Karyopharm Therapeutics Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. Dollar amounts are in millions unless otherwise stated. Karyopharm is an oncology-focused biotechnology company; through June 30, it had not generated revenue from drug sales.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| License and other revenue | $9.5 | $19.9 | $9.6 | $29.9 |
| Research and development expense | $26.5 | $44.7 | $64.5 | $86.1 |
| General and administrative expense | $24.7 | $9.5 | $51.8 | $17.1 |
| Operating loss | $(41.7) | $(34.3) | $(106.6) | $(73.3) |
| Net loss | $(43.4) | $(33.7) | $(109.6) | $(72.1) |
| Net loss per share | $(0.71) | $(0.60) | $(1.80) | $(1.36) |
Revenue was primarily licensing revenue, not product sales. Q2 2019 included $9.4 million recognized under the Antengene agreement after delivery of initial selinexor clinical supply. The filing does not present a meaningful product gross margin; the company had no drug sales during the quarter.
Cash flow, liquidity and debt
- At June 30, cash, cash equivalents and investments were $217.2 million, down from $330.2 million at December 31, 2018. Including restricted cash, the balance was $217.9 million.
- Six-month operating cash use was $114.8 million, compared with $72.3 million in 2018. Investing activities provided $71.8 million, largely reflecting investment maturities; financing provided $0.5 million.
- Convertible senior notes had $172.5 million principal outstanding, a 3.00% coupon and an October 2025 maturity. Their net carrying amount was $106.2 million; six-month interest expense was $6.1 million, including non-cash discount and issuance-cost amortization.
- Management expected cash, cash equivalents and investments at June 30 to fund current plans and capital requirements for at least 12 months from the financial statement issuance date. This is not a projection of profitability.
Material changes versus prior year
- Q2 revenue fell 52% and six-month revenue fell 68%, principally because prior-year periods included revenue from the Ono license and, for the six-month period, the Biogen asset sale; 2019 revenue included Antengene license revenue.
- R&D expense declined 41% in Q2 and 25% for the six months, mainly from lower clinical-trial and personnel costs. Management expected R&D expense to decrease in 2019 versus 2018 while continuing key selinexor development.
- G&A expense rose 160% in Q2 and 203% for the six months, primarily from hiring and commercial preparation for XPOVIO, along with commercial, facility and infrastructure costs. Management expected G&A to remain consistent for the rest of 2019 to support commercial activities.
- Net loss widened by $9.8 million in Q2 and $37.5 million for the six-month period, reflecting lower licensing revenue, higher G&A and interest expense on the notes.
Outlook, developments and risks
- After quarter-end, on July 3, 2019, the FDA granted accelerated approval for XPOVIO (selinexor) with dexamethasone for a narrowly defined, heavily pretreated relapsed or refractory multiple myeloma population. U.S. commercial availability began in July. Continued approval may depend on confirmation of clinical benefit; the Phase 3 BOSTON study is the confirmatory trial.
- The accelerated approval also carries post-marketing commitments, including the BOSTON study, a lower-dose randomized study, a hepatic impairment trial and a drug-interaction trial. Failure to verify benefit or meet requirements could jeopardize approval.
- The EMA review of the company’s conditional-approval application for heavily pretreated multiple myeloma was ongoing; management expected a decision by the end of 2019 or early 2020. Management anticipated filing for selinexor in DLBCL in the fourth quarter of 2019 or first quarter of 2020, subject to trial results and regulatory review.
- Management anticipated increased expenses associated with commercialization and continued clinical development. It said additional funding would be needed to support continuing operations over time; financing may be unavailable or dilutive, and failure to raise capital could force cuts or delays.
- Key risks include XPOVIO launch execution, market access and reimbursement, safety and tolerability, clinical and regulatory outcomes, reliance on third-party manufacturers and collaborators, and competition. STORM safety disclosures included frequent dose interruptions or reductions and a 27% treatment discontinuation rate due to adverse reactions.
- A securities class action filed July 23, 2019 alleges federal securities-law violations relating to disclosures about the SOPRA and STORM studies. The complaint seeks unspecified damages and other relief; the company says it believes the suit is without merit and intends to defend it. The filing text does not provide a clear estimate of potential financial exposure.
- In July 2019, after quarter-end, the company sold 1,037,794 shares under its at-the-market program for approximately $9.2 million net proceeds. No shares had been sold under the program as of June 30.
- Adoption of lease accounting in January 2019 added operating lease right-of-use assets and liabilities to the balance sheet; the company said it did not materially affect reported operating results.
Important facts for investors to verify
- Early XPOVIO sales, launch costs, reimbursement coverage and the resulting cash-burn trajectory.
- Progress and results of BOSTON and completion of all FDA post-marketing commitments.
- EMA review outcome and the timing and evidence supporting any planned DLBCL submissions.
- Whether the stated 12-month liquidity runway remains adequate as commercialization and development spending evolve, and whether additional financing is required.
- Developments in the securities class action and any subsequent disclosure of its potential financial impact.