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KemPharm: Has Confusion Created A Significant Opportunity?


KemPharm got slaughtered on Friday.

Yet, seemingly there's a level of confusion in what made it be sold so aggressively.

It would seem that KemPharm will not only see Apadaz approved, but that the possibility of having an abuse-deterrent label is not entirely gone.

Back on Friday, KemPharm (NASDAQ:KMPH) plunged by a full 55%. This happened because while the FDA's Anesthetic and Analgesic Drug Products Advisory Committee voted 16-4 to favor approval of KMPH's Apadaz drug candidate, it also surprisingly voted 2-18 against it having abuse-deterrent labeling.

Deterring opioid abuse is a very significant objective, in light of the fact that prescription opioid abuse is killing ~18,000 persons per year in the US. Thus, being able to market a drug that might be more resistant to abuse is something eagerly sought by all actors, be them the FDA, payers, doctors or the government itself.

Now, Apadaz was formulated exactly to have abuse-deterrent capabilities and to be marketed as such in an otherwise very competitive opioid market. It achieves these capabilities as a prodrug by only "releasing" its active agent when exposed to hydrolysis in the stomach. This formulation impedes easy extraction of the active agent (namely hydrocodone) when in pill form, something which is otherwise done by drug addicts/abusers to get pure hydrocodone from generics and other hydrocodone drugs.

Without this label, Apadaz -- even if approved -- would be just another opioid in a sea of opioids, whose commercial prospects wouldn't be that appealing. Naturally, the market sold off on this scenario. This happened in spite of Apadaz having a June 9 PDUFA date, and thus being very near possible FDA approval.

The Confusion

This is where things get interesting. What I am going to say is that not only is Apadaz likely to get approved, but it also still has a good shot at carrying an abuse-deterrent label. Said another way, the entire drop on Friday might have come from a significant market misunderstanding.

Why was there a...