commercialize any Additional Product Candidate, with such right of first refusal expiring upon the acceptance of a new drug application for such Additional Product Candidate. The Company has also granted Licensee a right of first negotiation and a right of first refusal, subject to specified exceptions, for any assignment of the Company’s rights under the License Agreement.

to the License Agreement, Licensee has agreed to pay the Company an upfront payment of $10,000,000 and up to $63,000,000 in milestone payments upon the occurrence of specified regulatory milestones related to the KP415 and KP484. In addition, Licensee has agreed to make additional payments upon the achievement of specified U.S. sales milestones of up to $420,000,000 in the aggregate, depending, among other things, on timing of approval for a new drug applicable for KP415 and its final approved label, if any. Further, Licensee will pay the Company quarterly, tiered royalty payments ranging from a percentage in the high single digits to the mid-twenties of Net Sales (as defined in the License Agreement) in the United States and a percentage in the low to mid-single digits of Net Sales in each country outside the United States, in each case subject to specified reductions under certain conditions as described in the License Agreement. Licensee is obligated to make such royalty payments on a product-by-product basis until expiration of the Royalty Term (as defined in the License Agreement) for the applicable product.

Licensee has agreed to be responsible and reimburse the Company for all of development, commercialization and regulatory expenses for the Licensed Product Candidates, subject to certain limitations as set forth in the License Agreement.

The License Agreement will continue on a product-by-product basis (i) until expiration of the Royalty Term for the applicable Licensed Product Candidate in the United States and (ii) perpetually for all other countries. Licensee may terminate the License Agreement at its convenience upon prior written notice prior to regulatory approval of any Licensed Product Candidate or upon prior written notice after regulatory approval of any Licensed Product Candidate. The Company may terminate the License Agreement in full if Licensee, any of its sublicensees or any of its or their affiliates challenge the validity of any Licensed Patent (as defined in the License Agreement) and such challenge is not required under a court order or subpoena and is not a defense against a claim, action or proceeding asserted by the Company. Either party may terminate the License Agreement (i) upon a material breach of the License Agreement by the other party, subject to a cure period, or (ii) if the other party encounters bankruptcy or insolvency. Upon a Serious Material Breach (as defined in the License Agreement) by the Company, subject to a cure period, Licensee may choose not to terminate the License Agreement and instead reduce the milestone and royalty payments owed to the Company. Upon termination, all licenses and other rights granted by the Company to Licensee to the License Agreement would revert to the Company. During the term of the License Agreement, the Company may not develop or commercialize any Competing Product (as defined in the License Agreement).

The License Agreement also establishes a joint steering committee, which will monitor progress in the development of the KP415 and KP484. Subject to the oversight of the joint steering committee, the Company otherwise retains all responsibility for the conduct of all regulatory activities required to obtain new drug application approval of KP415 and KP484; provided that Licensee shall be the sponsor of any clinical trials conducted by the Company on behalf of Licensee.

The foregoing description of the License Agreement is a summary and is qualified in its entirety by Exhibit 10.2 attached hereto, which is incorporated by reference into this Item 1.01.

In accordance with the terms of the Company’s March 20, 2012 Termination Agreement with Aquestive Therapeutics (formerly known as MonoSol Rx, LLC), Aquestive Therapeutics has the right to receive an amount equal to a percentage in the low double digits of any royalty or milestone payments made to the Company related to KP415, KP484 or KP879 under the License Agreement.

Item 3.02. Unregistered Sales of Equity Securities.

The information contained above in Item 1.01 related to the Exchange Agreement and below in Item 5.03 related to the Series B-1 Preferred Stock is hereby incorporated by reference into this Item 3.02.

The Initial Exchange Shares were, and any shares of Series B-2 Preferred Stock or Common Stock issued upon exchange of any portion of the Optional Exchange Principal Amount and any shares of Common Stock issuable upon conversion of any shares of Series B-1 Preferred Stock or Series B-2 Preferred Stock will be, issued in reliance on the exemption from registration provided in Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

Item 3.03. Material Modifications to Rights of Security Holders.

The information contained above in Item 1.01 related to the Exchange Agreement and below in Item 5.03 related to the Series B Preferred Stock is hereby incorporated by reference into this Item 3.03.

Item 5.03. Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.

Certificate of Designation of Preferences, Rights and Limitations of the Series B-1 Convertible Preferred Stock and the Series B-2 Convertible Preferred Stock

On September 3, 2019, as a condition to closing of the Exchange Agreement, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series B-1 Convertible Preferred Stock (the “Series B-1 Certificate of Designation”) and a Certificate of Designation of Preferences, Rights and Limitations of Series B-2 Convertible Preferred Stock (the “Series B-2 Certificate of Designation”) with the Secretary of State of the State Delaware, setting forth the preferences, rights and limitations of the Series B-1 Preferred Stock and the Series B-2 Preferred Stock, respectively. The Series B-1 Certificate of Designation and the Series B-2 Certificate of Designation are filed as Exhibits 3.1 and 3.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

Each share of Series B-1 Preferred Stock has an aggregate stated value of $1,000 and is convertible into shares of Common Stock at a per share price equal to $0.9494 per share (subject to adjustment to reflect stock splits and similar events). There are an aggregate of 1,659,996 shares of Common Stock issuable upon conversion of the Series B-1 Preferred Stock (without giving effect to the limitation on conversion described below). Each share of Series B-2 Preferred Stock has an aggregate stated value of $1,000 and is convertible into shares of Common Stock at a per share price equal to the greater of (i) $0.9494 (subject to adjustment to reflect stock splits and similar events), or (ii) the average of the volume-weighted average prices of the Common Stock on the Nasdaq Global Market on each of the 15 trading days immediately preceding such exchange. There are an aggregate of 28,439,015 shares of Common Stock issuable upon conversion of the Series B-2 Preferred Stock (without giving effect to the limitation on conversion described below), assuming a conversion date of September 3, 2019.

The Series B Preferred Stock is convertible at any time at the option of the Holders; provided that the Holders are prohibited from converting shares of Series B Preferred Stock into shares of Common Stock if, as a result of such conversion, such Holders (together with certain affiliates and “group” members of such Holders) would beneficially own more than 4.985% of the total number of shares of Common Stock then issued and outstanding. The Series B Preferred Stock is not redeemable. In the event of the Company’s liquidation, dissolution or winding up, the Holders will receive an amount equal to $0.0001 per share, plus any declared but unpaid dividends, and thereafter will share ratably in any distribution of the Company’s assets with holders of Common Stock and with the holders of any shares of any other class or series of capital stock of the Company entitled to share in such remaining assets of the Company (including the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”)) on an as-converted basis. With respect to rights upon liquidation, the Series B Preferred Stock ranks senior to the Common Stock, on parity with the Series A Preferred Stock and junior to existing and future indebtedness. Except as otherwise required by law (or with respect to approval of certain actions involving the Company’s organizational documents that materially and adversely affect the holders of Series B Preferred Stock), the Series B Preferred Stock does not have voting rights. The Series B Preferred Stock is not subject to any price-based anti-dilution protections and does not provide for any accruing dividends, but provides that holders of Series B Preferred Stock will participate in any dividends on the Common Stock on an as-converted basis (without giving effect to the limitation on conversion described above). The Series B-1 Certificate of Designation and the Series B-2 Certificate of Designation also provide for partial liquidated damages in the event that the Company fails to timely convert shares of Series B-1 Preferred Stock or Series B-2 Preferred Stock, respectively, into Common Stock in accordance with the applicable Certificate of Designation.

The foregoing description of the Series B-1 Certificate of Designation, the Series B-2 Certificate of Designation and the Series B Preferred Stock is a summary and is qualified in its entirety by Exhibits 3.1 and 3.2 attached hereto, which are incorporated by reference into this Item 5.03.

Item 7.01 Regulation FD Disclosure.

On September 4, 2019, the Company issued a press release to announce the transactions described in this Current Report on Form 8-K, as well as information regarding a conference call and live audio webcast with a slide presentation related thereto. A copy of the press release and presentation are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K.

The information contained in this Item 7.01, and the press release and presentation furnished as Exhibits 99.1 and 99.2, respectively, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act and are not incorporated by reference into any of the Company’s filings under the Securities Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in any such filing.

Forward Looking Statements

This Current Report on Form 8-K, including the press release and presentation incorporated herein by reference, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including, without limitation, statements about the any payments the Company may receive under the License Agreement, the potential conversion of any future principal amounts of the Convertible Notes under the Exchange Agreement, the Company’s expectations regarding its future financial position and operations and other statements containing the words “expect,” “intend,” “may,” “will,” and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: the uncertainties related to market conditions and the completion of the public offering on the anticipated terms or at all, uncertainties inherent in the initiation of future clinical trials and such other factors as are set forth in the risk factors detailed in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019. In addition, the forward-looking statements included in this Form 8-K,including the press release incorporated herein by reference, represent the Company’s views as of the date hereof. The Company anticipates that subsequent events and developments will cause the Company’s views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by law. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

# Portions of this exhibit (indicated by asterisks) have been omitted as the registrant has determined that (i) the omitted information is not material and (ii) the omitted information would likely cause competitive harm to the registrant if publicly disclosed.

KEMPHARM, INC Exhibit
EX-3.1 2 d759901dex31.htm EXHIBIT 3.1 Exhibit 3.1 Exhibit 3.1 KEMPHARM,…
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About KemPharm, Inc. (NASDAQ:KMPH)

KemPharm, Inc. is a clinical-stage specialty pharmaceutical company. The Company is engaged in the discovery and development of prodrugs. The Company uses its Ligand Activated Therapy (LAT) platform technology to create prodrugs. The Company’s product candidate, KP201/APAP, consists of KP201, its prodrug of hydrocodone, which is combined with acetaminophen (APAP). The Company is developing KP201/APAP as an immediate release (IR), a product candidate for the short-term, or no longer than 14 days for the management of acute pain. The Company has designed KP201/APAP with abuse-deterrent properties to address the epidemic of opioid abuse in the United States. The Company also focuses on developing the pipeline of additional prodrug product candidates that targets pain and attention deficit hyperactivity disorder (ADHD). The Company’s products include KP201/IR (APAP-free), KP511/ER, KP415, KP606/IR and KP746.