Karyopharm Therapeutics Inc. — Q2 2014 Form 10-Q
Reporting period: Three and six months ended June 30, 2014; financial statements are unaudited. Karyopharm is a clinical-stage pharmaceutical company developing SINE compounds, led by selinexor. It had no product sales and substantially all activity was research and development.
Financial results
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Contract and grant revenue | $21,000 | $133,000 | $193,000 | $366,000 |
| Research and development expense | $13.2 million | $6.1 million | $24.1 million | $11.0 million |
| General and administrative expense | $3.3 million | $943,000 | $6.2 million | $1.8 million |
| Net loss | $16.4 million | $6.9 million | $30.1 million | $12.5 million |
| Net loss per share | $0.55 | $2.86 | $1.02 | $5.39 |
| Net cash used in operating activities | — | $22.5 million | $11.3 million |
Balance sheet and liquidity: At June 30, cash and cash equivalents were $132.3 million, total current assets $135.3 million, total assets $137.7 million, and total liabilities $6.0 million. Stockholders’ equity was $131.7 million and accumulated deficit was $92.7 million. No borrowings or debt are reported. The company used $849,000 in investing activities, including $449,000 for property and equipment and $400,000 in restricted cash. Cash declined $23.7 million during the first half.
Changes and drivers
- First-half net loss increased to $30.1 million from $12.5 million, primarily as research and development spending more than doubled amid increased clinical, manufacturing, preclinical, discovery, consulting, and personnel costs.
- First-half general and administrative expense rose to $6.2 million from $1.8 million, reflecting higher headcount, stock-based compensation, public-company costs, legal and professional fees, and insurance.
- Grant and contract revenue declined as less grant funding was recognized. There was no revenue from drug sales.
- Reported first-half weighted-average shares rose substantially year over year, principally affecting per-share comparability. The company had 29.7 million common shares outstanding at June 30 and 32.7 million at July 31.
Outlook, risks, and notable items
- Management expected expenses and operating losses to increase as clinical development continued. The company had initiated a registration-directed trial in older patients with AML and planned two more registration-directed trials during 2014, with up to two additional trials in late 2014 or early 2015.
- After the quarter, in July 2014, the company sold 2,844,334 shares at $42.50 per share, receiving approximately $112.9 million net. Management said cash, including those proceeds, was expected to fund its current operating plan into the second half of 2017, and expected year-end 2014 cash above $200 million.
- Funding needs depend on clinical results, regulatory review, development costs, collaborations, and potential commercialization. Management cautioned that adequate additional financing may not be available and that trial results may not predict later success or lead to approval or commercial sales.
- A new office and research-space lease began in May 2014 and runs through October 2021, with $5.6 million in aggregate scheduled rent payments. A $400,000 letter of credit secures the lease. No material contractual-obligation changes were reported for the quarter.
- No material changes to the risk factors in the 2013 Form 10-K were reported; no legal proceedings or off-balance-sheet arrangements were reported. Management concluded disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Clinical trial progress, safety and efficacy evidence for selinexor, and timing and scope of planned registration-directed trials.
- Whether the July offering proceeds and stated runway assumptions remain consistent with actual spending and development plans.
- Drivers of rapidly rising R&D expense, including trial enrollment, CRO costs, and drug manufacturing needs.
- Potential future dilution, including the July share issuance and outstanding stock options.
- Cash runway sensitivity to trial outcomes, regulatory requirements, financing availability, and the company’s stated development plans.