Q3 2021 KemPharm Inc Earnings Call
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Good day, and thank you for standing by and welcome to the Cam Farm third quarter 2021 results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
I'd now like to hand, the conference over to your first speaker today, Jason Rando with Tiberon strategic advisors. Sir. Please go ahead.
Yeah.
Good afternoon, and thank you for joining our call today to discuss <unk> farms third quarter 2021 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 change at any time, including but not limited to statements about <unk> expectations regarding future operating results.
Forward looking statements are made pursuant to the safe Harbor provisions of the federal Securities laws.
Present managements current expectations.
Actual results may differ materially.
<unk> 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 in <unk> 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.
<unk> remarks, there will be a question and answer session, which will include responses to questions that were submitted during the past week.
With that it's my pleasure to introduce Travis.
Thanks, Jason and thanks, everyone for joining us on our call today.
The third quarter was certainly a big and transformational quarter for the company. Our biggest news of course was the launch of a startup and as most of you are certainly very focused on the launch of the product.
<unk>.
The near term here, while we can't give a lot of details based on our agreement with Corium. We're certainly excited to share with you. What has been passed along is that within the first 100 days into the launch.
Now have access to over 50 million lives that are covered by both commercial and Medicaid insurance.
And that's certainly in my experience and what I've seen it's been a tremendous win in the early days of the launch.
That's certainly a remarkable achievement in such a short amount of time and it certainly speaks to the corium team's deep experience in the managed market space.
Another highlight of the it was really a recent highlight in a kind of a look forward we have the SPX trial.
That got underway in the Q3 as well as continues.
To proceed.
We expect it still to have data available before year end for that particular trial.
From that data, we will provide more detail on the clinical development path for SPX or SPX related products.
And indications.
Again another.
Quarter financially the Duane will we'll report the details there, but certainly revenue based on our consulting fees continues.
Well as our continued.
A small spend.
Until we have.
The resources and the budget available for.
For our development programs.
And then last but not least as many of you have already seen in the press release, we continued advanced strategically forward as a company and with our board.
Welcome today with me and Duane Rich Pascoe. He is joined today as our executive Chairman.
Helpful Here in the office as well as with the board. He's here to help guide our organization in the future.
And joined US here on this call. So rich I will turn it over to you. If you want let's say a few words. Thank you travels I appreciate the opportunity to address the shareholders today and I just want to express my gratitude.
To the board and to the organization for being able to step into this new role as executive Chairman as I think everyone can test 2021 has truly been a transformational year for Kim form the team has done a remarkable job of setting into place the foundation for a strong company as we move forward.
We have much to celebrate with the launch of <unk> in particular, but.
The board and myself believe that there is there is more that we can do to build value for shareholders and Thats. My role here is to come and help assist the management team in that effort.
Our goal is truly to create opportunity for our shareholders to grow to build value in the company and to do that.
By building a profitable fully integrated biopharmaceutical company with multiple assets that we can take into the market.
Travis the board myself, we're all committed to creating that value for our shareholders. We believe that by continuing to build upon the successful track records of the company has in developing assets getting those products approved by the regulatory authorities and into the marketplace is critical to our long term success and as we look forward we will.
Continue to find ways to retain the value of those assets and be able to deliver that value back to shareholders. So I am just pleased to be able to be a part of the organization now in this new role as executive Chairman I expect that this year will continue to be.
A banner year for Kim form and Moreover, I believe that as we look forward into 2022 and beyond we will continue to grow the organization in a way that delivers value for all of our stakeholders, including patients physicians that treat those patients.
Our employees and importantly, our shareholders, who have been with us and supporting us and we hope to continue to support us in the future so with that.
Pleased to be able to assist the organization in that effort welcome.
Welcome this opportunity to be a part of that and I look forward to.
Coming quarters, so with that Travis I'll turn it back to you. Thanks Rich yeah certainly.
<unk> wholeheartedly.
Great way to wrap up that and certainly I think in line with that is certainly one other point that we had updated in the third quarter.
Tamara Seymour joined our board of directors, it's almost like old news, we have been working with her for four months now, but a great. Strategic addition, as well with their experiences in the past with the various transactions.
As well as.
Her accounting CFO background.
And.
Chair of the audit Committee, which I know the Duane is very happy about.
Not that the previous one had any issue.
Rich by the way.
Turning now to.
Really expand upon what Richard has really introduced here the <unk> value proposition.
This is more about where we sit today I think this will change and I think this will adapt.
Going to approved in partnered products on which to build our company on.
Focusing in CNS neurological diseases, and then using leveraging our lead platform technology to create additional opportunities as well as we look outside our own walls.
For the first time in our existence.
That's what we are and that's what we hope to be at least here in the very near term.
For those that aren't as familiar with the company and the technology or that you're fairly new to the story I will just spend a couple of minutes going over the high level I just mentioned the lead project technology, It's a fairly simple general concept.
An FDA approved product, it's got some sort of sub optimal properties.
Poor PK poor absorption poor metabolism, we attached to it referred to as a ligand do you get a new molecule from that that new molecule has the benefit of composition of matter patents, sometimes new chemical entity status and then <unk>.
Once you have that.
You administered as directed and the same drug comes back off so you still have the same effective.
Product, which gives you the benefits of a $505 two regulatory path in many cases.
So this has been a basis of which stars was was developed and approved <unk> was developed and approved.
SPX containing product would follow a similar path.
Briefly on the next slide just covering kind of where we've been.
As we look forward. This is the foundation on which we'll be able to financially.
What we want to do in the future.
<unk> of course, and <unk> 44 had been already partnered with granite point capital is the financial partner Corium as the actual commercialization party.
Portfolio company of granite point.
There's a number of different milestones, which I've highlighted in the past and I'm sure you can find the details too.
We have a number of SPX candidates.
Granite point does have a right of first negotiation and that right of first negotiation is triggered after we have our first proof of concept trial.
In man.
After the 150 day window that then flips to a rover so right.
Refusal on any valid third party offer and terminate the onetime ROFO terminates.
Upon an NDA acceptance. So if we do decide to pursue our own programs, we would do so.
Without hindrance or an evidence from GPC.
Turning briefly to the product and probably spoken several times about Srs.
Many of you are very familiar with this and I hope. This gives you a nice overview if youre not of the product is indicated for the treatment of ADHD.
In patient, 6% up so without any restriction on the upper end you can take us with or without food you can actually open the capsule and sprinkle it on Apple sauce or water.
And I think what we're hearing back is certainly there's a lot of benefit to having a schedule for component here is 70% of the product.
A lot of benefit to the uncertain duration, but what people resonate a little bit more than we had initially assumed which is there was no changes that we saw in our clinical trial in heightened weight over a course of an entire year.
And many of you may know that this is the primary concern, especially for parents have growing children and.
And so I think physicians here this feedback a lot and this is something that.
They believe will have value for their patients.
Parents, certainly could have some value, but that's some initial feedback that we're getting and I think that that certainly is captured in the label and something that corium has messaging.
Turning now to the commercial launch I did mentioned briefly at the beginning.
Progress at Corium has made when it comes to.
Managed care commercial Medicaid lives now over $50 million.
That momentum really does built and its receptivity across the board from patients and physicians providers and now payers.
They estimate over $50 million, they think the civil grow.
Over the coming months, they will of course plan there their launch in there.
Continued efforts around coverage it doesn't makes sense to try to sell something that nobody can get paid for of course.
In general I think over the last six months or so I've seen a lot of companies that have done recent launches.
It's challenging and it's due to of course, the COVID-19 environment. It's due to changes in how physicians will take sales calls and get introductions I think.
Corium has figured out ways around this as many organizations have.
And the wins with payers are really I think the biggest component of where we see the future with with historic.
So we'll keep keep.
Along with the updates that corium will allow us to do and of course, we're tracking.
Exactly what theyre doing on a day to day basis as best we can.
Looking forward looking at the SPX opportunity and highlighted this before but I just want to spend a second here kind of talking about why we're excited about this of course <unk> is the component and a star is about 70%. It's a prodrug that we've added to.
That particular product, it's the only scheduled for methylphenidate based products all of the other ones are scheduled to this is a huge advantage for prescribers for patients for refills pharmacist. The list goes on and on for convenience sake, but that's also perceived to be safer less abusable version when you consider methylphenidate.
These products.
Also as a unique PK profile, which allows for a gradual and continuous release throughout the day and there is no generic equivalent and it cannot be substituted.
And that's by law in most states.
We.
<unk> initiated a trial with SPX under our <unk> IND.
Now if you recall 879 is our program for stimulant use disorder.
Where we want to investigate that sort of <unk>.
Indication and it's looking at the pharmacokinetics safety and some of the exploratory.
Facts of what happens with SPX at high doses.
Data released still on track for the end of the year.
The goal with this study is to help inform us, though exactly where we want to head in the future with drug development. So I've mentioned SUV stimulant use disorder, we have also.
First again, it idiopathic hypersomnia, which is a severe.
Sleep disorder, as well as others, which methylphenidate has been useful in the past.
And so.
With that data in hand, what we're going to do and how we're going to make our business and clinical decisions here will be based on a number of different factors clinical risk.
E clinical.
How likely is to succeed.
Development risk so what what challenges may we see during the development path.
Regulatory risk is actually something not to be underappreciated.
First time products always have a more difficult road.
It's hard to.
To convince the FDA that of what you're always doing.
And even though it might be much needed. It just it's just a difficult task in many cases <unk>.
<unk> opportunity. This is this is a big part right we have to make sure that we're in the right space and it's going to have the right value wouldn't come out on the other end of the unapproved product.
Cost of development.
If all things else are equal it.
Go with the cheaper choice right. It just makes more sense.
As well as the time to approval anything that gets there faster.
Already know when I've already informed.
All.
Everyone investors and the like.
<unk> is a challenge because it will take longer.
As far as the time to approval. So all of these will be part of that.
Those considerations as well as generally with the strategy right. We don't want to step on their own toes with historic we don't want to butt up against other products, we don't want to run into difficulties with brokers and <unk>.
All of those will be components, so hard decision.
So at this.
Time will actually be turning the call over to La Duane will provide you with a financial update.
Thank you Travis and good afternoon, everyone.
For the third quarter, we reported revenue of $2 million, which was derived primarily from service fee revenue.
<unk>.
Is the same service fee revenue, we have been reporting to you and it's being earned under consulting arrangements with corium that continued through March of 2022.
Kim farms net loss for the quarter.
$1 8 million or <unk> <unk> per basic and diluted share compared to a net loss of $3 million 468 per basic and diluted share same period in 2020.
Net loss for Q3 was driven primarily by our operating loss of 2 million $2 2 million, which was partially offset by noncash fair value adjustment income of $300000 related to derivative warrant liability and some net interest income of about $100000.
Net operating loss of $2 2 million for Q3 of 'twenty, one was a change of about $1 million compared to prior year.
Which was primarily due to an increase in operating expenses period over period.
That increase was driven by R&D expense increases of about half a million dollars due to the ongoing SPX study, which Travis has described.
And an increase in other G&A expenses of about half a million dollars.
Turning to the balance sheet as of September 30, cash and cash equivalents were $131 5 million, which was a decrease of about $800000 compared to June 32021 are a little better than what I've told you our burn rate has been and so we can.
<unk> to be prudent and manage that wisely.
As of September 30, total shares of common stock outstanding was 35 million 317, three and 13 chairs and fully diluted common shares was about 46 5 million shares which includes warrants outstanding of $4 2 million.
Our financial position remains strong as a result of the restructuring and recapitalization effort completed earlier this year and it is healthy with a cash balance that provides us with the flexibility to consider the best opportunities post in both internal and external to leverage our position and drive growth and shareholder value.
<unk>.
This call our financial position derived from our restructuring led to the recently announced up listing to the NASDAQ global select market.
The global select market, which is comprised of only 1450 stocks is recognized as having the highest initial listing standards of any exchange in the world and is considered a mark of distinction among public companies.
In order to qualify companies must be strict financial and liquidity requirements.
As well as corporate governance standards on both an initial and continuing basis.
Strategically moving up to the NASDAQ Global select market provides the opportunity to introduce Kim farm stock to a new echelon of potential investors.
Particularly those who only consider investments in companies on that exchange.
This is an exciting development and one that we expect will provide benefits both now and in the future.
And so with that I'll return the call back to you Travis.
Thanks for joining.
So just looking ahead wrapping up here.
Certainly, we're very encouraged with the corium lunch.
We believe that they're deploying their sales team and their efforts in the right places and the focus on managed care and access is absolutely the highest priority.
Early days do you want to make sure that those scripts that are written are filled and so they continue to be written and theres no kick back back to the physician, which causes some unnecessary difficulties for them.
We do expect still to have the data from the CX trial before year end.
We also expect to be able to provide a pathway forward.
With that based on that data.
Our cash on hand, our potential for future revenue provide us with a really unique and strong position.
To act strategically to think beyond the walls of Kim farm and to think about what opportunities we have internally.
And so beyond Star is we do see those as the unique opportunities here the lead product candidate.
That will move forward with SPX.
We should be able to certainly outline as early as January perhaps hopefully early January right. After the data comes out and then ongoing evaluation of non SPX candidates and external opportunities.
Ongoing and certainly cash and future revenue all the great data that we have will support those efforts.
We're going to actually now turn to questions that we've received both from analysts as well as our shareholders investors like yourselves.
Probably the last quarter, we do it officially like this so hopefully we will do some actual live analyst questions, but will still always take and try to answer a few of the investor questions directly.
So thanks Travis.
Everyone that submitted questions prior to the call.
And so we'll just kind of start stepping through them.
Our first question is given the favorable DEA schedule for for SPX. When will we know the details of your new expanded development plans for <unk> 79 for a different product candidate using SPX as its sole API that you hinted at months earlier.
Well I think we've covered this a number of times already but just just for clarity sake.
We anticipate having the data for the trial by the end of the year.
That will allow us to actually hone in on the plan and prioritize what products to advance now it's unique because it gives us multiple opportunities. So maybe there is one or more opportunities.
We certainly want to identify which one of those where.
Where you could build a franchise around this.
SPX product.
Okay. Good thank you.
The next question what has the early launch taught you about the receptiveness of the market towards the stars.
Indications from Corium included including the updated provided in our press release and here in the call itself as too.
Payer penetration really suggest that the rollout is going very well and according to their expectations.
I think Korean display in a smart and being carefully orchestrated as to maximize resources towards near term opportunities that will build a foundation for <unk>.
Sustained success.
Certainly again I'll reiterate it.
Fourth time.
Very encouraged by the recent news and we'll see where the prescriptions track in the coming months.
Okay.
Sure.
The next question at what point in development must Corium Act upon its first right of refusal or right of first negotiation for future products or lose that right. If it doesn't act by then.
So I'll take this question.
Yes, so the agreement.
There is essentially the question outlines.
It changed the order it's really initially for SPX based products. There is a right of first negotiation. So when we have.
I have a new product.
Candidate and we run a study have the proof of concept data available.
To provide it to corium and then they get a 150 day evaluation period to consider the data and decide if they would like to license the product or at least make an offer to do so now Kim farm does not have an obligation to accept an offer.
From them at that point in time and then in.
So it can just run along and either we meet terms or we don't and it just depends on all the criteria that Travis has outlined in all of the strategic considerations, we would take into account.
So at any rate that rate remains until the point when for that particular product candidate and NDA has been accepted and so at that point that right of first negotiation.
Now with regard to our right of first refusal.
Think of it as kind of coming coming second in succession, if you will because thats really sums.
Something that would be triggered only if theres a bonafide third party offered to license one of the product candidates covered by the license agreement so.
In that case, then you've got a third party that has expressed interest in licensing perhaps.
We have to provide the terms of such an offer to GPC that the team there and now they have a 30 business day opportunity to evaluate that and decide if they want to match the terms and therefore step into the shoes of that third party in licensed that product candidate.
That's.
That right again, there are none of these rights exist following NDA acceptance.
And once they really decided not to exercise a roper we can move forward with that third party and there is no additional rights for GPC at that point so.
Okay. Two initial royalty milestones sales occurring in 2022, but beyond that we are unable to provide more clarity as you are aware corium is driving the shift in terms of product.
Penetration and as well our ability to communicate the specifics about the rollout.
Yes, I would say that as you watch payer access grow I think that's a good indication that things are proceeding, but again it remains difficult to predict when that translates into hitting the specific sales milestone. So, but we will continue to keep you posted correct.
Okay. So the next question.
The.
The question says I was wondering if you could maybe talk a little bit about the ongoing review of the SPX data is any efficacy being measured in the proof of concept SPX trial currently going on how.
How much have you shared with corium and continue to share with them and also have you had any additional discussion with them on the dataset.
Yeah as test have discussed a few times in the presentation. The ongoing trial is designed to investigate.
Several of the properties of STS, including the Pharmakinetics of high doses safety additional.
Kind of efficacy sort of effects and.
And an exploratory fashion. This data should should then inform us of our what prioritize.
Vertical Fort first and what other indications may be possible.
The next step in his.
Pinpoint what we want to move ahead with and what the timeline looks like as well as what the value proposition. So.
Our initial early data is exactly what was expected on how SPX performs farm, Connecticut, <unk>, absolutely no surprise, there, but that data and now must be paired with the additional pharmacodynamic data or the effect data and then the safety in order to decide what clinical path an indication should be advanced first.
So in terms of corium.
To keep them well informed they know what's going on.
Once we have data available for any clinical candidate will provide that to them as a proof of concept, which then would initiate that rover rofin process.
Okay. Thank you.
The next question is.
Based on current information when do you think you will be able to file an NDA for.
By age and Su D. Those indications is there any special designation for either of those programs from the FDA possible.
Yes, I think we've outlined a few times, but just just to say it one more time I mean, it will be based on the full analysis on when the timing is it's difficult without that to.
Determine exactly when you would file an NDA and that's usually a few years out so you want to be.
Cautious and exactly what what that timeframe looks like as far as designations from the FDA for both of these spaces. They are certainly applicable for a fast track designation.
Breakthrough therapies are a possibility depending on the data you're seeing the clinical.
Studies, but.
I think in the case of IH, that's one where you would have an orphan drug designation possibility. This is an orphan disease rare disease and.
In other products have received it for each.
Okay, Great and we will see the next question.
What impact could of stores have on potential future SPX products.
From a development and commercialization standpoint.
I believe in I think.
It's kind of.
Makes a lot of sense to the stars certainly have a positive impact on the development of future SPX products and that if you get a more data available to provide the fda's regarding the clinical program of whatever you're doing and you'll have data available for CMC as well as nonclinical.
Dana that could be generated from a commercial standpoint, and really it goes into one of our strategic considerations, we don't Wanna step on our own toes. So we don't want to to overlap or go up against indications that are already going to compete with historic especially if they're in a rare disease that can make command a higher price point.
And.
<unk> could could encroaching on our space. So we do want to make sure we announced and proceed ahead with a lead program, where these two distinct and unique markets.
Or fit distinct and unique market.
Okay.
The next question, let's see.
The last call.
Indicated difficulty in receiving accurate numbers from insurance companies.
When can a real time holistic report on insurance companies approving scripts, where sales for stars be anticipated.
The current script numbers reported by Symphony for available on Bloomberg accurate.
Well I think there's kind of two parts of this question one is.
<unk> gave us the answer right.
Over 50 million lines.
As of today are covered both for commercial or Medicaid I think the second part of that is really about these tracking mechanisms in script. So.
It really doesn't help if you have a small number of scripts, it's going to be those rely on estimates of those tracking and so they're going to be very subject to a lot of air.
As you get more and more scripts, that's when they become more and more reliable. So we're not not quite there I would say, but we're getting there and especially with this access number.
And these difficulties really aren't related to as far as as much as simply just the process of gathering the data that symphony and others have to go through and then trying to estimated across whatever section of the country or whatever but that's just sort of related to their assumptions doesn't really indicate anything related product, but we're all <unk>.
Looking forward to when we can have more data.
And all the good stuff that comes along with that so.
Okay actually this takes us to the last question.
Now that used to restructure the balance sheet and have a solid cash position.
Is Kim farm, considering any next possible steps such as a share repurchase program.
Sounds like I'll take outlets that sounds like money you can take it I think.
This is an interesting question I think it's something that.
We we've seen actually received a number of questions related to.
I'll, just say I think the best way to answer. This question is really to focus on the strategic rationale for a really why did we restructure our finances why was it important that we strengthen the balance sheet and have a better cash position.
Ultimately this was done to fuel Kim farms long term growth by providing the capital we need to invest not only in our current business in our ongoing development activities, but also allow us to consider external opportunities.
Any event all of those considerations are always designed to.
Answer the question how can we best invest how can we best invest.
So that we create shareholder value.
Ultimately that's always what we're focused on does a share repurchase program meet those goals.
At this point, we haven't announced one and I am not certain it does.
But we will always be considering the right ways to return to shareholders. So.
I think with that hopefully that helps address it but certainly I believe we do have a lot of good opportunities in front of his shirt.
To still be considered so.
And this is Reg I'd, just like to add a few thoughts there I mean first of all I think if you look at the company right. Now you look at you look at the value proposition. The company already has in his possession look we have.
What I think is the best in class ADHD drug this generating revenue for the company. So we have a revenue stream that we can look forward to that's rare in this business as you know.
The companies batting a thousand on NDA approvals again, something that's very rare in this industry to get one drug approved as a small company. We have two and that's been I think good track record that we can continue to be proud of and build upon.
We have a management team and an organization is very capital efficient.
Thanks to Travis Duane we've been able to build a strong team that's capable of developing.
Gaining regulatory approval and partnering assets and that's been a strategy. This work for us to date and we have a.
Platform technology that you are familiar with it not only can generate new drug candidates, but Moreover.
Can serve as a lifecycle management opportunity for any drug that we develop ourself or even look to bring in to do for someone else.
Having said all that look we can do better as an organization right. We know how to get drugs approved we have a strong balance sheet. We have a team in place that can make it happen we have a pretty good track record when it comes to licensing and partnering but I think what the board things and what we're going to be focused on from a value creation standpoint is building out a pipeline.
That extends beyond what's currently on the table and to do that in a way whether it's through our internal resources and internal product candidate opportunities or what we do that externally has to be determined but if we can do that and do that in a disciplined way.
And we can expend resources in a thoughtful way, we can be very strategic with respect to building out of pipelines. So that we stay close to where we understand and know markets and development strategies to be able to be successful yet again from a regulatory standpoint, and then we can retain value in there.
With assets.
To the point, where we can truly attract the sort of strategic interest in the company that I think everyone is.
Looking forward to and we can we can grow and build the organization not only from a balance sheet standpoint, but from a stock price standpoint, that's the goal here. That's why I'm here, that's why the boards squarely behind this effort to take the unique situation that we're in right now which.
The company has never been stronger and we can do better we can do more.
And we're going to continue to do that we're going to do it in a thoughtful way and so I just really want to express my gratitude to team here.
Sincerely want to express my gratitude to the shareholders out there who have been supporting us.
Of whom have been supporting us since day one.
And it's our intent and are.
Our drive year as an organization to ensure that everything we do going forward is squarely focused on creating value for you. So.
I, just really wanted to make sure that the.
The listeners today understand where we're headed what we're focused on and the commitment from the board myself in the management team to make that happen.
Thank you.
Thanks, Rich in Travis actually that's that's.
That's the end of the questions and I don't want to say anything else because that was perfect I'll just end the call. There thanks rich for that and thanks for Duane Thanks, everyone for joining today.
This concludes today's conference call. Thank you for participating you may now disconnect.
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