Karyopharm Therapeutics Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Karyopharm is a commercial-stage oncology company selling XPOVIO (selinexor) and developing selinexor and eltanexor in additional cancer indications.
Key financial results
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $38.7 million | $47.7 million; down 19% |
| Product revenue, net | $28.3 million | $28.3 million; essentially unchanged |
| License and other revenue | $10.4 million | $19.4 million; down 46% |
| Cost of sales / gross profit | $1.4 million / $37.3 million | Gross margin approximately 96.5%, versus 97.0% |
| Research and development | $32.3 million | $42.1 million; down 23% |
| Selling, general and administrative | $35.9 million | $38.8 million; down 7% |
| Operating loss | $30.9 million | $34.6 million |
| Net loss | $34.1 million; $0.30 per share | $41.4 million; $0.53 per share |
| Operating cash flow | -$18.9 million | -$59.2 million |
Liquidity, cash flow and debt
- Cash, cash equivalents and investments totaled $260.4 million at March 31, 2023, down from $278.0 million at year-end 2022. Cash, cash equivalents and restricted cash at quarter-end were $85.5 million.
- Net cash used in investing was $32.4 million, mainly reflecting purchases of investments; there was no financing cash inflow in the quarter. The company collected $22.4 million in Antengene milestone payments, a key contributor to the lower operating cash use.
- Current assets were $318.5 million and current liabilities $61.6 million. Total liabilities were $371.0 million, and stockholders’ deficit was $45.2 million.
- The 3.00% convertible notes have $172.5 million principal outstanding and mature in October 2025. Their balance-sheet carrying amount was $170.3 million.
- The balance sheet reports a $132.7 million deferred royalty obligation. Under the HCR revenue-interest financing, payments are tied to product-related revenues and are capped at 185% of the $135 million investment amount; $49.7 million had been paid through March 31, 2023. The company cites approximately $200 million in future royalty obligations.
- Management expects available cash, cash equivalents and investments to fund current operating plans and capital expenditures for at least 12 months from issuance of the financial statements.
Material changes and management outlook
- Product revenue was flat year over year. Closure of several foundations supporting Medicare Part D patients led Karyopharm to provide XPOVIO at no charge to some patients, reducing Q1 revenue by approximately $1.2 million. Management expects this pressure to increase through 2023 if the foundations remain closed or partly closed, and believes it will be limited to 2023 given expected Medicare Part D changes in 2024.
- License and other revenue fell mainly because Q1 2022 included $7.8 million of Antengene milestone revenue. Q1 2023 included $3.5 million of Menarini license-related revenue. Management expects license and other revenue to decrease slightly in Q2 due to non-recurring Q1 license revenue.
- R&D expense declined due to prioritization of core pipeline programs and higher prior-year trial start-up costs; Q1 2023 included $2.2 million for a Phase 3 endometrial cancer study. Management expects R&D and SG&A to remain relatively consistent in Q2; cost of sales and net other expense are also expected to remain relatively consistent.
- Management expects 2023 expenses excluding stock-based compensation to decline versus 2022, citing spending discipline, accelerated closure of non-core programs, and advancement of three pivotal Phase 3 programs. No specific annual revenue or expense guidance figures are provided in the filing text.
Business, risks and unusual items
- XPOVIO is marketed in the U.S. for multiple myeloma and relapsed or refractory DLBCL; partners handle commercialization in international territories. DLBCL approval is accelerated and depends on confirmatory evidence of clinical benefit.
- Key risks include continued operating losses and the need for additional financing; dependence on XPOVIO’s commercial performance; competition and reimbursement/access pressures; clinical-trial, regulatory and safety uncertainty; reliance on third-party manufacturers, including a single-source supplier; and obligations under the HCR financing and 2025 notes.
- The filing highlights differing views with the FDA on the SIENDO endometrial cancer study’s statistical significance and clinical benefit; Karyopharm is conducting a new Phase 3 study in a TP53 wild-type population. The filing also notes that failure of required DLBCL confirmatory work could jeopardize that indication’s approval.
- Investments had $334,000 of unrealized losses at quarter-end, which management attributed to interest-rate changes and did not consider credit losses. The company also disclosed exposure to foreign currency movements and did not hedge that risk.
- Disclosure controls and procedures were assessed as effective; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether foundation closures and patient-assistance use continue to pressure XPOVIO net sales, and how the anticipated 2024 Medicare Part D changes affect access.
- Progress, timing and results of the pivotal Phase 3 programs, including the TP53 wild-type endometrial cancer study and DLBCL confirmatory requirements.
- Cash burn, collaboration and milestone receipts, and whether liquidity remains sufficient for the stated operating plan beyond the company’s minimum 12-month estimate.
- Terms, timing and potential dilution from the available $100 million at-the-market offering, as well as the 9.5 million warrants issued in the 2022 private placement, none exercised by quarter-end.
- HCR payment requirements and covenants, the 2025 note maturity and any future financing needs.