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KemPharm, Gurnet Point sign $10M deal to develop multiple drugs

KemPharm Inc. is collaborating with privately owned investment firm Gurnet Point Capital Ltd. to develop, manufacture and commercialize multiple of its product candidates, in a deal with an up-front payment of $10 million.

The agreement covers KemPharm's product candidates that contain serdexmethylphenidate and d-methylphenidate, including attention deficit hyperactivity disorder treatments KP415 and KP484.

KP415, KemPharm's lead product candidate, improved symptoms of ADHD in children 6-12 years old as measured using two different scales during a phase 3 study, called KP415.E01.

Under the collaboration agreement, KemPharm is eligible to receive up to $483 million in development and milestone payments as well as sales royalties.

Cambridge, Mass.-based Gurnet Point, which primarily invests in life sciences and medical technology sectors, also has the option to other KemPharm's product candidates including KP879 and KP922, both of which are prodrugs that convert into pharmacologically active drugs after being metabolized in the body. KemPharm is developing KP879 and KP922 to treat stimulant use disorder and ADHD, respectively.

RBC Capital Markets was KemPharm's exclusive financial adviser for the agreement.

Concurrently, KemPharm and New York-based hedge fund manager Deerfield Management Co. LP entered into a debt exchange agreement that may reduce the pharmaceuticals company's debt by up to $30 million.

Under the deal, KemPharm issued Deerfield 1,499,894 common shares and 1,576 series B-1 preferred shares for $3 million of its 5.50% senior convertible notes due 2021. Each series B-1 preferred share can be converted into 1,053 common shares of KemPharm.

Moreover, Deerfield has the option to exchange up to an additional $27 million principal of the 2021 notes for KemPharm's common or Series B-2 preferred shares.

The exchange agreement also modified Deerfield's 9.75% senior convertible note, which is now due June 1, 2020, instead of June 2, 2019. Other changes include the addition of accrued interest to the principal in place of quarterly cash interest payments until the maturity date and reduction of 9.75% coupon rate to 6.75% for the remaining term of the note.

KemPharm CFO LaDuane Clifton said the company plans to submit a marketing approval application for KP415 by the end of this year, and Gurnet Point will be responsible for the further development costs of KP484. He added, "KemPharm's near-term cash requirements have been reduced, allowing us to fully support our partners and continue to develop our product candidate pipeline."

Celebration, Fla.-based KemPharm discovers and develops prodrugs that are designed to be improved versions of widely prescribed drugs.