Good day, ladies and gentlemen, and welcome to the KemPharm Fourth Quarter and Year End 2018 Results 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 be given at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference Mr. Jason Rando. Please go ahead.

Good afternoon, and thank you for joining our call today to discuss KemPharm's fourth quarter and full year 2018 financial and corporate results. Before we begin, 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 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 the reports KemPharm files with the SEC, which are available on KemPharm's website at www.kempharm.com under the Investor Relations section. We encourage you to review these documents carefully. Speaking on today's call will be Travis Mickle, KemPharm's President and CEO; LaDuane Clifton, CFO; and Rusty Johnson, Chief Business Officer. Following the remarks, we will open the call to your questions. With that it is my pleasure to introduce Travis Mickle.

Thanks, Jason and I'm pleased everyone joined today’s call. For those of [indiscernible] KemPharm or need a little refresher, KemPharm quite simply is a project company. We take existing approved drugs, improve them with our technology then develop those products and either out-license those candidates to other commercial organizations or in select cases could consider commercializing those products ourselves in the future. 2018 was a year marked with a lot of key accomplishments and value creation. We believe that 2019 will be the key year in which we start to see that value recognized. Looking back, we completed all the efficacy in human abuse potential trials necessary to file the NDA for KP415 as well as many other clinical and non-clinical and manufacturing work that you really never heard about. APADAZ was finally approved with a label we believe is differentiated and KVK ultimately agrees with us. Finding the right partner that shares our vision for APADAZ was the vital step in that commercial process. We also advanced our goals with the technology by entering in a collaboration with twoXAR and introduced what we believe could be another highly valuable asset in KP879. In order to realize the value created last year and forged ahead with our plan to create more we completed an offering to bring some strategic capital in order to advance the KP415 NDA and potentially to approval, complete the partnership process with KP415 and KP484 as well as start to reduce some of our outstanding debt. We reduced this debt through a conversion of principle on our senior convertible note with Deerfield back in June as well as an exchange in October of debt to preferred shares. All of these items were key actions to take in 2018 in order to prepare for the next stage…

Thank you, Travis and good afternoon everyone. I will provide a brief overview of our operating results for both fourth quarter and full year 2018. Additional details are available in our press release which was published just prior to this call. For Q4 of 2018 we reported a net loss of $5.2 million or $0.20 per basic share and $0.21 per diluted share that is compared to a net loss of $10.6 million or $0.72 per basic and diluted share for the same quarter in 2017. The net loss in Q4 2018 was driven primarily by an operating loss of $9.3 million and net interest expense and other items of $1.6 million which was partially offset by noncash fair value adjustment income of $5.7 million. The $1.1 million excuse me the $1.1 million increase in operating loss for Q4 of 2018 compared to last year's fourth quarter operating loss of $8.2 million was primarily the result of an increase of $800,000 in R&D spending and $400,000 in G&A expenses respectively. Moving ahead to our full year 2018 results. We reported a net loss of $56.5 million or $3.15 per basic and diluted share as compared to net loss of $43.4 million or $2.96 per basic and diluted share for 2017. Net loss for the year 2018 was driven primarily by an operating loss of $55.9 million and net interest expense and other items of $6.5 million, partially offset by non-cash fair value adjustment income of $6 million. The operating loss for 2018 of $55.9 million was an increase of $22.5 million as compared to an operating loss of $33.4 million for 2017. This was primarily due to an increase of $21.2 million in R&D expense and $1.6 million in severance expense that was recognized for 2018. This was partially offset…

Thanks LaDuane. And really to wrap up today's call and try to highlight how the actions and accomplishments of last year as well as those we have planned to execute in this year really do address that value creation as and as well the ultimate realization of that value. KP415, 484 represent our highest value assets. There is real and tangible interest in those products outside the walls of KemPharm. Our job is to capture that value with the best potential partner, but also not forget that work doesn't in there. Many of these types of potential deals have other milestones that may be squarely in our camp to accomplish. This could include the KP415 NDA submission except in send or approval and also conclude labeling and scheduling. Some of these items could be critical for potential cash milestones, but other -- and even more importantly that partner would need these to launch the product. From there the process doesn't stop. As with Vyvanse, a multibillion-dollar product isn't launched it's built. There will be added studies, age groups like preschool label changes and potential new indication that build a marketing story and lead to a better and better product From there the process doesn't stop. As with VYVANSE, a multi-billion-dollar product isn't launched, it's built. There will be added studies, age groups like preschool, label changes and potential new indication that build on marketing story and lead to a better-and-better product profile and a larger market share. And just consider I'm only really referring to KP415. Beyond that, and I'll try and answer -- excuse me, of course, there are no assurances of any of what could be or what we said. But certainly we're all working diligently towards the best outcome. Beyond that, and I'll try to answer the question of what's next. Nicely we have the ability to build our own pipeline of opportunities like KP879, and the R&D collaborations with twoXAR and Genco. We look to potentially license these opportunities similar to what we have with Apadaz and working towards with KP415 and KP484. Or point in the near future, some of these may be commercial assets of KemPharm. As you can see today, we are working towards executing on our plan as well as preparing for the future. I appreciate your time on today's call, and your continued support. I'd be happy to take any question.

[Operator Instructions] Our first question is from Randall Stanicky with RBC Capital Markets. Your line is open.

Hi. Good afternoon. This is Dan Busby on for Randall. First question, KP415, KP484, could you go into a little more detail on what exactly happened with the partnering process given that it was a structured process? It could be a little hard to tell from the outside whether there's a bidding war going on? Or whether you were low-balled initially? So any color there would be helpful. And then I don't know if you can comment on this, but would you characterize the offers you've received thus far as fair?

Yeah. I think basically all we've said -- as we've already said, they are in the press release or on this call again we have tangible real interest. It's a competitive process. I can't really give any details about how that process has evolved. I think you could probably ascertain different organizations that maybe interested in ADHD. But there are certainly others that you may not be able to identify. So there were interested parties last year. So if you assume there's parties there's more than one. And we've added more interested parties. So I think that can give a sense that there's multiple folks involved here.

Okay, fair enough. And is there a new timeline on that process? Or what you can see at this point?

I think we've given away our advantage here by indicating any sort of timing. We've pushed every party as rapidly along as we can. And we have our own internal process to execute on. So we're going to keep that one pretty close to the west right now.

Okay, got it. Moving on then, you touched upon it earlier. Can you point us to any specific pipeline milestones or other updates that we should be focused on this year outside of KP415, KP484 in terms of just assessing progress with some of your other pipeline?

Luckily for 879, we already have a lot of clinical work done there. So filing the IND, there isn't really something of real importance. It's more of a regulatory step that you can officially kind of move ahead in studies with that molecule specifically. But again, this is the same prodrug that's found in KP415, KP484. It's just now at higher doses and all by itself. So, I think in this case we'll have to provide more guidance once we get the NDA submitted. We have some studies that are -- that we're looking forward to. But we don't have timing on those as of yet.

Okay. Thanks. And then just one last one. Perhaps for LaDuane. I might've missed it, but can you provide any broad color on operating expense trends for 2019?

Yeah. So, I spoke briefly about our current forecast. I think for -- where we are currently, our burn rate is sort of between $10 million to $12 million. Although, I expect that as we go into the deeper in part of the year, our burn rate is going to be reduced somewhat. So that, of course, supports the cash run rate forecast that I suggested during the call which takes into Q3.

Okay. Great. Thanks, guys.

Thank you. Our next question is from Scott Henry with Roth Capital Partners. Your line is open.

Thank you, and good afternoon. Perhaps just staying on the model, can you tell me how many shares you ended the fourth quarter with? And how should we think about shares outstanding in 29, excluding anything with Lincoln Park, but just some of the other levers. I'm just trying to get a sense of where the cap table is in kind of real-time?

Yeah. Thank you. So it's largely -- let's see, we ended the year at 26.5 million shares approximately. And that's approximately where we were as we came out of the offering. So that's continued there, that's where it is at the end of the year. As we look forward, I mean, we expect to be able to utilize the facility with Lincoln Park. But obviously changes in price changes how much dilution that represent. Our intention is to manage that closely. We don't want to take down more than we need to. But we do like the fact that it provides some flexibility potentially to extend our cash runway and make sure that we have what we need to continue to executing on a lot of things that Travis referred to.

Okay. Great. Thank you for that color. And then KP484. And you may have said this already, I apologize if you did. But when should we expect that data to read out?

Right now the work that's being done with KP484 is really around formulation and some planning in those clinical studies. So second half of this year we can expect to start some of those studies. But we may not have data until early 2020. But again I'll have more definitive timing on that as we kind of move into 2019.

Okay. And on -- should we -- in the model again just to shift back. Should we expect any milestones coming through with -- relative to the APADAZ collaboration?

There is an early milestone that is possible this year. I can't tell you with certainty when that would come in. But there is an initial milestone that we had outlined in the original announcement of that deal that made a $2 million milestone payment could be available at or around the lunch just depending on how that goes. So again the timing is a bit unknown at the moment, but we're pressing very hard to reach that.

Okay great. Thank you for taking my question.

Thank you. [Operator Instructions] Our next question is from Esther Rajavelu with Oppenheimer. Your line is open.

Hi everyone. This is Henry for Esther. Thanks for taking our question. So, first of all, I just want to confirm with you guys about the R&D spending trend over -- I mean over each quarter of 2019? And second of all, assuming you would continue get funding from Lincoln Park Capital. How long do you think that capital would be lasting? Thanks.

Yeah. So as we look at this the R&D spending trend for 2018, you could tell that it was certainly up compared to 2017. And we had a lot of work going on specific to KP415 with the efficacy trial an ongoing safety trial that's continuing into this year. But we'll wrap up likely in Q2. So as we've done all this work to prepare for the NDA and now, as Travis just mentioned, we're doing a lot I'll call it less expensive work in terms of capital around the formulation and work for 484 and some of those studies won't actually begin until later in the year. You're going to see a decline in the R&D spending just naturally because of the ebb and flow of that activity. So I hope that helps there.

Thanks.

Thank you. And I'm showing no further questions at this time I would like to turn the call back over to Mr. Travis Mickle for any closing remarks.

Thanks again for your time today. We will continue to provide updates on these important developments as soon as we can. It certainly is a very exciting time here at KemPharm. Thanks everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a great day.