Karyopharm Therapeutics Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; the supplied text does not provide a standalone fourth-quarter income statement or cash flow.
Business context
Karyopharm is a commercial-stage oncology company developing drugs that inhibit XPO1. Its lead product, XPOVIO (selinexor), was marketed in the U.S. for three indications: multiple myeloma after at least one prior therapy, penta-refractory multiple myeloma, and relapsed or refractory diffuse large B-cell lymphoma (DLBCL). The company also has clinical-stage programs including eltanexor and KPT-9274, and partnered verdinexor for animal cancer and certain human non-oncology research.
Financial performance and liquidity
| Metric (USD millions, except per-share data) | 2020 | 2019 | Change |
|---|---|---|---|
| Product revenue, net | 76.2 | 30.5 | +149% |
| License and other revenue | 31.9 | 10.4 | +208% |
| Total revenue | 108.1 | 40.9 | +164% |
| Research and development expense | 150.8 | 122.3 | +23% |
| Selling, general and administrative expense | 126.4 | 105.4 | +20% |
| Operating loss | (171.9) | (189.3) | Loss narrowed |
| Net loss | (196.3) | (199.6) | Loss narrowed |
| Net loss per share, basic and diluted | (2.72) | (3.22) | |
| Net cash used in operating activities | (160.2) | (190.8) | Cash use decreased |
- Product revenue was U.S. XPOVIO sales. Management cited reduced in-person access to physicians and fewer patient visits during COVID-19, along with increased competition, as headwinds.
- License and other revenue included $23.5 million related to Antengene, $5.0 million from FORUS, $2.2 million from reacquiring rights from Ono, and about $1.0 million of clinical supply revenue. License revenue included milestone and other collaboration-related amounts and may not recur at the same level.
- Cost of sales was $2.7 million, equivalent to a reported product gross margin of approximately 96% using net product revenue less cost of sales. This is not necessarily a representative ongoing margin: some XPOVIO inventory costs had been expensed before FDA approval and were carried at zero cost.
- Other expense, net was $24.1 million, versus $10.3 million in 2019, primarily reflecting higher interest expense and lower interest income. Interest expense was $27.1 million; the deferred royalty obligation and convertible notes were key sources.
- At year-end, cash and cash equivalents were $85.9 million; short- and long-term investments totaled $187.5 million; restricted cash totaled $3.2 million. Cash, cash equivalents, restricted cash and investments together were approximately $276.7 million. The company stated these resources were expected to fund current plans for at least 12 months from the financial statement issuance date.
- Year-end liabilities included $117.9 million carrying value of convertible senior notes and $73.1 million deferred royalty obligation. The notes had $172.5 million principal, 3.00% coupon and October 2025 maturity; the deferred royalty financing carries payments tied to future product revenue and has a stated payment cap and minimum payment provisions.
- The company raised approximately $161.8 million net in a March 2020 common-stock offering, issuing 7.19 million shares. Shares outstanding were 73.9 million at year-end 2020, versus 65.4 million at year-end 2019.
Material changes and operating developments
- XPOVIO product revenue increased to $76.2 million from $30.5 million in 2019, its first partial year of U.S. commercial sales. The company reported nearly 3,900 prescriptions filled in 2020.
- The FDA approved XPOVIO for DLBCL in June 2020 under accelerated approval and expanded its multiple myeloma indication in December 2020 to patients after at least one prior therapy. The latter approval fulfilled the confirmatory-trial requirement for the earlier penta-refractory indication.
- R&D spending rose by $28.5 million, mainly due to increased clinical-trial activity and personnel costs. SG&A rose by $21.0 million, primarily due to commercial activity and increased headcount.
- Net loss narrowed modestly despite higher operating expenses, supported by increased revenue and a lower operating loss; higher interest expense offset part of that improvement.
- Operating cash use decreased by $30.6 million year over year. Financing cash flow included the 2020 stock offering; investing cash flow was a $53.7 million use, largely reflecting purchases of investments.
Outlook, risks and unusual items
- Management expected XPOVIO revenue to increase in 2021 following the expanded multiple myeloma approval, while cautioning that COVID-19-related challenges could continue at least into early 2021. Management also expected R&D, commercial and administrative spending to increase.
- The company planned further selinexor studies, including a Phase 3 trial with pomalidomide and trials in solid tumors. Top-line results from the Phase 3 SIENDO endometrial cancer study were expected in the second half of 2021. The SIENDO trial had passed an interim futility analysis, but efficacy had not yet been established.
- In November 2020, the Phase 3 SEAL liposarcoma study met its primary PFS endpoint (hazard ratio 0.70; p=0.023). The company was evaluating regulatory and commercialization options; this did not constitute an approval.
- As of the filing date, the EMA’s committee had recommended conditional approval of selinexor for heavily pretreated multiple myeloma, with a European Commission decision expected by April 2021. Israel had approved XPOVIO in February 2021. These are post-year-end developments disclosed in the filing.
- DLBCL approval is accelerated and remains contingent on confirmatory evidence; a Phase 3 confirmatory trial began dosing patients in February 2021. Failure to verify clinical benefit could jeopardize continued approval.
- Key risks include continued losses and reliance on additional funding; clinical and regulatory uncertainty; XPOVIO safety and tolerability; competition and reimbursement or pricing pressure; COVID-19 disruption; dependence on third-party manufacturing, including a single-source supplier; and debt and royalty-payment obligations.
- The company reported a securities class action alleging disclosure violations related to clinical study results and a shareholder derivative suit based on substantially similar allegations. It stated it believed the claims were without merit and intended to defend them. The derivative suit was stayed pending the class action.
- Management and the auditor concluded internal control over financial reporting was effective; the auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether XPOVIO prescription growth and net revenue after the 2020 expansion support management’s 2021 growth outlook, including the persistence of COVID-19 and competitive effects.
- Progress and results of the DLBCL confirmatory study, SIENDO, and other pivotal programs, and any resulting regulatory decisions or safety updates.
- Cash burn, remaining liquidity runway, and financing needs relative to planned clinical and commercialization spending; the stated runway is based on current plans and is not a guarantee.
- Terms and cash consequences of the 2025 convertible notes and HCR revenue-interest financing, including any minimum payments, covenants, or default triggers.
- How much future revenue depends on collaboration milestones and other non-recurring license income, and whether reported product margins remain representative as zero-cost inventory is used.
- Developments in the securities litigation, third-party supply continuity, and payer coverage and pricing for XPOVIO.