Karyopharm Therapeutics Inc. — Q3 2016 Form 10-Q
Reporting period: Three and nine months ended September 30, 2016. Karyopharm is a clinical-stage drug developer focused on XPO1 inhibitors; it had no approved drugs and had not generated drug-sale revenue. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Contract and grant revenue | $0.05 million | $0.08 million | $0.11 million | $0.23 million |
| Research and development expense | $19.9 million | $25.9 million | $66.3 million | $73.7 million |
| General and administrative expense | $5.9 million | $4.8 million | $17.4 million | $16.3 million |
| Operating loss | $25.7 million | $30.6 million | $83.6 million | $89.8 million |
| Net loss | $25.4 million | $30.4 million | $82.6 million | $89.1 million |
| Basic and diluted loss per share | $0.69 | $0.85 | $2.28 | $2.51 |
- Q3 net loss improved 16% year over year; nine-month net loss improved 7%. Lower R&D spending was partly offset by higher G&A and personnel-related costs. Contract and grant revenue was immaterial.
- Operating cash used was $64.4 million for the first nine months of 2016, versus $73.7 million a year earlier. Investing activities provided $18.0 million, primarily reflecting investment maturities and purchases; financing provided $31.9 million, including approximately $31.5 million of net ATM offering proceeds.
- Cash, cash equivalents, restricted cash, and short- and long-term investments totaled approximately $176.9 million at September 30, 2016. Cash and cash equivalents alone were $43.9 million. Total assets were $183.6 million; total liabilities were $16.7 million, with no debt reported on the balance sheet.
- Accumulated deficit was $339.2 million. Common shares outstanding were 39.7 million at quarter-end and 41.2 million as of November 2, 2016.
Material changes and financing
- Q3 R&D expense fell $6.0 million year over year, reflecting lower clinical-trial, preclinical, discovery, and consulting costs, partly offset by increased personnel and stock compensation. Nine-month R&D declined $7.4 million, while personnel costs and stock compensation increased.
- G&A expense rose 24% in Q3 and 7% for the first nine months, mainly due to higher personnel, stock compensation, consulting, and professional costs.
- The company reported approximately $48.4 million of cumulative net proceeds from its up-to-$50 million ATM offering as of November 2, 2016, including proceeds received in September and October. Management said this financing extended expected funding for its current operating plan and capital expenditures through the end of 2018.
Outlook, commentary, and risks
- Management expected Q4 R&D and G&A expense to remain consistent with Q3 levels, and expected to finish 2016 with more than $170 million in cash, cash equivalents, restricted cash, and investments. It also expects expenses and operating losses to increase over the foreseeable future.
- Clinical milestones stated in the filing included planned initiation of the Phase 3 BOSTON multiple-myeloma study in early 2017; expected SADAL topline data in early 2017; SOPRA and the Phase 2 portion of SEAL topline data in mid-2017; and expanded STORM cohort topline data in early 2018.
- Management viewed interim STORM results as positive but cautioned that further analysis or the expanded cohort might not confirm them. Accelerated approval for selinexor in penta-refractory multiple myeloma was uncertain; the FDA had recommended planning for a randomized trial supporting regular approval.
- Disclosed safety concerns included potential worsening of pre-existing cataracts, gastrointestinal effects and fatigue, Grade 3 or 4 thrombocytopenia and neutropenia, and increased sepsis rates in AML patients receiving high selinexor doses. The filing also noted an FDA request for additional information concerning the verdinexor influenza IND.
- Key risks include clinical-trial failure or delay, regulatory approval uncertainty, dependence on selinexor and third-party manufacturers and research organizations, competition, future financing needs and potential shareholder dilution. The company does not hedge foreign-currency exposure. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether trial enrollment, safety findings, and upcoming selinexor data support the stated clinical timelines and any potential regulatory filing.
- Whether the assumptions underlying management’s cash runway through year-end 2018 remain valid as trial and commercialization-related spending evolves.
- The amount and timing of further ATM or other financing, and the resulting share dilution; the filing reported 39.7 million shares at quarter-end and 41.2 million by November 2.
- Whether the FDA’s feedback, including its preference for randomized evidence in multiple myeloma, changes the feasibility or timing of accelerated or regular approval.