Q4 2020 KemPharm Inc Earnings Call
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Yes.
Ladies and gentlemen, thank you for standing by and welcome to the cancer on fourth quarter and year end 'twenty 'twenty results on.
French call at this time, all participants are in a listen only mode. Please be advised that today's conference call is being recorded and if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your Speaker today, Mr. Jason Rando from Tinder in strategic advisors. Thank you. Please go ahead Sir.
Good afternoon, and thank you for joining our call today to discuss Kim from fourth quarter and full year 2000, Twenty's financial and corporate results.
Before we begin 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 confirms expectations regarding future operating results.
Forward looking statements are made pursuant to the safe Harbor provisions of the federal Securities laws and represent management's current expectations.
Actual results may differ materially.
Ken pharma disclaims any obligation to update or revise its forward looking statements, except as required by law.
More complete information regarding forward looking statements risks and uncertainties can be found on Ken forms filings with the SEC, which are available on <unk> website under the Investor Relations section.
Speaking on today's call will be Travis Mickle, <unk>, President and CEO and the Duane <unk> Clifton CFO.
Following their remarks there'll be a question and answer session during which campfires management will respond to questions that have been submitted during the past week since that companies call regarding the approval of the stars.
With that it's my pleasure to introduce Travis.
Thank you, Jason and thanks, everyone for joining this afternoon and this evening.
I wanted to just quickly provide some updates are really just recaps from what.
What we've discussed over the past few months.
I think most of our questions that we've received and most of the focus will be around the financial position of the organization. Since now we're able to actually report that out. So I think the focus of today's call will center around very much so the financial position of the organization.
So it started start out of course, hopefully every single person is aware that's on this call are will be listening to it to the FDA approved our product to stars last week.
That is of course partnered with an affiliate of granite point capital and the commercial partner in that case is also corium.
Under the license agreement, we're eligible to receive regulatory and sales based milestones totaling up to $468 million and also includes a tiered royalties up to the mid twenties.
These milestones are broken up into various amounts payable include an approval and of course sales based milestones.
Uh huh.
Corium has issued a press release regarding the approval of the stars I encourage you if you want to hear a little more from them on the product are please seek out their press release, a true more about our stars.
Updates on the partnership.
Again, we've entered into a consulting agreement with corium.
On other projects other than keeping 415 slash of stars.
This provides us additional revenue and we have of course, our ongoing collaboration with K VK Tech and.
For the launch of <unk> and the pilot program there that just launched in Alabama.
Greatly improved financial position I will let Dwayne really talk through all of this I think everybody on the call Oh listening can see the tremendous turnaround.
From from a year ago, two years ago, even before that.
And I'll, let him go through that in detail.
And then kind of looking forward. We have this this great achievement I do want to spend a little bit of time, mostly towards the end kind of outlining for everybody you know, where we believe the product is differentiated.
You know help help point to the value proposition a little bit more and provide some context on I think it'll be very very helpful. For you as this test in the future.
Of the product and the future value proposition on the product as well as the value to this organization.
So with that I will jump right into a talk a little bit about the approval of the stars of course this was approved on.
On the second this was actually a very late night event there.
There was no Pizza party just so everybody knows are in fact, many of US had already gone home for the day waiting for that event to happen an official letter from the FDA.
Corium does expect to make <unk> available in the U S. As early as the second half I think in general.
For anybody that would launch an ADHD product at a great time to do so is at the very beginning of the school year. So.
If I was in Perry Sternberg shoes over there at corium that would be where I would focus on my most attention.
As far as NDA approval, not only validates the pro drug approach the L. A T approach that we've developed here at Kim form, but also the value potential of each one of our pro drugs that we we do spend a lot of time and effort on to get these products approved this is goes far beyond the stars.
This goes into keeping 44.
Same active the only active ingredient and keep the 87 nine so with this just really a pivotal point in our organization's history.
Turning to the partnership a little bit more for those that arent.
No really familiar with this license again it started off back in September 2019, it's with a portfolio company directly of G. P C.
Who has been assigned the commercialization rights to corium.
Corium has headed by Perry Sternberg I've mentioned him already this is the guy who are really made vyvanse, what it was commercially.
Much of the team that worked with him. There is now at corium and we are very excited to have.
Such a great commercial partner literally are very complementary to this great development team that we have here to Chem farm.
The milestones and royalties I've already mentioned so.
Just briefly I did want to touch on the marketplace.
And this is really about a prelude to some of the discussion I'll have related to some questions.
This is a very big and growing market I think we really underestimate when.
We think about ADHD is so well understood is $17 $5 billion market.
In this particular case divided up yeah sure in a number of different products, but two major categories stimulant and non stimulant with only really two stimulus based types of products.
And we believe that our product has met many of these if not all of the key advantages that we intended to go out and demonstrate as far as how we can improve.
On methylphenidate based products.
Uh huh.
So with that I'm actually going to turn it back over turned it over sorry, two low Duane and he'll go through the financial update.
Thank you Travis and good afternoon, as we've spoken about already a couple of times certainly we are pleased and excited to report that the multiphase financial restructuring process has been completed.
This was the culmination of a series of transactions that began.
At least Q4, but really went back of last year, but really went back even further than that.
And the result has been pretty astonishing.
We were able to put together a string of transactions, which culminated in gross proceeds of approximately 94 million to come for.
This allowed us to regain our listing on the NASDAQ capital market back in January.
We eliminated all of the companies that as of February 8th.
I'll, probably be talking about that for the rest of the year just because it really is.
A major accomplishment for the company given the years that we've been under that that really since pre IPO.
And we've added substantial new capital to propel the company's growth efforts.
We're positioned with a great balance sheet now significantly extended runway.
And frankly, it's a brand new company with a whole different.
Set of strategic options available to us for the future.
Specific to the Q4 2020 financial results, we reported revenue of $2 4 million for Q4, that's primarily composed of services revenue under our corium consulting arrangement and other consulting arrangements and compare that to Q3 and you can see that was about half a million more.
On the prior quarter we.
We reported a net loss of $4 9 million or about $1.07 per basic and diluted share compared to a net loss of $6 million or $2 97 per basic share for the same quarter in 2019.
Our operating loss for Q4, 2020 was about $3 2 million and that is an improvement of $1 2 million by comparison to the same quarter in Q4 19.
This was primarily driven by an increase on the revenue as well as a decrease on our operating operating expenses during Q4 2020.
And you can see here.
R&D expenses of $3 1 million G&A expenses of $2 5 million.
Essentially here you can see that we are maintaining our same expense posture as we have been since 2000 since since our.
Adjustments to the.
Cost structure in 2019.
Turning now to the full year 2020 financial results.
We had full year revenue of $13 3 million for 2020.
This was primarily services revenue.
As well as.
We received a regulatory milestone revenue of $5 million, which was at the NDA acceptance last may.
The K before 15, now stars and compare that to 2019 revenue about $12 8 million.
Net loss for the full year was $12 8 million or $3.21 per basic and diluted share compare that to a net loss from the prior year of $24 5 million or <unk> 23 per basic and diluted share for 2019.
Uh huh.
The expense picture follows along with what I've already described to you related to Q4 and so for full year 2020, our operating loss was $5 6 million.
That's an improvement of about $14 7 million compared to operating loss in 2019 of $23 million.
This was primarily driven by the increases in revenue and decreases in operating expenses.
Now, let me turn to the balance sheet and of course as we've gone through the first few months of this year.
Balance as of cash at $4 3 million as of 12 31 is certainly a fact, but thats not the story as you well know.
On our burn rate, we had a decrease of about $1 1 million during Q4, and that's been consistent with what I've been telling you over the last several quarters and that remains the case, a burn rate of around $1 million per quarter.
Based on existing resources.
And really going past now all of the transactions that have taken place in the beginning of 2021.
Our cash runway is much longer here it says at least through 2023, but to be honest.
It's even longer than that based on our current.
Our current operating forecast.
Total debt net of we had a net total debt of $67 7 million as of December 31.
But as you know it's been fully extinguished.
Did that sort of three ways here, we paid $30 million out of the January 21, offering we converted 31 half million into preferred stock also in January and then we paid the remaining amount of $8 million of principal interest and prepayment fee in February 2021, again, Thats a great accomplishment for the <unk>.
Company and really puts us on a different place.
<unk>.
As of March 10th.
Normally we wanted to make sure. We got your number that kind of says exactly where we are today total cash today or as of yesterday was $77 6 million.
This does not include any.
Milestone payments related to the approval of the stars. This is really just the cash that came in through the series of transactions as well as cash that's come in from warrant exercises that have also been taking place over the last several weeks.
Total shares outstanding as of yesterday, there's $28 million 376321.
Fully diluted shares outstanding $38 6 million.
And that includes $9 6 million of shares issuable upon exercise of the remaining warrants.
The press release has more detail around exactly how many have been exercised and we can try to address that as we go through the questions later on.
Other feature of the balance sheet and cap structure today is that on.
Of that preferred that was issued and conversion of the debt none of that preferred stock is outstanding as of March 10.
So with that Travis I'll turn it back to you.
Alright, thanks for Duane.
And.
We are taking a little bit of a unique format. This time with the call that we just had and so many questions coming in from our hundreds if not thousands of shareholders.
We wanted to address as many of those as possible. While also addressing questions from analysts. So we've collected those questions ahead of time able to kind of.
Solid date and precisely have those are in a form that we can explain I did want to mention that if we didn't answer a question that you had it's either because it was answered in something else in the presentation.
We plan to address that.
And some other forum or it's just something we can't talk about because it's a confidential business discussion, it's something that maybe we don't have all the information on whatever it is it's a very valid reason.
We want to tell you everything we can.
We have to tell you everything that is legally responsible to do so please.
These questions are just a piece of what we've heard but I think are representative of everything that we feel is important for everybody to know as well as many things that you should know.
So it was the first one really goes off of what you've already spoken about with Wayne can you clarify the number of fully diluted shares outstanding after the restructuring.
So I just spoke to that a moment ago that that number again is $38 6 million fully diluted shares and.
And that's inclusive of the warrants of $9 6 million. It includes the preferred stock that was issued.
Really every element of the recent transactions is included in that number.
Okay, well the next one really its very similar its can you clarify a number of warrants exercised not exercised.
This one's a little bit different as well as the current market cap and cash position.
Right so.
In the press release, we tried to provide this detail too so with regard to the number of warrants.
Exercise.
To date or as of yesterday.
$12 million 281000 warrants have been exercised.
And converted into 11 8 million shares of common stock.
The reason for that difference is primarily that in some cases warrants were exercised on a cashless basis. So it resulted in a less shares being issued.
A large majority.
It was actually incremental cash that came into the company and to the company, which is included in the cash balance I mentioned of $76 million.
And then of course warrants already exercised or excuse me that remain to be exercise is the $9 6 million that we've talked about.
Our current cash position of $77 6 million again, we've already talked about that.
And then current market cap I guess, if you base. It on today's closed just $9 98.
Literally doing the math right now.
And you would assume.
I guess the 28 point.
$28 4 million approximately shares outstanding gives you a market cap.
On that basis of $283 million approximately on.
On a fully diluted basis.
38.
0.6 times.
On $9 98.
This.
Suggest a market cap fully diluted is $3 85 point too so.
I think that answers that question pretty well and I do know that because of the flurry of these transactions that while these seem like very basic questions. All of the filings we've been required to do obviously, we're not intending to obfuscate, but it's pretty technical a lot of these transactions and so I'm glad that we could provide some color.
<unk> today and.
And by the way if there are any follow up questions. You know continue to send those in either at info at Kim farm Dot com or through the contacts at tea brand and we will continue to try to bring clarity where we can.
Thanks Duane.
The next one is more of a general question I think ive covered a part of it.
A lot of folks are trying to understand the commercialization plans that corium have and of course any updates a day that they have provided.
The first one on kind of related to that is the launch till expected I believe I've covered that.
Of course, my belief as well as you know I think their press release and in the press release, we are that they reviewed that we issued.
Allstate is such so theres nothing to the contrary I think as far as any detail. The best sources youre going to find per that is located in the presentation that corium and Kim Kim farm Gaped together that's found in the past events section of our website. It's a full transcript there you can go read it see the slides.
Actually very well done and so.
I think thats going to be your best resource nothing has changed from that.
Other than the fact that we believe we have an.
An excellent label, perhaps the best in class label, when you talk about ADHD products and.
That just that just means it's all the more valuable and important to do our very best.
We've got some questions are very astute shareholders. What is the status slash process of scheduling with the DEA.
Some of you may recall hearing me speak about this in the past the day is required to issue a preliminary schedule decision for the prodrug SPX tier Dexmethylphenidate 90 days. After approval now that is based on a recommendation that sent from the FDA to the day.
Hey.
At this time that remains a confidential.
Recommendation and at such time as that final determination is made we will be happy to pass that along.
To our shareholders and potential investors.
And tries to be clear that's 90 days from when.
From approval date March 2nd Yeah.
I'm really glad we have this format actually works a lot better.
The next question was submitted from one of our analysts.
And this one I think is on a lot of People's minds. So we were happy to spend some time here your market cap is currently very near.
It was before the successful Paducah date, how do you account for what I view as a clear disconnect between the current valuation and the potential value to Kim farm from the recent <unk> approval, well I certainly won't pretend to.
Understand all the ins and outs of.
The public markets and of course, everybody has an opinion.
Whether it's good bad or indifferent, what I would really encourage everybody to do and I can sit here and tell you. The great things that I believe are in part of it in the label for <unk> I can tell you what I know about the.
ADHD marketplace, what the needs are I can tell you personally what my needs are and those are my children.
But what I can't do is fully convinced you of.
Exactly what the value is because I've said to all of these things multiple multiple times. So what I'd encourage here is go and look at the label for Concerta and Focalin XR. These.
These are two of the most prescribed products in this methylphenidate based space.
Take those labels and put them side by side with Sars and look for things about heightened weight look for things about onset and duration look at the different grafts that are included in there look about sprinkling and.
Pro drug profiles and pharmacokinetics.
And just look at the differences and you'll be able to tell I believe that there are major differences from these two are very valuable products, both concerta and Focalin XR right now roughly about 1% each market share they're highly generic sized the only benefit to these one per.
Market share since these guidance both half is the fact, we have a brand name.
We have no differentiation from a generic which would be cheaper and yet they still hold on to 1% market share. So.
I really trying to say here I think alluding to any way you'll have to come to your own market assessment do we think this is 1% the same as a brand branded generic.
Or do we think there is 2%, 3%, 4% five per cent of the marketplace and then what does that mean, well we know it's a $17 $5 billion market.
I think really the disconnect is between the value proposition and what the market shows. So everybody was focused on what the label would say and forgot at the end what is the value of that label.
And I think that's at least in our belief where the where that disconnect lies.
I do have a presentation that we're going to share at the Roth Conference. It is available if you go to our press release and sign up for the register for the conference you can listen to it now I walk through the label in detail I'm not going to do it on this call. It would take forever. So certainly I think that will help you on your.
Exercise there.
Another question kind of relates to this kind of pilot this in here.
His other milestones for Istar as well in the license agreement. There's also on approval milestone associated with <unk> 44.
There's also a number of different sales milestones, we're giving you what our GPC allows us to tell you. So we are under confidentiality, we havent redacted agreement in the public space I encourage you to go to that.
I also encourage you to look at other licensing deals this isn't strange or ordinary extraordinary. This is very much a typical type of licensing deal. So you could probably guess and get fairly close on what those breakdowns are and.
If you wanted to do that please feel free to add literally one thing I would add and one of the questions that we had sort.
Sort of summarized here someone was curious if there are specific.
Two first first dose or first prescription or sort of I would just say we have very simple milestone structure, it's simply based on achieving certain sales tiers. So again, we can't disclose the exact amount of those tiers, but theres nothing fancy.
When you achieve X dollars in sales for a year you achieve certain milestone. So thats very simple if we're able to bring <unk> hundred 84, two approval. It gets added into and has the effect of taking our stars sales plus K before 84 sales and then you can reach each.
To your arguably you would probably reach it sooner because now you've got two products contributing sales. So it's a very simple milestone model.
Very very good point.
I was there anything else I believe I missed on that question.
No I think you covered it well I think the way I think about it I know when we saw the data from 2018 sales I believe it is of Focalin XR and Concerta.
Focalin XR again on a label book to label comparison, there's amazing differences in terms of benefits to patients potentially for Starz.
And Focalin XR had around $350 million in sales approximately 2018. Similarly concerta again this is as generic.
<unk> had sales in the approximate range of around $500 million. So just wanted to put numbers on that and you combine those two products youre approaching.
$850 to $900 million in sales, Okay, and again, making that label comparison, what do you think <unk> would be able to do is concerta and focalin in a generic position was able to get those kinds of sales. So that's the.
That's our CFO his way of saying peak market share seems to not be well understood.
At least that's my guess.
Right.
But one point I do want to make.
Certainly here.
We're the developer we're trying to convey as best as we can the differentiation of the product. That's why we're both encourage you to go and look at the label.
We're not going on making promotional claims.
We are not a regulatory.
The agency, we're not we're not claiming to be the FTA. So.
Corium has a lot of work to do because the label literally just came out and while they I'm sure. They predicted certain things at the same time I will tell you. There are surprises and this label that are that are great surprises. So.
It takes some time it takes some work but ultimately.
I think we're in VM and agreement. This is a great product it will do very very well and ultimately I think it's just highly underappreciated.
So the last question is a little more strategic and also from one of our analysts.
Kim harvest completely transformed as balance sheets since year end 'twenty with debt dropping from 60, roughly $65 million you didn't have the exact number apparently to zero and cash is far higher than it was back then.
How should investors be thinking about Kim farms' capital deployment and Youre looking at any new assets to potentially acquire.
I think there's actually several several parts to this answer.
Of course the financial.
Transformation, I mean, low Duane talking about our current market cap at one point last year is sitting as an OTC company, we had a market cap below $15 million.
To go to that to $280 million market cap and this is meaningful many different ways, including access to <unk>.
Mutual funds additional new investors shareholders.
Just visibility credibility on the list goes on and on and on about what that can mean to an organization have a meaningful market cap.
But at the same time, we've removed the debt overhang.
The 67 million net we owed.
It was less than the $48 million approval milestone that would have been.
That is available to us and so you.
You start to do the math you worry about market conditions.
There was just a huge transformation, so I can't undersell that in <unk>.
Certainly it really proves the commitment we have to continue to add value for shareholders.
When we think about the capital deployment as we look forward.
This is where we get very excited his book.
We've got this transformational product. So we are going to optimize it if we were a commercial party we would be out there.
Really doing everything we can in all your questions be directed well what about market access what about pricing what about what about your sales force how big is that going to be I can't tell you any of that excess corium. They are a private company. They don't have to tell me you don't have to tell me and they really don't have to tell the public.
But at the same time I'm very convinced that they know exactly what they're doing and we will do the very best because they have all the incentive in the world to do so.
And certainly the right team in place to capitalize on that.
At the same time.
Our focus is back into development, some but we will be supporting that entire effort, including manufacturing support our medical affairs and scientific literature, and just anything regulatory Theres a lot on regulatory work that still goes on it wasn't a one and done event. So we will be doing everything we.
Can to optimize the value of that product as well and that will not change in the near term or the long term.
Secondly, we have this great validation for our technology and <unk> approval is great, but the opioid space.
<unk> difficult is the best adjective I could use.
And.
At the same time.
We're going to deploy our capital and our resources and our development expertise in areas of high value high need high value.
And kind of to answer the last part of this or are you looking at any new assets.
Absolutely we should be we should be looking at things that add the most value and if it is a little later stage and we can add our approach at our development team whatever we can do to create new value for the shareholders. That's exactly what we intend to do.
So I hopefully that wraps up that question on the joint did you anything I missed on that one no I would say.
Not only is it what Travis my view, but of course together with our board.
This strategic direction the strategic focus on what's next is it going to be I think a very important conversation, it's something that we talk about on an ongoing basis.
But I can't say enough, how the new balance sheet really now makes us have.
Real conversations about what's possible. What's next so this will be ongoing discussion and I think over the next several months throughout the rest of the year just on an ongoing basis, we will do our best to provide updates as we make progress in this area. So.
I appreciate the question frankly, it's really the right direction.
To be thinking about.
Alright with that we don't have any more questions that oh.
For this time allotted.
Again, I'll reiterate the Roth Conference again, there is a link to register and listen to the fault current management presentation. Hopefully can answer a few more questions I think all your financial updates can be found here.
So certainly this is the best resource for that.
At the same time I really wanted to thank everyone for your time the intense.
Interest.
And the excitement around the approval.
All those great things are still present in the company. So think my shareholders and I appreciate everyone's effort.
Okay. Thank you and operator with that we will conclude today's call.
This does conclude today's conference call. Thank you for participating you may now disconnect.
Okay.
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On forward.
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EBITDA.
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