Karyopharm Therapeutics Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Financial statements are unaudited; amounts below are in U.S. dollars, generally millions unless noted.
Business context
Karyopharm is a commercial-stage oncology company. Its lead product, selinexor (XPOVIO), is marketed in the U.S. for three cancer indications. In March 2021, the European Commission granted conditional marketing authorization for NEXPOVIO for heavily pretreated multiple myeloma. The company continues to develop selinexor and other oncology candidates.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $23.3 | $18.1 | +$5.1 |
| Net product revenue | $21.7 | $16.1 | +35% |
| License and other revenue | $1.5 | $2.1 | -26% |
| Research and development | $37.1 | $34.0 | +9% |
| Selling, general and administrative | $37.7 | $30.7 | +23% |
| Operating loss | $(52.4) | $(47.4) | Loss widened $5.0 |
| Net loss | $(57.4) | $(52.9) | Loss widened $4.5 |
| Net loss per share | $(0.77) | $(0.78) | — |
| Net cash used in operating activities | $(52.9) | $(45.0) | Use increased $7.9 |
At March 31, cash, cash equivalents and investments totaled approximately $232.0 million, excluding restricted cash. Cash, cash equivalents and restricted cash were $90.0 million. Total liabilities were $314.5 million, including $168.7 million of convertible notes and a $73.1 million deferred royalty obligation; stockholders’ equity was a deficit of $39.6 million.
Cash from investing activities was $43.2 million, mainly reflecting investment maturities net of purchases. Financing provided $10.7 million, including $9.9 million net proceeds from at-the-market share sales. The company reported no off-balance-sheet arrangements. No consolidated gross or operating margin is explicitly presented; cost of sales was $0.9 million.
Changes, outlook and notable items
- Product revenue growth reflected U.S. XPOVIO sales; management expected Q2 2021 product revenue to increase compared with Q1 following the December 2020 expanded multiple myeloma approval.
- R&D rose mainly due to higher personnel and clinical-trial costs. SG&A increased primarily from personnel and commercial activity. Management expected Q2 R&D to increase and SG&A to remain relatively consistent versus Q1.
- Management stated that March 31 cash, cash equivalents and investments, together with anticipated product revenue, should fund current operating plans and capital requirements for at least 12 months from the financial statements’ issuance. The company nevertheless expects substantial expenses and says additional funding will be needed to achieve its objectives; profitability is not assured.
- On January 1, 2021, the company early adopted ASU 2020-06 for convertible debt. Adoption increased the notes’ carrying value by approximately $50.6 million and reduced additional paid-in capital and accumulated deficit through a noncash accounting adjustment. It reduced subsequent noncash interest expense; Q1 interest expense on the notes was $1.5 million versus $3.2 million a year earlier.
- The $172.5 million principal amount of 3.00% convertible notes matures in October 2025. The HCR royalty financing carries tiered payments tied to product revenues, with a 185% repayment cap and potential acceleration or collateral remedies in specified default or change-of-control circumstances. HCR had received $8.5 million of payments through March 31.
- Risks include continuing operating losses and funding needs, competition and uncertainty in XPOVIO adoption, adverse effects and regulatory requirements, completion of confirmatory studies for accelerated/conditional approvals, clinical and manufacturing dependence on third parties, and possible COVID-19 impacts. The filing identifies a securities class action alleging disclosure violations related to SOPRA and STORM study results; the company disputes the allegations. A related derivative action was stayed pending the class action.
- After quarter-end, the company announced Richard Paulson would become CEO effective May 3, 2021; Michael Kauffman would remain a director and become Senior Clinical Advisor, and Sharon Shacham would continue as Chief Scientific Officer.
Important facts for investors to verify
- Whether XPOVIO revenue growth continues and translates into improved operating cash flow, given the $52.9 million quarterly operating cash outflow.
- Cash runway assumptions and the timing, amount and potential dilution of any future financing.
- Progress and outcomes of the DLBCL confirmatory study and other post-marketing obligations, plus European conditional-authorization requirements.
- Terms and potential cash demands under the convertible notes and HCR agreement, including default and change-of-control provisions.
- Developments in the securities class action and derivative litigation, and any material impacts from COVID-19 on sales, clinical trials or supply.