Ladies and gentlemen, thank you for being here and welcome to the KemPharm 4th Quarter and Year End 2020 Results Conference Call. All participants are currently in a listen-only mode. Please note that today's call is being recorded. I will now turn the conference over to your speaker today, Mr. Jason Rando from Tiberend Strategic Advisors. Thank you. Please proceed.

Good afternoon, and thank you for joining our call today to discuss KemPharm's fourth quarter and full-year 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. 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 remarks, there will be a question and answer session during which KemPharm management will respond to questions that have been submitted during the past week since that company's call regarding the approval of AZSTARYS. With that, it is my pleasure to introduce Travis.

Thanks, Jason, and thank you all for being here today. I want to provide some updates and recap what we've talked about in recent months. Most of the questions we received focus on our organization's financial position, which we can now report on. Therefore, today's call will primarily center around our financial standing. I hope everyone is aware of the FDA approval of our product AZSTARYS last week, which we partnered on with Gurnet Point Capital and Corium. Under our licensing agreement, we can earn regulatory sales-based milestones totaling up to $468 million, along with growth tiers that extend into the mid-2020s. These milestones include various amounts and core sales-based incentives. Corium has issued a press release regarding AZSTARYS' approval, and I encourage you to check that out for additional information. Regarding our partnership, we’ve entered into a consulting agreement with Corium on other projects separate from KP415/AZSTARYS, which provides us with additional revenue. We also have our ongoing collaboration with KVK Tech for the launch of APADAZ in a private program that recently started in Alabama. Our financial position has greatly improved, and I’ll let LaDuane discuss that in detail. The turnaround from a year or two ago is significant. Looking ahead, this achievement is noteworthy. I want to take some time towards the end to outline how we believe our product is differentiated and provide context to assess its future value proposition, as well as the value to the organization. Now, let's talk more about the approval of AZSTARYS. This approval was given late at night on the second. There were no new third-party approvals, and many of us had already returned home waiting for the official FDA letter. Corium expects to make AZSTARYS available in the U.S. in the second half of the year, which is an ideal time to launch an ADHD product, coinciding with the beginning of the school year. If I were in Perry Sternberg's position at Corium, that would be my main focus. The NDA approval of AZSTARYS validates our prodrug approach and highlights the value potential of each of our prodrugs that we invest significant time and resources to approve. This milestone goes beyond AZSTARYS to KP484 and includes the same active ingredient in KP879, marking a pivotal moment in our organization's history. Turning to our partnership, for those who may not be familiar, the license began in September 2019 with a portfolio company of GPC assigned commercial rights to Corium, led by Perry Sternberg, who has commercially driven finance significantly. We’re thrilled to partner with such a strong commercial entity, which complements our exceptional development team here at KemPharm. I've mentioned the milestones and royalties already. I also want to briefly touch on the marketplace as a lead into the discussion to follow. The ADHD market is large and rapidly growing. The current market is valued at $17.5 billion, divided among various products, predominantly within stimulant and non-stimulant categories, with only two stimulant-based products currently. We believe our product offers advantages over existing methylphenidate-based options. Now, I'll turn it over to LaDuane for the financial update.

Thank you, Travis, and good afternoon. As we've spoken about already a couple of times, certainly we are pleased and excited to report that the multi-phase financial restructuring process has been completed. This was the culmination of a series of transactions that began at least in Q4, but really went back last year, but really went back even further than that. And the result has been pretty astonishing. We were able to pull together a string of transactions which culminated in growth proceeds of approximately $94 million for KemPharm. This allowed us to regain our listing on the NASDAQ Capital Market back in January. We eliminated all of the company's debt as of February 8th. I'll probably be talking about that for the rest of the year just because it really is a major accomplishment for the company given the years that we've been under that debt really since pre-IPO. And we've added substantial new capital to propel the company's growth efforts. We position with a great balance sheet now, significantly extended runway and frankly it's a brand new company with a whole different set of strategic options available to us for the future. Specific to the Q4 2020 financial results, we reported revenue of $2.4 million for Q4; that's primarily composed of services revenue under our Corium consulting arrangement and other consulting arrangements, and compared that to Q3 and you can see that was about $0.5 million more than the prior quarter. We reported a net loss of $4.9 million or about $1.07 per basic and diluted share, compared to a net loss of $6 million or $2.90 per basic share for the same quarter in 2019. Our operating loss for Q4 2020 was about $3.2 million and that is an improvement of $1.2 million by comparison to the same quarter in Q4 '19. This was primarily driven by an increase in revenue as well as a decrease in our operating expenses during Q4 2020. And you can see here R&D expenses at $3.1 million, G&A expenses at $2.5 million. Essentially here, you can see that we are maintaining our same expense posture as we have been since our adjustments to the cost structure in 2019. Turning now to the full-year 2020 financial results, we had full-year revenue of $13.3 million for 2020. This was primarily services revenue, as well as we received regulatory milestone revenue of $5 million which was at the NDA acceptance last May of KP415 now AZSTARYS NDA. Compare that to 2019 revenue about $12.8 million. Net loss for the full-year was $12.8 million or $3.21 per basic and diluted share compared that to a net loss in the prior year of $24.5 million or $13.23 per basic and diluted share for 2019. The expense picture follows along with what I've already described related to Q4, and so for full-year 2020, our operating loss was $5.6 million and that's an improvement of about $14.7 million compared to the operating loss in 2019 of $20.3 million. This was primarily driven by the increases in revenue and decreases in operating expenses. Now, we turn to the balance sheet. And of course, as we've gone through the first few months of this year, balance had of cash at $4.3 million as of 12/31 is certainly a fact, but that's not the story as you well know. Our burn rate, we had a decrease of about $1.1 million during Q4 and that's been consistent with live and telling you over the last several quarters and that remains the case of burn rate of around $1 million per quarter. Based on existing resources and really going past now, all the transactions that have taken place in the beginning of 2021. Our cash run rate is much longer. Fewer tiers at least through 2023, but to be honest is even longer than that based on our current operating forecast. Total debt net of we had a net total debt of $67.7 million as of December 31st, but as you know, it has been fully extinguished. We did that sort of three ways here. We paid $30 million out at the January '21 offering. We converted $31.5 million at its preferred stock also in January. And then we paid the remaining amount of $8 million in principal interest and pre-payment fee in February 2021. Again, that's a great accomplishment for the company and really put this in a different place. And as of March 10th, normally we wanted to make sure we got you a number that kind of sits exactly where we are today. Total cash today as of yesterday was $77.6 million. This does not include any milestone payments related to the approval of AZSTARYS. This is really just the cash that came in through the series of transactions as well as cash that’s coming from warrant exercises that have also been taking place over the last several weeks. Total shares outstanding as of yesterday is 28,376,321. Before we diluted shares outstanding 38.6 million and that includes 9.6 million shares issuable upon exercise of the remaining warrants. The press release has more detail around exactly how many have been exercised and we can try to address that as we go through the questions later. Another feature of the balance in cash structure today is that all that preferred that was issued in conversion of the debt, none of that preferred stock is outstanding as of March 10th. So with that, Travis, I'll turn it back to you.

Thank you, LaDuane. This time, we're using a slightly different format to address the many questions from our numerous shareholders. We want to respond to as many of those as we can, as well as questions from analysts. We’ve gathered and organized these questions in advance to ensure we can provide clear explanations. If we don't address a question you had, it may be because it was answered elsewhere in the presentation, or we plan to cover it in another way. There may also be instances where we can’t discuss certain topics due to confidentiality. We aim to provide as much information as we can and fulfill our legal obligations. These questions represent only a portion of what we've heard, but they encompass the key points we believe everyone should know.

So the first one really goes off for what you've already spoken about LaDuane. Can you clarify the number of fully diluted shares outstanding after the restructuring?

Yes. So, I just spoke to that a moment ago that, that number again is 38.6 million fully diluted shares. And that's inclusive of then more it's a 9.6 million. It includes preferred stock that was issued. Again, that really every element of the recent transactions were included in that number.

Okay. Well, the next one really is very similar. It's can you clarify the number of warrants exercised not exercised? This one's a little bit different as well as the current market cap and the cash position.

Right. So, in the press release we tried to provide this detail too. So, with regard to the number of warrants exercised, to-date or as of yesterday, 12,281,000 warrants have been exercised and converted into 11.8 million shares of common stock. The reason for that difference is primarily that in some cases warrants were exercised on a cashless basis. So, it results in fewer shares being issued, but a large majority was actually incremental cash that came into the company, which is included in the cash balance I mentioned of $76 million. And then, of course, the remaining warrants to be exercised is the 9.6 million that we talked about. Our current cash position is $77.6 million again we've already talked about that. And then, current market cap, I guess if you base it on today's calls were just 998. And where we do in the map right now and you would assume I guess the 28.4 million approximately shares outstanding is your market cap. On that basis, approximately $283 million. On a fully diluted basis, 38.6 times 998 suggests the market cap fully diluted at $385.2 million. So, it does answer that question pretty well. And I do know that because of the flurry of these transactions that while these seem like very basic questions, all of the filings we have been required to do obviously we're not intending to obfuscate but it's pretty technical a lot of these transactions. So, I'm glad that we could provide some clarity today. And by the way, if there are any follow-up questions, continue to send those in either at [email protected] or through the contacts at Tiberend and we will continue to try to bring clarity where we can.

Thank you, LaDuane. The next question is more general. I believe I addressed part of it. Many people are trying to understand Corium's commercialization plans and any updates they have shared. The first related question is about expected launch timing, which I believe I have covered. My understanding aligns with the press release that we issued, confirming this information. For further details, you can refer to the presentation that Corium and KemPharm put together, available in the past events section of our website. It includes a full transcript and slides that are very informative. That will be your best resource. Nothing has changed, except that we believe we have an exceptional label, possibly the best-in-class for ADHD products. This makes it even more valuable and crucial for us to perform at our best. We have received questions about the status and process of scheduling with the DEA. You might recall that the DEA is required to issue a preliminary scheduling decision for the prodrug SDX Serdexmethylphenidate within 90 days after approval, based on a recommendation from the FDA to the DEA. Currently, that recommendation remains confidential, but once a final determination is made, we will gladly share that information with our shareholders and potential investors.

And Travis, to be clear, that's 90 days from when?

From approval date, March 2nd, yes. I'm really glad we have this format actually, we're somewhat better. The next question was submitted from one of our analyst. This one I think is on a lot of people's mind, so we're happy to spend some time here. Your market capital is currently very near, was it for the successful PDUFA date. How do you account for what I view as a clear disconnect between the current evaluation and the potential value to KemPharm from the recent AZSTARYS approval. Well, I certainly won't pretend to understand all the ins-and-outs of the public markets and of course everybody has an opinion whether it's good bad or indifferent. What I would really encourage everybody to do, and I can sit here and tell you the great things that I believe are imparted in the label for AZSTARYS, I can tell you what I know about the ADHD marketplace what the needs are. I can tell you personally what my needs are and those are my children. But what I can do is fully convince you of exactly what the value is because I've said all these things multiple times. So, what I encourage here is go and look at the label for Concerta and Focalin XR. These are two of the most best tried products in this methylphenidate base phase. Take those labels and put them side-by-side with AZSTARYS and look for things about height and weight. Look for things about onset and duration, look at the different graphs that are included in there. Look about sprinkling and prodrug profiles and pharmacokinetics and just look at the differences and you'll be able to tell I believe that there are major differences from these two very valuable products. Both Concerta and Focalin XR are right now roughly about 1% each market share. They're highly generic side, the only benefit to these 1% market shares that these guys will have is effectively have a brand name. They really have no differentiation from a generic which would be cheaper, and yet they still hold onto 1% market share. So, I'm really trying to say here I think alluding to anyway, you have to come to your own market assessment. Do we think this is 1% the same as a branded generic or do we think there's 2%, 3%, 4%, 5% of the marketplace and then what does that mean? Well, we know it's a $17.5 billion market. So, I think it's really the disconnect is between the value proposition and what the market shows. So, everybody was focused on what the label would say and forgot at the end what is the value of that label. And I think that's at least in our belief where that disconnect lies. I do we have a presentation that we're going to share at the Roth Conference. It is available if you go to our press release and signup for the register for the conference. You can listen to it now. I walk through the label in detail, I'm not going to do it on this call, it'll take forever. So, certainly I think that will help you in your exercise there.

Another question that kind of relates to this, we kind of pile this in here is other milestones for AZSTARYS. Well, in the license agreement, there is also an approval milestone associated with KP484. There is also a number of different sales milestones. We are giving you what GPC allows us to tell you. So, we're under confidentiality, we have a redacted agreement in the public space. I encourage you to go to that, I also encourage you to look at other licensing deals. This isn’t strange or ordinary, extraordinary, this is very much a typical type of licensing deal. So, you could probably guess and get fairly close on what those breakdowns are. And if you want to do that, please feel free. Go ahead, LaDuane.

I would like to add that we have a very straightforward milestone structure based solely on achieving specific sales targets. While we cannot disclose the exact figures for those targets, they are quite simple. When you reach a certain amount of sales in a year, you hit specific milestones. If we manage to get KP484 approved, it would be included, allowing us to combine sales from AZSTARYS and KP484, which could help us reach those milestones more quickly due to the contributions from both products. Overall, it’s a straightforward milestone model.

Very good point. Or is there anything else you believe I missed on that question?

No, I think you covered that well. I think the way I think about it, I know when we saw the data from 2018 sales I believe it is of Focalin XR and Concerta. Focalin XR, again on a label book to label comparison, there are amazing differences in terms of benefits to patients potentially for AZSTARYS. And Focalin XR had around $350 million in sales, approximately 2018. Similarly, Concerta. Again this is as a generic had sales in the proximal range of around $500 million. So, just wanted to print numbers on that. You combine those two products, you're approaching $850 million to $900 million in sales. Okay, and again making that label comparison, what do you think AZSTARYS would be able to do with Concerta and Focalin in our generic position was able to get those kinds of sales. So, that's a CFO's way of saying peak market share seems to not be well understood. I believe, that's my guess.

One point I want to make is that as the developer, we are trying to convey the differentiation of our product as effectively as possible. That's why we encourage everyone to check the label. We are not making promotional claims because we are not a regulatory agency and we do not claim to be the FDA. Corium has a lot of work ahead since the label just came out, and while they predicted certain outcomes, there are some surprising positive aspects in the label. It took time and effort, but we agree this is a great product that will perform well and is currently undervalued. Regarding the last question, KemPharm has significantly improved its balance sheet since the end of 2020, with debt decreased from about $65 million to zero, and cash levels have changed since then. How should investors view KemPharm's capital deployment, and are there any new assets you are considering for acquisition?

I think there are several components to address. Firstly, regarding our financial transformation, LaDuane mentioned our current market cap. At one point last year, as an OTC company, our market cap was below $15 million, and now it has increased to $280 million. This is significant for various reasons, including access to more mutual funds, attracting new investors, enhancing our visibility and credibility, and more. This meaningful market cap is crucial for any organization. Additionally, we've eliminated the debt overhang; the $67 million we owed was less than the $48 million approval milestone available to us. This transformation indicates our commitment to adding value for shareholders. Looking ahead at our capital deployment, we are excited about our transformational product, and we plan to optimize it. If we were a commercial entity, we would be actively pursuing every opportunity. Your questions about market access, pricing, and the size of our salesforce are valid; however, I cannot provide specific details regarding Corium. They are a private company and are not obligated to share that information publicly. Nevertheless, I am confident they know what they are doing and are motivated to succeed. We have the right team in place to leverage this opportunity. Simultaneously, we will remain focused on development while also supporting all aspects of the effort, including manufacturing, medical affairs, scientific literature, and regulatory work, as much remains to be done beyond the initial approvals. Our goal is to maximize the value of that product in both the short and long term. Additionally, we have validated our technology with APADAZ's approvals, despite the significant challenges in the market. We plan to allocate our capital and resources towards high-value projects that address critical needs. In response to whether we are looking at any new assets, the answer is absolutely. We should be pursuing opportunities that enhance value, even if they are at a later stage where we can integrate our development team. Our intention is to create value for shareholders, and that remains our focus. Hopefully, that answers your question. LaDuane, is there anything I missed?

No, I would say not only is it what Travis and I view but of course together with our board this strategic direction the strategic focus on what's next is going to be I think a very important conversation. It's something that we talk about on an ongoing basis but I can't say enough how the new balance sheet really now makes us have real conversations about what's possible, what's next. So, this will be an ongoing discussion and I think over the next several months throughout the rest of the year just on an ongoing basis we'll do our best to provide update as we make progress in this area. So, I appreciate the question, frankly it's really the right direction to be thinking about.

Alright. With that we don’t have any more questions that we can for this time allotted. Again I will reiterate the Roth Conference, again there's a link to register and listen to the full current management presentation. Hopefully can answer few more questions. I think all your financial updates can be found here. So, certainly this is the best resource for that. At the same time I really want to thank everyone for your time. The intense interest in and excitement around the approval, that all those great things are still present in the company. So, I thank my shareholders and appreciate everyone's effort.

Okay, thank you. And operator, with that we will conclude today's call.

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