Karyopharm Therapeutics Inc. — 2013 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2013; quarterly figures below include the fourth quarter. The filing was signed March 21, 2014. Karyopharm is a clinical-stage biotechnology company developing SINE compounds that inhibit XPO1. Its lead candidate, selinexor, was in Phase 1 trials, with Phase 2 studies underway in selected solid tumors. The company had no approved human drugs and no product-sales revenue.
Financial performance and position
| Metric | 2013 | 2012 |
|---|---|---|
| Contract and grant revenue | $0.387 million | $0.634 million |
| Research and development expense | $28.452 million | $14.095 million |
| General and administrative expense | $5.885 million | $2.429 million |
| Operating loss | $33.950 million | $15.890 million |
| Net loss | $33.947 million | $15.888 million |
| Net loss per share, basic and diluted | $5.59 | $8.95 |
Revenue was entirely from grants and research contracts; there were no drug sales. Margins are not meaningful for this pre-commercial business. The annual loss widened as development activity and public-company costs increased. R&D growth was principally tied to clinical-trial costs, drug supply, consulting, staffing and discovery work. G&A increased with staffing, professional fees, investor-relations and public-company expenses.
Fourth quarter: Revenue was $21,000 versus $33,000 in Q4 2012; operating expenses were $12.169 million versus $4.271 million; net loss was $12.146 million versus $4.238 million. Q4 2013 loss per share was $0.72 versus $2.08 in Q4 2012; comparison is affected by the substantial increase in shares after the IPO and preferred-stock conversion.
Cash and liquidity: Cash and cash equivalents were $155.974 million at year-end, compared with $391,000 a year earlier; working capital was $154.664 million. Operating cash use was $30.290 million in 2013, versus $15.509 million in 2012. Financing provided $185.930 million, including preferred-stock proceeds and the IPO. Management expected available cash to fund the then-current operating plan into early 2016. Total current liabilities were $3.292 million; the balance sheet reports no debt. Contractual obligations listed were $106,000 of operating leases, primarily due in 2014. The filing notes no off-balance-sheet arrangements.
Material changes and notable items
- Completed an IPO in November 2013, including the underwriters’ overallotment, for approximately $113.2 million in net proceeds. Outstanding preferred stock converted into common stock; year-end common shares outstanding were 29.6 million.
- Cash rose from $391,000 to $155.974 million, primarily due to financing, while operating cash use nearly doubled year over year.
- Stock-based compensation expense increased to $3.785 million from $653,000 in 2012. Unrecognized compensation cost was approximately $21.2 million at year-end, expected to be recognized over a weighted-average 3.7 years.
- Net loss per share improved despite a higher total net loss, reflecting the share-count and capital-structure changes associated with the IPO and preferred-stock conversion.
Development outlook, risks and contingencies
- Management planned, subject to ongoing trial results and regulatory feedback, registration-directed selinexor trials in AML, diffuse large B-cell lymphoma (DLBCL) and Richter’s Syndrome during 2014. It also planned additional Phase 2 solid-tumor studies and investigator-sponsored trials. These were forward-looking plans, not completed milestones.
- Interim Phase 1 findings were preliminary and unaudited. As of December 2013, reported disease control or responses included 82% of evaluated chronic B-cell malignancy patients, 52% of evaluated AML patients and 48% of evaluated solid-tumor patients. These results do not establish efficacy or regulatory approvability.
- Reported tolerability issues included nausea, anorexia, vomiting, fatigue, thrombocytopenia and neutropenia. Serious adverse events occurred; some were considered related to selinexor. The company reported no major organ toxicities to date in the described trials and said supportive care reduced certain symptoms.
- Verdinexor, a related candidate for canine lymphoma, had its safety and effectiveness sections submitted to the FDA in a New Animal Drug Application in December 2013. Approval and commercialization were uncertain.
- The company expected increasing expenses and stated it would need substantial additional funding over time. Clinical failure, regulatory delays, trial enrollment, safety, competition, intellectual-property protection, reimbursement, dependence on external manufacturers and collaborators, and future financing availability were significant risks.
- Manufacturing relied on third parties, with no long-term supply agreement or redundant supply arrangement. The company reported no material legal proceedings. A research agreement with the Multiple Myeloma Research Foundation includes potential royalties and other payments, capped at $6 million in aggregate.
- The auditor gave an unqualified opinion on the financial statements. The auditor did not opine on internal control effectiveness. Management reported disclosure controls were effective at a reasonable-assurance level; the filing also describes prior finance-staff segregation deficiencies and remediation efforts.
Important facts for investors to verify
- Current cash runway versus actual trial spending, hiring, facility expansion and financing needs; the early-2016 runway was management’s estimate based on the 2013 operating plan.
- Updated, audited clinical outcomes and safety data for selinexor, including response durability, discontinuations, dose selection and whether planned registration-directed trials proceeded as described.
- Regulatory feedback on trial design and endpoints, and whether trial results support filings or approval in each proposed indication.
- Potential dilution from equity compensation and future fundraising; year-end options outstanding were approximately 2.41 million, in addition to common shares outstanding.
- Manufacturing continuity, intellectual-property status and any future collaboration terms or obligations, including potential MMRF payments.