Karyopharm Therapeutics Inc. — Q2 2017 Form 10-Q
Reporting period: Three and six months ended June 30, 2017. The company is a clinical-stage pharmaceutical developer focused on SINE compounds targeting XPO1; it had no approved drugs and no product sales.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| Contract and grant revenue | $0.003 | $0.059 | $0.071 | $0.059 |
| Research and development | $23.120 | $24.579 | $47.203 | $46.374 |
| General and administrative | $6.635 | $5.956 | $12.899 | $11.510 |
| Net loss | $(29.387) | $(30.158) | $(59.304) | $(57.217) |
| Net loss per share, basic and diluted | $(0.64) | $(0.84) | $(1.35) | $(1.59) |
| Net cash used in operating activities | — | — | $(46.429) | $(44.059) |
- Q2 net loss narrowed by about 3% year over year as lower R&D expense outweighed higher G&A. For the first half, net loss widened about 4%, reflecting higher operating expenses.
- Q2 R&D fell $1.5 million, primarily from lower clinical, personnel and discovery costs, partly offset by higher consulting and professional expense. First-half R&D rose $0.8 million, including higher clinical trial and consulting costs. G&A increased 11% in Q2 and 12% for the first half.
- Margins are not meaningful given negligible grant/contract revenue and the company’s substantial development spending.
- At June 30, cash and cash equivalents were $55.4 million; short- and long-term investments were $125.3 million, and restricted cash was $0.5 million. Combined liquidity was approximately $181.2 million, versus $175.5 million at year-end 2016.
- First-half financing provided $52.6 million, including $37.9 million net proceeds from an April follow-on offering and approximately $14.4 million from ATM share sales. Common shares outstanding increased to 47.1 million from 41.9 million at year-end 2016.
- Total liabilities were $19.0 million, chiefly accounts payable, accrued expenses and deferred rent. The filing reports no borrowings or material changes in contractual obligations; no debt balance is shown.
Business developments, outlook and risks
- Selinexor was being evaluated in multiple mid- and late-stage trials. Management expected SADAL topline data in the second half of 2018, STORM expanded-cohort topline data by April 2018, BOSTON topline data in 2019, and a SEAL Phase 2 progression-free-survival hazard ratio in September or October 2017. These were forward-looking expectations, not guarantees.
- Management expected R&D expense to increase for full-year 2017 as development programs and trials continued, and G&A to grow with expanding operations. It estimated existing liquidity would fund the current operating plan and capital expenditure needs into 2019, while also stating that substantial additional funding would be needed over time.
- Under an April 2017 license, Anivive received worldwide rights to develop and commercialize verdinexor for companion-animal cancer. Karyopharm received a $1.0 million upfront payment and could receive up to $43.5 million in milestones plus low-double-digit royalties. The upfront payment remained deferred at June 30; the company planned to recognize the allocated $1.25 million when the technology transfer is completed.
- The FDA’s March 2017 partial clinical holds on selinexor trials were lifted by the relevant divisions by April 5. The hold related to incomplete investigator-brochure information, including serious adverse events, rather than new safety information. A February FDA Form 483 had identified procedural and documentation deficiencies; the company reported corrective actions and responses.
- Key risks include clinical efficacy and safety uncertainty, regulatory review and possible additional trials, trial enrollment and execution, dependence on third-party manufacturers and research organizations, future financing and dilution, and the need to build commercialization capabilities. Reported selinexor adverse events included gastrointestinal effects and fatigue; Grade 3 or 4 events most commonly included thrombocytopenia and neutropenia. The company also disclosed potential worsening of pre-existing cataracts.
- Other notable items: CFO Justin Renz resigned in April 2017 and the company had begun a search for a replacement; $371,000 of Q2 stock-based compensation related to his separation and consulting agreements. Management said disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether selinexor trial results, timelines and regulatory feedback support the company’s stated development and potential approval plans.
- Whether the FDA’s prior observations were fully resolved and whether safety findings or trial execution create further regulatory or enrollment delays.
- Whether the projected liquidity runway into 2019 remains achievable as clinical and potential commercial-preparation spending increases, and what financing may be required.
- Completion of Anivive’s technology transfer, the resulting revenue recognition, and the achievability and economic value of contingent milestones and royalties.
- The impact of equity issuance and future capital needs on share dilution; the filing reports 47,123,208 shares at June 30 and 47,138,861 at July 31.