Karyopharm Therapeutics Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; filed May 10, 2018. Karyopharm is a clinical-stage biopharmaceutical company developing SINE compounds, led by selinexor. It had no approved drugs and had generated no revenue from drug sales.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| License and other revenue | $10.0 million | $68,000 |
| Research and development expense | $41.3 million | $24.1 million |
| General and administrative expense | $7.6 million | $6.3 million |
| Operating loss | $38.9 million | $30.3 million |
| Net loss | $38.5 million; $0.78 per share | $29.9 million; $0.71 per share |
| Cash used in operating activities | $34.7 million | $24.7 million |
| Cash, cash equivalents and investments | $141.2 million at March 31 | $175.9 million at December 31, 2017 |
Revenue in Q1 2018 was primarily the $10 million upfront payment under the January Biogen agreement, recognized when the related intellectual property and manufacturing license obligation was satisfied. It is not recurring product revenue. The filing does not present a meaningful product gross margin. At March 31, current assets were $133.3 million and current liabilities were $46.7 million, implying working capital of approximately $86.6 million. The balance sheet reports no debt; total liabilities were $50.8 million, including deferred revenue. Accumulated deficit was $533.8 million.
Management said cash, cash equivalents and short- and long-term investments at March 31, together with the $145.6 million net proceeds from a May 7 follow-on offering, were expected to fund current operating and capital plans into the third quarter of 2019. The May offering issued 10.5 million shares at $14.75 per share. This subsequent financing materially increased liquidity but diluted existing holders.
Changes, agreements and notable items
- Net loss increased 28.6% year over year as operating expenses rose; R&D increased 71.6%, largely due to higher selinexor clinical-trial costs, consulting, staffing and other development expenses.
- Biogen acquired worldwide KPT-350 development and commercialization rights. In addition to the $10 million upfront payment, Karyopharm may receive up to $142 million in development milestones, $65 million in commercial milestones and tiered royalties reaching low double digits. Future milestone amounts were excluded from the transaction price because they were constrained; they are not assured revenue.
- The $21.9 million upfront payment from Ono for selinexor and eltanexor rights remained deferred revenue at March 31: $19.7 million current and $2.2 million non-current. The company reported no Ono revenue through the quarter; it expected to recognize the selinexor allocation of $19.7 million after initial clinical supply was delivered in Q2 2018.
- The company paid approximately $2.0 million to the Multiple Myeloma Research Foundation from the Ono upfront payment and may owe a share of future Ono milestones and royalties, subject to a stated $6 million maximum aggregate obligation.
- The Newton headquarters lease was amended in February 2018, extending the term to September 2025 and expanding the premises. Management reported no material changes to contractual obligations and no off-balance-sheet arrangements.
- ASC 606 was adopted January 1, 2018 without a material transition adjustment. Management stated disclosure controls were effective and there was no material change in internal control over financial reporting during the quarter.
Outlook, commentary and risks
- Management expected R&D and G&A spending to increase as clinical programs, regulatory preparation and potential U.S. commercialization infrastructure advanced. The company expected ongoing losses and said it would need substantial additional funding after its projected runway; additional financing may not be available on acceptable terms.
- Karyopharm planned to submit an FDA NDA in the second half of 2018 seeking accelerated approval for selinexor in penta-refractory multiple myeloma, and an EMA application in early 2019 seeking conditional approval. These were plans, not approvals or guaranteed timelines.
- Following the quarter, the company reported top-line expanded-cohort STORM results on April 30, 2018 and said it expected top-line SADAL results by year-end 2018, BOSTON results in 2019 and Phase 3 SEAL results by year-end 2019. The FDA granted selinexor fast track designation in April 2018; the filing cautions that this does not ensure faster review or approval.
- Key risks include clinical-trial failure or delay, regulatory authorities rejecting data or accelerated approval requests, adverse effects, competition, reliance on third-party manufacturers and collaborators, and the need for further capital. The filing cites selinexor-related gastrointestinal effects and fatigue, with grade 3 or 4 thrombocytopenia and neutropenia among the more common severe events; it also notes potential worsening of pre-existing cataracts.
- The company disclosed interest-rate and foreign-exchange exposure and said it did not hedge foreign-currency risk. It warned that future investment losses at financial institutions cannot be ruled out.
Most important facts for investors to verify
- Whether selinexor trial results support regulatory submissions and whether the FDA and EMA accept the proposed evidence, endpoints and approval pathways.
- Actual cash burn and whether the stated runway remains adequate as clinical and commercial-preparation costs rise.
- Terms, timing and likelihood of Biogen and Ono milestone or royalty payments; neither should be treated as guaranteed funding.
- The effect of the May 2018 equity offering and future financing needs on share count and existing ownership.
- Selinexor safety, manufacturing supply readiness, and the ability to build commercial capacity and obtain coverage and reimbursement if a product is approved.