Good afternoon, ladies and gentlemen, and welcome to KemPharm Q3 2020 Corporate Update Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call may be recorded. I would now like to turn the conference over to your host, Mr. Jason Rando, Tiberend Strategic Advisor. Sir, the floor is yours.

Good afternoon, and thank you for joining our call today to discuss KemPharm's third quarter 2020 financial and corporate results. Before we begin, I would like to remind our listeners that the 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. For our complete information regarding forward-looking statements, risks, and uncertainties, can be found in reports KemPharm files with the SEC, which are available on KemPharm's website at www.kempharm.com under the Investor Relations section. We encourage you to review these documents carefully. Speaking on today's call will be Travis Mickle, KemPharm's President and CEO, and LaDuane Clifton, CFO. Following remarks, we will open the call to questions. With that, it is my pleasure to introduce Travis.

Thank you, Jason, and thank you, everyone for joining this afternoon. I want to run through the KemPharm highlights here on Slide 4. Just a few things of note. We continue to execute on our plan, as we've stated all along, continue to meet the obligations with our partners, continue to push forward with our NDA and development programs, and continue to address the base business, including revenue as well as expenses and continue to work on our debt. You can see from the highlights of the last quarter that's very much what we've done. The FDA continues to review the NDA for KP415. We have a PDUFA date for March 2, 2021, which many of you are already familiar with. And to date, there have been no new safety issues, no safety issues, and no substantial issues identified as far as that review of the KP415 NDA. We announced recently the expansion of a consulting arrangement with Corium, our commercial partner for KP415, as well as a collaboration intended to really launch the APADAZ program between KVK and Sure Med. I'll discuss this a little bit more in detail soon, and I'm also going to be presenting our financial results. We continue to have revenue based on our services to our partner, and we see that continuing for the foreseeable future. And all of this, at the same time, while trying to address maybe the only issue left to address for us, which is our outstanding debt. Turning to the next slide, looking more specifically at KP415. As I mentioned, there were no substantial issues or safety concerns raised in our last meeting with the FDA on August 13. We do have a tentative date of December 1 of this year, in which we could also meet with the agency for a late cycle review meeting. This meeting would only be called if it was necessary to do so, to identify any approvability issues or just to confirm there are no issues. So either way, we will be explaining and sending along what happens at that meeting to investors and shareholders in order for you to know essentially how that is progressing. That is effectively the approvability point with the FDA, and we’re supposed to know whether the product would be approvable or not from then on. We also have announced and are really working ahead with Corium on their commercial activities. They are targeting a midyear, second-half 2021 date for the product launch. This is after what is expected to be roughly a 90-day process to achieve DEA scheduling and quota generation in order to have that launch at that point. We do plan to still have a call with Corium to provide an overview of the commercial plans and market dynamics related to ADHD, as well as their viewpoints on KP415. Again, scheduling has been a challenge for multiple reasons, all of them good, so the date could be announced as soon as possible. Turning now to that agreement on Slide 6, the agreement between Corium and KemPharm. We continue to build on the relationship that has put us in the position that we are in with this great partnership on KP415, now adding additional services from our R&D staff able to support Corium in their internal endeavors to develop other products not related to our pro drugs. So this is already an expansion of what we were doing to support them in their commercial activities, which include manufacturing, medical affairs, scientific publications and such. You can see the relationship there. The kind of co-support trust, as it were, is continuing to build. This is a fairly substantive financial commitment based on the relationship here. Our support, up to $15.6 million past the PDUFA date for a full year certainly shows the commitment on both parties' side and one that we are very excited about as we expand that relationship. On the next slide, returning to the Sure Med and KVK agreement. We recently announced a new program actually named Perspectives in Care. This is a tool that will be used to educate physicians as well as to create research in which we will be able to identify and look for more information about the potential abuse pattern for products like APADAZ. This effort will be focused on the research around what would happen in the appropriate switching situation, where a product is switched from a hydrocodone product to something like APADAZ when it's an appropriate prescription to do that with. This pilot program is intended to measure or gauge these abuse-related outcomes with APADAZ, and then expand those efforts further once those are successful. The launch of the program is officially set for December 1 in Alabama. Alabama is in a unique situation; it has the highest utilization per capita in the United States for hydrocodone acetaminophen type products. As described, it's more than 129 million tablets dispensed annually in 2019. This presents a great opportunity, and hopefully, some good momentum now with the APADAZ project. With that, I'm actually going to turn the rest of the call over, except for wrapping up some summary comments, to LaDuane Clifton, our CFO. LaDuane?

Thank you, Travis, and good afternoon, everyone. Looking ahead to Slide 8. As you know, on October 8, we announced that the company is going to hold a special meeting of stockholders to obtain authorization for a potential reverse stock split of the company's common stock. Just this past Monday, we announced that the special meeting has been rescheduled to now take place on November 17 at 8 AM via webcast. We encourage you to review the proxy statement that has been filed with the SEC for more details on how to attend the meeting, and for shareholders, how to exercise your voting rights on this matter. We have received a number of questions from shareholders about the authorization of a reverse stock split and what it could mean for the company, and I hope to address a few of those today. One of the first items to again make clear is that the special meeting is intended to obtain the authorization for a reverse stock split and not to make a reverse stock split effective immediately. If shareholders approve the authorization at the upcoming special meeting, such authorization would be valid for up to 12 months following that meeting. Then the Board of Directors would make the determination of when to implement a reverse stock split, if at all. This decision will be tied closely to our debt restructuring process, and any transaction that we seek to close would need to be in the best interest of both the company and our shareholders in order to proceed with making a reverse stock split effective. Another important consideration is that the relevant initial listing requirements for KemPharm to relist on the NASDAQ Capital Market include that we have both a bid price of at least $4 per share and stockholders equity of at least $5 million. As of September 30, the quarter we are just now reporting, we had a stockholders' deficit of $62.3 million, which means that any transaction we undertake would need to address this balance, which is a swing of a little more than $67 million. If we cannot address the equity deficit, then making a reverse stock split effective would not enable relisting on NASDAQ. We have to have both. Turning now to Slide 9. We have also received questions about the reverse stock split range, and of necessity, it is intentionally broad in order to allow us to reach the minimum bid price of $4. It is impossible to predict the timing of a transaction, if there is one at all, and therefore impossible to predict the prevailing circumstances that will ultimately determine the split range that could be made effective. I am not sure that either extreme of the range represents the most likely scenario, but in any event, when determining whether a transaction and the reverse stock split are in the best interests of the company and its shareholders, the reverse split ratio will have to be carefully considered. Regarding the timing, the administrative process for holding the special meeting is very lengthy. If we are successful in negotiating the terms of a debt restructuring transaction that will meet our goals, then we will need the ability to move quickly to consummate such a transaction. We are seeking this authorization now so that we will have the freedom to operate and negotiate with this tool available to us if needed to get the right deal done. Ultimately, all of our current shareholders are worried about potential dilution, including me, Travis, and our Board. We are all shareholders together with you. At this point, though, while a reverse stock split does not itself create dilution, many of the options we have at our disposal for debt restructuring will require varying degrees of either equity or asset dilution. For example, converting debt to equity as we had done earlier this year was dilutive to equity, but a royalty financing technically dilutes the value of future assets by taking a portion of future cash flows to repay the financing. Ultimately, we are intensely focused on minimizing the overall cost of capital, of which dilution is certainly a component. Finally, it's essential to keep in mind that while there are costs associated with the process we are working through, there are also benefits. Regaining our listing on NASDAQ has the potential to provide access to a larger institutional investor base than we currently have while trading on the OTC. If it is possible to relist prior to our upcoming milestones for KP415, it could unlock shareholder value. However, costs and benefits always have to be carefully analyzed. Now we'll turn to Slide 10 and focus our attention on the financial results for Q3 2020. As Travis mentioned, we reported revenue of $1.9 million derived primarily from our consulting services. This is our fifth consecutive quarter of revenue, and with the expanded services arrangement with Corium, we expect revenue to continue through March of 2022. We reported a net loss of $0.04 per basic and diluted share. We had an operating loss for Q3 2020 of $1.2 million, and both our R&D and G&A expenses were more than 50% lower than Q3 of last year, as we continue to carefully manage those items. Turning to the next slide, we see that as of September 30, we had total cash of $5.5 million, which was a decrease of $1.1 million compared to the prior quarter, June 30. This was in line with our ongoing cash burn rate of approximately $1 million per quarter. Our cash run rate continues to take us up to the debt maturity date of March 31, 2021. If we can restructure the debt before that date, the cash runway could lengthen. Debt as of September 30, 2020 was approximately $66 million, and as of yesterday, our shares outstanding were 72.5 million. On the next slide, and as we've already alluded to, we continue to actively work through the debt restructuring process. We have several options that we've outlined here, such as converting debt to equity, replacing the existing debt with new debt that has an extended maturity, or repayment of the debt from various sources, including potential upcoming milestone payments under the KP415 license agreement, proceeds from a secondary offering, or royalty financing. The process we are working through is complex. As we seek to find the right transaction, or series of transactions, it is most likely that the ultimate solution will be some combination of these options or even some other option that may become available. Getting the right deal to ensure our ability to create long-term value is our first priority. We also want to enable a potential uplist to NASDAQ if we can. We will keep you updated as these efforts continue to progress. With that, I'll turn the call back to Travis.

Thanks, LaDuane. To kind of expand and summarize from the next steps for KemPharm, as I mentioned before, we have the December 1 FDA meeting upcoming, the PDUFA date in March, up to $48 million in milestones, depending on the approval and labeling of KP415, and we're less than a year away potentially from a launch with a highly differentiated product in a very large market with a need for a product like this. We continue to build the base business by adding revenue, addressing the debt, and now, luckily, launching APADAZ with KVK and Sure Med in the very near future. We're also looking ahead. We're preparing the KP879 IND, filing it as soon as reasonably possible, as well as providing you with a more detailed pipeline update in the very near future, something that we're all looking forward to beyond KP415. As I hope you have been able to summarize from our presentation, we believe there is tremendous value in KemPharm. A lot of that value is untapped. As an example, our current enterprise value demonstrates this. We are on the OTC, which is a fairly inefficient market relative to NASDAQ or other capital markets in which to measure that value. Being able to capture that upside provides the opportunities we need to address our debt, potentially uplist, and continue executing on our plan to create that value. Once that value is untapped, we really believe it will be in a far more meaningful way than it has been on the OTC. That's just one example of where we see the plan and where we think we will be going in the near future. We'll continue to update you as we advance along. With that, I believe our presentation is completed, and I welcome any questions you may have.

Thank you so much. Your first question comes from the line of Oren Livnat from H.C. Wainwright. Your line is now open.

Hello. Can you hear me?

Hi, Oren. Good afternoon.

Great. Making sure it’s obviously you. That’s all right. Just regarding the regulatory status of 415, can you just remind us or clue us into what is the typical type of agenda items that might be covered in the mid-cycle review versus this potential December 1, late-cycle review, if there is any difference? And, I guess what type of issues at this stage, this late review might you be coming up with? Are we just talking about labeling negotiations? Or are these really approvability issues regardless of the label? Thanks.

Just to remind – and thanks for the question, Oren. I’d just remind everybody. KP415 is actually from a regulatory perspective, under what's known as the program. So the program is the regulatory guidance that follows regarding new molecular entities. This guidance was intended to provide sponsors with timely feedback without waiting until the PDUFA date to find out if there are real issues in a proven space. The mid-cycle meeting is intended to identify issues that the agency is currently reviewing, regarding labeling, study designs, whatever it may be, as well as identifying any major safety concerns that would raise red flags for non-approval. From the mid-stage meeting, we know there were no issues regarding safety, and the issues they were reviewing at that time involved the product's duration and clinical attributes, but nothing really unexpected. The late-stage meeting is really the approvability meeting. We have the opportunity to hear from the agency about their views on the safety and efficacy, and from there they’ll be working on the labeling. We know this is a methylphenidate-based product, and it was efficacious in our clinical studies, and they've already told us there's no significant safety concern. We feel we're on the right track.

Okay. Separately, regarding the expanded agreement with Corium, I'm just trying to understand what that really encompasses. First of all, can you confirm that $15.6 million or up to $15.6 million includes whatever was remaining on the prior consulting agreement? And I noticed the wording in the initial press release was interesting. It said KP415 and other current or future products in the Corium portfolio. So I’m wondering, does this also involve you guys potentially working with them on portfolio products that aren't yours originally, or maybe some other stuff in their hopper?

I'll try and take this question, Travis. Yes. Oren, thanks for the question. I understand why it could be a little confusing. In prior quarters, we reported revenue generated under the KP415 license agreement, which included a provision that allowed us to provide services to them on a fee basis. Some of those activities were specific to KP415 commercial support. In the current arrangement, we have converted the prior arrangement under the license agreement that allowed us to provide that commercial support into a flat fee arrangement, giving us more visibility. But that's actually the smaller piece of it. The bigger piece is a new arrangement with Corium, where they contracted with us for our product development and regulatory services to assist them on products they currently have in their pipeline that are not related to KemPharm or other future products. These products may not necessarily even be pro-drugs. It's projects we are asked to work on. This expansion provides us with revenue visibility through March 31, 2022.

Just to follow up on that. Is there any change to the economics of your deal regarding milestones or royalties? And just remind us, are there any milestones in your one or more agreements with Corium that essentially come before that PDUFA date?

No, there was no impact or change to the milestones or any other provision of the license agreement. This was just intended to expand the amount of commercial and other support they would get from us. The next upcoming milestone for KP415 is related to the potential approval on the PDUFA date.

Got it. If I may be so greedy, I ask every call, and you did speak to it earlier in the script a little bit regarding Corium potentially coming out of the shadows to announce themselves and KP415 to the world at least pre-launch. I’m just wondering, you said there were a couple things making that hard to schedule, most or all of them good. So I'm wondering what our potential, other than scheduling, what are the gating factors for such a coming-out party? And are they KP415 regulatory related? Thanks.

Yes. Certainly, there's been nothing for us to update regulatory-wise, so that wasn't the issue. Corium is the organization in transition, as you would expect. They're adding a significant commercial team that had a lot of work to do to prepare to get to this point. We wanted to provide a relevant update, something informed with directionality, as opposed to spreading early-stage high-level information. So, that's what Corium and KemPharm have both decided to do. I think we're reaching that point. Now we just have to settle on a date.

Beautiful enough. Apologies for asking so many questions. Thank you very much.

Thank you, Oren.

Thank you. I am showing no further questions at this time. I would like to turn the conference back to Travis Mickle, President and CEO of KemPharm.

I'd like to thank everybody for their time today. Again, we'll continue to execute our plan and provide updates in a timely fashion as it continues to unfold before us. Appreciate your time. Thanks, everyone.

Thank you, speakers. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.