Karyopharm Therapeutics Inc. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Unaudited financial statements; amounts below are in U.S. dollars unless noted.
Business context
Karyopharm is a clinical-stage biopharmaceutical company developing SINE compounds, including lead candidate selinexor, for cancer and other diseases. It had no approved drugs and generated no product sales. Its principal programs included Phase 3 BOSTON and SEAL studies and Phase 2 STORM and SADAL studies.
Financial performance and position
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Contract and grant revenue | $0 | $48,000 | $71,000 | $107,000 |
| Research and development expense | $25.2 million | $19.9 million | $72.4 million | $66.3 million |
| General and administrative expense | $5.8 million | $5.9 million | $18.7 million | $17.4 million |
| Net loss | $30.6 million | $25.4 million | $89.9 million | $82.6 million |
| Net loss per share, basic and diluted | $0.65 | $0.69 | $2.00 | $2.28 |
- R&D represented the main expense; the filing attributes its increase chiefly to selinexor clinical-trial costs and consulting and professional expenses. With minimal grant revenue and no product sales, conventional revenue margins are not meaningful.
- Nine-month operating cash use was $68.2 million, compared with $64.4 million in 2016. Investing activities provided $20.0 million, largely reflecting investment maturities net of purchases; financing activities provided $52.8 million.
- At September 30, cash and cash equivalents were $54.5 million; restricted cash was $0.5 million; short- and long-term investments totaled $104.5 million. Combined liquidity was $159.4 million, down from $175.5 million at December 31, 2016. Total assets were $163.8 million and total liabilities were $22.6 million. No borrowings are reported on the presented balance sheet.
- Accumulated deficit was $456.3 million. Common shares outstanding rose to 47.2 million from 41.9 million at year-end 2016. The April follow-on offering raised approximately $37.9 million net.
Changes, outlook, and notable developments
- Q3 net loss increased 21% year over year; nine-month net loss increased 9%. R&D rose 27% in Q3 and 9% for the nine-month period, while nine-month G&A rose 8%.
- Management expected existing cash, restricted cash and investments to fund its current operating plan and capital expenditure needs into 2019. It also expected 2017 R&D expense to exceed 2016 and future G&A to increase as operations expand. The company cautioned that substantial additional funding will be needed over time; additional financing may dilute shareholders or require reduced or delayed programs.
- Management’s stated clinical-data expectations were: expanded STORM topline data by April 2018; SADAL in the second half of 2018; BOSTON in 2019; and the Phase 3 portion of SEAL by year-end 2019. These are forward-looking expectations, not guaranteed outcomes.
- In October 2017, after quarter-end, Karyopharm signed a regional license with Ono for selinexor and KPT-8602. Terms include a ¥2.5 billion (about $22.3 million) upfront payment, up to ¥19.15 billion in development and sales milestones, and low-double-digit royalties. These amounts were not Q3 revenue. Karyopharm expects to pay the Multiple Myeloma Research Foundation about $2.0 million from the upfront payment and may owe further amounts, subject to a $6.0 million aggregate maximum under the research agreement.
- The Anivive verdinexor animal-health license included a $1.0 million upfront payment and potential milestones and royalties. The technology transfer was completed in October 2017; the upfront payment was deferred at September 30 pending completion of the combined deliverables.
- In early 2017, FDA inspections resulted in a Form 483 and a partial clinical hold on selinexor trials relating to incomplete information in the investigator brochure, not new safety information. The holds were lifted by the relevant FDA divisions in March and April 2017. The filing also identifies potential selinexor adverse events, including gastrointestinal effects, fatigue, thrombocytopenia and neutropenia, and notes advice to patients concerning possible worsening of pre-existing cataracts.
- Principal risks include clinical-trial failure or delay, regulatory uncertainty, safety concerns, competition, dependence on third-party manufacturers and research organizations, intellectual-property challenges, and the need for additional capital. The company reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether cash use and clinical-development spending remain consistent with the stated runway into 2019, and what financing may be required.
- Progress, enrollment, safety findings and final results for STORM, SADAL, BOSTON and SEAL against the company’s stated timelines.
- Receipt and accounting treatment of the Ono upfront payment, milestone conditions, royalty terms and related MMRF obligations.
- Whether selinexor’s efficacy and safety data support regulatory filings, including any accelerated-approval pathway, and whether further FDA actions arise.
- Potential dilution from future equity issuance and the terms and availability of additional financing.