KemPharm (KMPH) Announces Amendment to Licensing Agreement with Gurnet Point Capital Affiliate Following FDA Approval of AZSTARYS

KemPharm, Inc. (NASDAQ: KMPH), a specialty pharmaceutical company engaged in the discovery and development of proprietary prodrugs, today announced an amendment to the definitive collaboration and license agreement (the License Agreement) with an affiliate of Gurnet Point Capital (GPC), a private investment firm focused on the life sciences and medical technology sectors. The License Agreement provides for an exclusive worldwide license to develop, manufacture and commercialize KemPharm’s product candidates containing serdexmethylphenidate (SDX) and d-methylphenidate (d-MPH), including AZSTARYS™ (formerly referred to as KP415), a once-daily product for the treatment of attention deficit hyperactivity disorder (ADHD) in patients age six years and older. AZSTARYS was approved by the U.S. Food and Drug Administration (FDA) on March 2, 2021.

Under the terms of the amended License Agreement, KemPharm is now eligible to receive a total of up to $590 million in future regulatory and sales milestone payments for AZSTARYS, as well as tiered royalty payments on a product-by-product basis for net sales. Royalty rates range, on a product-by-product basis, from a percentage in the high single digits up to the mid-twenties for U.S. net sales, and a percentage in the low to mid-single digits of net sales in each country outside of the U.S. Under the original terms of the License Agreement, KemPharm was eligible to receive up to $468 million in regulatory and sales milestones, having already received $15 million from previously achieved milestones.

Per the amended terms, KemPharm will receive a regulatory milestone payment of $10 million for the FDA approval of AZSTARYS which is due five (5) calendar days after the effective date of the amendment. In addition, KemPharm is eligible to receive an additional regulatory milestone payment of $10 million within thirty (30) days following the scheduling determination of SDX, the prodrug component of AZSTARYS, by the U.S. Drug Enforcement Administration (DEA). The DEA action is expected to be completed on or around June 2, 2021. Other changes include the addition of four new sales milestone tiers, including three lower-level sales tiers and a new top level sales tier. Potential sales milestones available under the amended License Agreement total $550 million, as compared to $420 million in the original agreement. Corium, Inc. (Corium), a portfolio company of Gurnet Point Capital (GPC), is leading the commercialization of AZSTARYS and expects to make AZSTARYS commercially available in the U.S. as early as the second half of 2021.

“The last few weeks since AZSTARYS was approved have been an exciting and busy time as we have worked with our partners at GPC and Corium to re-evaluate the commercial potential of AZSTARYS based on the final approved label, and negotiated adjustments to the economics of our License Agreement to optimize investment in the commercial launch and, ultimately, long-term value creation. The outcome is that more resources will be invested during the initial phases of the commercial timeline for AZSTARYS which we believe could lead to greater market share and potentially accelerate the ramp to peak, as compared to our original forecasts, if successful,” said Travis C. Mickle, Ph.D., President and CEO of KemPharm.

Dr. Mickle continued, “Our recently completed financial restructuring, by which we eliminated all of our debt and built a cash reserve of more than $77 million, has provided KemPharm with the financial flexibility to work with GPC to re-allocate a portion of the original regulatory milestone amounts associated with FDA approval of AZSTARYS to the commercialization efforts underway at Corium. In exchange for re-allocating of a portion of the original regulatory milestone payments, the amended License Agreement now has a greater total value in terms of total regulatory and sales milestones, and increased royalty rates throughout the life of the patents that cover AZSTARYS, which extend to 2037.”

The complete label for AZSTARYS, including prescribing information and important safety information, may be found at www.kempharm.com/pipeline-products/#kp415.

Conference Call Information:

KemPharm will host a conference call and live audio webcast with slide presentation today, Thursday, April 8, 2021, at 4:30 p.m. ET, to discuss the amendments to the License Agreement. Interested participants and investors may access the conference call by dialing either:

• (866) 395-2480 (U.S.)
• (678) 509-7538 (international)
• Conference ID: 3593808

An audio webcast with slide presentation will be accessible via the Investor Relations section of the Company’s website, http://investors.kempharm.com/. An archive of the webcast and presentation will be available for 90 days beginning today, April 8, 2021, at approximately 5:30 p.m. ET.

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