New Abuse-Resistant Opioid Receives $60 Million Backing | The Fix
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New Abuse-Resistant Opioid Receives $60 Million Backing

A New York investment firm has ponied up to fund KemPharm's new painkiller technology.

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By John Lavitt

06/12/14

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Revealing the dynamic nature of the prescription painkiller marketplace, KemPharm, a small Midwestern biopharmaceutical company, has received $60 million in backing from Deerfield Management Company to develop a new abuse-resistant painkiller technology. On June 6, the New York-based healthcare investment firm announced the financing agreement with KemPharm, a research-oriented operation based in Coralville, Iowa.

With only 13 employees, KemPharm has made remarkable progress in developing innovative drug abuse-resistant technologies to make safer opioids. Since its founding in 2006, the company has received the majority of its funding from local Iowa investors. With the deal with Deerfield signed, however, KemPharm enters the big-time with its first institutional investor.

Gordon "Rusty" Johnson, KemPharm's chief operating officer and chief financial officer, talked about the investment with the Iowa City Press-Citizen, “Getting institutional investment capital is the hardest thing that any biotech does until they have an approved drug," Johnson said. "So this is really significant. It's a huge validation of KemPharm and its science."

KemPharm plans to use the financing to take its number one product candidate to the next stage of development. A prescription painkiller is called KP201 and the drug's opioid base chemical is hydrocodone. Unlike traditional opioids, however, it only activates in the body if taken orally. This is the real innovation of KemPharm proprietary drug technology. According to Johnson, if a drug abuser tried to crush KP201 in order to snort it or dissolve it for the purpose of injection, the proprietary technology would prevent the hydrocodone from being metabolized by the body and the drug would have no effect.

The initial investment by Deerfield is $25 million. The remaining $35 million will become available as the company hits certain milestones in the development of the new technology. Deerfield’s investment makes sense given Johnson’s description of how the state-of-the-art abuse-resistant innovation in KemPharm’s KP201 painkiller differs from the existing drugs.

"There are multiple companies trying to come up with abuse-deterrent opioids," Johnson said. "But the technology to date has been wrapping them in a pill that is really hard to smash, or having them in a pill that, if you mix it in water, kind of gets like Jell-O. But in all those cases, if you do work hard enough to crush the pill, the opioid is right there, or if you're able to dissolve it in water, which you can do, you can get out the majority of the opioid. So they're sort of like speed bumps, but not barriers."

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