kpti-10q_20170930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                  

Commission file number: 001-36167

 

Karyopharm Therapeutics Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

26-3931704

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

85 Wells Avenue, 2nd Floor

Newton, MA

02459

(Address of principal executive offices)

(Zip Code)

(617) 658-0600

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes     No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No 

As of October 30, 2017 there were 47,180,775 shares of Common Stock, $0.0001 par value per share, outstanding.

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

PART I—FINANCIAL INFORMATION

 

3

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

Condensed Consolidated Statements of Operations

 

4

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

5

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

23

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

24

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

Item 6.

 

Exhibits

 

56

 

 

Signatures

 

57

 

2


 

PART I—FINANCIAL INFORMATION

Item  1.

Condensed Consolidated Financial Statements (Unaudited).

Karyopharm Therapeutics Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

September 30,

2017

 

 

December 31,

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,450

 

 

$

49,663

 

Short-term investments

 

 

64,956

 

 

 

79,889

 

Restricted cash

 

 

200

 

 

 

 

Prepaid expenses and other current assets

 

 

2,076

 

 

 

2,084

 

Total current assets

 

 

121,682

 

 

 

131,636

 

Property and equipment, net

 

 

2,304

 

 

 

2,836

 

Long-term investments

 

 

39,498

 

 

 

45,434

 

Restricted cash

 

 

289

 

 

 

479

 

Total assets

 

$

163,773

 

 

$

180,385

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,890

 

 

$

4,751

 

Accrued expenses

 

 

17,715

 

 

 

11,362

 

Deferred revenue

 

 

1,050

 

 

 

 

Deferred rent

 

 

298

 

 

 

280

 

Other current liabilities

 

 

202

 

 

 

83

 

Total current liabilities

 

 

21,155

 

 

 

16,476

 

Deferred rent, net of current portion

 

 

1,441

 

 

 

1,666

 

Total liabilities

 

 

22,596

 

 

 

18,142

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none

   issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 100,000,000 shares authorized; 47,154,204

   and 41,887,829 shares issued and outstanding at September 30, 2017

   and December 31, 2016, respectively

 

 

5

 

 

 

4

 

Additional paid-in capital

 

 

597,562

 

 

 

528,617

 

Accumulated other comprehensive loss

 

 

(90

)

 

 

(274

)

Accumulated deficit

 

 

(456,300

)

 

 

(366,104

)

Total stockholders’ equity

 

 

141,177

 

 

 

162,243

 

Total liabilities and stockholders’ equity

 

$

163,773

 

 

$

180,385

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

Karyopharm Therapeutics Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Contract and grant revenue

 

$

 

 

$

48

 

 

$

71

 

 

$

107

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,237

 

 

 

19,893

 

 

 

72,440

 

 

 

66,267

 

General and administrative

 

 

5,818

 

 

 

5,897

 

 

 

18,717

 

 

 

17,407

 

Total operating expenses

 

 

31,055

 

 

 

25,790

 

 

 

91,157

 

 

 

83,674

 

Loss from operations

 

 

(31,055

)

 

 

(25,742

)

 

 

(91,086

)

 

 

(83,567

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

454

 

 

 

311

 

 

 

1,266

 

 

 

926

 

Other income (expense)

 

 

(26

)

 

 

6

 

 

 

(70

)

 

 

(1

)

Total other income (expense), net

 

 

428

 

 

 

317

 

 

 

1,196

 

 

 

925

 

Loss before income taxes

 

 

(30,627

)

 

 

(25,425

)

 

 

(89,890

)

 

 

(82,642

)

Provision for income taxes

 

 

(13

)

 

 

 

 

 

(54

)

 

 

 

Net loss

 

$

(30,640

)

 

$

(25,425

)

 

$

(89,944

)

 

$

(82,642

)

Net loss per share—basic and diluted

 

$

(0.65

)

 

$

(0.69

)

 

$

(2.00

)

 

$

(2.28

)

Weighted-average number of common shares outstanding used

   in net loss per share—basic and diluted

 

 

47,141,146

 

 

 

36,819,329

 

 

 

44,974,945

 

 

 

36,223,324

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

Karyopharm Therapeutics Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net loss

 

$

(30,640

)

 

$

(25,425

)

 

$

(89,944

)

 

$

(82,642

)

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments

 

 

25

 

 

 

(182

)

 

 

50

 

 

 

225

 

Foreign currency translation adjustments

 

 

50

 

 

 

15

 

 

 

134

 

 

 

29

 

Comprehensive loss

 

$

(30,565

)

 

$

(25,592

)

 

$

(89,760

)

 

$

(82,388

)

 

See accompanying notes to condensed consolidated financial statements.

5


 

Karyopharm Therapeutics Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(89,944

)

 

$

(82,642

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

539

 

 

 

537

 

Net amortization of premiums and discounts on investments

 

 

903

 

 

 

839

 

Stock-based compensation expense

 

 

15,906

 

 

 

17,157

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

18

 

 

 

412

 

Accounts payable

 

 

(2,867

)

 

 

(1,659

)

Accrued expenses and other liabilities

 

 

6,423

 

 

 

1,101

 

Deferred revenue

 

 

1,050

 

 

 

 

Deferred rent

 

 

(207

)

 

 

(138

)

Net cash used in operating activities

 

 

(68,179

)

 

 

(64,393

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(7

)

 

 

(45

)

Proceeds from maturities of investments

 

 

94,033

 

 

 

140,719

 

Purchases of investments

 

 

(74,017

)

 

 

(122,681

)

Net cash provided by investing activities

 

 

20,009

 

 

 

17,993

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from the issuance of common stock, net of issuance costs

 

 

52,323

 

 

 

31,463

 

Proceeds from the exercise of stock options and shares issued under

   employee stock purchase plan

 

 

463

 

 

 

452

 

Net cash provided by financing activities

 

 

52,786

 

 

 

31,915

 

Effect of exchange rate on cash

 

 

171

 

 

 

35

 

Net increase (decrease) in cash and cash equivalents

 

 

4,787

 

 

 

(14,450

)

Cash and cash equivalents at beginning of period

 

 

49,663

 

 

 

58,358

 

Cash and cash equivalents at end of period

 

$

54,450

 

 

$

43,908

 

Supplemental disclosure of non-cash financing activity

 

 

 

 

 

 

 

 

Deferred financing costs included in accounts payable

 

$

 

 

$

40

 

Deferred financing costs included in accrued expenses

 

$

 

 

$

258

 

Deferred financing costs included in other current assets

 

$

16

 

 

$

1,883

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

Karyopharm Therapeutics Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands except share and per share data)

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Karyopharm Therapeutics Inc., a Delaware corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2017. For further information, refer to the financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2017.

Basis of Consolidation

The condensed consolidated financial statements at September 30, 2017 include the accounts of (i) the Company, (ii) Karyopharm Securities Corp. (a wholly-owned Massachusetts corporation of the Company incorporated in December 2013), (iii) Karyopharm Europe GmbH (a wholly-owned German Limited Liability Company formed in August 2014) and (iv) Karyopharm Therapeutics (Bermuda) Ltd. (a wholly-owned Bermuda subsidiary of the Company formed in March 2015). All intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists; services have been performed or products have been delivered; the fee is fixed or determinable; and collection is reasonably assured.

The Company evaluates multiple element agreements under the Financial Accounting Standards Board’s, or FASB, Accounting Standards Codification, or ASC, Revenue Recognition (Topic 605). When evaluating multiple element arrangements under Topic 605, the Company identifies the deliverables included within the agreement and determines whether the deliverables under the arrangement represent separate units of accounting. Deliverables under the arrangement are a separate unit of accounting if (i) the delivered item has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivered item and delivery or performance of the undelivered items are considered probable and substantially within the Company’s control. This evaluation requires subjective determinations and requires management to make judgments about the individual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. In determining the units of accounting, management evaluates certain criteria, including whether the deliverables have standalone value, based on the consideration of the relevant facts and circumstances for each arrangement. The Company considers whether the licensor can use the license or other deliverables for their intended purpose without the receipt of the remaining elements, and whether the value of the deliverable is dependent on the undelivered items and whether there are other vendors that can provide the undelivered items.

Arrangement consideration generally includes up-front license fees. The Company determines how to allocate arrangement consideration to identified units of accounting based on the selling price hierarchy provided under the relevant guidance. The Company determines the estimated selling price for deliverables using vendor-specific objective evidence (“VSOE”) of selling price, if available, third-party evidence (“TPE”), if VSOE is not available, or best estimate of selling price (“BESP”), if neither VSOE nor TPE is available. Determining the BESP for a deliverable requires significant judgment.

Up-Front License Fees

Up-front payments received in connection with licenses of the Company’s technology rights are deferred if facts and circumstances dictate that the license does not have stand-alone value. When management believes the license to its intellectual property does not have stand-alone value from the other deliverables to be provided in the arrangement, it is combined with other deliverables and the revenue of the combined unit of accounting is recorded based on the method appropriate for the last delivered item.

7


 

Milestones

At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive, in accordance with Accounting Standards Update, or ASU, No. 2010-17, Revenue Recognition—Milestone Method. A milestone is defined as an event that can only be achieved based on the Company’s performance and there is substantive uncertainty about whether the event will be achieved at the inception of the arrangement. Events that are contingent only on the passage of time or only on counterparty performance are not considered milestones under this accounting guidance. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the Company’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone, (b) the consideration relates solely to past performance, (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement and (d) the milestone fee is refundable or adjusts based on future performance or non-performance. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. Payments that are contingent upon the achievement of a substantive milestone are recognized in their entirety in the period in which the milestone is achieved, assuming all other revenue recognition criteria are met.

Sales-based and commercial milestones are accounted for as royalties and are recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.

2. Recently Issued Accounting Pronouncements

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for annual reporting periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating this standard and does not believe it will have a material impact on the Company’s consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory (Topic 740).  Topic 740 eliminates the ability to defer the tax expense related to intra-entity asset transfers other than inventory.  Under the new standard, entities should recognize the income tax consequences on an intra-entity transfer of an asset other than inventory when the transfer occurs.  Topic 740 is effective for fiscal periods beginning after December 15, 2018.  Early adoption is permitted. The Company is evaluating the potential impact that the adoption of this standard may have on the Company’s financial position or results of operation.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The new standard will be effective for the Company on January 1, 2019. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which defers the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), for all entities by one year. ASU 2014-09 and subsequent amendments have been codified as ASC 606, Revenue from Contracts with Customers. The new standard is now effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. ASC 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the current revenue recognition guidance, including industry-specific guidance. In addition, ASC 606 provides guidance on accounting for certain revenue-related costs including, but not limited to, when to capitalize costs associated with obtaining and fulfilling a contract. ASC 606 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application).

The Company will adopt ASC 606 effective January 1, 2018. The Company has not yet finalized its assessment of the impact of ASC 606, which is applicable to the Company’s arrangement with Anivive Lifesciences, Inc., as described in Note 7, Collaboration and License Agreements, as well as the Company’s arrangement with Ono Pharmaceutical Co., which was executed on October 11, 2017 and described in Note 12, Subsequent Events. However, the Company anticipates that it will adopt the standard using the

8


 

modified retrospective method, as permissible under the transitional provisions of ASC 606 for all contracts not yet completed as of the effective date. The modified retrospective method applies the guidance retrospectively only to the most current period presented in the financial statements, recognizing the cumulative effect of initially applying the standard as an adjustment to the opening balance of accumulated deficit at the date of initial application. As of September 30, 2017, the Company is in process of estimating the expected financial statement impact of applying the new standard to these arrangements. During the fourth quarter of 2017, the Company plans to finalize its analysis to determine the impact the standard may have on its results of operations, financial position, and disclosures.

Recently Adopted Accounting Standards

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718). The new standard identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The new standard also provides for companies to make a policy election on accounting for forfeitures. The Company adopted the new standard on January 1, 2017 and has elected to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment to increase additional paid-in capital and charge accumulated deficit by $254, as of January 1, 2017. In addition, upon adoption of the new standard, the Company has additional deferred tax assets related to tax deductions from excess tax benefits related to the exercise of stock options. As a result, the deferred tax assets associated with net operating losses increased by $1,844 in the first quarter of 2017. The amounts are offset by a corresponding increase in the valuation allowance; therefore, there is no net effect on the Company’s results of operations for the three or nine months ended September 30, 2017.

3. Fair Value of Financial Instruments

Financial instruments, including cash, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses are presented in the condensed consolidated financial statements at amounts that approximate fair value at September 30, 2017 and December 31, 2016.

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1 inputs

Quoted prices in active markets for identical assets or liabilities

Level 2 inputs

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 inputs

Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability

Items classified as Level 2 within the valuation hierarchy consist of commercial paper, corporate debt securities, U.S. government agency securities and certificates of deposit. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

9


 

The following table presents information about the Company’s financial assets that have been measured at fair value at September 30, 2017 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

 

Description

 

Total

 

 

Quoted Prices

in Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

29,038

 

 

$

29,038

 

 

$

 

 

$

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

58,462

 

 

 

 

 

 

58,462

 

 

 

 

Commercial paper

 

 

1,996

 

 

 

 

 

 

1,996

 

 

 

 

U.S. government and agency securities

 

 

4,498

 

 

 

 

 

 

4,498

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two year maturity)

 

 

34,498

 

 

 

 

 

 

34,498

 

 

 

 

Certificates of deposit (one to two year maturity)

 

 

2,500

 

 

 

 

 

 

2,500

 

 

 

 

U.S. government and agency securities

 

 

2,500

 

 

 

 

 

 

2,500

 

 

 

 

 

 

$

133,492

 

 

$

29,038

 

 

$

104,454

 

 

$

 

 

The following table presents information about the Company’s financial assets that have been measured at fair value at December 31, 2016 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

 

Description

 

Total

 

 

Quoted Prices

in Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

37,916

 

 

$

37,916

 

 

$

 

 

$

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

52,722

 

 

 

 

 

 

52,722

 

 

 

 

Commercial paper

 

 

24,668

 

 

 

 

 

 

24,668

 

 

 

 

U.S. government and agency securities

 

 

2,499

 

 

 

 

 

 

2,499

 

 

 

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two year maturity)

 

 

43,435

 

 

 

 

 

 

43,435

 

 

 

 

U.S. government securities

 

 

1,999

 

 

 

 

 

 

1,999

 

 

 

 

 

 

$

163,239

 

 

$

37,916

 

 

$

125,323

 

 

$

 

 

10


 

4. Investments

The following table summarizes the Company’s investments as of September 30, 2017 (in thousands):

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Loss

 

 

Fair Value

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

58,533

 

 

$

2

 

 

$

(73

)

 

$

58,462

 

Commercial paper

 

 

1,996

 

 

 

 

 

 

 

 

 

1,996

 

U.S. government and agency securities

 

 

4,500

 

 

 

 

 

 

(2

)

 

 

4,498

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two year maturity)

 

 

34,530

 

 

 

8

 

 

 

(40

)

 

 

34,498

 

Certificates of deposit (one to two year maturity)

 

 

2,500

 

 

 

 

 

 

 

 

 

2,500

 

U.S. government and agency securities

 

 

2,500

 

 

 

 

 

 

 

 

 

 

 

2,500

 

 

 

$

104,559

 

 

$

10

 

 

$

(115

)

 

$

104,454

 

 

The following table summarizes the Company’s investments as of December 31, 2016 (in thousands):

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Loss

 

 

Fair Value

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

52,762

 

 

$

5

 

 

$

(45

)

 

$

52,722

 

Commercial paper

 

 

24,670

 

 

 

5

 

 

 

(7

)

 

 

24,668

 

U.S. government and agency securities

 

 

2,500

 

 

 

 

 

 

(1

)

 

 

2,499

 

Non-current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two year maturity)

 

 

43,546

 

 

 

29

 

 

 

(140

)

 

 

43,435

 

U.S. government and agency securities

 

 

2,000

 

 

 

 

 

 

(1

)

 

 

1,999

 

 

 

$

125,478

 

 

$

39

 

 

$

(194

)

 

$

125,323

 

 

At September 30, 2017 and December 31, 2016, the Company held 49 and 58 debt securities, respectively, that were in an unrealized loss position for less than one year. The aggregate fair value of debt securities in an unrealized loss position at September 30, 2017 and December 31, 2016 was $81,275 and $95,949, respectively. There were no individual securities that were in a significant unrealized loss position or that had been in an unrealized loss position for greater than one year as of September 30, 2017 or December 31, 2016.

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the condensed consolidated statements of operations if the Company has experienced a credit loss and has the intent to sell the investment or if it is more likely than not that the Company will be required to sell the investment before recovery of the amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period.

11


 

5. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

 

 

 

Estimated Useful

Life Years

 

September 30,

2017

 

 

December 31,

2016

 

Laboratory equipment

 

4

 

$

538

 

 

$

538

 

Furniture and fixtures

 

5

 

 

381

 

 

 

381

 

Office and computer equipment

 

3

 

 

378

 

 

 

371

 

Leasehold improvements

 

Lesser of useful life

or lease term

 

 

3,391

 

 

 

3,391

 

 

 

 

 

 

4,688

 

 

 

4,681

 

Less accumulated depreciation and amortization

 

 

 

 

(2,384

)

 

 

(1,845

)

 

 

 

 

$

2,304

 

 

$

2,836

 

 

6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

September 30,

2017

 

 

December 31,

2016

 

Research and development costs

 

$

13,328

 

 

$

6,855

 

Payroll and employee-related costs

 

 

3,129

 

 

 

3,476

 

Professional fees

 

 

955

 

 

 

480

 

Other

 

 

303

 

 

 

551

 

 

 

$

17,715

 

 

$

11,362

 

 

7. Collaboration and License Agreements

Anivive License Agreement

On April 28, 2017, the Company entered into a license agreement with Anivive Lifesciences, Inc. (“Anivive”), a biopharmaceutical company engaged in the research, development and commercialization of animal health medicines, pursuant to which the Company has granted Anivive an exclusive, worldwide license to develop and commercialize verdinexor (KPT-335) for the treatment of cancer in companion animals (the “Anivive Agreement”). Pursuant to the terms of the Anivive Agreement, the Company received an upfront payment of $1.0 million. In addition, the Company will be eligible to receive potential future technology transfer and clinical, regulatory and commercial development milestone payments totaling up to $43.5 million, as well as a low double digit royalty based on Anivive’s future net sales of verdinexor following commercialization. The potential future milestone payments are comprised of $0.25 million for completion of the technology transfer, $5.75 million based on achievement of clinical and regulatory milestone events and $37.5 million based on achievement of sales milestone events.

In accordance with ASC 605, the Company identified the deliverables at the inception of the Anivive Agreement. The significant deliverables were determined to include the license and the Company’s responsibility to transfer the technology package relating to verdinexor. The Company determined that the license does not have stand-alone value separate and apart from the transfer of the verdinexor technology package to Anivive because (1) there are no other vendors selling similar licenses on a stand-alone basis and (2) Anivive is unable to use the license for its intended purpose without the technology transfer. As such, the Company determined that there is one unit of accounting. The total consideration of $1.25 million, including the $1.0 million upfront payment and a $0.25 million payment for completion of the technology transfer, was allocated to the single unit of accounting and will be recognized as revenue once the technology transfer is completed, which is the final item to be delivered in the unit of accounting. The technology transfer was subsequently completed in October 2017. As of September 30, 2017, $1.0 million was included in deferred revenue and is classified as a current liability in the consolidated balance sheet.  

8. Net Loss Per Share

Basic and diluted net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. The Company’s potentially dilutive shares, which include outstanding stock options and unvested restricted stock and restricted stock units, are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

12


 

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

 

 

 

Three and Nine Months Ended

September 30,

 

 

 

2017

 

 

2016

 

Outstanding stock options

 

 

7,049,007

 

 

 

5,557,752

 

Unvested restricted stock units

 

 

425,850

 

 

 

451,600

 

 

9. Stock-based Compensation

Stock Options

A summary of the Company’s stock option activity and related information follows:

 

 

 

Shares

 

 

Weighted-

Average

Exercise

Price

Per Share

 

 

Weighted-

Average

Remaining

Contractual

Term (years)

 

 

Aggregate

Intrinsic

Value

(in thousands)

 

Outstanding at December 31, 2016

 

 

5,574,179

 

 

$

16.55

 

 

 

7.7

 

 

$

12,178

 

Granted

 

 

2,443,200

 

 

 

10.13

 

 

 

 

 

 

 

 

 

Exercised

 

 

(46,995

)

 

 

5.24

 

 

 

 

 

 

 

 

 

Canceled

 

 

(921,377

)

 

 

20.88

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2017

 

 

7,049,007

 

 

$

13.83

 

 

 

7.7

 

 

$

17,456

 

Exercisable at September 30, 2017

 

 

3,580,821

 

 

$

15.41

 

 

 

6.4

 

 

$

12,884

 

 

Total stock-based compensation expense related to stock options for the nine months ended September 30, 2017 and 2016 was $13,140 and $13,758, respectively.

As of September 30, 2017, there was $25,164 of total unrecognized stock-based compensation expense related to stock options. The expense is expected to be recognized over a weighted-average period of 2.8 years.

Restricted Stock Units

A restricted stock unit (“RSU”) represents the right to receive one share of the Company’s common stock upon vesting of the RSU. The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant. In November 2015, the Company granted RSUs with service conditions that vest in two equal annual installments provided that the employee remains employed with the Company (“Time-Based RSUs”). During the nine months ended September 30, 2017, the Company granted performance-based RSUs, which vest upon the achievement of certain performance goals subject to the employee’s continued employment (“Performance-Based RSUs”). In the event the performance goals are not achieved, none of the Performance-Based RSUs will vest. The grant date fair value of the outstanding Performance-Based RSUs is $2.4 million and will be recognized on an accelerated attribution basis when the Performance-Based RSUs are deemed probable of achievement to the date the awards vest. No stock-based compensation expense related to the Performance-Based RSUs was recognized during the nine months ended September 30, 2017, as the likelihood of the Performance-Based RSUs being earned was not deemed probable of achievement as of September 30, 2017. The following is a summary of RSU activity under the 2013 Stock Incentive Plan for the nine months ended September 30, 2017:

 

 

 

Number of

Shares

Underlying

RSUs

 

 

Weighted-

Average

Grant Date

Fair Value

 

Unvested at December 31, 2016

 

 

214,300

 

 

$

17.91

 

Granted

 

 

298,800

 

 

 

10.26

 

Forfeited

 

 

(81,950

)

 

 

12.93

 

Vested

 

 

(5,300

)

 

 

17.91

 

Unvested at September 30, 2017

 

 

425,850

 

 

$

13.19

 

 

13


 

The total stock-based compensation expense related to RSUs for the nine months ended September 30, 2017 and 2016 was $2,243 and $3,246, respectively. As of September 30, 2017, $357 of unrecognized compensation costs related to unvested Time-Based RSUs are expected to be recognized over a weighted-average period of 0.2 years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (“ESPP”) that permits eligible employees to enroll in six-month offering periods. Participants may purchase shares of the Company’s common stock, through payroll deductions, at a price equal to 85% of the fair market value of the common stock on the first or last day of the applicable six-month offering period, whichever is lower. Purchase dates under the ESPP occur on or about May 1 and November 1 of each year. In 2013, the Company’s stockholders approved the reservation of 242,424 shares of the Company’s common stock for issuance under the ESPP, plus an annual increase to be added on the first day of each fiscal year, commencing on January 1, 2015 and ending on December 31, 2023, equal to the lesser of 484,848 shares of the Company’s common stock, 1% of the number of outstanding shares on such date, or an amount determined by the board of directors.

For the nine months ended September 30, 2017 and 2016, the Company recorded stock-based compensation expense related to the ESPP of $152 and $153, respectively. As of September 30, 2017, 454,977 shares of the Company’s common stock remained available for issuance under the ESPP. As of September 30, 2017, there was $17 of total unrecognized stock-based compensation expense related to the ESPP. The expense is expected to be recognized over a period of one month.

 

10. Commitments and Contingencies

In March 2014, the Company entered into an operating lease for approximately 29,933 square feet of office and research space in Newton, Massachusetts. The Company uses the leased premises as its corporate headquarters and for research and development purposes. The lease was amended on December 31, 2014 by extending the lease term of the lease from November 30, 2021 to September 30, 2022. The amendment provides for the expansion of the premises leased by the Company by approximately 16,234 square feet, and provides the Company with the rights of first offer to lease approximately 27,701 square feet of additional space. The Company may extend the lease term for one additional five-year period. The Company is recording rent expense on a straight-line basis through the end of the lease term, inclusive of the period in which there are no scheduled rent payments. The Company has recorded deferred rent on the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016, accordingly. The lease provides the Company with an allowance for improvements of $1,616, all of which was incurred in the first quarter of 2015. All improvements were deemed normal tenant improvements, were recorded as leasehold improvements and deferred rent and will be recorded as a reduction to rent expense ratably over the lease term. The Company has provided a security deposit in the form of a cash-collateralized letter of credit in the amount of $400, which amount may be reduced to $200 in January 2018. The amount is classified as restricted cash on the condensed consolidated balance sheet. As of September 30, 2017, $200 has been reclassified to current assets.

In November 2014, the Company signed a five-year operating lease agreement in Munich, Germany for approximately 3,681 square feet of office space. The lease is for the period February 2015 through January 2020. Pursuant to the lease agreement, the Company is obligated to make aggregate rent payments of €374 (approximately $427), through January 31, 2020. The Company is recording rent expense on a straight-line basis through the end of the lease term, inclusive of the period in which there are no scheduled rent payments.

The Company recorded rent expense totaling $296 and $280 for the three months ended September 30, 2017 and 2016, respectively, and $894 and $859 for the nine months ended September 30, 2017 and 2016, respectively.

11. Equity

Underwritten Offering

On April 28, 2017, the Company completed a follow-on offering under its shelf registration statement on Form S-3 (File No. 333-214489) pursuant to which the Company issued an aggregate of 3,902,439 shares of common stock at a public offering price of $10.25 per share. The Company received net proceeds of approximately $37.9 million from the offering after deducting the underwriting discount and commissions and offering expenses.

14


 

Controlled Equity Offering Sales Agreement

On December 7, 2015, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co., as sales agent (“Cantor”), pursuant to which the Company may issue and sell, from time to time, through Cantor, shares of the Company’s common stock (the “Shares”), up to an aggregate offering price of $50.0 million. On November 7, 2016, the Company entered into an amendment to the Controlled Equity Offering Sales Agreement (as amended, the “Sales Agreement”) that provides that the Company may issue and sell additional Shares having an additional aggregate offering price of up to $50.0 million on or after November 7, 2016.

Under the Sales Agreement, Cantor may sell the Shares by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on The NASDAQ Global Select Market, on any other existing trading market for the Shares or to or through a market maker. In addition, under the Sales Agreement, Cantor may sell the Shares by any other method permitted by law, including in privately negotiated transactions.

The Company is not obligated to make any sales of the Shares under the Sales Agreement. The Company or Cantor may suspend or terminate the offering of Shares upon notice to the other party and subject to other conditions. The Company will pay Cantor a commission of up to 3.0% of the gross proceeds from the sale of the Shares pursuant to the Sales Agreement and has agreed to provide Cantor with customary indemnification and contribution rights.

As of October 31, 2017, the Company had sold an aggregate of 7,064,513 Shares under the Sales Agreement, for net proceeds of approximately $66.7 million. The Company sold no Shares under the Sales Agreement during the three months ended September 30, 2017 and 22,100 Shares in October 2017.

12. Subsequent Event

 

Ono License Agreement

 

Effective October 11, 2017 (the “Effective Date”), the Company entered into a license agreement (the “Agreement”) with Ono Pharmaceutical Co., Ltd., a corporation organized and existing under the laws of Japan (“Ono”), pursuant to which the Company granted Ono exclusive rights to develop and commercialize, at its own cost, selinexor (KPT-330), the Company’s lead, novel, oral Selective Inhibitor of Nuclear Export (SINE™) compound, as well as KPT-8602, the Company’s second-generation oral SINE™ compound, for the diagnosis, treatment and/or prevention of all human oncology indications (the “Field”) in Japan, Republic of Korea, Republic of China (Taiwan) and Hong Kong as well as in the ten Southeast Asian countries currently comprising the Association of Southeast Asian Nations (the “Ono Territory”).  Pursuant to the terms of the Agreement, the Company will receive an upfront payment of ¥2.5 billion (US$22.3 million at the exchange rate as of the Effective Date), up to ¥10.15 billion (US$90.5 million at the exchange rate as of the Effective Date) in milestone payments if certain development goals are achieved and up to ¥9.0 billion (US$80.2 million at the exchange rate as of the Effective Date) in milestone payments if certain sales milestones are achieved, as well as a low double-digit royalty based on future net sales of selinexor and KPT-8602 in the Ono Territory.  In addition, upon Ono’s election and the parties’ full execution of a manufacturing technology transfer plan and satisfaction of other specified conditions (the “Manufacturing Election”), the Company will grant to Ono non-exclusive rights to manufacture selinexor, KPT-8602 and products containing such compounds in or outside of the Ono Territory solely for development and commercialization in the Field in the Ono Territory.   

 

The Company expects to continue all ongoing clinical trials involving selinexor and KPT-8602 as they are currently being conducted. As part of the Agreement, Ono will also have the right to participate in global clinical studies of selinexor and KPT-8602, and will bear the cost and expense for patients enrolled in clinical studies in the Ono Territory. Ono is responsible for seeking regulatory and marketing approvals for selinexor and KPT-8602 in the Ono Territory, as well as any development of the products specifically necessary to obtain such approvals. Ono is also responsible for the commercialization of products containing selinexor or KPT-8602 in the Field in the Ono Territory at its own cost and expense.

 

Subject to Ono’s Manufacturing Election, the Company will furnish clinical supplies of drug substance to Ono for use in Ono’s development efforts pursuant to a clinical supply agreement to be entered into by the Company and Ono, and Ono may elect to have the Company provide commercial supplies of drug product to Ono pursuant to a commercial supply agreement to be entered into by the Company and Ono, in each case the costs of which will be borne by Ono.  

 

15


 

The Agreement will continue in effect on a product-by-product, country-by-country basis until the later of the tenth anniversary of the first commercial sale of the applicable product in such country or the expiration of specified patent protection and regulatory exclusivity periods for the applicable product in such country.  However, the Agreement may be terminated earlier by (i) either party for breach of the Agreement by the other party or in the event of the insolvency or bankruptcy of the other party, (ii) Ono on a product-by-product basis for certain safety reasons or on a product-by-product, country-by-country basis for any reason with 180 days’ prior notice or (iii) the Company in the event Ono challenges or assists with a challenge to certain of the Company’s patent rights.

 

The Company is a party to a research agreement with the Multiple Myeloma Research Foundation, or MMRF.  Under this research agreement, the Company is obligated to make certain payments to MMRF, including if the Company out-licenses selinexor.  The terms of this research agreement do not apply to KPT-8602. In connection with the transactions contemplated under the Agreement, the Company expects that it will be obligated to pay to MMRF approximately ¥225 million (approximately US$2.0 million at the exchange rate as of the Effective Date) of the upfront cash payment from Ono, as well as a percentage of any milestone payments from Ono and a mid-single-digit percentage of any royalty payments from Ono. The maximum aggregate amount the Company may be obligated to pay to MMRF under the research agreement is $6.0 million.

 

 

16


 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this quarterly report.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding possible achievement of discovery and development milestones, our future discovery and development efforts, our collaborations and partnering agreements with third parties, our strategy, our future operations, financial position and revenues, projected costs, prospects, plans and objectives of management, are forward looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements are not guarantees of future performance and our actual results could differ materially from the plans, intentions, expectations or results discussed in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, adverse results in our drug discovery and clinical development activities, decisions made by the U.S. Food and Drug Administration and other regulatory authorities with respect to the development and commercialization of our drug candidates, our ability to raise additional capital to support our clinical development program and other operations, our ability to develop products of commercial value and to identify, discover and obtain rights to additional potential product candidates, our ability to obtain, maintain and enforce our intellectual property, the outcome of research and development activities and the fact that the preclinical and clinical testing of our compounds may not be predictive of the success of later clinical trials, our reliance on third-parties, competitive developments, the effect of current and future legislation and regulation and regulatory actions, as well as other risks described in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2016, or 2016 Form 10-K, as filed with the Securities and Exchange Commission, or SEC, on March 16, 2017, and other filings with the SEC.

As a result of these and other factors, we may not actually achieve the plans, intentions, expectations or results disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

OVERVIEW

We are a clinical-stage pharmaceutical company focused on the discovery, development and subsequent commercialization of novel, first-in-class drugs directed against nuclear transport and related targets for the treatment of cancer and other major diseases. Our scientific expertise is focused on understanding the regulation of intracellular communication between the nucleus and the cytoplasm. We have discovered and are developing wholly-owned, novel, small molecule Selective Inhibitor of Nuclear Export, or SINE™, compounds that inhibit the nuclear export protein XPO1. These SINE compounds represent a new class of drug candidates with a novel mechanism of action that have the potential to treat a variety of diseases in areas of unmet medical need. Our SINE compounds were the first oral XPO1 inhibitors in clinical development.

17


 

Our initial focus is on seeking the regulatory approval and commercialization of our lead drug candidate, selinexor (KPT-330), as an oral agent in cancer indications with significant unmet clinical need, initially for hematologic malignancies. We then plan to seek additional approvals for the use of selinexor in combination therapies to expand the patient populations that are eligible for selinexor, as well as to move selinexor towards front-line cancer therapy. We are also advancing the clinical development of selinexor in multiple solid tumor indications. To date, over 2,100 patients have been treated with oral selinexor in company- and investigator-sponsored clinical trials in advanced hematologic malignancies and solid tumors. Selinexor is currently being evaluated in several mid- and later-stage clinical trials, including, among others, the pivotal, randomized Phase 3 BOSTON (Bortezomib, Selinexor and Dexamethasone) study in multiple myeloma, the Phase 2b STORM (Selinexor Treatment of Refractory Myeloma) study in multiple myeloma, the Phase 1b/2 STOMP (Selinexor and Backbone Treatments of Multiple Myeloma Patients) study in combination with backbone therapies in multiple myeloma, the Phase 2b SADAL (Selinexor Against Diffuse Aggressive Lymphoma) study in diffuse large B-cell lymphoma (DLBCL), and the Phase 2/3 SEAL (Selinexor in Advanced Liposarcoma) study in liposarcoma. We expect to provide topline data from the expanded cohort for the STORM study by April 2018, topline data from the SADAL study in the second half of 2018, topline data from the BOSTON study in 2019 and topline data from the Phase 3 portion of the SEAL study by the end of 2019. We are also preparing to establish the commercial infrastructure to support a potential launch of selinexor in North America and Western Europe. We have devoted substantially all of our efforts to research and development. It may be several years, if ever, before we have a drug candidate ready for commercialization for the treatment of human disease. To date, we have financed our operations principally through private placements of our preferred stock and proceeds from public offerings of our common stock.

As of September 30, 2017, we had an accumulated deficit of $456.3 million. We had net losses of $30.6 million and $25.4 million for the three months ended September 30, 2017 and 2016, respectively, and net losses of $89.9 million and $82.6 million for the nine months ended September 30, 2017 and 2016, respectively. We have not generated any revenue to date from the sales of any drugs.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

 

continue our research and preclinical and clinical development of our drug candidates;

 

initiate additional clinical trials for our drug candidates;

 

seek marketing approvals for any of our drug candidates that successfully complete clinical trials;

 

establish a sales, marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval;

 

maintain, expand and protect our intellectual property portfolio;

 

manufacture our drug candidates;

 

hire additional clinical, quality control and scientific personnel;

 

identify additional drug candidates;

 

acquire or in-license other drugs and technologies; and

 

add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our other operations as a public company.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.

There were no changes to the critical accounting policies we identified in the 2016 Form 10-K, other than the adoption of ASU No. 2016-09, as described further in Note 2 to the Condensed Consolidated Financial Statements. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in the 2016 Form 10-K.

18


 

RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2017 and September 30, 2016

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

$ Change

 

 

% Change

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Contract and grant revenue

 

$

 

 

$

48

 

 

$

(48

)

 

 

(100

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,237

 

 

 

19,893

 

 

 

5,344

 

 

 

27

%

General and administrative

 

 

5,818

 

 

 

5,897

 

 

 

(79

)

 

 

(1

)%

Loss from operations

 

 

(31,055

)

 

 

(25,742

)

 

 

(5,313

)

 

 

21

%

Other income, net

 

428

 

 

 

317

 

 

 

111

 

 

 

35

%

Loss before income taxes

 

 

(30,627

)

 

 

(25,425

)

 

 

(5,202

)

 

 

21

%

Provision for income taxes

 

 

(13

)

 

 

 

 

 

(13

)

 

 

 

Net loss

 

$

(30,640

)