Karyopharm Therapeutics Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited consolidated financial statements. Karyopharm is a commercial-stage oncology company focused on XPOVIO (selinexor) and development of selinexor and eltanexor. Amounts below are in millions of dollars unless noted.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $37.6 | $39.7 | $76.3 | $87.3 |
| Product revenue, net | $28.5 | $29.0 | $56.7 | $57.3 |
| License and other revenue | $9.1 | $10.7 | $19.5 | $30.0 |
| Operating expenses | $67.2 | $82.6 | $136.7 | $164.8 |
| Operating loss | $(29.6) | $(42.9) | $(60.5) | $(77.5) |
| Net loss | $(32.6) | $(49.1) | $(66.8) | $(90.5) |
| Net loss per share | $(0.29) | $(0.62) | $(0.59) | $(1.15) |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $(44.6) | $(94.3) |
Balance sheet and funding: At June 30, cash and cash equivalents were $80.9, investments $155.9, and restricted cash $1.0. Management reported $236.8 of cash, cash equivalents and investments and expects these resources to fund current operating plans and capital requirements for at least 12 months from issuance of the statements. Total liabilities were $369.1, including $170.5 carrying value of convertible notes and a $132.7 deferred royalty obligation; stockholders’ deficit was $71.2. The notes have $172.5 principal and mature in October 2025. The company reported an accumulated deficit of $1.4 billion.
Material changes and management commentary
- Q2 revenue decreased 5% year over year; first-half revenue declined 13%. Net product revenue was broadly stable, down 2% in Q2 and 1% for the half-year.
- Myeloma foundation closures led Karyopharm to provide XPOVIO at no charge through its Patient Assistance Program, reducing revenue by approximately $3.0 in Q2 and $4.2 in the first half. Management expected this effect to increase during 2023 if foundations remained partly or fully closed.
- First-half license and other revenue fell $10.5, primarily because 2022 included $7.8 of Antengene milestone revenue and higher Menarini development reimbursements; 2023 included $3.5 of Menarini license-related revenue. Management expected license and other revenue in the second half to be relatively consistent with the first half.
- First-half R&D expense fell 26% to $63.8, reflecting pipeline prioritization, lower trial start-up costs, reduced headcount and lower stock-based compensation, partly offset by spending on the Phase 3 EC-042 endometrial cancer study. Management expected R&D expense to increase slightly in the second half as three Phase 3 studies progressed.
- First-half SG&A fell 8% to $70.4, largely due to prior-year severance-related stock compensation. Management expected SG&A and cost of sales to remain relatively consistent in the second half.
- Net cash used in operations improved to $44.6 from $94.3 in the first half of 2022, due mainly to lower expenses and collection of $22.4 in Antengene milestone payments. Interest income increased as average investment yields rose.
Outlook, risks and unusual items
- The company expects 2023 expenses, excluding stock-based compensation, to decrease versus 2022 through spending discipline and closure of non-core programs while advancing three pivotal Phase 3 programs. It cautioned that additional financing will be needed to achieve its business objectives and may not be available on acceptable terms.
- On August 1, 2023, after quarter-end, Karyopharm amended its HCR revenue-interest financing: the payment cap rose from 185% to 195% of the investment amount, the first minimum aggregate payment date was extended six months to June 30, 2025, and HCR received warrants for up to 250,000 shares at $2.25 per share. The financing is secured by company assets, and default or change-of-control provisions can require substantial payments.
- The company cited substantial dependence on XPOVIO commercialization, competition, clinical-trial and regulatory uncertainty, adverse effects and reimbursement/pricing risks. XPOVIO’s DLBCL indication is under accelerated approval and depends on confirmatory clinical evidence; failure to verify benefit could put the indication at risk.
- Additional exposures include reliance on third-party manufacturers, including a single-source supplier for active pharmaceutical ingredient and drug-product manufacturing; foreign-currency exposure without hedging; and potential dilution from equity financing. An at-the-market program of up to $100 million remained available at quarter-end; no shares were sold under it in the first half of 2023.
Important facts for investors to verify
- Whether patient-assistance use and foundation availability continue to affect XPOVIO net sales and revenue in 2023.
- Progress, timing, enrollment and results of the three Phase 3 programs, including EC-042, and the required DLBCL confirmatory work.
- Cash burn, milestone and partner receipts, and whether management’s stated 12-month funding runway remains adequate.
- The implications of the amended HCR terms, including the higher payment cap, minimum payment schedule, collateral and potential payment obligations.
- Competitive, reimbursement, manufacturing and financing developments that could affect XPOVIO adoption, operating costs or shareholder dilution.