Karyopharm Therapeutics(KPTI) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements, management's discussion, and internal controls Condensed Consolidated Financial Statements (Unaudited) Karyopharm Therapeutics Inc.'s unaudited Q1 2022 financials show $294.0 million in assets, $47.7 million in revenue, and a $41.4 million net loss Condensed Consolidated Balance Sheets The balance sheet shows total assets of $294.0 million, a slight decrease from year-end 2021, and a widened stockholders' deficit of $83.1 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $153,256 | $190,459 | | Total current assets | $276,533 | $275,606 | | Total assets | $294,033 | $305,305 | | Liabilities & Equity | | | | Total current liabilities | $66,337 | $73,718 | | Convertible senior notes | $169,491 | $169,293 | | Deferred royalty obligation | $132,998 | $132,998 | | Total liabilities | $377,112 | $384,978 | | Total stockholders' deficit | ($83,079) | ($79,673) | Condensed Consolidated Statements of Operations Total revenues more than doubled to $47.7 million in Q1 2022, leading to a reduced net loss of $41.4 million compared to the prior year Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Product revenue, net | $28,300 | $21,731 | | License and other revenue | $19,370 | $1,529 | | Total revenues | $47,670 | $23,260 | | Total operating expenses | $82,256 | $75,633 | | Loss from operations | ($34,586) | ($52,373) | | Net loss | ($41,399) | ($57,414) | | Net loss per share | ($0.53) | ($0.77) | Condensed Consolidated Statements of Comprehensive Loss The company reported a comprehensive loss of $41.5 million for Q1 2022, primarily driven by the net loss and minor other comprehensive losses Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net loss | ($41,399) | ($57,414) | | Other comprehensive loss | ($104) | ($217) | | Comprehensive loss | ($41,503) | ($57,631) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $59.2 million, while financing activities provided $30.8 million, resulting in a $42.5 million net decrease in cash Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($59,197) | ($52,888) | | Net cash (used in) provided by investing activities | ($14,035) | $43,186 | | Net cash provided by financing activities | $30,783 | $10,676 | | Net (decrease) increase in cash | ($42,539) | $883 | Condensed Consolidated Statements of Stockholders' (Deficit) Equity The stockholders' deficit widened to $83.1 million due to the net loss, partially offset by $29.3 million from common stock issuance - The company's accumulated deficit grew to $1.22 billion as of March 31, 2022, from $1.18 billion at the end of 2021[17] - Net proceeds from the issuance of common stock were $29.3 million during the three months ended March 31, 2022, significantly higher than the $9.9 million in the same period of 2021[17] Notes to Condensed Consolidated Financial Statements Notes detail XPOVIO's commercial performance, including $28.3 million in net product revenue, and outline significant long-term obligations like convertible notes and royalty payments - The company's lead asset, XPOVIO® (selinexor), is approved in the U.S. for multiple myeloma and diffuse large B-cell lymphoma (DLBCL) and has received approvals in various other countries[21] Product Revenue, Net (in thousands) | | For the Three Months Ended March 31, | | :--- | :--- | | | 2022 | 2021 | | Gross product revenue | $34,910 | $27,544 | | Provisions for product revenue | ($6,610) | ($5,813) | | Total product revenue, net | $28,300 | $21,731 | - In Q1 2022, the company recognized $8.6 million in milestone-related revenue, primarily from Antengene ($7.8 million net), and $7.1 million from Menarini for reimbursement of development expenses[28] - As of March 31, 2022, the company had $169.5 million in net carrying amount of 3.00% Convertible Senior Notes due 2025 and a deferred royalty obligation to HCR with a total liability of $133.0 million[52][9][54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial performance, highlighting a 105% revenue increase, reduced net loss, and sufficient liquidity to fund operations for the next twelve months Results of Operations Q1 2022 total revenues surged 105% to $47.7 million, driven by product and license revenue growth, leading to a narrowed operating loss Q1 2022 vs Q1 2021 Results of Operations (in thousands) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $47,670 | $23,260 | $24,410 | 105% | | Product revenue, net | $28,300 | $21,731 | $6,569 | 30% | | License and other revenue | $19,370 | $1,529 | $17,841 | 1167% | | Total operating expenses | $82,256 | $75,633 | $6,623 | 9% | | Research and development | $42,062 | $37,050 | $5,012 | 14% | | Selling, general and administrative | $38,768 | $37,650 | $1,118 | 3% | | Net loss | ($41,399) | ($57,414) | $16,015 | (28)% | - The 30% increase in net product revenue was attributed to a growing number of patients being treated in earlier lines of therapy and increasing physician utilization of XPOVIO[80] - The significant increase in license and other revenue was due to recognizing $7.8 million in development/regulatory milestones from Antengene and $7.1 million for reimbursement of development expenses from Menarini[81] - R&D expenses increased by 14% YoY, primarily due to a $3.1 million increase in personnel costs (including $1.6 million in severance) and a $1.5 million increase in clinical trial costs[86] Liquidity and Capital Resources The company holds $205.3 million in liquidity, with $59.2 million cash used in operations, and expects sufficient funds for the next twelve months - The company believes its cash, cash equivalents, and investments of $205.3 million as of March 31, 2022, will be sufficient to fund operations for at least twelve months[91][103] - In Q1 2022, the company raised approximately $29.3 million in net proceeds from selling 2,941,517 shares under its Open Market Sale Agreement with Jefferies[94][96] - Net cash used in operating activities increased to $59.2 million in Q1 2022 from $52.9 million in Q1 2021, driven by changes in operating assets and liabilities despite a lower net loss[92] - Future funding requirements include approximately $13.1 million in future lease costs, $169.5 million in long-term debt obligations for Notes, and approximately $217.6 million in future royalty obligations to HCR[104] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on its short-term investments and unhedged foreign currency exposure from international contracts - The primary market risk is interest rate sensitivity on the company's $205.3 million portfolio of cash, cash equivalents, and investments, but due to the short-term nature, a 100 basis point shift is not expected to be material[105] - The company is exposed to foreign currency exchange rate risk through contracts with CROs and CMOs in Canada and Europe, and does not currently hedge this risk[107] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2022, the President and CEO and the CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[108] - No material changes to the company's internal control over financial reporting were identified during the fiscal quarter ended March 31, 2022[109] PART II - OTHER INFORMATION This section covers legal proceedings, significant risk factors, and exhibits filed with the Form 10-Q Legal Proceedings The company is involved in a pending securities class action appeal and a stayed shareholder derivative suit related to prior disclosures - A securities class action lawsuit alleging violations of federal securities laws was dismissed by the court on July 21, 2021[112] - The plaintiff in the class action filed a Notice of Appeal on August 20, 2021. The company believes the appeal is without merit and intends to defend vigorously against it[112] - A shareholder derivative suit filed in December 2020, based on similar allegations, is currently stayed pending the outcome of the securities class action litigation[113] Risk Factors The company faces significant risks including XPOVIO commercial success dependency, clinical development uncertainties, financial losses, and reliance on third-party manufacturing - The business is substantially dependent on the commercial success of XPOVIO. Failure to successfully commercialize it will materially harm the business[116] - Clinical development is lengthy, expensive, and uncertain. The COVID-19 pandemic has disrupted and may continue to disrupt clinical trial activities and commercial operations[124][135] - The company has incurred significant losses since inception ($1.2 billion accumulated deficit as of March 31, 2022) and will need additional funding to achieve its business objectives[239][243] - The company is completely dependent on third parties for manufacturing, including a single source supplier for its active pharmaceutical ingredient, which entails significant supply chain risk[277][280] - The company's debt and royalty agreements with HCR contain covenants that, if violated, could result in accelerated payments or foreclosure on assets related to selinexor[247] Exhibits This section lists Form 10-Q exhibits, including executive transition and severance agreements, and required officer certifications - Filed exhibits include transition agreements for Michael G. Kauffman and Sharon Shacham, and a severance agreement for Jatin Shah[332] - Certifications from the principal executive officer and principal financial officer pursuant to SEC rules and the Sarbanes-Oxley Act of 2002 are included as exhibits[332] Signatures The Form 10-Q report was signed on May 5, 2022, by Karyopharm Therapeutics Inc.'s President and CEO, and EVP, CFO, and Treasurer - The report was signed on May 5, 2022, by Richard Paulson (President and CEO) and Michael Mason (EVP, CFO, and Treasurer)[338]