Karyopharm Therapeutics Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unless otherwise stated, dollar amounts are in millions. The company is a commercial-stage oncology pharmaceutical company; its only product revenue is U.S. sales of XPOVIO (selinexor), while partners commercialize selinexor outside the U.S.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $33.1 | $38.7 | Down 14% |
| Net product revenue | $26.0 | $28.3 | Down 8% |
| License and other revenue | $7.1 | $10.4 | Down 32% |
| Operating expenses | $66.9 | $69.6 | Down 4% |
| Loss from operations | $(33.8) | $(30.9) | Loss widened $2.9 |
| Net loss | $(37.4) | $(34.1) | Loss widened $3.2 |
| Net loss per share, basic and diluted | $(0.32) | $(0.30) | |
| Net cash used in operating activities | $(43.7) | $(18.9) | Use increased $24.8 |
- At March 31, cash and cash equivalents were $30.6 and investments were $118.0, totaling $148.6. Cash, cash equivalents and restricted cash were $31.4. Management said available cash, cash equivalents and investments were expected to fund current operating plans and capital expenditures for at least 12 months from the financial-statement issuance date.
- Current assets were $198.4 and current liabilities $65.3. Total liabilities were $373.4; stockholders’ deficit was $169.0. The balance sheet reported convertible notes of $171.1 net and a deferred royalty obligation of $132.5, including an embedded derivative liability. The underlying deferred royalty debt carrying value was approximately $129.7.
- Operating cash use increased primarily because Q1 2023 included collection of $22.4 in Antengene milestone payments. Q1 2024 investing activities provided $21.9, mainly reflecting investment maturities net of purchases.
Material changes and management commentary
- Net XPOVIO product revenue fell $2.3, which management attributed mainly to lower demand amid increasing competition and higher gross-to-net deductions, including Medicare/Medicaid rebates and 340B discounts. Gross product revenue was nearly flat, but provisions rose to $10.8 from $8.8.
- License and other revenue declined $3.3, primarily because Q1 2023 included $3.5 of non-recurring Menarini license revenue. Q1 2024 Menarini revenue included $5.8 of development-expense reimbursements.
- R&D expense increased $3.1 to $35.4. Clinical-trial costs rose $5.3 as activity increased in three pivotal Phase 3 trials in myelofibrosis, endometrial cancer and multiple myeloma; lower spending in other programs partly offset the increase. SG&A fell $6.4 to $29.5, primarily due to lower headcount and cost-reduction initiatives.
- Management expected Q2 2024 product revenue to increase slightly, largely from more favorable gross-to-net; license and other revenue to increase due to partner milestones and royalties; R&D expense to increase slightly as pivotal trials progress; and SG&A and cost of sales to remain relatively consistent. It expected other expense, net, to increase slightly, reflecting new financing interest costs partly offset by reduced HCRx payments.
- In January 2024, the company put further clinical development of eltanexor on hold to focus resources on prioritized late-stage programs. It reported an accumulated deficit of $1.5 billion and stated it may need additional financing; adequate financing may not be available on acceptable terms.
Debt refinancing after quarter-end
On May 8, 2024, Karyopharm entered into refinancing transactions intended to extend certain maturities, limit aggregate indebtedness and provide working capital. The exchange of existing notes was expected to close around May 13, subject to customary conditions.
- A new $100.0 senior secured term loan matures in May 2028 and bears interest at a variable rate of SOFR plus 9.25%, subject to a 3.00% floor. It is secured by substantially all assets and includes a minimum liquidity covenant of $25.0, restrictions on business activities and specified repayment, redemption and prepayment charges.
- Approximately $148.0 of 2025 notes was to be exchanged for approximately $111.0 of 6.00% secured convertible notes due 2029 and warrants to purchase up to 45.8 million shares. The company also expected to issue $5.0 of 2029 notes to HCRx. Approximately $24.5 of 2025 notes was expected to remain outstanding after the exchange.
- The HCRx amendment involved a $49.5 cash payment, a $15.0 term-loan note and an agreed $5.0 issuance of 2029 notes. After the transactions, the company said aggregate payments under the royalty agreement would total $135.0, no further gross-up payments would be due, and the maximum remaining amount owed to HCRx would be $128.3.
- The company also agreed to issue 6.9 million common shares to its financial adviser as payment for transaction-related services. These financing terms and potential share issuance create material interest, repayment, covenant and dilution considerations.
Risks, contingencies and other notable items
- XPOVIO is central to the business, and the filing cites competition, demand, reimbursement and gross-to-net deductions as risks to product revenue. The DLBCL indication has accelerated approval; continued approval may depend on confirming clinical benefit.
- Clinical development carries enrollment, timing, safety, regulatory and trial-outcome risks. The endometrial cancer program also depends on a companion diagnostic, and the filing describes EU regulatory-related site activation delays.
- The May financing adds substantial secured debt, a $25.0 minimum-liquidity requirement and restrictions, including a prohibition on exclusively licensing, selling or disposing of U.S. rights to oncology indications of selinexor. Defaults could accelerate obligations and risk foreclosure on collateral.
- Other risks include reliance on third-party manufacturers, including a single-source supplier for active pharmaceutical ingredient and drug product; potential dilution from financing and warrants; and foreign-currency exposure, which the company does not hedge.
- Management concluded disclosure controls and procedures were effective as of March 31, 2024 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the May 2024 note exchange and related issuances closed as expected, and the final amounts and terms of the resulting debt and HCRx obligations.
- Subsequent cash, investment balances and operating cash use, including compliance with the new $25.0 minimum-liquidity covenant.
- Quarterly XPOVIO demand and gross-to-net deductions, and whether management’s Q2 revenue expectations were realized.
- Enrollment, timing and readouts for the three pivotal Phase 3 programs, along with regulatory and companion-diagnostic developments.
- The potential dilution from the 45.8 million warrants, adviser shares and other securities, relative to the 117.7 million shares reported outstanding on May 3, 2024.