Karyopharm Therapeutics Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Amounts are in U.S. dollars; financial statement figures are in millions except per-share data. Karyopharm is a commercial-stage oncology company marketing XPOVIO (selinexor) in the U.S. for relapsed or refractory multiple myeloma and diffuse large B-cell lymphoma (DLBCL), while continuing clinical development in additional indications.
Key financial results
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Product revenue, net | $21.3 | $12.8 | $56.0 | $12.8 |
| License and other revenue | $0.003 | $0.3 | $17.0 | $10.0 |
| Total revenue | $21.3 | $13.1 | $73.0 | $22.8 |
| Research and development | $37.0 | $26.3 | $113.6 | $90.8 |
| Selling, general and administrative | $31.0 | $25.3 | $92.5 | $77.0 |
| Operating loss | $(47.1) | $(39.4) | $(134.8) | $(146.0) |
| Net loss | $(53.5) | $(41.4) | $(152.9) | $(150.9) |
| Net loss per share, basic and diluted | $(0.73) | $(0.67) | $(2.14) | $(2.46) |
- Q3 product revenue rose 66% year over year; nine-month product revenue rose 337%, reflecting the July 2019 launch and the June 2020 DLBCL approval. The company reported nearly 4,200 prescriptions filled since launch.
- Q3 operating expenses increased 30% year over year, led by higher clinical-trial spending and commercial and personnel costs. Q3 net loss widened 29%, including substantially higher interest expense. For the nine-month period, operating loss narrowed, but higher interest expense largely offset the improvement, leaving net loss slightly higher.
- Gross profit and margin are not representative of ongoing product economics: cost of sales was $0.4 million in Q3 and $1.7 million year to date, and the company expected to use previously expensed, zero-cost inventory for an extended period.
Cash, liquidity and debt
- At September 30, 2020, cash and cash equivalents were $82.3 million; short- and long-term investments were $220.1 million; and restricted cash was $1.8 million. Cash, cash equivalents and investments totaled $302.4 million. Current assets were $285.4 million and current liabilities $52.6 million, implying working capital of approximately $232.8 million.
- Nine-month operating cash use was $129.6 million, compared with $151.3 million in 2019. Investing activities used $85.1 million, primarily reflecting purchases of investments; financing provided $168.1 million, including $161.8 million net proceeds from a March follow-on equity offering. Cash, cash equivalents and restricted cash declined by $46.6 million to $84.1 million.
- Convertible notes had a $115.8 million carrying value and $172.5 million principal outstanding; they bear 3% stated interest, mature in 2025, and had an 11.85% effective interest rate. The deferred royalty obligation was $73.6 million on the balance sheet. It entails tiered royalties on product-related revenues, with a 185% repayment cap and minimum-payment provisions; the reported effective rate was approximately 18.1%. The company had paid HCR $4.6 million by quarter-end.
- Management said available cash, cash equivalents and investments were expected to fund current operating plans and capital requirements for at least 12 months from the financial statement issuance date. The company also stated it expects to need substantial additional funding and may pursue further financing.
Material changes, outlook and notable items
- Q3 revenue growth did not keep pace with expense growth: R&D rose 41% and SG&A 23% year over year. Management expected Q4 R&D and SG&A to remain relatively consistent with Q3, with launch-preparation costs potentially affecting SG&A; interest expense was expected to increase slightly.
- For the nine months, license and other revenue included $13.8 million associated with Antengene and $2.2 million recognized when the Ono license was terminated and rights returned. The Antengene amendment expanded territories and generated an $11.7 million upfront payment; future milestones remain contingent and royalties depend on future sales.
- The FDA had accepted the BOSTON-based supplemental application for XPOVIO in earlier-line multiple myeloma, with a March 19, 2021 action date. If approved, the company expected an immediate launch. The DLBCL confirmatory study was expected to begin by year-end 2020.
- After quarter-end, on November 2, 2020, the company announced positive top-line Phase 3 SEAL results in dedifferentiated liposarcoma: the study met its progression-free-survival primary endpoint (hazard ratio 0.70; p=0.023). The company expected to submit an NDA in Q1 2021. The results were top-line and subject to audit and verification.
- The COVID-19 selinexor trial in hospitalized patients was discontinued after an interim analysis indicated it was unlikely to meet its primary endpoint across the overall population. The company reported COVID-related enrollment delays in other trials and identified potential risks to sales, trials, supply and regulatory timelines.
- Both U.S. XPOVIO approvals are accelerated approvals with confirmatory and other post-marketing obligations; continued approval depends on required evidence of clinical benefit. The European multiple-myeloma application remained under review, with CHMP outstanding issues and a request for further justification of benefit-risk and supporting data.
Risks, contingencies and investor verification points
- Verify XPOVIO prescription growth, net sales, access and reimbursement, and the contribution of the newer DLBCL indication; commercialization success and product adoption remain key uncertainties.
- Track confirmatory-trial execution and regulatory decisions, especially the BOSTON action date, DLBCL post-marketing studies, the EMA review, and whether SEAL’s final data support the anticipated NDA.
- Assess cash burn against the stated liquidity runway, financing needs and potential dilution. The company raised $161.8 million through equity in March and had expanded its at-the-market program authorization to $175 million.
- Review the terms and cash burden of the convertible notes and HCR royalty financing, including HCR’s revenue share, minimum-return provisions, covenants and potential acceleration or collateral remedies.
- Consider the ongoing COVID-19 disruption, clinical and manufacturing dependence on third parties, product safety and market competition, and the risk that accelerated approvals could be withdrawn if confirmatory evidence is inadequate.
- A securities class action remained pending: the amended complaint alleges disclosure-related violations concerning earlier trial results; the company denied the allegations and stated it would defend the case. Damages sought were unspecified.