Karyopharm Therapeutics Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Unaudited figures below are in U.S. dollars; financial statement amounts are in millions unless otherwise noted.
Business context
Karyopharm is a commercial-stage oncology company. Its product XPOVIO (selinexor) was approved in the U.S. in July 2019 for certain heavily pretreated multiple myeloma patients and received a second accelerated approval in June 2020 for certain relapsed or refractory diffuse large B-cell lymphoma (DLBCL) patients. The company also develops eltanexor, verdinexor and KPT-9274.
Key financial results
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Product revenue | $18.6 | — | $34.7 | — |
| License and other revenue | $14.9 | $9.5 | $17.0 | $9.6 |
| Total revenue | $33.5 | $9.5 | $51.7 | $9.6 |
| Research and development expense | $42.6 | $26.5 | $76.6 | $64.5 |
| Selling, general and administrative expense | $30.8 | $24.7 | $61.5 | $51.8 |
| Operating loss | $(40.3) | $(41.7) | $(87.7) | $(106.6) |
| Net loss | $(46.4) | $(43.4) | $(99.4) | $(109.6) |
| Basic and diluted loss per share | $(0.63) | $(0.71) | $(1.41) | $(1.80) |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $(85.3) | $(114.8) |
Product revenue was entirely from U.S. XPOVIO sales. Q2 license revenue included $12.7 million recognized from the amended Antengene agreement and $2.2 million recognized upon termination of the Ono agreement. The company reported cost of sales of $0.4 million for Q2 and $1.2 million for the first half; it did not report a headline gross-margin figure.
Liquidity, debt and capital
- At June 30, 2020, cash and cash equivalents were $103.1 million; short- and long-term investments were $242.5 million. The company reported $345.6 million of cash, cash equivalents and investments as its principal liquidity source.
- Cash, cash equivalents and restricted cash totaled $105.7 million. Total assets were $380.0 million, total liabilities $250.2 million and stockholders’ equity $129.8 million.
- Six-month operating cash use was $85.3 million. Management stated available cash, cash equivalents and investments were expected to fund current operating plans and capital expenditures for at least 12 months from the financial statements’ issuance date.
- Convertible notes due 2025 had $172.5 million principal and a $113.8 million net carrying amount; the stated coupon is 3%, with an 11.85% effective interest rate. The notes were not convertible as of June 30, 2020.
- The deferred royalty obligation had a $73.6 million balance-sheet carrying amount. HCR received $75 million initially and is entitled to tiered royalties; payments are capped at 185% of the investment amount, with specified minimum-payment provisions.
- A March follow-on offering issued 7.19 million shares at $24 per share and generated approximately $161.8 million net. The company also expanded its at-the-market facility to a maximum $175 million; it reported no ATM sales in the first half of 2020.
Changes, outlook and material developments
- Compared with Q2 2019, total revenue rose due to XPOVIO sales and license revenue; the prior-year quarter had no product revenue. Q2 operating loss narrowed modestly, but net loss widened by $3.0 million, mainly reflecting higher interest expense and lower interest income.
- For the first half, operating and net losses improved versus 2019, while R&D and SG&A expenses increased. Management attributed expense growth chiefly to clinical-trial activity, personnel and commercial investment.
- Management expected Q3 license and other revenue to decline because Q2 included nonrecurring Antengene and Ono-related revenue. It expected R&D and SG&A to remain relatively consistent quarter over quarter for the rest of 2020, subject to trial timing and possible preparation for a BOSTON-based launch. Interest expense was expected to increase due to the deferred royalty obligation.
- The FDA accepted the BOSTON-based supplemental application for XPOVIO in multiple myeloma in July 2020, with a March 19, 2021 action date. The company anticipated an EMA opinion on its existing multiple myeloma application before year-end 2020, subject to completing requested monitoring work; it also expected to submit a BOSTON-based European application before year-end.
- Both U.S. XPOVIO indications have accelerated approval and require confirmatory or other post-marketing studies; continued approval may depend on verification of clinical benefit. The company expected the XPORT-DLBCL-030 confirmatory study to begin by year-end 2020.
- The COVID-19 selinexor trial in hospitalized patients was discontinued after interim review because the DSMB considered efficacy across the heterogeneous population unlikely to be statistically significant. Preliminary subgroup signals were reported, but FDA considered the benefit-risk ratio unfavorable for the population studied. The company planned further analysis and discussions with FDA and sought potential partners and external funding for future studies.
- COVID-19 was also identified as a risk to product demand, patient starts, clinical-trial enrollment and monitoring, regulatory timelines, vendors and supply. The filing states that effects remain uncertain; management reported enrollment delays in SEAL, SIENDO and STOMP.
- A securities class action remained pending: an amended complaint was filed June 29, 2020, alleging securities-law violations concerning SOPRA and STORM disclosures. The company said it believed the claims lacked merit and intended to defend the case.
Important facts for investors to verify
- Whether XPOVIO sales and adoption sustain growth, including the contribution of the newly approved DLBCL indication and the impact of COVID-19 on new patient starts.
- Progress and outcomes of BOSTON, XPORT-DLBCL-030 and other post-marketing requirements, and the implications for continued accelerated approvals.
- Timing and outcome of the FDA review of the BOSTON-based multiple myeloma application and the EMA review, including completion of requested monitoring work.
- Cash burn, liquidity runway and potential future financing needs relative to commercialization and clinical-development spending; the filing cautions that additional funding may be needed.
- Debt and royalty-financing obligations, including effective interest costs, HCR payment triggers and the potential dilution from further equity issuance or note conversion.
- Status and potential exposure from the securities litigation, and any operational or trial disruptions from the pandemic.