IPO Report: KemPharm (KMPH)

Francis Gaskins |

KemPharm.jpg

KemPharm (KMPH) is a clinical-stage specialty pharmaceutical company engaged in the discovery and development of proprietary prodrugs that KMPH believes will be improved versions of widely prescribed, approved drugs. It is headquartered in Coralville, IA.

Six other companies are scheduled for the week of April 13. The full IPO calendar is available at IPO Premium.

Manager, Joint-managers: Cowen and Company, RBC Capital Markets
Co-managers: Canaccord Genuity, Oppenheimer

KemPharm Overview

KMPH scheduled a $52 million IPO with a market capitalization of $160 million at a price range midpoint of $13 for Thursday, April 16, 2015 on Nasdaq.  

SEC filings

KemPharm Valuation

Glossary

Accumulated deficit (mm)

.

.

-$50

     

Per share dilution

.

.

-$11.20

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

KemPharm (KMPH)

$160

no rev

-6.5

6.3

7.2

38%

             

KemPharm Conclusion

Neutral

Trial finding that lead product is bioequivalent to Norco, see below

P/E -6.5, indicating heavy cash burn rate relative to market cap

No rev

Selling 38% on the IPO, a relatively large amount

Price-to-book 6.3, relatively high

KemPharm Shareholder may buy on the IPO

An entity affiliated with Deerfield Private Design Fund III, L.P., one of the existing stockholders, has indicated an interest in purchasing up to an aggregate of $10.0 million or 19% of the IPO

KemPharm Business

KMPH is a clinical-stage specialty pharmaceutical company engaged in the discovery and development of proprietary prodrugs that KMPH believes will be improved versions of widely prescribed, approved drugs.

KMPH employs its Ligand Activated Therapy, or LAT, platform technology to create KMPH’s prodrugs, each of which is a new molecular entity, or NME, and therefore may be eligible for composition-of-matter patent protection.

KP201/APAP, Most Advanced Product, for Acute Moderate to Moderately Severe Pain

KMPH’s most advanced product candidate, KP201/APAP, consists of KP201, its NME prodrug of hydrocodone, formulated in combination with acetaminophen, or APAP. KMPH is developing KP201/APAP as an immediate release, or IR, product candidate for the treatment of acute moderate to moderately severe pain.

Abuse-deterrent Properties

KMPH designed KP201/APAP with abuse-deterrent properties to address the epidemic of opioid abuse in the United States.

KMPH believes that KP201/APAP has the potential to be the first FDA-approved IR product for the treatment of pain with the efficacy of hydrocodone/APAP combination products and abuse-deterrent labeling.

Bioavailability Trial

KMPH completed a bioavailability trial comparing KP201/APAP to Norco, an approved hydrocodone/APAP combination product, and based on this trial, the FDA confirmed at an October 2013 End-of-Phase 2 meeting that the results of the trial support a finding that KP201/APAP is bioequivalent to Norco.

Bioavailability refers to the rate and total amount of a drug that reaches the target in the body after administration, and two drugs are said to be bioequivalent if there is no clinically significant difference in their bioavailability.

KMPH is conducting clinical trials that are designed with the goal of obtaining abuse-deterrent claims in the product label for KP201/APAP.

KMPH intends to submit a new drug application, or NDA, under 505(b)(2), otherwise known as a 505(b)(2) NDA, for KP201/APAP to the FDA in the second half of 2015.

KMH believes that its NDA will receive priority review like other abuse-deterrent opioids.

KemPharm Pipeline

KMPH is also building a pipeline of additional NME prodrug product candidates that target large market opportunities in pain, attention deficit hyperactivity disorder, or ADHD, and other central nervous system indications.

A prodrug is a precursor chemical compound of a drug that is inactive or less than fully active, which is then converted in the body to its active form through a normal metabolic process. A new molecular entity is a drug containing an active ingredient that has not been approved or marketed in the United States.

KemPharm Management Team

Key members of KMPH’s senior management, while at New River Pharmaceuticals Inc., were instrumental in the development of Vyvanse, a prodrug of amphetamine indicated for ADHD, through FDA approval. New River Pharmaceuticals was acquired by Shire plc in 2007 and Vyvanse generated over $1.2 billion in sales in 2013.

KemPharm LAT Platform Technology

KMPH uses its LAT platform technology to discover and develop NME prodrugs that improve one or more of the attributes of approved drugs, such as susceptibility to abuse, bioavailability and safety.

KMPH primarily seeks to develop NME prodrugs that will be eligible for approval under the 505(b)(2) NDA pathway, which allows KMPH to rely on the FDA’s previous findings of safety and effectiveness for one or more approved products, if KMPH demonstrates such reliance is scientifically appropriate.

Because KMPH’s prodrugs are novel combinations of an FDA-approved drug, referred to as the parent drug, with one or more ligands, they are NMEs and may be eligible for composition-of-matter patent protection.

KemPharm Intellectual Property

KMPH’s intellectual property strategy includes seeking composition-of-matter patents, among other patents, for KMPH’s NME prodrugs and product candidates and conjugates of KMPH’s NME prodrugs while also protecting as trade secrets KMPH’s LAT platform technology, the process by which KMPH identifies, screens, evaluates and selects ligands to be conjugated with parent drugs to create KMPH’s NME prodrugs.

KMPH’s current prodrugs all consist of an approved parent drug and one or more ligands that KMPH has selected using its LAT platform technology. The parent drug and ligand or ligands together constitute an NME and thus may be eligible for composition-of-matter patent protection, among other patent protections, in the United States and abroad.

To date, KMPH has internally developed all of its intellectual property, including its LAT platform technology, and have not in-licensed or otherwise acquired its technology, patents, show-how or know-how from an outside source.

As of March 10, 2015, KMPH owned nine issued patents or allowed patent applications within the United States, and an additional 19 foreign patents covering its NME prodrugs or product candidates. The terms of the nine issued U.S. patents or allowed U.S. patent applications extend to various dates between 2030 and 2032.

KemPharm Competition

KMPH will face competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, specialty pharmaceutical companies, generic drug companies, drug delivery companies and academic and research institutions.

If approved, KMPH’s abuse-deterrent opioid product candidates may face competition from opioid products or abuse-deterrent technologies from companies including Actavis plc, Acura Pharmaceuticals, Inc., Cara Therapeutics, Inc., Collegium Pharmaceutical, Inc., Depomed, Inc., DURECT Corporation, Egalet Corporation, Elite Pharmaceuticals, Inc., Endo International plc, Grünenthal Group, IntelliPharmaceutics International Inc., Mallinckrodt plc, Mylan Inc., Nektar Therapeutics, Pain Therapeutics, Inc., Pfizer Inc., Purdue Pharma L.P., Signature Pharmaceuticals, Teva Pharmaceutical Industries Ltd., Trevena Inc. and UCB S.A.

KemPharm 5% Shareholders Pre-IPO

Deerfield Private Design Fund III, L.P.    9.9%

Bridgepoint Investment Partners I, LLLP             5.2%

Travis C. Mickle, Ph.D. 28.6%

Christal M.M. Mickle      28.6%    

Matthew R. Plooster      5.2%                   

KemPharm Dividends

No dividends are planned.

KemPharm Use of Proceeds

KMPH expects to receive $46 million from its IPO and use it for the following:

$20 million to complete its planned clinical trials and seek regulatory approval of KP201/APAP;

$10 million to fund continued research and development of KP511/ER, KP606/ER, KP415 and KMPH’s other NME prodrug product candidates; and

the remainder for working capital and other general corporate purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
KMPH KemPharm Inc. 3.85 0.05 1.32 18,459

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