Karyopharm Therapeutics Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; unaudited. Karyopharm is a commercial-stage oncology company whose lead product, selinexor (XPOVIO), is marketed in the U.S. for multiple myeloma and DLBCL.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $22.6 million | $33.5 million | $45.9 million | $51.7 million |
| Net product revenue | $20.2 million | $18.6 million | $41.9 million | $34.7 million |
| Operating loss | $49.0 million | $40.3 million | $101.4 million | $87.7 million |
| Net loss | $53.6 million | $46.4 million | $111.0 million | $99.4 million |
| Net loss per share | $0.71 | $0.63 | $1.48 | $1.41 |
| Cash used in operating activities | Not stated by quarter | $108.6 million | $85.3 million |
- Product revenue grew 8% year over year in Q2 and 21% for the first half. The decline in total revenue reflected much lower license and other revenue: $2.4 million versus $14.9 million in Q2, and $4.0 million versus $17.0 million for the first half.
- Q2 research and development expense fell 20% to $34.0 million, while selling, general and administrative expense rose 18% to $36.5 million. For the first half, R&D declined 7% to $71.0 million and SG&A increased 21% to $74.2 million.
- At June 30, cash and cash equivalents were $141.3 million; short- and long-term investments were $96.6 million. Management reported $237.9 million of cash, cash equivalents and investments and said these resources were expected to fund current plans for at least 12 months from filing issuance.
- Current assets were $273.5 million and current liabilities $58.1 million. Total liabilities were $369.7 million, versus $262.5 million at year-end 2020; stockholders’ equity was a deficit of $83.1 million. Accumulated deficit was $1.17 billion.
- Debt and financing obligations included $168.9 million carrying value of 3.00% convertible notes due 2025 and $132.5 million of deferred royalty obligation on the balance sheet. The royalty financing carries tiered payments tied to selinexor and other product revenues, capped at 185% of funded amounts, and is secured by XPOVIO-related assets.
Material changes and unusual items
- Net loss increased 15% in Q2 and 12% for the first half, despite higher product revenue. Lower license revenue and increased SG&A were important contributors.
- In June, Karyopharm received $60 million, less transaction expenses, under an amended revenue-interest financing agreement. It may receive two additional $20 million payments if specified milestones are achieved. It also raised $9.9 million net through at-the-market share sales in the first half.
- Early adoption of ASU 2020-06 in January increased the carrying value of convertible debt by about $50.6 million and reduced additional paid-in capital and accumulated deficit through a transition adjustment. The adoption also significantly reduced subsequent non-cash interest expense.
- On July 22, 2021, after quarter-end, the company acquired HemaMax/IL-12 assets for $6 million cash and 150,000 shares; additional royalties, milestone payments and shares may be due. On July 30, Antengene announced South Korean approvals that triggered $10 million in milestone payments expected in Q3.
- Richard Paulson became CEO and president on May 3, 2021, succeeding Michael Kauffman as CEO and Sharon Shacham as president. Kauffman remains on the board and became Senior Clinical Advisor; Shacham remains Chief Scientific Officer.
Outlook, risks and contingencies
- Management expected XPOVIO product revenue to increase in the second half of 2021 versus the first half, citing continued education and uptake following the expanded multiple myeloma indication. It expected license and other revenue to rise, primarily due to the anticipated $10 million Antengene milestone.
- Management expected R&D expense to increase in the second half as clinical development continues, while SG&A was expected to remain relatively consistent. It also anticipated higher other expense in the second half due to increased royalty rates under the amended financing.
- The company continues to incur substantial losses and expects expenses to rise with commercialization and clinical development. It stated that additional funding will be needed to achieve its objectives; unavailable or unattractive financing could force delays or reductions in programs.
- Key risks include XPOVIO adoption and competition, clinical-trial and regulatory uncertainty, safety and tolerability, reimbursement and pricing, reliance on third-party manufacturers and collaborators, and possible COVID-19-related disruption. DLBCL approval is accelerated and requires confirmatory studies; European selinexor authorization is conditional and subject to ongoing obligations.
- A securities class action was dismissed on July 21, 2021; whether plaintiffs appeal was uncertain. A related shareholder derivative suit remained stayed.
- Management reported effective disclosure controls as of June 30, 2021 and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Track U.S. XPOVIO sales growth, commercial adoption, pricing and the effect of rebates and other product-revenue provisions.
- Verify receipt and conditions of the expected $10 million Antengene milestone and progress toward the two additional $20 million financing tranches.
- Review cash burn against the stated 12-month runway, future financing needs, dilution risk and the terms and payment triggers of the HCR royalty obligation.
- Monitor clinical and regulatory milestones, particularly DLBCL confirmatory commitments, the conditional European authorization and the expected review of the BOSTON-based EU application.
- Assess the HemaMax acquisition’s contingent costs and development prospects, and follow the status of the stayed derivative suit and any appeal of the securities-case dismissal.