Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of unaudited condensed financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed financial statements and accompanying notes. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, the useful lives of property and equipment, the recoverability of long-lived assets, the incremental borrowing rate for leases, and assumptions used for purposes of determining stock-based compensation, income taxes, and the fair value of the derivative and warrant liability, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition

The Company commenced recognizing revenue in accordance with the provisions of ASC

606,

 

Revenue from Contracts with Customers

 (“ASC

606”

), starting

January 1, 2018.

However, the Company had

no

revenue until the

third

quarter of

2019.

Arrangements with Multiple-Performance Obligations

From time to time, the Company enters into arrangements for research and development, manufacturing and/or commercialization services. Such arrangements

may

require the Company to deliver various rights, services, including intellectual property rights/licenses, research and development services, and/or commercialization services. The underlying terms of these arrangements generally provide for consideration to the Company in the form of nonrefundable upfront license fees, development and commercial performance milestone payments, royalty payments, consulting fees and/or profit sharing.

In arrangements involving more than

one

performance obligation, each required performance obligation is evaluated to determine whether it qualifies as a distinct performance obligation based on whether (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available and (ii) the good or service is separately identifiable from other promises in the contract. The consideration under the arrangement is then allocated to each separate distinct performance obligation based on its respective relative stand-alone selling price. The estimated selling price of each deliverable reflects the Company's best estimate of what the selling price would be if the deliverable was regularly sold by the Company on a stand-alone basis or using an adjusted market assessment approach if selling price on a stand-alone basis is

not

available.

The consideration allocated to each distinct performance obligation is recognized as revenue when control of the related goods or services is transferred. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will

not

occur. Should there be royalties, the Company utilizes the sales and usage-based royalty exception in arrangements that resulted from the license of intellectual property, recognizing revenues generated from royalties or profit sharing as the underlying sales occur.

Licensing Agreements

The Company enters into licensing agreements with licensees that fall under the scope of ASC

606.

The terms of the Company's licensing agreements typically include

one

or more of the following: (i) upfront fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; and (iii) royalties on net sales of licensed products. Each of these payments

may

result in licensing revenues.

As part of the accounting for these agreements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. Generally, the estimation of the stand-alone selling price

may

include such estimates as, independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probability of regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the licensee which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: 

If a license to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

Milestone Payments:

 At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would

not

occur, the associated milestone value is included in the transaction price. Milestone payments that are

not

within the Company's or the licensee's control, such as non-operational developmental and regulatory approvals, are generally

not

considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the licensee's control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company's estimate of the transaction price

may

also result in negative licensing revenues and earnings in the period of adjustment.

KP415

 License Agreement

In

September 2019,

the Company entered into the

KP415

 License Agreement with Commave under which the Company granted to Commave an exclusive, worldwide license to develop, manufacture and commercialize the Company's product candidates containing SDX and d-MPH, including

KP415,

KP484,

and, at the option of Commave,

KP879,

KP922

and/or any other product candidate developed by the Company containing SDX and developed to treat ADHD or any other central nervous system disorder. The license granted to Commave is distinct from other performance obligations as Commave can benefit from the license either on its own or together with other resources that are readily available and the license is separately identifiable from other promises in the

KP415

 License Agreement.

In exchange for the exclusive, worldwide license, discussed above, Commave paid the Company a non-refundable upfront payment of

$10.0

million. The Company is also entitled to additional payments from Commave of up to 

$63.0

million, conditioned upon the achievement of specified regulatory milestones related to

KP415

and

KP484.

In

May 2020,

the FDA accepted the Company's NDA for

KP415.

Per the

KP415

License Agreement, the Company received a regulatory milestone payment of

$5.0

million following the FDA's acceptance of the

KP415

NDA. In addition, the Company is entitled to payments from Commave of up to

$420.0

million in the aggregate, conditioned upon the achievement of certain U.S. sales milestones, which are dependent upon, among other things, the timing of approval for a new drug application for

KP415

and its final approved label, if any. Further, Commave will pay the Company quarterly, tiered royalty payments ranging from a percentage in the high single digits to mid-twenties of Net Sales (as defined in the

KP415

 License Agreement) in the U.S. and a percentage in the low to mid-single digits of Net Sales in each country outside of the U.S., in each case subject to specified reductions under certain conditions as described in the

KP415

 License Agreement

Commave also agreed to be responsible for and reimburse the Company for all of development, commercialization and regulatory expenses incurred on the licensed products, subject to certain limitations as set forth in the

KP415

 License Agreement. As part of this agreement the Company is obligated to perform consulting services on behalf of Commave related to the licensed products. For these consulting services, Commave has agreed to pay the Company a set rate per hour on any consulting services performed on behalf of Commave for the benefit of the licensed products.

The

KP415

 License Agreement is within the scope of ASC

606,

as the transaction represents a contract with a customer where the participants function in a customer / vendor relationship and are

not

 exposed equally to the risks and rewards of the activities contemplated under the

KP415

 License Agreement. Using the concepts of ASC

606,

the Company identified the grant of the exclusive, worldwide license and the performance of consulting services, which includes the reimbursement of out-of-pocket

third

-party research and development costs, as its only

two

performance obligations at inception. The Company further determined that the transaction price, at inception, under the agreement was

$10.0

 million upfront payment plus the fair value of the Development Costs (as defined in the

KP415

 License Agreement) which was allocated among the performance obligations based on their respective related stand-alone selling price. 

The consideration allocated to the grant of the exclusive, worldwide license was

$10.0

million, which reflects the standalone selling price. The Company utilized the adjusted market assessment approach to determine this standalone selling price which included analyzing prospective offers received from various entities throughout our licensing negotiation process as well as the consideration paid to other competitors in the market for a similar type transaction. The Company determined that the intellectual property licensed under the

KP415

 License Agreement represented functional intellectual property and it has significant standalone functionality and therefore should be recognized at a point in time as opposed to over time. The revenue related to the grant of the exclusive, worldwide license was recognized at a point in time at the inception of the

KP415

 License Agreement.

The consideration allocated to the performance of consulting services, which includes the reimbursement of out-of-pocket

third

-party research and development costs, was the fair value of the Development Costs (as defined in the

KP415

 License Agreement), which reflects the standalone selling price. The Company utilized a blended approach which took into consideration the adjusted market assessment approach and the expected cost plus a margin approach to determine this standalone selling price. This blended approach utilized the adjusted market approach and expected cost plus margin approach to value the performance of consulting services which included analyzing hourly rates of vendors in the a market who perform similar services to those of the Company to develop a range and then analyzing the average cost per hour of our internal resources and applying a margin which placed the value in the median of the previously identified range. For the reimbursement of out-of-pocket

third

-party research and development costs the Company utilized the expected cost plus a margin approach, which included estimating the actual out-of-pocket cost the Company expects to pay to

third

-parties for research and development costs and applying a margin, if necessary. The Company determined that

no

margin was necessary of these out-of-pocket

third

-party research and development costs as these are purely pass-through costs and the margin for managing these

third

-party activities is included within the value of the performance of consulting services. The Company determined that the performance of consulting services, including reimbursement of out-of-pocket

third

-party research and development costs, is a performance obligation that is satisfied over time as the services are performed and the reimbursable costs are paid. As such, the revenue related to the performance obligation will be recognized as the consulting services are performed and the services associated with the reimbursable out-of-pocket

third

-party research and development costs are incurred and paid by the Company, in accordance with the practical expedient allowed under ASC

606

regarding an entity's right to consideration from a customer in an amount that corresponds directly to the value to the customer of the entity's performance completed to date. As discussed above, the combination of the standalone selling price of these consulting services and certain out-of-pocket

third

-party research and development costs for

KP415

was the fair value of the Development Costs at inception. These Development Costs effectively created a cap on certain consulting services and out-of-pocket

third

-party research and development costs identified in the initial product development plan for

KP415

which was anticipated at the inception date of the

KP415

License Agreement. As of

September 30, 2020,

the Company has recognized all of the consulting services and out-of-pocket

third

-party research and development costs under this cap. 

Under the

KP415

 License Agreement, Commave was granted an exclusive option to include Additional Products as Product(s) (both as defined in the

KP415

 License Agreement) under the

KP415

 License Agreement (the "Additional Product Option"). In addition to the Additional Product Option, Commave was also granted a right of

first

refusal ("ROFR") to acquire, license and/or commercialize any of the Additional Product Candidates should they choose

not

to exercise the Additional Product Option. Should Commave choose to exercise the Additional Product Option on any Additional Product Candidates, Commave and the Company shall negotiate in good faith regarding the economic terms of such Additional Product. Further, should Commave exercise the ROFR on any Additional Product Candidate, the economic terms of the agreement shall be the same as those offered to the

third

-party. Under ASC

606

an option to acquire additional goods or services gives rise to a performance obligation if the option provides a material right to the customer. The Company concluded that the above described Additional Product Option and ROFR do

not

constitute material rights to the customer as Commave would acquire the goods or services at a to be negotiated price, which the Company expects to approximate fair value and therefore Commave would

not

receive a material discount on these goods or services compared to market rates.  

The Company is entitled to additional payments from Commave conditioned upon the achievement of specified regulatory milestones related to

KP415

and

KP484

and the achievement of certain U.S. sales milestones, which are dependent upon, among other things, the timing of approval for a new drug application for

KP415

and its final approved label, if any. Further, Commave will pay the Company quarterly, tiered royalty payments ranging from a percentage in the high single digits to mid-twenties of Net Sales (as defined in the

KP415

 License Agreement) in the U.S. and a percentage in the low to mid-single digits of Net Sales in each country outside of the U.S., in each case subject to specified reductions under certain conditions as described in the

KP415

 License Agreement. The Company concluded that these regulatory milestones, sales milestones and royalty payments each contain a significant uncertainty associated with a future event. As such, these milestone and royalty payments are constrained at contract inception and are

not

included in the transaction price as the Company could

not

conclude that it is probable a significant reversal in the amount of cumulative revenue recognized will

not

occur surrounding these milestone payments. At the end of each reporting period, the Company updates its assessment of whether the milestone and royalty payments are constrained by considering both the likelihood and magnitude of the potential revenue reversal. 

For example, in

May 2020,

the FDA accepted the Company's NDA for

KP415.

Per the

KP415

License Agreement, the Company received a regulatory milestone payment of

$5.0

million following the FDA's acceptance of the

KP415

NDA. Since the FDA accepted the Company's NDA for

KP415

the constraint was removed and revenue recognized. The associated revenue was allocated among the

two

performance obligations identified at contract inception. Since both performance obligations were satisfied as of the end of the

second

quarter of

2020

the full

$5.0

million payment was recognized as revenue during the

second

quarter of

2020.

 

For the

three

and

nine

months ended

September 30, 2020

, the Company recognized revenue under the

KP415

License Agreement of

$0

and

$7.3

million, respectively. In accordance with the guidance provided in ASC

340

-

40,

Contracts with Customers

, the Company capitalized approximately

$2.8

million of incremental costs incurred in obtaining the

KP415

License Agreement and will amortize these costs as the revenue associated with the exclusive worldwide license, reimbursement of out-of-pocket

third

-party research and development costs and consulting services is recognized. As of

September 30, 2020

, the Company has recognized all of these incremental costs,

$0

and

$0.8

million of which was recognized in the

three

and

nine

months ended

September 30, 2020

, respectively, and are recorded in the line item titled royalty and direct contract acquisition costs in the unaudited condensed statement of operations. There was

$11.5

million of revenue and

$1.0

million of associated direct contract acquisition costs recognized for the

three

and

nine

months ended

September 30, 2019

 related to the

KP415

License Agreement. There was 

no

 deferred revenue related to this agreement as of 

September 30, 2020

 or 

December 31, 2019

.

Consulting Arrangements

From time to time, the Company enters into consulting arrangements with

third

-parties to provide research and development, manufacturing and/or commercialization services. Such arrangements

may

require the Company to deliver various rights, services, including research and development services, regulatory services and/or commercialization services. The underlying terms of these arrangements generally provide for consideration to the Company in the form of consulting fees and reimbursements of out-of-pocket

third

-party research and development, regulatory and commercial costs.

Corium Consulting Agreement

In

July 2020,

the Company entered into a consultation services arrangement (the "Corium Consulting Agreement") with Corium, Inc. ("Corium") under which Corium engaged the Company to guide the product development and regulatory activities for certain current and potential future products in Corium's portfolio, as well as continue supporting preparation for the potential commercial launch of

KP415

(together, "Corium Consulting Services"). Corium is a portfolio company of Gurnet Point Capital and has been tasked with leading all commercialization activities for

KP415

under the

KP415

License Agreement, as discussed above.

Under the Corium Consulting Agreement, the Company is entitled to receive payments from Corium of up to 

$15.6

million,

$13.6

million of which will be paid in quarterly installments through

March 31, 2022.

The remaining

$2.0

million is conditioned upon the achievement of a specified regulatory milestone related to Corium's product portfolio. Corium also agreed to be responsible for and reimburse the Company for all development, commercialization and regulatory expenses incurred as part of the performance of the Corium Consulting Services.  

The Corium Consulting Agreement is within the scope of ASC

606,

as the transaction represents a contract with a customer where the participants function in a customer / vendor relationship and are

not

 exposed equally to the risks and rewards of the activities contemplated under the Corium Consulting Agreement. Using the concepts of ASC

606,

the Company identified the performance of consulting services, which includes the reimbursement to the Company of

third

-party pass-through costs, as its only performance obligation at inception. The Company further determined that the transaction price, at inception, under the agreement was

$13.6

million which is the fair value of the consulting services, including the reimbursement of

third

-party pass through costs. The Company concluded that the regulatory milestone contains a significant uncertainty associated with a future event. As such, this milestone is constrained at contract inception and is 

not

included in the transaction price as the Company could

not

conclude that it is probable a significant reversal in the amount of cumulative revenue recognized will

not

occur surrounding these milestone payments. At the end of each reporting period, the Company updates its assessment of whether the milestone is constrained by considering both the likelihood and magnitude of the potential revenue reversal.

The Company determined that the performance of consulting services, including reimbursement of

third

-party pass-through costs, is a performance obligation that is satisfied over time as the services are performed and the reimbursable costs are paid. As such, the revenue related to the performance obligation will be recognized as the consulting services are performed and the services associated with the reimbursable

third

-party pass-through costs are incurred and paid by the Company, in accordance with the practical expedient allowed under ASC

606

regarding an entity's right to consideration from a customer in an amount that corresponds directly to the value to the customer of the entity's performance completed to date. As of

September 

30,

2020,

the Company has recognized approximately

15%

of the consulting services and

third

-party pass-through costs under the Corium Consulting Agreement. 

For the

three

and

nine

months ended

September 30, 2020

, the Company recognized revenue under the Corium Consulting Agreement of

$1.9

million. There was

no

revenue recognized for the

three

and

nine

months ended

September 30, 2019

 related to the Corium Consulting Agreement. As of

September 30, 2020,

the Company had deferred revenue related to this agreement of

$0.1

million. There was 

no

 deferred revenue related to this agreement as of 

December 31, 2019

 as it was

not

entered into until

July 2020.

Other Consulting Arrangements

For the

three

and

nine

months ended

September 30, 2020

, the Company recognized revenue under other consulting arrangements of

$0

and

$1.7

million, respectively. There was

no

revenue recognized from other consulting arrangements for the

three

and

nine

months ended

September 30, 2019

. There was 

no

 deferred revenue from other from consulting arrangements as of 

September 30, 2020

 or 

December 31, 2019

.

Receivable [Policy Text Block]

Accounts and Other Receivables

Accounts and other receivables consists of receivables under the

KP415

 License Agreement and Corium Consulting Agreement, as well as receivables related to other consulting arrangements, income tax receivables and other receivables due to the Company. Receivables under the

KP415

 License Agreement and Corium Consulting Agreement are recorded for amounts due to the Company related to reimbursable

third

-party costs and performance of consulting services. These receivables, as well as the receivables related to other consulting arrangements, are evaluated to determine if any reserve or allowance should be established at each reporting date. As of

September 30, 2020

, the Company had receivables related to the Corium Consulting Agreement in the amount of

$2.0

million and

no

 receivables related to the

KP415

License Agreement or other consulting arrangements. As of

December 31, 2019,

the Company had receivables related to the

KP415

License Agreement in the amount of

$1.6

 million and receivables related to other consulting arrangements of

$0.1

million. As of

September 30, 2020

and

December 31, 2019

no

reserve or allowance for doubtful accounts has been established.

New Accounting Pronouncements, Policy [Policy Text Block]

Application of New or Revised Accounting Standards—Adopted

From time to time, the Financial Accounting Standards Board (the “FASB”) or other standard-setting bodies issue accounting standards that are adopted by the Company as of the specified effective date.

In

April 2012,

President Obama signed the Jump-Start Our Business Startups Act (the “JOBS Act”) into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an emerging growth company. As an emerging growth company, the Company could have elected to adopt new or revised accounting standards when they become effective for non-public companies, which typically is later than public companies must adopt the standards. The Company has irrevocably elected

not

to take advantage of the extended transition period afforded by the JOBS Act and, as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

In

June 2016,

the FASB issued ASU

2016

-

13,

 

Financial Instruments – Credit Losses (Topic

326

) – Measurement of Credit Losses on Financial Instruments 

("ASU

2016

-

13"

), which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update applies to all entities holding financial assets and net investment in leases that are

not

accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets

not

excluded from the scope that have the contractual right to receive cash. This guidance is effective for financial statements issued for fiscal years beginning after

December 15, 2019,

and interim periods within those fiscal years. The adoption of ASU

2016

-

13

did

not

have a material impact on the Company's financial statements and disclosures.

In

August 2018,

the FASB issued ASU

2018

-

13,

 

Fair Value Measurement (Topic

820

) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement 

("ASU

2018

-

13"

), which modifies the disclosure requirements on fair value measurements in Topic

820,

Fair Value Measurement, based on the concepts in the FASB Concepts Statement, 

Conceptual Framework for Financial Reporting—Chapter

8:

Notes to Financial Statements, 

which the FASB finalized on

August 28, 2018,

including the consideration of costs and benefits. This update applies to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after

December 15, 2019,

and interim periods within those fiscal years. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The adoption of ASU

2018

-

13

did

not

have a material impact on the Company's financial statements and disclosures.

Application of New or Revised Accounting Standards—Not Yet Adopted

In

August 2020,

the FASB issued ASU

2020

-

06,

Debt – Debt with Conversion and Other Options (Subtopic

470

-

20

) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic

815

-

40

); Accounting for Convertible Instruments and Contracts in an Entity's Own Equity 

("ASU

2020

-

06"

), which addresses issues identified as a result of the complexities associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. This update addresses, among other things, the number of accounting models for convertible debt instruments and convertible preferred stock, targeted improvements to the disclosures for convertible instruments and earnings-per-share ("EPS") guidance and amendments to the guidance for the derivatives scope exception for contracts in an entity's own equity, as well as the related EPS guidance. This update applies to all entities that issue convertible instruments and/or contracts in an entity's own equity. This guidance is effective for financial statements issued for fiscal years beginning after

December 15, 2021,

and interim periods within those fiscal years. Early adoption is permitted, but

no

earlier than fiscal years beginning after

December 15, 2020,

including interim periods within those fiscal years. FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluating the impact the adoption of ASU

2020

-

06

could have on the Company's financial statements and disclosures.