Karyopharm Therapeutics Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; dollar figures below are in millions except per-share data. Karyopharm is a commercial-stage oncology company marketing XPOVIO (selinexor) and developing selinexor, eltanexor and other candidates.
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Net product revenue | $32.0 | $26.7 | $89.3 | $68.6 |
| License and other revenue | $4.1 | $11.0 | $34.2 | $14.9 |
| Total revenue | $36.1 | $37.7 | $123.5 | $83.6 |
| Operating expenses | $67.0 | $81.5 | $231.8 | $228.8 |
| Operating loss | $(30.8) | $(43.8) | $(108.3) | $(145.2) |
| Net loss | $(36.3) | $(51.8) | $(126.8) | $(162.8) |
| Net loss per share, basic and diluted | $(0.45) | $(0.69) | $(1.60) | $(2.17) |
- Revenue and margins: Q3 product revenue rose 20% year over year, while total revenue declined 4%. Operating loss was 85% of revenue in Q3 2022, compared with 116% in Q3 2021. For the nine months, product revenue increased 30% and total revenue 48%; operating loss narrowed to 88% of revenue from 174% in 2021. These operating-loss ratios are not gross margins.
- Cash flow: Net cash used in operating activities was $122.7 for the first nine months, versus $132.6 in 2021. Investing used $39.0, compared with $111.1 provided in 2021; financing provided $37.9, versus $72.8. Cash, cash equivalents and restricted cash fell $124.4 to $73.1.
- Liquidity: Cash and cash equivalents were $71.4 and short-term investments $77.0 at September 30, for $148.4 combined. Current assets were $222.7 and current liabilities $61.8. Management said these cash, cash equivalents and investments were expected to fund current operating plans and capital spending for at least 12 months from the financial statements’ issuance.
- Debt and obligations: Convertible notes due 2025 had $172.5 principal and a $169.9 net carrying amount; the notes bear 3% stated interest, with an 11.85% effective interest rate. The deferred royalty obligation was reported at $133.0 on the balance sheet; the note describes $129.9 of carrying value plus a $3.1 embedded derivative. Future minimum note payments were $190.6, including interest, and the company estimated future HCR royalty obligations of approximately $208.7.
- Equity: The company raised $35.1 net through its at-the-market stock sale program in the first nine months, issuing about 4.0 million shares. A further $64.0 remained available under that program at quarter-end. Shares outstanding were 81.0 million at September 30, versus 75.7 million at December 31, 2021.
Material changes and notable items
- Q3 license and other revenue fell 62%, mainly because Q3 2021 included $9.8 of Antengene milestone revenue. Nine-month license and other revenue rose 129%, primarily reflecting $15.0 of Menarini development-expense reimbursements recognized in 2022.
- XPOVIO net product revenue increased as more patients were treated in earlier lines of therapy and physician utilization grew. Product revenue was from U.S. sales.
- Q3 R&D expense declined 32%, largely because Q3 2021 included $7.4 of acquired in-process R&D and because clinical-trial costs were lower. Nine-month R&D was broadly flat. 2022 expenses included severance related to the departures of the former Chief Scientific Officer and Chief Medical Officer; SG&A also included severance related to the former CEO.
- On June 7, 2022, Biogen terminated its asset purchase agreement. Karyopharm said it would not receive further milestones or royalties under that agreement and was evaluating specified rights to the purchased assets.
- In February 2022, the FDA indicated that the SIENDO Phase 3 results were unlikely to support an sNDA approval. Karyopharm initiated a new Phase 3 study in patients with TP53 wild-type endometrial cancer and expected to dose its first patient in Q4 2022.
- The securities class action was dismissed, with the First Circuit affirming dismissal on August 5, 2022. A related shareholder derivative suit was dismissed September 8, 2022.
Outlook, risks and contingencies
- Management expected 2022 XPOVIO net product revenue to exceed 2021, based on the observed growth trend. It expected Q4 license and other revenue, cost of sales, R&D, SG&A and net other expense to be relatively consistent with Q3 levels. The filing does not provide a numerical full-year revenue or expense guidance range in the text provided.
- The company expected expenses excluding stock-based compensation to decrease in 2022 versus 2021, while continuing clinical development and commercialization spending. It cautioned that it may not achieve profitability for several years, if ever, and may need additional financing; future financing could be dilutive or unavailable on acceptable terms.
- Key risks include dependence on XPOVIO’s commercial success, competition and pricing/reimbursement pressure, clinical-trial and regulatory uncertainty, adverse effects, reliance on third-party manufacturers and collaborators, and possible COVID-19-related disruption. XPOVIO’s DLBCL indication has accelerated approval and requires confirmatory evidence; failure to meet post-marketing requirements could jeopardize approval.
- Under the HCR agreement, payments are linked to product and other revenues, with minimum payment tests, change-of-control and default provisions, and collateral covering present and future XPOVIO-related assets. The agreement also restricts certain borrowing, liens, asset disposals and other actions.
- The company reported no material change in internal control over financial reporting and concluded disclosure controls were effective at the reasonable-assurance level. It noted exposure to interest-rate and foreign-exchange risk and did not hedge foreign-currency exposure.
Most important facts for investors to verify
- Whether XPOVIO’s product-revenue growth continues and how much is offset by discounts, rebates and other product-revenue provisions.
- Cash burn, remaining runway and potential need for further ATM or other financing, including resulting dilution.
- Progress and timing of the TP53 wild-type endometrial cancer Phase 3 trial, and the status of XPOVIO’s DLBCL confirmatory obligations.
- Actual HCR royalty payments and the agreement’s minimum-payment, default and collateral implications; reconcile the balance-sheet obligation with the note’s carrying-value components.
- Effects of Biogen’s termination on any rights Karyopharm may recover, and the sustainability of Menarini reimbursements and other partner revenue.
- Competitive, safety, reimbursement and manufacturing developments affecting XPOVIO’s market adoption and revenue.