Karyopharm Therapeutics(US:KPTI)2023-11-02 11:57PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Karyopharm Therapeutics Inc.'s unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2023, are presented Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets from $358.2 million at the end of 2022 to $270.0 million as of September 30, 2023, primarily driven by a reduction in cash and cash equivalents Condensed Consolidated Balance Sheets (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $43,655 | $135,188 | | Investments | $164,660 | $142,779 | | Total current assets | $263,222 | $350,162 | | Total assets | $269,960 | $358,172 | | Liabilities and Stockholders' Deficit | | | | Total current liabilities | $62,079 | $65,908 | | Convertible senior notes | $170,702 | $170,105 | | Total liabilities | $370,356 | $374,828 | | Total stockholders' deficit | ($100,396) | ($16,656) | | Total liabilities and stockholders' deficit | $269,960 | $358,172 | Condensed Consolidated Statements of Operations Total revenue for Q3 2023 was $36.0 million, with a net loss of $34.5 million, while nine-month revenue decreased to $112.3 million with a narrowed net loss of $101.3 million Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | | For the Three Months Ended Sep 30, 2023 | For the Three Months Ended Sep 30, 2022 | For the Nine Months Ended Sep 30, 2023 | For the Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $30,207 | $32,009 | $86,955 | $89,319 | | License and other revenue | $5,802 | $4,136 | $25,331 | $34,175 | | Total revenue | $36,009 | $36,145 | $112,286 | $123,494 | | Research and development | $35,553 | $31,359 | $99,369 | $117,730 | | Selling, general and administrative | $30,805 | $34,645 | $101,193 | $110,752 | | Total operating expenses | $67,269 | $66,984 | $204,018 | $231,827 | | Loss from operations | ($31,260) | ($30,839) | ($91,732) | ($108,333) | | Net loss | ($34,506) | ($36,324) | ($101,262) | ($126,785) | | Net loss per share—basic and diluted | ($0.30) | ($0.45) | ($0.89) | ($1.60) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly decreased for the nine months ended September 30, 2023, while cash, cash equivalents, and restricted cash ended lower Condensed Consolidated Statements of Cash Flows (in thousands) | | For the Nine Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($74,138) | ($122,711) | | Net cash used in investing activities | ($18,903) | ($38,958) | | Net cash provided by financing activities | $860 | $37,895 | | Net decrease in cash, cash equivalents and restricted cash | ($92,304) | ($124,388) | | Cash, cash equivalents and restricted cash at end of period | $44,581 | $73,057 | Notes to Condensed Consolidated Financial Statements The notes detail Karyopharm's business, key accounting policies, and breakdowns of revenues, inventory, financial instruments, investments, stock-based compensation, equity, and long-term obligations - The company's lead asset, XPOVIO® (selinexor), is approved for multiple myeloma and diffuse large B-cell lymphoma (DLBCL) in the U.S. and is commercialized by partners in approximately 40 countries outside the U.S.2223 Product Revenue, Net (in thousands) | | For the Three Months Ended Sep 30, | For the Nine Months Ended Sep 30, | | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Gross product revenue | $37,981 | $39,178 | $111,387 | $108,947 | | Provisions for product revenue | ($7,774) | ($7,169) | ($24,432) | ($19,628) | | Total product revenue, net | $30,207 | $32,009 | $86,955 | $89,319 | License and Other Revenue (in thousands) | | For the Three Months Ended Sep 30, | For the Nine Months Ended Sep 30, | | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Menarini | $5,564 | $1,618 | $19,912 | $15,235 | | Antengene | $80 | $1,532 | $1,952 | $11,533 | | Other | $158 | $986 | $3,467 | $7,407 | | Total license and other revenue | $5,802 | $4,136 | $25,331 | $34,175 | - The company has $172.5 million in principal of 3.00% convertible senior notes due 2025. As of September 30, 2023, the conditions for conversion had not been met.606264 - A deferred royalty obligation exists with HealthCare Royalty Partners (HCR), where Karyopharm received $135.0 million in total investment and makes tiered percentage payments on net revenues of selinexor. Total payments are capped at 195% of the investment amount.6768 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial condition, results of operations, and liquidity, highlighting XPOVIO® commercialization and pipeline development Results of Operations Q3 2023 total revenue was flat, with net product revenue impacted by patient assistance programs, while R&D expenses rose and SG&A expenses fell, leading to a narrowed net loss Comparison of Operations (in thousands) | | For the Three Months Ended Sep 30, 2023 | For the Three Months Ended Sep 30, 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $30,207 | $32,009 | ($1,802) | (6)% | | License and other revenue | $5,802 | $4,136 | $1,666 | 40% | | Total revenue | $36,009 | $36,145 | ($136) | (0)% | | Research and development | $35,553 | $31,359 | $4,194 | 13% | | Selling, general and administrative | $30,805 | $34,645 | ($3,840) | (11)% | | Net loss | ($34,506) | ($36,324) | $1,818 | (5)% | - Net product revenue in 2023 was adversely impacted by approximately $1.2 million in Q3 and $5.4 million year-to-date due to providing XPOVIO at no charge through its Patient Assistance Program (PAP) following the closure of several myeloma foundation support programs.88 - The decrease in nine-month license and other revenue was primarily due to the recognition of $7.8 million of milestone-related revenue from Antengene in 2022 which did not recur in 2023.90 - The increase in Q3 R&D expenses was driven by a $7.1 million rise in clinical trial costs for three pivotal Phase 3 studies, partially offset by lower personnel and stock-based compensation costs due to reduced headcount.95 Liquidity and Capital Resources As of September 30, 2023, Karyopharm had $208.3 million in liquidity, expected to fund operations for at least twelve months, with decreased cash used in operating activities - As of September 30, 2023, the company's principal source of liquidity was $208.3 million of cash, cash equivalents and investments.104 - Management believes that existing cash, cash equivalents and investments will be sufficient to fund current operating plans and capital expenditure requirements for at least twelve months from the report's issuance date.104 Cash Flow Summary (in thousands) | | For the Nine Months Ended Sep 30, 2023 | For the Nine Months Ended Sep 30, 2022 | $ Change | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($74,138) | ($122,711) | $48,573 | | Net cash used in investing activities | ($18,903) | ($38,958) | $20,055 | | Net cash provided by financing activities | $860 | $37,895 | ($37,035) | - The company has a 2023 Open Market Sale Agreement with Jefferies to sell up to $100.0 million of common stock. No shares were sold under this agreement during the nine months ended September 30, 2023.111112 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are U.S. interest rates and foreign currency exchange rates, with interest rate risk considered low due to short-term investments - The primary market risk is interest rate sensitivity on its $208.3 million portfolio of cash, cash equivalents, and investments. An immediate 100 basis point shift in interest rates is not expected to have a material effect.121 - The company is exposed to foreign currency exchange rate risk through contracts with CROs and CMOs in Canada and Europe. It does not currently hedge this risk.123 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting - Based on an evaluation as of September 30, 2023, the President and CEO and the Executive VP and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level.124 - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls.125 PART II - OTHER INFORMATION Item 1A. Risk Factors This section details material risks and uncertainties that could adversely affect the company's business, financial condition, and results of operations Risks Related to Commercialization and Product Development The company's success depends on XPOVIO's commercial success, facing intense competition, and risks from long, expensive, and uncertain clinical development processes - The business is substantially dependent on the commercial success of XPOVIO. Failure to successfully commercialize it will materially harm the business.130 - The company faces substantial competition from major pharmaceutical and biotech companies, with several new novel therapeutics recently entering the multiple myeloma market, such as TECVAYLI™, ELREXFIO™, and TALVEY™.134 - Serious adverse side effects related to XPOVIO, such as fatigue, nausea, and cytopenias, could delay or prevent regulatory approval, limit commercial value, or lead to significant negative financial consequences.144145 Risks Related to Regulatory Matters The company faces risks from expensive, uncertain regulatory approvals, post-marketing requirements, healthcare reform, and stringent data privacy laws - The regulatory approval process is expensive, time-consuming, and uncertain, and the company may not receive approvals for commercialization in a timely manner, or at all.172 - XPOVIO's approval for DLBCL is under the FDA's Accelerated Approval Program, which requires a post-marketing confirmatory trial. Failure to verify clinical benefit in this trial could lead the FDA to withdraw its approval for this indication.188 - The Inflation Reduction Act (IRA) of 2022 has significant implications, including authorizing Medicare to negotiate drug prices (starting 2026) and imposing rebates for price increases that outpace inflation, which could adversely affect revenue.223224 - The company is subject to stringent data privacy laws like GDPR in Europe and CCPA/CPRA in California, which regulate the processing of personal data. Non-compliance can lead to significant fines and reputational harm.242246248 Risks Related to Our Financial Position and Capital Requirements The company has a history of significant losses, requires additional funding, and its indebtedness contains covenants that could restrict operations - The company has incurred significant losses since inception, with an accumulated deficit of $1.4 billion as of September 30, 2023, and expects to continue incurring losses.270 - Additional funding will be needed to achieve business objectives. If unable to raise capital when needed, the company may be forced to delay, reduce, or eliminate R&D programs or commercialization efforts.275 - The Revenue Interest Agreement with HCR contains covenants that, if violated, could lead to accelerated payments or foreclosure on all present and future assets related to selinexor.278 Risks Related to Our Dependence on Third Parties The company heavily relies on third parties for international collaborations, U.S. product distribution, clinical trials, and manufacturing, posing significant operational risks - The company depends on collaborations with third parties (e.g., Antengene, Menarini) for development, marketing, and commercialization of its products outside the U.S. Unsuccessful collaborations could force the company to alter its plans.289290 - The company relies on a limited number of specialty pharmacies and distributors for U.S. sales of XPOVIO. Any failure by these parties to perform could adversely affect results.295 - The company is completely dependent on third-party contract manufacturers, including a single source supplier for its active pharmaceutical ingredient. Any disruption could delay clinical development, marketing approval, or commercialization.305308 Risks Related to Our Intellectual Property Success depends on obtaining and maintaining patent protection, facing litigation risks, and potential competition from generic versions of approved products - The company's success depends on its ability to obtain and maintain patent protection. The patent position of biotech companies is highly uncertain, and pending applications may not result in issued patents that provide meaningful protection.310312 - The company may become involved in expensive and time-consuming lawsuits to protect its patents or defend against infringement claims by third parties, the outcomes of which are uncertain.318319 - Upon regulatory approval of its products, competitors could enter the market with generic versions by filing ANDAs or 505(b)(2) applications, which may lead to a material decline in sales of the company's products.324 Risks Related to Our Operations and Employee Matters Future success relies on retaining key personnel and is vulnerable to increasing cyber incidents that could disrupt operations and lead to data loss - The company is highly dependent on its key management and scientific teams and faces significant competition in recruiting and retaining qualified personnel.335336 - Internal computer systems are vulnerable to cyber incidents such as malware, ransomware, and phishing. A security breach could result in a material disruption of development programs, loss of trade secrets, and significant liability.337339 Risks Related to Our Common Stock The common stock price may be volatile, facing delisting risks from Nasdaq non-compliance, and corporate provisions could deter potential acquisitions - Failure to comply with Nasdaq's continued listing requirements, such as the minimum $1.00 bid price, could lead to delisting, which would negatively impact the stock's price and liquidity. The stock price has recently closed below $1.00 per share.341 - The stock price has been and may continue to be volatile, influenced by factors such as clinical trial results, competitor announcements, regulatory developments, and general market conditions.345 - Provisions in the corporate charter and Delaware law, such as a classified board and inability of stockholders to act by written consent, could discourage or delay a potential acquisition.342344 Item 5. Other Information This section discloses information regarding director and officer trading arrangements under Rule 10b5-1, with no adoptions or terminations in Q3 2023 - During the third quarter of 2023, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement.365 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including a common stock purchase warrant, an amendment to the Revenue Interest Financing Agreement, and certifications - Lists exhibits filed with the report, including a Common Stock Purchase Warrant, the Second Amendment to the Revenue Interest Financing Agreement, and CEO/CFO certifications pursuant to the Sarbanes-Oxley Act.367 Signatures The report is duly signed and authorized by the company's Principal Executive Officer and Principal Financial and Accounting Officer on November 2, 2023 - The report was signed on November 2, 2023, by Richard Paulson, President and Chief Executive Officer, and Michael Mason, Executive Vice President, Chief Financial Officer and Treasurer.372