Karyopharm Therapeutics Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited consolidated results; financial amounts below are in millions of dollars unless otherwise stated. Karyopharm is a commercial-stage oncology company whose lead product, selinexor, is marketed as XPOVIO in the United States and NEXPOVIO in Europe and the United Kingdom.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net product revenue | $26.7 | $21.3 | $68.6 | $56.0 |
| License and other revenue | $11.0 | $0.0 | $14.9 | $17.0 |
| Total revenue | $37.7 | $21.3 | $83.6 | $73.0 |
| Research and development | $45.8 | $37.0 | $116.8 | $113.6 |
| Selling, general and administrative | $35.1 | $31.0 | $109.3 | $92.5 |
| Operating loss | $(43.8) | $(47.1) | $(145.2) | $(134.8) |
| Net loss | $(51.8) | $(53.5) | $(162.8) | $(152.9) |
| Basic and diluted loss per share | $(0.69) | $(0.73) | $(2.17) | $(2.14) |
- Q3 product revenue grew 25%; nine-month product revenue grew 23%. Q3 total revenue also included $9.8 million of net milestone revenue related to South Korean approvals by partner Antengene.
- Q3 operating loss narrowed year over year as revenue growth exceeded expense growth. Nine-month operating and net losses increased year over year. The company remained loss-making; no operating-profit margin was reported.
- Operating cash outflow was $132.6 million for the first nine months, versus $129.6 million in 2020. Cash, cash equivalents and investments totaled $206.2 million at September 30; cash and cash equivalents alone were $137.4 million. Cash, cash equivalents and restricted cash totaled $140.4 million.
- Current assets were $241.6 million and current liabilities $68.9 million. Total liabilities were $380.1 million, total assets $254.1 million, and stockholders’ deficit $126.0 million.
- Debt and royalty financing: convertible notes had $172.5 million principal and $169.1 million carrying value. The balance sheet reported a $132.5 million deferred royalty obligation; the notes describe a $129.4 million carrying value plus a separately recognized $3.1 million embedded derivative liability.
Changes, outlook and material developments
- Revenue and expenses: Q3 license revenue rose sharply from a nominal prior-year amount due largely to Antengene’s $10.0 million milestone (recognized as $9.8 million net of tax). Management expected license and other revenue to decrease in Q4. Nine-month license revenue declined 12%, reflecting different partner-related revenue items between periods.
- Cost base: Q3 R&D increased 24%, primarily including $7.4 million of one-time expense for the Neumedicines asset acquisition and higher personnel costs. SG&A increased 13%, driven mainly by personnel and commercial activity. Management expected Q4 R&D to decrease as the acquisition expense did not recur, SG&A to remain relatively consistent, and other expense to increase due to the amended royalty financing.
- Cash runway and funding: Management stated that September 30 cash, cash equivalents and investments were expected to fund current operating plans and capital expenditure requirements for at least 12 months from the financial statements’ issuance. It also anticipated substantial additional funding would be needed over time; failure to obtain financing could force delays or reductions in development or commercialization.
- Financing obligations: The June 2021 HCR amendment provided $60.0 million; two further $20.0 million payments may be available upon specified milestones. HCR receives a tiered share of product-related revenues, with capped total payments and minimum-return, change-of-control and default provisions. A default or change of control may accelerate payments and expose XPOVIO-related assets pledged as collateral.
- Business and pipeline: Selinexor was approved in South Korea for multiple myeloma and DLBCL through Antengene, triggering the milestone above. Karyopharm acquired HemaMax/IL-12 assets for $6.0 million cash and 150,000 shares, with potential additional royalties, shares and milestone payments. The company described ongoing selinexor development, including the SIENDO endometrial cancer study and planned or active studies in hematologic and solid tumors.
- Regulatory and operating risks: XPOVIO’s DLBCL indication has accelerated approval, subject to confirmatory study requirements; failure to verify clinical benefit could put the indication at risk. European and UK selinexor approvals are conditional. COVID-19 could disrupt sales, trials, enrollment, supply and regulatory timelines; the scope remained uncertain.
- Legal and controls: A securities class action was dismissed in July 2021, but the plaintiff appealed in August; the related shareholder derivative suit remained stayed. Management concluded disclosure controls were effective as of September 30, 2021 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether XPOVIO’s U.S. sales growth can continue and support the company’s high R&D and commercial spending, apart from partner milestone revenue.
- Updated cash runway and financing needs, including the timing and conditions for any additional HCR milestone funding and the revenue share, minimum-return and collateral provisions.
- Progress and outcomes of required confirmatory studies for accelerated or conditional approvals, particularly the DLBCL confirmatory program.
- Potential future cash demands from the convertible notes, HCR agreement and Neumedicines acquisition, and the effects of further share issuance or dilution.
- Outcome of the securities class-action appeal and any resulting change in the status of the stayed derivative suit.