Good day and thank you for standing by. Welcome to the KemPharm Third Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. And I'd like to hand the conference over to your first speaker today Jason Rando with Tiberend Strategic Advisors. Sir, please go ahead.

Good afternoon, and thank you for joining our call today to discuss KemPharm's 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 changes at any time, including, but not limited to, statements about KemPharm's 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. KemPharm 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 KemPharm's filings with the SEC, which are available on KemPharm's website under the Investor Relations section. Speaking on today's call will be Travis Mickle, KemPharm's President and CEO, and LaDuane Clifton, CFO. Following the remarks, there will be a question-and-answer session which will include responses to the questions that were submitted during the past week. With that, it is my pleasure to introduce Travis.

Thanks, Jason, and thanks to 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 AZSTARYS and as most of you are certainly very focused on the launch of the product and the near term here, while we can't give a lot of details based on our agreement with Corium. We are certainly excited to share with you what has been passed along, is that within the first 100 days into the launch, they 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 have seen has 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’s certainly speaks to the Corium’s team's deep experience in the managed market space. Highlight of the – it was really a recent highlight and it kind of a look forward. We have the SDX trial that got underway in Q3 as well as continues to proceed expected 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 SDX or SDX-related products and indications. Again, another great quarter financially. LaDuane will report the details there, but certainly revenue based on our consulting fees continues as well as our continued small spend until we have the resources and the budget available for our development programs. And then last but not least, as many of you have already seen in the press release, we continue to advance strategically forward as a company and with our Board, welcome today with me LaDuane, Rich Pascoe, he has 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. He's joined us here on this call, so Rich, I will turn it over to you if you want to like say a few words.

Thank you, Travis. 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 attest 2021 has truly been a transformational year for KemPharm. 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 AZSTARYS in particular, but the Board and myself believe that there's more that we can do to build value for shareholders. And that's 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 record that 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'll continue to find ways to retain the value of those assets and be able to deliver that value back to shareholders. So I'm 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 KemPharm. And moreover, I believe that as we look forward into 2022 and beyond, we'll continue to grow organization in a way that delivers value for all of our stakeholders, including patients, the physicians that treat those patients and 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, I'm just pleased to be able to assist the organization in that effort. I welcome this opportunity to be a part of that. And I look forward to coming quarters. So with that, Travis I will turn it back to you.

Thanks, Rich. Yes. Certainly I agree wholeheartedly. That's a great way to wrap up that. And certainly I think in line with that is certainly one other point that we had updated in third quarter. Tamara Seymour joined our Board of Directors is almost like old news. We've been working with her for months now, but a great strategic addition as well with their experiences in the past with various transactions as well as her accounting CFO background and Chair of the Audit Committee, which I know that LaDuane is very happy about. Not the previous one had any issues. It was rich by the way. Turning now to really expand upon what Richard has really introduced here. The KemPharm value proposition, this is more about where we sit today. I think this will change, and I think this will adapt, having two approved and partnered products in which to build a company on focusing in CNS neurological diseases, and then using leveraging our LAT platform technology to create additional opportunities as well as we look outside our own walls really 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 would just spend a couple minutes going over the high level. I just mentioned the LAT prodrug technology. It's a fairly simple general concept. We take 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, you get a new molecule from that. That new molecule has the benefit of a composition of matter of his…

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. This is the same service fee revenue we've been reporting to you, and it's being earned under consulting arrangements with Corium that continued through March of 2022. KemPharm’s net loss for the quarter was $1.8 million or $0.05 per basic, and diluted share compared to a net loss of $3 million or $0.68 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 non-cash value adjustment. Income of $300,000 related to derivative and warrant liability. And some net interest income of about $100,000. Net operating loss of $2.2 million for Q3 of 2021 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 $0.5 million due to the ongoing SDX study, which Travis has described and an increase in other G&A expenses of about $0.5 million. Turning to the balance sheet. As of September 30, cash and cash equivalents were $131.5 million, which was a decrease of about $800,000 compared to June 30, 2021 are a little better than what I've told you. Our burn rate has been. And so we continue to be prudent and manage that wisely. As of September 30, total shares of common stock outstanding was 35,317,313 shares and fully diluted common shares is 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 ever completed earlier this year. And it's healthy with a cash balance that provides us with the flexibility to consider the best opportunities both internal and external to leverage our position and drive growth in shareholder value. This solid financial position derived from our restructuring led to the recently announced uplisting to the NASDAQ Global Select Market. The global select market which is comprised of only 1,450 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, and as well as corporate governance standards on both an initial and a continuing basis. Strategically moving up to the NASDAQ Global Slug Market provides the opportunity to introduce KemPharm 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, LaDuane. So just looking ahead wrapping up here. Certainly, we're very encouraged with the Corum launch. We believe that they are 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, you want to make sure that those scripts that are written are filled and so they continue to be written and there's no kickback back to the physician which causes unnecessary difficulties for them. We do expect still to have the data from the SDX 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 KemPharm and to think about what opportunities we have internally. And so beyond AZSTARYS, we do see those as the unique opportunities here, the lead product candidate that we'll move forward with SDX. 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-SDX candidates and external opportunities is ongoing and certainly cash and future revenue, all the great data that we have will support those efforts. So we're going to actually now turn to questions that we've received both from analysts as well as shareholders, investors like yourselves. This probably the last quarter we do it officially like this. So hopefully we'll do some actual live analysts questions, but we'll still always take and try to answer a few of the investor questions directly.

Yes. So thanks Travis. And thank you everyone that submitted questions prior to the call. And so we'll just kind of start stepping through them. The first question is given the favorable DEA Schedule IV for SDX, when will we know the details of your new expanded development plans for KP879 or a different product candidate using SDX as its sole API that you hinted that months earlier?

Well, I think we've covered this a number of times already, but just for clarity sake, anticipate having the data for the trial by the end of the year that 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's one or more opportunities. So we certainly want to identify which one of those where you could build a franchise around this unique SDX product.

Okay, good. Thank you. The next question, what has the early launch taught you about the receptiveness of the market towards AZSTARYS?

Indications from Corium including the updated provided in press release and here in the call itself as to the payer penetration really suggested the rollout is going very well and according to their expectations. I think Corium’s plan is smart and being carefully orchestrated as to maximize resources towards near-term opportunities that will build a foundation for sustained success. Certainly again, I'll reiterate it a fourth time, very encouraged by the recent news and we'll see where the prescriptions track in the coming months.

Okay. 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? Travis, I'll take this question. Yes. So the agreement, there's essentially the question outlines going to change the order. It's really initially for SDX based product. There's a Right of First Negotiations. So when we have a new product candidate and we run a study, have the proof-of-concept data available we have 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 KemPharm does not have an obligation to accept an offer from them at that point in time. And then – and so it can just run along and either we meet terms or we don't, it just depends on all the criteria that Travis is outlined and all the strategic considerations we would take into account. So at any rate that right 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 ends. Now with regard to a Right of First Refusal, think of it as kind of coming second in succession if you will, because that's really something that would be triggered only if there's a bonafide third-party offer to license one of the product candidates covered by the license agreement. So in that case, then you've got a third party that's 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 and license that product candidate. That right, again, there – none of these rights exist following NDA acceptance and once they've really decided not to exercise a ROFR, we can move forward with that third party and there's no additional rights for GPC at that point. So this process can take place more than once, because technically there could be more than one SDX based product candidate that comes out. So hopefully that provides additional details and color around those. I'd say that particularly in the Right of First Negotiation, KemPharm maintains a lot of flexibility and making sure that we only accept offers that we think are in the best interest of shareholders and our strategic objectives. So…

I just one point of clarity that the ROFR actually is not bound in time to the ROFN, it could happen at any time a valid third party offer comes in. Is that correct?

Yes. Good point. Okay. That takes us to the next question. When do you think you might have enough clarity on product uptake to guide on when you may receive the first, as far as sales milestones?

So we continue to guide to initial royalty milestones sales occurring in 2022, but beyond that, we are unable to provide more clarity. As you're aware, Corium is driving the ship 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 milestones. So – but we will continue to keep you posted.

Correct.

Okay. So the next question, the question says, I was wondering if you could maybe talk a little bit about the ongoing review of the SDX data. Is any efficacy being measured in the proof-of-concept SDX trial currently going on, how much have you shared with Corium and continue to share with them? And also, have you had any additional discuss with them on the data set?

As I've discussed a few times in the presentation, the ongoing trial is designed to investigate several of the properties of SDX, including the pharmacokinetics of high doses, safety, additional kind of efficacy sort of effects in an exploratory fashion. This data should just then inform us of our what to prioritize, what to go for first and what other indications may be possible. The next step in is to 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 SDX performs pharmacokinetically. There's absolutely no surprise there, but that data now must be paired with the additional pharmacodynamic data or the effect data. And then the safety in order to decide what clinical path and indication should be advanced first. So in terms of Corium, we do keep them well informed. They know what's going on. Once we have data available for any clinical candidate, we'll provide that to them as a proof-of-concept, which then would initiate the ROFR – ROFN 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 IH and SUD those indications. Is there any special designation for either of those programs from the FDA possible?

Yes, I think we've outlined this a few times, but just, just to say it one more time, I mean, it'll 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 that timeframe looks like. As far as designations from the FDA, for both of these spaces, they're certainly applicable for a fast track designation. Breakthrough therapies are a possibility depending on the data you see in 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 other products have received it for IH.

Okay, great. And let's see the next question. What impact could AZSTARYS have on potential future FDX products, both from a development and commercialization standpoint?

I believe, and I think, it's kind of makes a lot of sense that AZSTARYS certainly have a positive impact on the development of future SDX products in that you're going have more data available to provide the FDA is regarding the clinical program of whatever you're doing. And you'll have of data available for CMC as well as nonclinical data that could be generated. From a commercial standpoint and really, it goes into one of our strategic considerations. We don't want to step on our own toes. So we don't want, to overlap or go up against indications that are already going to compete with AZSTARYS, especially if they're in a rare disease that may command a higher price point. And AZSTARYS could encroach in on our space. So we do want to make sure we announce and proceed ahead with a lead program where these two are distinct and unique markets – fit distinct and unique markets.

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 or sales for AZSTARYS be anticipated? Are the current script numbers reported by Symphony or available on Bloomberg accurate?

Well, I think there's kind of two parts to this question. One is, Corium gave us the answer, right over 50 million lives, as of today are covered both for commercial and Medicaid. I think the second part of that is really about these tracking mechanisms in scripts. So it really doesn't help if you have a small number of scripts, it's going to be those rely on estimates those tracking. And so you'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 are 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 AZSTARYS as much as simply just the process of gathering the data that Symphony and others have to go through and then trying to estimate it across whatever section of the country or whatever that's just sort of related to their assumptions. Doesn't really indicate anything related to the product, but we're all 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 you've restructured the balance sheet and have a solid cash position. Is KemPharm considering any next possible steps such as the share repurchase program? Well, sounds like I'll take that one.

So it sounds like money. You can take it.

Yes. 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 and I'll just say, I think the best way to answer this question is really to focus on the strategic rationale for really why did we restructure our finances? Why was it important that we strengthened the balance sheet and have a better cash position? Ultimately this was done to fuel KemPharm long-term growth by providing the capital we need to invest not only in our current business and our ongoing development activities, but also allow us to consider external opportunities. In 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. And so ultimately that's always what we're focused on. Does a share repurchase program meet those goals? Well, at this point we haven't announced one and I'm not certain it does, but we will always be considering the right way to return by a shareholder. 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 us yet to still be considered so.

Yes. And this is Rich. 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 the value proposition the company already has in its possession. Look, we have a – what I think is a best-in-class ADHD drug that's 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 company's 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, a track record that we can continue to be out of and build upon. We have a management team and an organization that's very capital efficient. Thanks to Travis and LaDuane. We have been able to build a strong team that's capable of developing gaining regulatory approval and partnering assets. And that's been a strategy that's worked for us to date, and we have a platform technology that you're familiar with that not only can generate new drug candidates, but moreover can serve as a life cycle management opportunity for any drug that we develop ourself or even look to bring in and 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 thinks and what we're going to be focused on from a value creation standpoint is building out a pipeline that extends beyond…

Thanks Rich and Travis, actually, that's the wrap. That's the end of the questions.

Yes. And I don't want to say anything else, because that was perfect. I am going to just end the call there. Thanks Rich for that. And thank, thanks LaDuane. Thanks everyone for joining today.

This concludes today's conference call. Thank you for participating. You may now disconnect.