Karyopharm Therapeutics Inc. — Q3 2018 Form 10-Q
Reporting period: Three and nine months ended September 30, 2018. Karyopharm is a clinical-stage pharmaceutical company developing cancer and other disease therapies, led by selinexor. It had no revenue from drug sales.
Financial performance
Amounts below are in $ millions, except per-share data. Revenue was primarily collaboration, license, supply, and grant revenue rather than product sales.
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| License and other revenue | 0.239 | 0 | 30.130 | 0.071 |
| Research and development expense | 36.427 | 25.237 | 122.482 | 72.440 |
| General and administrative expense | 12.966 | 5.818 | 30.076 | 18.717 |
| Operating loss | (49.154) | (31.055) | (122.428) | (91.086) |
| Net loss | (48.083) | (30.640) | (120.197) | (89.944) |
| Basic and diluted net loss per share | (0.79) | (0.65) | (2.17) | (2.00) |
Profitability and operating margins were negative; the filing does not present a meaningful product gross margin because the company had no drug sales. Interest income was $1.1 million in Q3 and $2.3 million for the nine months.
Liquidity, cash flow, and capital
- At September 30, 2018, cash and cash equivalents were $101.6 million; short- and long-term investments were $110.0 million. Combined cash, cash equivalents, and investments totaled $211.6 million. Including restricted cash, cash and equivalents totaled $102.3 million.
- Current assets were $211.6 million and current liabilities $41.6 million, implying working capital of approximately $170.0 million. Total liabilities were $48.9 million; no debt was reported on the September 30 balance sheet.
- For the nine months, operating cash use was $110.9 million, investing cash use was $4.6 million, and financing provided $148.3 million. Cash, cash equivalents, and restricted cash increased $32.8 million.
- Financing included $145.7 million net proceeds from a May 2018 common-stock offering. Shares outstanding rose to 60.7 million by November 2, 2018, from 49.5 million at December 31, 2017.
- Subsequent financing: In October 2018, the company issued $172.5 million principal amount of 3.00% convertible senior notes due 2025, receiving approximately $166.9 million net proceeds. The notes are senior unsecured, convertible at an initial price of approximately $15.85 per share, and may create future cash-payment obligations or shareholder dilution.
Changes versus prior periods
- Q3 net loss widened by $17.4 million year over year; nine-month net loss widened by $30.3 million. Higher clinical-trial, NDA preparation, staffing, commercial-readiness, and occupancy costs drove expenses higher.
- Nine-month revenue increased to $30.1 million, principally reflecting $10.0 million recognized under the Biogen asset purchase agreement and $19.7 million recognized under the Ono license agreement, plus other revenue. Q3 revenue was only $0.239 million.
- Research and development expense rose 44% in Q3 and 69% for the nine-month period; general and administrative expense rose 123% and 61%, respectively.
- The May equity offering materially increased financing proceeds and share count. The company also expanded its Newton facilities and extended the lease through September 2025.
Outlook, commentary, and risks
- Management expected September-end liquid resources plus the October notes proceeds to fund current operating and capital plans for at least 12 months from issuance of the financial statements, while building U.S. commercial infrastructure for a potential selinexor launch. It also stated that additional funding would be needed thereafter; future capital needs depend on trial, regulatory, and commercialization outcomes.
- The FDA accepted selinexor’s NDA for penta-refractory multiple myeloma, granted priority review, and set an April 6, 2019 action date. The FDA was planning an advisory committee meeting. Management planned an EMA application in early 2019, expected SADAL top-line data by year-end 2018, BOSTON data in 2019, and SEAL Phase 3 data by year-end 2019. These were forward-looking expectations, not guarantees.
- Management expected R&D and G&A spending to increase as clinical programs, regulatory work, and commercial preparation continued. Selinexor remained investigational, and approval, timing, market acceptance, pricing, reimbursement, and commercial success were uncertain.
- Key risks include clinical efficacy and safety, regulatory decisions (including whether accelerated approval is granted), trial enrollment and execution, manufacturing and third-party dependence, competition, intellectual-property challenges, and the need for future financing. The company reported recurring losses, a $615.5 million accumulated deficit, and no drug-sales revenue.
- Potentially material subsequent debt terms include conversion, redemption, and fundamental-change repurchase provisions. Lease commitments totaled $23.8 million in future minimum payments as of September 30, 2018.
- Management reported disclosure controls and procedures were effective at a reasonable assurance level, with no material quarterly change in internal control over financial reporting. The company did not report off-balance-sheet arrangements.
Important facts for investors to verify
- FDA review progress, advisory committee outcome, and the April 6, 2019 action date for selinexor; distinguish regulatory milestones from approval.
- Clinical results and safety data for STORM, SADAL, BOSTON, and SEAL, including whether results support the stated development plans.
- Actual cash burn and runway against management’s estimate, including commercial-readiness spending and any need for additional financing.
- Convertible-note conversion, cash settlement, dilution, and repurchase exposure, as well as the company’s ability to service or refinance the notes.
- Timing and conditions for recognizing deferred license revenue, and whether milestone or royalty payments from partners are achieved; most potential payments were constrained or contingent at quarter-end.
- Whether commercial infrastructure, manufacturing supply, reimbursement, and market access can support a launch if selinexor receives approval.