Karyopharm Therapeutics Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Financial amounts below are in U.S. dollars; statements are unaudited. The company develops and commercializes cancer medicines targeting XPO1. Its first marketed product, XPOVIO (selinexor), was FDA-approved in July 2019 for a narrowly defined, heavily pretreated multiple myeloma population.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Total revenue | $18.1 million | $0.2 million |
| Net product revenue | $16.1 million | None |
| License and other revenue | $2.1 million | $0.2 million |
| Operating expenses | $65.5 million | $65.1 million |
| Loss from operations | $(47.4) million | $(64.9) million |
| Net loss | $(52.9) million | $(66.2) million |
| Net loss per share | $(0.78) | $(1.09) |
| Net cash used in operating activities | $(45.0) million | $(66.6) million |
Cash and cash equivalents were $202.2 million at quarter-end; cash, cash equivalents and investments totaled $383.5 million, compared with $264.0 million at December 31, 2019. Current assets were $370.9 million and current liabilities $49.7 million. The company reported an accumulated deficit of $926.3 million.
Research and development expense declined 10% to $34.0 million, mainly due to lower clinical trial and consulting costs, partly offset by higher personnel costs. Selling, general and administrative expense rose 13% to $30.7 million, primarily reflecting commercialization and personnel spending. Other expense, net increased to $5.5 million from $1.2 million, chiefly because of higher debt-related interest expense and lower interest income.
Convertible senior notes had $172.5 million principal and a $111.8 million net carrying value at March 31, 2020; they bear 3.00% coupon interest and mature in 2025. The company also reported a $73.6 million deferred royalty obligation related to HCR financing. The balance sheet showed no current portion of these obligations.
Material changes and financing
- XPOVIO generated its first reported quarterly product revenue, following its U.S. launch in July 2019. The company reported approximately 2,200 prescriptions filled by March 31 and cumulative net sales of $46.6 million since launch.
- On March 6, the company issued 7.19 million shares in a follow-on offering at $24 per share, receiving approximately $161.8 million net. This was the principal driver of the $164.8 million of financing cash flow and increased shares outstanding to 73.1 million at quarter-end.
- Operating cash use fell year over year, while investing cash flow was $(46.5) million, reflecting purchases of investments. Cash, cash equivalents and restricted cash increased by $73.3 million during the quarter.
- After quarter-end, the company terminated its Ono license agreement in April 2020 and amended its Antengene agreement in May. The expanded Antengene territory and rights carry a one-time $12.0 million upfront payment, expected in Q2 2020, plus potential future milestones and royalties.
Outlook, commentary and principal risks
- Management expected Q2 2020 XPOVIO net product sales to be slightly higher than Q1, license and other revenue to increase due in part to Antengene, and R&D and SG&A expenses to remain relatively consistent quarter over quarter for the rest of 2020. These are expectations, not formal full-year financial guidance.
- Management stated that quarter-end cash, cash equivalents and investments were expected to fund current operating plans and capital expenditure requirements for at least 12 months from issuance of the financial statements. It also cautioned that substantial additional funding will be needed over time and profitability may be years away, if achieved.
- Positive topline Phase 3 BOSTON results were announced in March. The company expected to submit an sNDA for a potential earlier-line multiple myeloma indication by the end of May 2020; submission and approval remained uncertain. The FDA target decision date for the DLBCL application was June 23, 2020. The EMA multiple myeloma review was expected to conclude in late 2020, with additional time sought for responses and re-monitoring activities.
- COVID-19 posed risks to commercial sales, clinical trial enrollment and conduct, supply, regulatory timelines and business operations. The company reported enrollment delays in SEAL, SIENDO and STOMP and warned that the pandemic’s full financial and operational impact was not predictable. A global Phase 2 selinexor study in hospitalized patients with severe COVID-19 began in April; its efficacy and regulatory prospects were unproven.
- XPOVIO’s current multiple myeloma approval is accelerated and continued approval may depend on confirming clinical benefit. The filing identifies post-marketing commitments and the risk of approval withdrawal if requirements or confirmatory evidence are inadequate.
- A securities class action remained active after a separate complaint was voluntarily dismissed in March. The active complaint alleges securities-law violations concerning disclosures about clinical studies and seeks unspecified damages and other relief; the company said it intended to defend the case and believed the allegations were without merit.
- Other material risks include continued operating losses and financing needs, possible dilution, debt service and HCR agreement covenants, clinical and regulatory uncertainty, adverse effects and market adoption of XPOVIO, third-party manufacturing and distribution reliance, competition, and reimbursement and pricing pressures.
Key facts for investors to verify
- Whether XPOVIO sales and prescription trends continued to improve, particularly amid COVID-19 disruptions, and how sales compare with commercialization costs.
- Status and outcomes of the BOSTON sNDA, the DLBCL FDA review, the EMA application and required XPOVIO post-marketing studies.
- Whether the anticipated $12.0 million Antengene payment was received in Q2 and what revenue recognition, milestones and royalties followed the amended agreement.
- Cash burn, liquidity runway and future financing needs, including the effects of the HCR royalty obligation and convertible notes.
- Clinical trial enrollment, supply and regulatory impacts from COVID-19, including results and costs of the selinexor COVID-19 study.
- Developments in the securities litigation and any resulting financial exposure or changes to the company’s risk disclosures.