth, Consistent Effect, With Less Insomnia
Against Vyvanse, concentrations seem equivalent in efficacy after the 12 hour mark through the 24 hour mark, but against other methylphenidate products like Concerta and Focalin XR, there is a drop-off (rapid in Focalin XR's case).
Thus, as CEO Travis Mickle stated in response to "where do they [key opinion leaders] see the biggest opportunity or area differentiation for KP415", Mickle answered abuse potential and duration:
The current methylphenidate products really suffer from a lack of duration. And that duration, you know, even though it's labeled as such, for all of the current products is lackluster. ... The only other option is Vyvanse which doesn't apply for many patients.
Less Insomnia Than Vyvanse?
As discussed in the Vyvanse section in Part 2, we should also consider the difference of effect on dopamine and norepinephrine, the neurotransmitter which is responsible in large part for insomnia side effects.
To recap: methylphenidate (one mechanism of action) affects norepinephrine much less than amphetamine does (three mechanisms of action). This may be why we see a trend towards more insomnia in amphetamine labels versus methylphenidate labels. Therefore, those who respond to both drugs, and for the same equivalently effective concentration, I think it is not a stretch that we will at least see less insomnia in KP-415 versus Vyvanse, if not more efficacy (simply due to the insomnia reduction). A word: the open-label safety data will be much more informative than the safety data in the efficacy trial.
Advantage 5: Low Inter-Patient Variability
Low patient variability (in terms of duration of effect) is obviously a huge plus for doctors and patients.
We currently have supporting data versus Concerta. Table 2 from the Phase 1 poster shows that when adjusting for effect size, there is a much smaller standard deviation in KP415 versus Concerta in terms of AUC, Cmax, and Tmax:
KemPharm, likely using the above data and other data points, confirms the low inter-patient variability by stating in its presentations that "active metabolism may offer more predictable therapeutic effect".
What Kind of Data Will We See In The KP415 Trial Results?
The KP415 laboratory "classroom study" (clinicaltrials.gov identifier NCT03292952) in children 6-12 is currently the primary efficacy study of the KP415 program. It enrolled 157 children in the US with ADHD symptoms as confirmed by DSM-5 criteria with a minimum score of 3 on the Clinical Global Impresssion (CGI-S) scale. Participants were titrated up to the optimal dose based on tolerability and dose-response, ending with either 20mg, 30mg, or 40mg.
Participants were then dosed for 7 days with either drug or placebo. Then, in a laboratory classroom (i.e.: a "classroom" designed specifically for testing the drug), their SKAMP-C and PERMP scores, across the full classroom day, were assessed.
The primary outcome of the study is the change in SKAMP-C scores from baseline compared to placebo. The secondary outcome is similar, but for PERMP scores.
New River conducted a similar trial for Vyvanse in Study 3, assessing SKAMP and PERMP results for 129 children between 6 and 12 years old. (That study, however, was a crossover design, while KemPharm's study is not.)
The SKAMP (Swanson, Kotkin, Agler, M-Flynn, and Pelham) scale is a "measure intended to assess functional impairment related to attention deficit hyperactivity disorder": the lower the score, the better. In clinical trials, SKAMP is assessed by trained clinicians in laboratory classrooms.
SKAMP is typically measured in three different ways:
- SKAMP-C, the "combined score", is a "13-item independent observer rating of subject impairment of classroom observed behaviors". Each item has a value between 0 and 6. This contains 4 sub-scales: attention (4 items), deportment (4 items), quality of work (3 items), and compliance (2 items). This rating is thus between 0 and 78.
- SKAMP-D, the "deportment sub-scale", with a rating between 0 and 24.
- SKAMP-A, the "attention sub-scale" , with a rating between 0 and 24.
Here are the 13 questions of the SKAMP test. The first four are attention items (SKAMP-A), the next four are deportment items (SKAMP-D), the next three are "quality of work", and the last two are "compliance".
For Vyvanse Study 3, SKAMP was assessed at 1.5, 2.5, 5.0, 7.5, 10.0, 12.0, and 13.0 hours post-dose for children between 6 and 12 years old. Here are the results:
Results diverge immediately, and the gap begins to narrow around hour 10. By hour 13, there is very little difference. Given the peak effect at the 2.5 hour assessment, it looks like the Vyvanse SKAMP results follow the PK curve (more on this later).
The Permanent Product Measure Of Performance, or PERMP, is a "math test that measures effortful performance without a learning curve (Wigal and Wigal 2006). The test determines the number of problems attempted and the number of problems correctly answered. A higher PERMP score indicates better performance."
PERMP is a 5-page math test with 80 problems per page, taken over the span of 10 minutes. Difficulty levels are set according to the results of a "pretest" during patient screening.
PERMP performance is separated into PERMP-A (number of problems attempted) and PERMP-C (number of problems completed). PERMP tests are given at time points identical to that of SKAMP assessments.
Here are the Vyvanse Study 3 results for PERMP:
(Click here for the original page, which has some more detail)
They roughly follow the SKAMP results, although in this case, the best effect is seen at 5 hours. This is probably because of a training effect — as the kids practice do test more, they get better at avoiding simple mistakes.
Finally, given 7 tests, with 400 questions each, seven times a week, I think almost anyone would become tired, and their performance would suffer towards the end of the day. Thus, with PERMP, the effect of both training and tiredness can somewhat confound the results. But the difference is so big that the confounding shouldn't be a big problem.
Correlation of Effect to PK Curve
As I examined the results from other drugs on the market, and new drugs yet to get there, I noticed over and over that the PK curve roughly correlates with efficacy. To thoroughly explore this relationship, it would merit a whole new article, but here is a quote to consider from the FDA, regarding Concerta:
... the analysis by age shows that duration of effect is likely affected by prolonged higher MPH concentrations, ...
What To Look For On The KP415 Readout for SKAMP and PERMP
- As KP415 seems to have low variability, maybe because it is a prodrug, we could see similar variability to that of Vyvanse.
- We might see a lower SKAMP score at hour 1.5 for KP415 versus Vyvanse. But, as the methylphenidate effect seems to be more delayed than the amphetamine effect, it might be only a small difference at that time point.
- A home-run would be to see placebo-adjusted scores at all time points similar to (or lower than!) that of Vyvanse on the SKAMP assessment, and higher on the PERMP assessment. If KP415 works better in the latter half of the day, we could see the effect fall off slower.
- But if (3) doesn't happen, we must still remember the other advantages of KP415 of quick effect, lower abuse liability, possibly longer duration, and possibly fewer insomnia side-effects. We must also remember that for those who can't tolerate amphetamines, the comparison would be against other methylphenidates, not Vyvanse.
What To Expect In The Side-Effect Result Data
As this trial is very short term, we should not expect very much information about side-effects yet. But they will be presented, and it is worth examining the Vyvanse Study 3 data to get a baseline comparison, as I am sure certain bloggers will take advantage of whatever the numbers are to paint a misleading picture of the drug!
In Vyvanse Study 3, patients with any adverse event in the dose optimization phase comprised 85% of the population, while in the crossover phase it was 33%, and for placebo it was 19%:
Conclusion: KP415's Market Share Potential Is Not Factored Into Its Stock Price
In a 2008 article entitled "Shire's Big Gamble on ADHD Drug Vyvanse", Edwards wrote that Vyvanse sales may fall off due to generic entry of Adderall XR. The writer noted that Vyvanse annual sales were pegged by Shire at $350-$400m, and speculated that this number might be too high. Of course, billions in yearly sales later, this concern obviously didn't manifest itself.
In my view, KemPharm is in an even more misunderstood situation with KP415. I believe the highest price target KemPharm has right now is Janney's $17, which wouldn't be enough to cover even mediocre Apadaz sales, let alone the potential for a rapid KP415 blockbuster. As stated at the start, $120m to $174m in revenues is all that KemPharm needs to support a valuation 10 times the current market cap. At sales equivalent to Vyvanse's $2.2B, well... I'll let the readers do the math.
I think that the gap between the potential of KP415 and the current price of KemPharm is so great that investors new to the story don't really believe it, and hence the price languishes. But that may change once the KP415 efficacy trial reads out.
Disclosure: I am/we are long KMPH.