Q2 2022 KemPharm Inc Earnings Call

Good afternoon, and welcome to the <unk> second quarter, 2020, corporate and financial results Conference call.

Currently all caller kind of been placed in a listen only mode.

Following management's prepared remarks, the call will be opened up for questions.

If you would like to ask a question at that time. Please press star one on your telephone keypad.

You need to remove yourself from the queue Press Star Q.

At any time, if you should need operator assistance press Star zero.

Please be advised that today's call is being recorded.

I will now turn the call over to Nicole Oh, sure, Ken Bond, Vice President Investor Relations and corporate communications.

Ma'am you may begin.

Thank you good afternoon, and thank you for joining our call today are Scott Cam farms second quarter, 2022 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 <unk> 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 Kemp pharm disclaims any obligation to update or revise its forward looking statements, except as required by law for more information regarding <unk>.

We're looking statements risks and uncertainties can be found in Chem farms 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.

Hello, Duane Clifton CFO . In addition, we are very pleased to have Perry Sternberg, President and CEO of Corium, Inc. On today's call to provide an update on the commercialization of austerity.

Following their remarks, Travisano Duane will participate in a question and answer session with that it's my pleasure to introduce Travis.

Thank you Nicole and thank you everyone for joining us again today.

We are pleased to have <unk> with us on our second quarter results call today.

We'll also be providing some product development updates from myself as well as the typical financial update from what Duane our CFO .

With that I'm actually going to turn it over to Perry and just do a short intro here Perry as a biotechnology and pharmaceutical industry leader with more than 25 years of commercial experience across a wide range of therapeutic areas and diverse markets.

Prior to <unk> served a dual role of Shire as the head of commercial for 700 therapeutic.

<unk> business units as well as the Chief commercial officer Slash head of Neuroscience Division.

The acquisition of Shire by Takeda in early 2019, but the pleasure to know Perry for a number of years and of course, we work closely together as partners on the on the startup so with that period I. Appreciate you for your participation and let you take it from here.

Thank you Travis for that introduction and for inviting me to provide an update regarding <unk> commercialization of the stores and this is a very exciting and busy time for us at core Yelp. So I would like to start with a brief overview of Korea.

Next slide.

I am pleased to be able to say that over the last few years corium has transformed itself from being primarily a contract development and manufacturing organization.

And in pharmaceutical company that develops manufactures and now commercialize innovative CNS products.

Since late 2018 Corium has been owned by an affiliate of granite point capital, a leading health care private equity organization.

We have offices and a manufacturing facility in Grand Rapids, Michigan and offices in Boston match.

We have assembled a seasoned leadership team with broad ADHD experience, including some who previously worked at Shire and help launch and build by events into a blockbuster.

We have two recently approved CNS products, we are commercializing <unk>.

The stars, which was approved by the FDA in March 2021 for ADHD and.

<unk>, a transdermal patch that delivers donepezil, which was approved in March 2022 for dementia Alzheimer's type.

Our CMO operations is based in Grand Rapids, and that has industry, leading transdermal development and manufacturing expertise developing development and manufacturing several consumer an FDA approved drug products, including our.

One product alacrity.

So thats the brief overview on core mix side. Please.

In terms of the stars as I had mentioned it was approved by the FDA in March 2021.

For the treatment of ADHD in patients six years of age and older.

It is unique when compared to all other ADHD drugs because it contains 70% third deck missile candidate, which is a novel prodrug of D methylphenidate and 30% of D methylphenidate, resulting in immediate and sustained Bennett.

Throughout the day.

Starz has a scheduled to controlled substance, but the 70% SPX component is scheduled for.

It is the first and only approved methylphenidate drug containing the pro drug.

We have received very positive feedback from Hcp's regarding the product profile.

We have a long exclusivity runway with the stars.

It has robust.

Protection until at least 2037 and.

And we believe is eligible for regulatory exclusivity.

Next slide.

Our launch of <unk> has gone very well.

We have had steady growth in prescriptions during the market introduction phase in terms of both breadth and depth of prescriptions.

Meaning more physicians are prescribing of stars and those puts.

<unk> are prescribing more of it.

In addition, we have had an increasing number of pharmacies ordering a store is based on the geographies in which we have said sales representatives.

We have been very strategic in our approach to launching a startup.

Applying what we've learned with other product launches with the initial launch in 2021 in early 2022.

Focusing on geographies with product coverage and we grew the field force to align with our coverage wins.

We have been.

Rewarded for our efforts and as a result.

As of July of this year, we now have a national footprint with approximately 175 sales representatives.

And we had our first ever our stores National sales meeting last month.

Our season market access team has had significant success with coverage of $145 million 145 million patient lives and preferred status for greater than 35 million covered lives.

Yeah.

In addition to expanding our launch to be National we are also increasing our commercial team's focus on the significant adult market.

Particularly influenced by the volume of that field force back.

Takeda thus.

Thus, we are now focused both on the pediatric and adult market.

Which we.

Well.

Commercially and importantly provide benefits to the patients and caregivers we serve.

That's it in a nutshell.

To wrap my update we are very pleased that corium with the success, we've had in the CNS space and our trends and.

Our transformation to an end to end pharmaceutical company.

Our stars launch has gone as well.

If not better than planned and we are very optimistic about the future of our business.

I want to thank Travis for the opportunity to provide the update on <unk> <unk> and for participating.

In this call and partnering with Kevin Farr.

Travis back to you.

Yes, Thanks for Perry very much for your time I appreciate that very detailed.

Very timely presentation of the update on <unk> and the commercial launch. So thank you very much again for your time.

Can drop off whenever you choose to.

So now turning over to the Kim farm.

Updating that we have today.

Just briefly for those that may be new to the <unk> story Kim from really has gone through what is a remarkable transformation from its initial days is a prodrug.

Drug discovery organization, where we transformed into developments and eventually had.

Partners in one you just heard about right there with the startup and now today, where we have a late stage CNS focused rare disease product.

We have a mid stage another opportunity as well of course revenue opportunity with our partnerships that are already in place. This transformation is not done we have great balance sheet.

We have the potential here for any number of these products.

To transform the organization again into what would be.

Commercial organization so from from early stage drug discovery, all the way through potential commercial.

Launch commercial company that is a true value proposition and that's what Kim farm brings for us today.

Looking at some of our recent highlights you can start to really see that transformation happening are unfolding before you. The most recent.

News I believe that everyone should be very aware of if youre familiar with the story is the acquisition of <unk>. This was an NDA stage asset that was available for us because of some difficulties that aramark remote went through with the CRM.

Involved with the treatment of.

Niemann pick type C or MPC for short.

We're able to obtain this asset through a very capital efficient structure.

Effectively allowing for the potential future of positive cash flow as well as overall no shareholder dilution.

Certainly a very clever.

Clever financial transaction.

Then not only in obtaining this asset we also have the potential to re file the NDA as soon as the first quarter of next year. So here again, we went from a product that was just approved and the startup.

Mid stage assets, and what's known as <unk> hundred 77% for idiopathic hypersomnia and now with the late stage product with the Resubmission of an NDA first quarter of next year.

Just just highlighting again for TP 277 of our other development stage asset.

That is for the treatment of video Pathic hypersomnia everything here in our development program is still remains on track we have a phase II trial that will officially initiate in the second half which of course, we are already in.

Work has already begun around this and I'll give a few more details. We also expect to see some results from our cardiovascular trial that we initiated last quarter and those top line results should be available sometime this quarter.

We have the very relevant update from Perry on the historic launch very exciting news with the growth in sales reps the growth in coverage.

We're just really leads to the future here for the potential for royalties and milestones and then as I mentioned before the strong balance sheet cash and cash equivalents of roughly.

$114 5 million as of the end of the quarter.

<unk>.

Excuse me the potential to add more revenue in the future through various sources.

So with those highlights I'm going to touch on briefly.

Some of our development stage assets, starting with their Mark the mall as the most advanced candidate.

This is a little bit of review everything here is basically.

No fundamental change to what we've updated in the past with Aramark the mall.

This is a treatment ultra rare disease.

Niemann pick type C, where MPC for short.

Disabling and fatal.

It is almost storage disorder primary.

Symptoms or issues with niemann pick type C are related to neurological symptoms and so that's why we believe those neurological symptoms are something we're very familiar with with other CNS disorders, and something that fits very well within <unk>.

Our expertise and our ability to develop.

Right now there is no approved treatments that exist in the United States for MPC.

I've mentioned, the very efficient capital a capital efficient financial structure for the acquisition the upside opportunity that we see is several fold.

Number one this is a late stage candidate, allowing us to transform commercially.

It also provides an opportunity to highlight our expertise internally, which is in development of asset say that.

May not be particularly attractive to other organizations or things that have gone through their own development difficulties.

We've had here in the case of Kim farm.

With <unk> that was issued we have through an appeal process and ultimately got that product approved and partnered.

Considering there was an opioid that that is a remarkable feat.

<unk> had some difficulties with the statistical analysis, and we did work closely with our partner.

They are at corium to.

To help them along with their <unk> program.

So those two aspects really tell you about what we believe the future of Kim form will be a strong development organization.

<unk>, forming and adding commercial as part of that value proposition.

<unk> also has a number of early access programs available to it in the U S, France, and Germany, primarily in other European countries.

In in France. This is very progressive.

Interesting system in which they allow for reimbursement prior to approval for certain rare diseases that have a unmet need.

Currently under the French EAP system.

We estimate will generate roughly $12 million a year in annual gross revenue under that program.

Duane will give a few more updates on on on what that looks like and how that.

May be used.

Under the financial structure, we used to acquire the asset.

Looking out a little forward with their <unk>.

Again, we have this near term opportunity to commercialize the asset and I haven't really given any forward looking thoughts here.

This is an ultra rare disease. So we know literally there's roughly 300 identified patients.

Many of them are part of a patient registry and all of them go to see specialist at various centers around the country and so it is not terribly difficult to generate the appropriate commercial organization in order to reach all of these patients and of course, all the thought leaders clinicians and everyone.

Involved in those processes. So that's why it's great to start with a disease like Niemann pick is your first opportunity to treat number one the patients but number two to expand as a commercial into commercialization of your own products.

This lower marketing has been really really does help you do that.

It's not something.

Hertz concerns from various shareholders.

Going to transform into a pfizer overnight with hundreds of sales reps. That's just isn't the case in diseases like niemann pick and even even diseases like idiopathic hypersomnia with <unk> 77.

We already have a network of <unk>.

Established relationships through our early access programs both in the U S and the EU and we believe that these will be critical as we think to commercialize and move forward.

At some point and hopefully very soon with an approved product.

Then as we look outside of U S and EU. There are other countries territories and regions that may be of interest to us for various partnership and licensing opportunities with their <unk>.

So it gives you just.

Brief overview of what our thinking is when we say.

Aramark the mall can be the opportunities that we've.

Been looking for to transform Kim form.

Into that next stage of development.

Turning now to <unk> 77. This I've mentioned several times is our treatment option potential therapeutic treatment for idiopathic hypersomnia. This is a rare.

Sleep disorder in which individuals cannot achieve fully restful sleep they can see for.

10, 12, 14 hours take multiple maps.

Continuously belief.

They are in a fog so they are as brain fog and have extreme difficulty.

Starting the day, so we can.

As one of the primary issues.

This product candidate is actually 100% of the project that Perry mentioned, great introduction to the product and $77 four as Perry.

<unk> methylphenidate and in this particular cases, 100% of the active ingredient here not a mixture like historic.

Much higher doses that we are anticipating it to be at much higher doses to address the fundamental symptoms of idiopathic hypersomnia, which are both severe and completely disabling to these to these patients.

The product itself is eligible for fast track orphan drug and breakthrough therapy designations and.

Much of it is the same.

Or similar IP is whats Perry described.

No better person to describe.

Your intellectual property then the person that licensed it so.

To have that information on this slide.

What I haven't really discussed in detail with <unk> 77 is that our dosing that we're focused on here really is intended to address the symptoms.

It's either going to be dosed, one time at night for those that really suffered most from waiting.

Or it's going to be dosed twice a day. So once at night for waking and once in the morning to help with brain fog that occur shop today now we do know that most patients.

<unk> have both but there is a subset.

It appears that just sleep.

Waking as their primary issue and then they function fairly well throughout the rest of the day. So we believe that with our current phase II study, we're really going to be able to address.

Figure out, which which symptoms do best where KPN 77 would.

It would be would be best suited.

To treat those patients.

Given that we plan to use a higher dose we do see that we have to do some work and we started that study last quarter. That's a study to look at lower cardiovascular effects.

Keep the 10 77 or SPX versus that of other stimulus. So at equivalent dose of ruin a riddle MLA do we performed better similar or worse than those equivalent doses when it comes to cardiovascular effects like blood pressure and heart rate.

We believe that we will actually perform better which will lead to greater tolerability, allowing for higher and higher doses, which ultimately should show greater effect in this disease state.

We also know that there is.

Theres a few drugs used off label.

That can treat some of these same symptoms.

In this particular case SPX has no drug drug interaction potential with hormonal contraceptives and anti depressants. These are some of the other products.

That of course.

Could potentially used off label to treat IH.

And just to kind of wrap up I wanted to give you a sense for what we believe are the upcoming clinical and regulatory milestones.

We're going to be most relevant for our audience here.

<unk> I mentioned already that Q1 anticipated.

2000, 22023 re file the NDA for MPC.

We've already accomplished some of our goals for <unk> 77 for IH.

Not listed here was the type B meeting we filed the IND.

The CV trial is underway and should read out this quarter.

Preliminary results are already in we're just putting everything together to be able to disclose that.

Phase II trial.

Is already underway with the planning protocol development recruitment CRM selections all done.

It should anticipate them for first patient dosed by the end of the year.

That.

That study will go on for a while but as I mentioned before we anticipate sometime around Q2 Q3 to be able to have open label.

Interim results as well as top line data before the end of 2023.

Following.

The IH indication, we do expect to pursue <unk> 77 for narcolepsy, that's roughly going to follow about a quarter behind.

Everything we do for IH.

Again, we don't the same division of the FDA, we want to make sure that they're fully aware primarily that we're seeking NIH indication.

We're going to use our narcolepsy development program to support the IH approval and subsequent edition of the narcolepsy indication to that label.

<unk>.

You can't do them permanently you have to do them kind of staggered like this and we think thats. That's why that's generated in that fashion.

So I think thats, all the relevant updates I want to give.

We'll be taking questions later, but I'm going to actually turn it over to Duane to provide us with a financial update.

Thanks, Travis and good afternoon.

We continue to have the benefit of a very strong financial position in Q2.

<unk> has proven to be the same sort of good results we believe.

For the quarter, we had net.

<unk> of $1 3 million, that's derived from her remarkable product sales consulting service fees and royalties.

The change in revenue from what <unk> seen in prior quarters and I would just note that as we've talked to you before we knew the consulting service fees would be reducing as that contract came to an end. We do have a continued sort of smaller scope in that regard, but really not going to be a principal driver of revenue going forward and then.

Of course.

Included in the Q2 revenue is only one month of Aramark more product sales. So just the month of June since the transaction closed Theyre just that on May 31.

So you can expect in that you would see.

Increasing impact from from that revenue on the go forward quarters, where you'll have a full three months each quarter.

When you look at the net loss for Q2 came in at $24 million or <unk> 77 per share but that did include a.

A onetime noncash expense, which was related to the <unk> asset acquisition.

Most of that purchase price ends up being.

Written off and a noncash basis, and I think thats, probably good for us in the future, but that's where the accounting guidance let us.

You account for that then you come up with a non-GAAP net loss of only $6 4 million or <unk> 19 per basic and diluted share, which I think is more relevant. If you are looking at net income net loss trends.

Balance sheet itself as of June 30, we remain very.

Very strong and as Travis mentioned, we closed the quarter at $114 $5 million in cash.

Very strong it was a decrease of about $4 6 million compared to where we were at the end of Q1.

And again this is sort of in line with our expectations, we knew that the R&D spending would be increasing as the 277 program.

Is underway and so all of the work. The Travis mentioned is work that we've begun during Q2 and you see that increase there and but and also in future quarters. I think you'll continue to see probably a cash burn rate in the range of $4 million to $6 million a quarter and again, that's very much within our operating expectations.

The actual line of credit.

Travis had mentioned that we brought up this on really is a novel really creative way too.

Maintain capital flexibility because there is an ongoing revenue stream from the <unk> acquisition.

We then chose to use our line of credit, which can be serviced by that cash flow and then we're able to use R. R.

Our cash reserves in other ways. So it gives us flexibility for our operating plan all of the development milestones that we intend to reach as well as sort of the potential if there are opportunities in business development ways. We still have the flexibility of a solid balance sheet for those purposes also.

Our cash runway continues to be very strong in.

It really goes beyond 2025, and again, just really puts us sets us apart from other companies candidly in this space, where we do not have an immediate need to raise capital and to be more specific the capital we have on the balance sheet. In this runway allows us to complete those things required to.

Hopefully get unremarkable approved but also allows us to do all the development work and take $10 77 up to an NDA submission as well. So we are in a very good position and I think for all those reasons, we're very excited about the future for Kemp Pharm.

But Travis I guess at this point, we will go ahead and turn it over and take questions.

Greater you can open up for Q&A. Please.

Yes, Sir.

At this time, if you wish to ask a question. Please press star one on your telephone keypad you.

You may remove yourself from the queue by pressing star Q.

We will take our first question from Jonathan Aschoff with Roth Capital Partners.

Thank you. Good afternoon, guys could you. Please tell me what you think might be the riskiest parts, where parts of the Aramark hamal re filing.

Jonathan This is Travis.

Good question, we have been spending the vast majority of the time since the acquisition and digging into all the details.

Given the transaction itself happened in a very rapid timeframe.

Fundamentally.

Three major items.

Were brought up in the CRM.

Related to the validity or the strength of the primary instrument to measure in PC.

Also known as the NPC CSS.

Secondary to that is how.

Basically the efficacy was determined through use of various statistical methods the estimates.

They're known.

In order to.

Determined if there wasn't effect.

And a lot of that is missing data and so forth and then last but not least was confirmatory evidence I think.

Going through that I can't identify one that doesn't rely on the other.

I do believe that there are strong.

Data that's been produced by the former <unk> team and since the acquisition together now with those individuals.

And as well as additional.

Additional evidenced through confirmatory evidence that we address all the issues.

I guess fundamentally we can't go back and change the instrument. So if I had to say where that the greatest risk remains is on.

Convincing the agency that this is a.

Validated in and strong and robust method for determining.

The progression of the disease.

With MPC.

Okay.

Could you please break down the $1 3 million among the three line items star is a remarkable and other.

The non product category.

We will have to look and see how we break that down in the 10-Q, Jonathan but I will tell you.

<unk> revenue came in at about $1.4 million.

And then we show it net of.

Our liability we have to make.

If approved.

And that reduction.

As a discount of about 35% so with that knowledge, then you can kind of fill in the breast.

And hopefully in the 10-Q, we have a little more color there for you.

Okay.

When we might see some <unk> revenue.

Well I would just remind you that we have licensed <unk> you know it is a profit share model and so we don't expect that we would receive anything until <unk> has been able to get to a point of having profits so of its nature is longer and.

Time than a traditional royalty scheme.

But with that said I'll say they continue to be.

Pursuing commercialization of <unk> is still in a very small sort of localized regional setting at the moment.

But I don't believe its near profitability. Therefore, I don't have a timeline for when we would see profit share.

Okay and lastly.

You said $46 million quarterly burn cash beyond 2025 should I read that as if you expect to be cash flow negative through 2025 or do you not.

We really expect that with.

Particularly help from Aramark, who bought in stores.

Sure No I love the question, because when I put together and take a look at the cash runway I try to do is a very conservative lens for that so I believe the early access revenue is reasonable to use as part of your operating forecast, but given the sort of.

It's hard to gauge the timelines of the scars revenue. So when I quote that then I'm looking at sort of our cash runway plus our budgeted RMB.

Plus the contribution of the the French revenue and Thats, all in including the upside to that forecast would be the royalty stronger royalties unexpected.

Oil royalties in general from a stars as well as when they reach those net sales milestones those would also be upside to that forecast.

I'm trying to paint a very realistic picture, but we also find ourselves in this place where we're kind of generating revenue, but we're also certainly a development per company continuing so there is a point and we hope it's when we get approval a remarkable that we will truly become a commercialized entity with meaningful.

That we get to keep the.

The majority of it because we will commercialize directly.

So.

That explains how I derive that runway.

Okay.

It helps me somewhat thank you. Thank you very much that's all.

This concludes the Q&A portion of today's call I would now like to turn the call back over to Travis Mickle for any additional or closing remarks.

Thanks again, everyone for joining today's call I would just like to summarize a lot of what you've heard here today.

Certainly we've talked about the transformation you've heard us speak about this strategically for the company.

About nine months now.

Moving the organization forward and thinking about where we sit today, our strong financial position.

We have a partnered asset you just heard from our partner that is moving to a full national launch. So we have the great upside there of <unk> royalties and milestones.

We have a late stage asset.

That already generates revenue and effectively pays for itself at.

At least here in the short term it could be cash flow positive and then on top of that we have mid stage.

Rare disease product with <unk> 77.

It's a remarkable story.

Can't find another one.

Out there as something like this that our market cap and our price and where we are it's just it's just simply amazing.

We sit where we are with all of that opportunity. So certainly.

We're very excited and hope you are as well again I appreciate the time thanks, everyone.

Ladies and gentlemen, this concludes today's Kelly farms second quarter 2022 earnings call and webcast. You may disconnect. Your line at this time and have a wonderful day.

Okay.

[music].

Yes.

Okay.

Okay.

Okay.

Sure.

Okay.

[music].