Jason Rando - Tiberend Strategic Advisors Travis Mickle - President and CEO Dan Cohen - EVP, Government and Public Relations LaDuane Clifton - CFO

Marcus Ho - Oppenheimer

Good afternoon, ladies and gentlemen, and welcome to the KemPharm Third Quarter 2016 Corporate Update Conference 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. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Jason Rando of Tiberend Strategic Advisors. Please go ahead.

Good afternoon everyone, and thank you for joining our call today. At this time, I would like to remind our listeners that 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 on this call are made pursuant to the Safe Harbor provisions of the Federal Securities Laws. Information contained in the forward-looking statements is management's beliefs based on current expectations, and is subject to change. And actual results may differ materially from forward-looking statements. KemPharm disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future developments or events, except as required by law. There is more complete information regarding the forward-looking statements, risks, and uncertainties in the reports KemPharm files with the SEC. These documents are available on KemPharm's website at www.kempharm.com, under the Investor Relations section, and we encourage you to review these documents carefully. Before I introduce today’s speakers, I would like to note that KemPharm is using a slide presentation at the conference call. The presentation is accessible via the Investor Relations section on KemPharm’s website and is also included within the webcast. Speaking on today's call will be Travis Mickle, President and CEO, who will provide an update on KemPharm's corporate and clinical development achievements. Dan Cohen, EVP, Government and Public Relations will provide an update on the Apadaz regulatory process; and LaDuane Clifton, CFO will review KemPharm’s third quarter 2016 financial results. At the conclusion of the remarks, we will then proceed to a question-and-answer session. I will now turn the call and presentation over to Travis.

Thank you, Jason, and welcome everyone to KemPharm’s third quarter financial and business update conference call. As Jason mentioned, we are providing a brief slide presentation to accompany todays’ remarks. KemPharm’s overall key mission is the discovery and development of proprietary products that improve one or more of the attributes of approved drugs, such as susceptibility to abuse, bio availability and safety. We do this by leveraging our Ligand Activated Therapy or LAT discovery platform to create prodrugs by chemically attaching one or more molecules or Ligands to an FDA approved parent drug. We then combined with the parent drug, our ligands create prodrugs designed to have improved drug attributes while maintaining efficacy equivalent to the parent drug. Once administered, targeted human metabolic processes such as those in the GI tract separate the ligand from the prodrug and release the parent drug, which then can exhort its therapeutic effect. Utilizing our LAT discovery platform, we are developing a portfolio of product candidates targeting opportunities and pain management, ADHD, and central nervous system disorders. The third quarter began a transformative period for KemPharm. Most importantly was the realigning of our development pipeline. As detailed in our corporate and clinical update on September 15, KP415 and KP201/IR were elevated to our co-lead product candidates. We achieved several key milestones with each product that’s moved us forward with opportunities that each offers to potentially address important patient, prescriber and market needs. Beyond our lead candidates, we are continuing efforts to advance KP511 extended-release, and we announced in the licensing agreement with Acura Pharmaceuticals of their proprietary aversion technology that we believe will potentially enhance the value of our entire immediate release of opioid portfolio. Additionally, as Dan will discuss in a few minutes, we have filed an appeal of the Apadaz TRL to…

Thank you Travis. As we announced on November 3, KemPharm has responded to the FDAs complete response letter for Apadaz through the initiation of a formal dispute resolution request going as an FDRR through that process. This followed the completion of an end-of-review meeting in August of 2016, which the FDA provided the company with a more complete understanding of its assessment of the NDA. The deal was submitted in accordance with the FDRR process that exists within the FDAs center for drug evaluation and research. FDA regulation provide this mechanism for those seeking regulatory approval of the drug product pursuant to an NDA to obtain formal review of any agency decision or raising matters with the subsequent levels of the agency. At this point of process, we are unable to forecast either the length of the review or anticipate when the FDRR process will be completed. It may be short or could take several steps that has the possibility of taking up 12 months. During this time, the FDA typically requests that companies do not comment during the ongoing review. Our intent is that the next announcement on Apadaz will be after the final determination of the FDRR. With that, I will hand the call over to LaDuane Clifton, who review our third quarter financial situation. LaDuane?

Thank you Dan and good afternoon everyone. For the third quarter 2016, KemPharm had a net loss of $13.4 million or $0.92 per basic and diluted share. The net loss was driven by an operating loss of 10.4 million, net interest expense of 1.4 million, and a fair value adjustment expense of 1.3 million. The operating loss included $3 million of severance expense associated with our deferral of commercial operations and the realignment of resources which has been previously announced. Total cash as of September 30, which included cash, cash equivalents, restricted cash, marketable securities and long term investments was approximately 92 million, which was a decrease of 10.6 million compared to the prior quarter of June 30. One of the interesting item was that our shelf registration was declared effective by the SEC on October 17, as well as we signed a sales agreement for an after-market offering on October 3 in conjunction with that shelf registration filing. While we have no plans presently to utilize this, the filing of the shelf registration is considered a good housekeeping and provides the company with flexibility to more quickly respond to advantageous financing opportunities should they arise. Overall, the strategic realignment of our investment priorities place KemPharm in a solid position in financial resources needed to fund our development and operating activities through the end of 2018. I will now return the call to Travis.

Thank you LaDuane. We accomplished much during the third quarter, and I believe KemPharm is the stronger company as a result. Our pipeline is deep with multiple differentiated products, with which they potentially reshaped the markets and treatment indications for which they have been designed. Additionally, we secured a licensing agreement with Acura Pharmaceuticals which offers the potential to enhance our entire IR opioid prodrug franchise. Looking ahead to the fourth quarter and 2017, we anticipate multiple clinical milestones for both KP201/IR and KP415 as well as KP511 that if the data are favorable, we’ll greatly enhance the value of each product while empowering KemPharm with three late stage drugs that address unmet medical needs in large established markets. As I said at the start of this call, we’ve begun a transformative period for KemPharm, as we have focused our product priorities and added to our formulation capability. We look forward to continuing to keep you informed of these ongoing clinical progress and over our novel prodrug product candidates. With that I will now open the call to your questions.

[Operator Instructions] And your first question comes from Randall Stanicky from RBC Capital Markets. Your line is open.

This is Matt filling in for Randall. So I just had a few questions that more related to your reselling prioritize pipeline products. KP415 methylphenidate product, you talked about marrying Vyvanse in terms of commercial launch. What gives you the confidence in that and is there a subset of methylphenidate users that you are targeting, the 4.2 billion you talked about. And then if you could just go over why KT511, the NDA was extended to 2019 versus 2018 before, I didn’t quite catch that?

So the first part of your question, the target product profile for KP415 has been designed around some of the similar attributes that we’ve seen for Vyvanse. But in particular in looking at duration of action for the methylphenidate space will be especially important and that’s in the feedback we’ve received from key opinion leaders and thought leaders in this space, as well as some of our preliminary research that we’ve done. The potential market here really is asserted by all of those individuals that take methylphenidate that potentially could again need a longer duration whether that be an improved onset or total duration of action for that particular product, as well as something that’s more consistent in its deliveries in the current formulation based technologies. But specifically, about 40% of methylphenidate patients only respond to methylphenidate. So they can’t switch and take Vyvanse as an opportunity to have along the duration. So I think really if you look at this market, that would be your lowest hanging fruit as it were and you could focus then efforts to expand upon that potential. And then to answer the last part of your question, when we provided our updates in September on the clinical progress of the organization and commercial opportunities, we discussed the need to deprioritize or move KP511 a little bit further back and not to deprioritize the product but to move it further back in order to explore further the extend and release technologies that we’re looking at and incorporate those as well as investigate overdose protection that may be enhance the molecule as we’ve seen pre-clinically and the possibility of a lower incidence of opioid induced constipation which we’ve also seen pre-clinically.

Can I just have one more, so what are your expectations of cash burn over the near term?

Our cash burn as we’ve said prior quarter remains around I’d say in the 10 million to 12 million range per quarter, and certainly what prevailed during this Q3 and so we expect that is (inaudible).

And your next question comes from Marcus Ho from Oppenheimer and your line is open.

Just a question on Apadaz as far as the FDRR goes, can you may be talk about what will be considered the best case scenario? What would that entail in terms of this kind of development of Apadaz going forward? And then I had a question on cash, is the current cash good for all the milestones that you have listed?

First of all, I would refer you back to our press release last week when we described the filing for the FDRR and it contains details. And obviously we’ve indicated that our questioned deals with the new term language this [period] that we have with the division and we hope to resolve those questions regarding what language is appropriate in Section 9.2. The best case is obviously that they agree with our interpretation and we will work through that process within the coming weeks and months.

To answer the rest of your question around that, if once you have a resolution in assuming the best case scenario as Dan outlined it there, you would still have to resubmit the NDA. Again this would be in response to the CRL, so you would assume if it’s a labeling discussing, it’s a two month review process. So there’s not a lengthy expectation (inaudible).

And then Marcus in regard to your cash question, as I mentioned, cash will take us through 2018 and so that does cover the milestones through 2018 that Travis mentioned. So clinical trials, the cash we need to prepare the NDAs or 201/IR (inaudible) are milestones that go past that in to 2019 like what we talked about at 511 are not contemplated in that.

[Operator Instructions] I am showing no further questions at this time. I would now like to turn the call back over to the presenters.

Thanks everyone for attending the call today, and I appreciate the very good questions. Look forward to updating more in the very near future. Thank you.

Ladies and gentlemen, this concludes todays’ conference. Thank you for your participation and have a wonderful day. You may all disconnect.