Karyopharm Therapeutics Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Karyopharm is a clinical-stage pharmaceutical company developing XPO1 inhibitors, led by selinexor. It had no revenue from drug sales; reported revenue was limited to a government grant.
Financial results and position
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Contract and grant revenue | $68,000 | $0 |
| Research and development expense | $24.1 million | $21.8 million |
| General and administrative expense | $6.3 million | $5.6 million |
| Net loss | $29.9 million | $27.1 million |
| Net loss per share, basic and diluted | $0.71 | $0.75 |
| Cash used in operating activities | $24.7 million | $23.2 million |
Amounts are in U.S. dollars. Net loss widened 11% year over year as operating expenses rose 11%; R&D growth primarily reflected higher selinexor clinical-trial and personnel costs. The lower per-share loss reflected a larger weighted-average share count. Profit margins are not meaningful given the company’s development-stage operations and negligible revenue.
At March 31, 2017, cash and cash equivalents were $25.6 million, short- and long-term investments were $124.6 million, and restricted cash was $0.5 million, for total cash, cash equivalents, restricted cash and investments of $150.6 million. Total assets were $155.4 million, total liabilities $17.1 million, and stockholders’ equity $138.4 million. The filing reports no debt. Current assets of $112.2 million exceeded current liabilities of $15.5 million.
Cash, cash equivalents and investments declined from $175.5 million at December 31, 2016. Net cash decreased $24.1 million during the quarter. Investing cash flow was positive $0.5 million, largely reflecting investment maturities and purchases; financing cash flow was positive $0.1 million.
Material developments, outlook and risks
- Management expected available funds at March 31, plus approximately $52.2 million raised in April through public stock offerings, to fund its current operating plan and capital expenditure needs into 2019. This is a management estimate, dependent on clinical, regulatory and spending outcomes. The company said it would need substantial additional funding for continuing operations.
- In April, the company raised approximately $14.5 million net through its at-the-market program and approximately $37.8 million net from a follow-on offering of 3,902,439 shares at $10.25 per share. The underwriter also received a 30-day option for up to 585,365 additional shares. These financings increased the share count and diluted existing holders.
- Management expected R&D expense to continue increasing during 2017 as development programs and trials advance, and G&A expense to rise in support of expanded operations.
- Clinical plans included initiating the Phase 3 BOSTON multiple myeloma study in May 2017; expected topline results were mid-2017 for the Phase 2 portion of SEAL, mid-2018 for SADAL, and early 2018 for the expanded STORM cohort. These are forward-looking expectations, not assured outcomes.
- FDA inspections in February identified deficiencies in procedures and documentation, prompting a Form 483. The FDA placed selinexor trials on partial clinical hold in March because the investigator’s brochure did not include complete information, including a complete list of serious adverse events; the filing states this was not due to new safety information. Holds were lifted by the relevant FDA divisions effective March 30, March 31 and April 5, 2017.
- Selinexor development remains subject to clinical efficacy and safety uncertainty, regulatory approval and trial-enrollment risks. The filing identifies adverse events including gastrointestinal symptoms, fatigue, thrombocytopenia and neutropenia, and notes potential worsening of pre-existing cataracts.
- On April 3, the CFO resigned; the company entered into consulting and separation arrangements, including $278,250 in severance payments, healthcare continuation and continued vesting of certain awards. The company had begun searching for a new CFO.
- On April 28, Karyopharm licensed verdinexor for companion-animal cancer worldwide. Terms include a $1.0 million upfront payment, potential milestones of up to $43.5 million and a low double-digit royalty on future net sales.
- Other key risks include dependence on selinexor, future financing needs and potential dilution, reliance on third-party trial and manufacturing providers, competition, reimbursement and commercialization uncertainty, and foreign-currency exposure. The company reported no off-balance-sheet arrangements and no material change in contractual obligations.
Important facts for investors to verify
- Whether clinical trial timelines and results, particularly BOSTON, STORM, SADAL and SEAL, meet the company’s stated expectations.
- Current status of FDA follow-up to the Form 483 and whether any further regulatory restrictions or trial delays arise.
- Cash burn, remaining liquidity and financing needs relative to the stated runway into 2019.
- Share-count impact of the April ATM and follow-on offerings, including exercise of the underwriter’s option, if applicable.
- Progress toward appointing a CFO and the implications of the CFO transition for financial reporting and operations.
- Whether verdinexor license milestones and royalties are achieved; these payments are contingent and not guaranteed.