Shares of KemPharm Inc. exploded 93% in Wednesday’s pre-market trading session after the US Food and Drug Administration (FDA) approved its treatment for attention deficit hyperactivity disorder (ADHD) in patients age six years and older.
Specifically, the FDA approved KemPharm’s (KMPH) New Drug Application (NDA) for Azstarys, formerly referred to as KP415, a once-daily product for the treatment of ADHD. The developer of proprietary prodrugs engineered the candidate as a treatment for ADHD with its partner Gurnet Point Capital (GPC). Following the FDA decision, Corium, a portfolio company of GPC, will lead the commercialization of Azstarys, and expects to make the treatment available in the US as early as in the second half of 2021.
Azstarys consists of serdexmethylphenidate (SDX), KemPharm’s prodrug of d-methylphenidate (d-MPH), co-formulated with immediate-release d-MPH. ADHD is one of the most common mental disorders affecting children and it also affects many adults. Symptoms of ADHD include inattention, hyperactivity and impulsivity. An estimated 8.4% of children and 2.5% of adults have ADHD.
“The FDA approval of the Azstarys NDA is a transformational event for KemPharm and, we believe, an important advancement in the treatment of ADHD,” said KemPharm CEO Travis C. Mickle. “Today’s approval highlights both the value potential of SDX, our prodrug of d-MPH, and the ability of our LAT platform technology to develop new prodrugs of approved medications that improve one or more of the attributes of the parent drug.”
As a result of the FDA approval, KemPharm has earned a regulatory milestone payment as agreed under its license agreement with GPC. Under the terms of the agreement, KemPharm will be eligible for up to $468 million in regulatory and sales milestone payments, as well as tiered royalty payments, on a product-by-product basis for net sales, with potential percentages up to the mid-twenties for US net sales, and up to the mid-single digits of net sales in each country outside of the US.
KemPharm shares plunged 40% over the past three months after gaining 95% over the past year.
Roth Capital analyst Jonathan Aschoff on Jan. 25 initiated the stock’s coverage with a Buy rating and a $28 price target, which implies upside potential of a whopping 197% over the coming 12 months.
Aschoff cited the ADHD treatments as the company’s lead value driver, from which it could potentially earn up to a $48 million in milestone payments from partner Corium should it be granted “what the agreement defines as a favorable approval label.” (See KemPharm stock analysis on TipRanks)
On TipRanks’ Smart Score ranking system, KemPharma gets an 8 out of 10, suggesting that the stock is likely to outperform market expectations.