Karyopharm Therapeutics Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Financial statements are unaudited. Unless noted otherwise, amounts below are in millions of dollars.
Business context
Karyopharm is a clinical-stage pharmaceutical company developing SINE compounds that inhibit XPO1. Its lead candidate, oral selinexor (KPT-330), was in clinical trials; the company reported administering it to more than 1,200 patients across company- and investigator-sponsored Phase 1 and Phase 2 studies. The company had no drug sales and relied principally on equity financing.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Contract and grant revenue, 2015 / 2014 | $0.075 / $0.021 | $0.225 / $0.214 |
| Research and development expense, 2015 / 2014 | $25.923 / $15.951 | $73.680 / $40.089 |
| General and administrative expense, 2015 / 2014 | $4.762 / $3.814 | $16.318 / $10.028 |
| Net loss, 2015 / 2014 | $(30.373) / $(19.724) | $(89.135) / $(49.849) |
| Net loss per share, 2015 / 2014 | $(0.85) / $(0.61) | $(2.51) / $(1.63) |
- Revenue was immaterial and came from a sponsored research agreement; no revenue came from drug sales. Product margins are therefore not meaningful.
- For the first nine months of 2015, operating cash used was $73.654 million, investing cash used was $124.666 million, and financing cash provided was $91.216 million. The investing outflow primarily reflected purchases of investments, partly offset by maturities.
- At September 30, cash and cash equivalents were $43.499 million, short-term investments $151.738 million, long-term investments $34.430 million, and restricted cash $0.485 million—$230.2 million combined. Current assets were $198.344 million versus current liabilities of $14.440 million.
- Total liabilities were $16.379 million; the balance sheet reported no borrowings. Stockholders’ equity was $220.592 million.
- In January 2015, the company raised $90.830 million net through a common-stock offering. Shares outstanding increased to 35.712 million at September 30 from 32.699 million at December 31, 2014.
Changes versus the prior comparable period
- Q3 net loss increased 54% year over year; nine-month net loss increased 79%. The increase reflected higher operating expenses, partly offset by greater interest income.
- R&D expense rose 63% in Q3 and 84% for the first nine months, largely due to expanded clinical-trial spending, including selinexor, and increased personnel and trial-support costs.
- G&A expense rose 25% in Q3 and 63% for the first nine months, primarily reflecting higher personnel-related costs and occupancy expense.
- Cash and cash equivalents fell from $150.609 million at year-end 2014 to $43.499 million, while the company increased its holdings of short- and long-term investments.
Outlook, risks and other notable items
- Management expected existing cash, cash equivalents and investments to fund its current operating plan and capital expenditures into 2018, and expected to finish 2015 with more than $200 million in cash, cash equivalents, restricted cash and investments. The company nevertheless said it would need substantial additional funding and had no committed external source of funds.
- Management anticipated rising expenses and operating losses as clinical development continued. Funding needs depend on trial progress, regulatory requirements, other pipeline spending and potential commercialization costs.
- Key risks include selinexor’s clinical efficacy and safety, regulatory approval and trial-enrollment uncertainty, reliance on third-party manufacturers and trial operators, competition, intellectual-property protection, and the possibility that additional financing may be unavailable or dilutive.
- Reported selinexor safety concerns included gastrointestinal effects and fatigue, Grade 3 or 4 thrombocytopenia and neutropenia, and increased sepsis rates in AML patients receiving higher doses. The filing also noted potential worsening of pre-existing cataracts.
- Interest-rate and foreign-currency exposures were described as not material under an immediate 10% change scenario; the company did not hedge foreign-currency risk. It reported no off-balance-sheet arrangements and no material change in contractual obligations from its 2014 Form 10-K.
- Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the reported cash runway into 2018 remains supportable as clinical-trial spending and operating losses grow.
- Progress, enrollment, efficacy and safety results in selinexor trials, including trial endpoints and regulatory feedback.
- Future capital needs and the potential dilution or other terms of any additional financing.
- Clinical-trial, manufacturing and regulatory developments that could delay or impair the development program.