What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-08 · 85 added, 61 removed, 144 unchanged (50% of the section changed)

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• In combination with bortezomib and dexamethasone for the treatment of adult patients with multiple myeloma who have received at least one prior therapy.

Approval in this indication was based on the results from the BOSTON ( Bo rtezomib, S elinexor and Dexame t has on e) trial;

Approval in this indication was based on the results from the BOSTON ( B o rtezomib, S elinexor and Dexame t has on e) trial;

• In combination with dexamethasone for the treatment of adult patients with relapsed or refractory multiple myeloma who have received at least four prior therapies and whose disease is refractory to at least two proteasome inhibitors, at least two immunomodulatory agents, and an anti-CD38 monoclonal antibody.

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In January 2024, we announced that further clinical development of our eltanexor program is on hold in an effort to focus our resources on our prioritized late-stage programs.

As of March 31, 2024, we had an accumulated deficit of $1.5 billion.

We had net losses of $37.4 million and $34.1 million for the three months ended March 31, 2024 and 2023, respectively.

In May 2024, we entered into a series of transactions to limit our aggregate indebtedness, extend the maturity of certain of our indebtedness and provide us with additional working capital.

As of June 30, 2024, we had an accumulated deficit of $1.5 billion.

We had net losses of $13.6 million and $66.8 million for the six months ended June 30, 2024 and 2023, respectively.

In May 2024, we entered into a series of transactions (the “Refinancing Transactions”) to limit our aggregate indebtedness, extend the maturity of certain of our indebtedness and provide us with additional working capital.

Pursuant to these transactions, we borrowed $100.0 million from existing lenders and certain entities managed by HealthCare Royalty Management, LLC (“HCRx”) under a new, senior secured term loan facility and used a portion of the proceeds of that loan to repay obligations under our existing financing arrangement with HCRx pursuant to an amendment that made other changes to our existing financing arrangement with HCRx.

We also entered into privately negotiated agreements to exchange $148.0 million aggregate principal amount of our existing unsecured convertible senior notes for (i) $111.0 million aggregate principal amount of our new secured convertible senior notes and (ii) warrants to purchase up to 46.0 million shares of our common stock.

In addition, HCRx agreed to purchase $5.0 million aggregate principal amount of our new secured convertible senior notes through satisfaction of $5.0 million of our existing obligations to HCRx.

We also exchanged, pursuant to privately negotiated agreements, an aggregate principal amount of $148.0 million of our existing 3.00% unsecured convertible senior notes for (i) $111.0 million aggregate principal amount of our new 6.00% secured convertible senior notes and (ii) warrants to purchase up to 45.8 million shares of our common stock.

In addition, HCRx purchased $5.0 million aggregate principal amount of our new 6.00% secured convertible senior notes through satisfaction of $5.0 million of our existing obligations to HCRx.

Please refer to Note 10 “ Long-Term Obligations ”, to the condensed consolidated financial statements contained within Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details of these refinancing transactions.

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There have been no changes to the critical accounting estimates we identified in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report except for our estimated value of the gain on extinguishment of debt, the embedded derivatives, and the liability classified common stock warrants related to the Refinancing Transactions, which were valued using methodologies that incorporate certain unobservable inputs including (i) the volatility of our common stock price and (ii) our estimated credit spread.

RESULTS OF OPERATIONS

The following table summarizes our results of operations (in thousands, except for percentages):

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Product revenue, net

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Loss from operations

Other expense, net

Loss before income taxes

Other income (expense), net

Income (loss) before income taxes

Income tax provision

Net income (loss)

Product Revenue, net (in thousands, except for percentages)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Product revenue, net

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sales of XPOVIO.

Net product revenue for the three months ended March 31, 2024 decreased as compared to the three months ended March 31, 2023, primarily due to decreased demand as a result of increasing competition and higher gross-to-net driven by increased Medicare/Medicaid rebates and 340B discounts.

We expect product revenue to increase slightly in the second quarter of 2024 as compared to the first quarter of 2024 driven largely by gross-to-net favorability.

Net product revenue for the three and six months ended June 30, 2024 decreased as compared to the three and six months ended June 30, 2023, primarily due to decreased demand as a result of increasing competition and higher gross-to-net driven by increased Medicare/Medicaid rebates and 340B discounts.

We expect product revenue to slightly increase in the second half of 2024 as compared to the first half of 2024.

License and Other Revenue (in thousands, except for percentages)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Menarini Group ("Menarini")

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Total license and other revenue

License and other revenue for the three months ended March 31, 2024 decreased by $3.3 million as compared to the three months ended March 31, 2023 primarily due to $3.5 million of non-recurring license-related revenue recognized from Menarini during the three months ended March 31, 2023, partially offset by a $1.0 million increase in revenue for the reimbursement of development-related expenses from Menarini due to a corresponding increase in the underlying expenses during the three months ended March 31, 2024.

We expect license and other revenue to increase in the second quarter of 2024 as compared to the first quarter of 2024 due to milestone achievements and increased royalties expected from our partners.

License and other revenue for the three months ended June 30, 2024 increased by $5.6 million as compared to the three months ended June 30, 2023 primarily due to $4.0 million of license-related revenue recognized from Menarini during the three months ended June 30, 2024 and a $2.3 million increase in revenue for the reimbursement of development-related expenses from Menarini due to an increase in the corresponding expenses.

License and other revenue for the six months ended June 30, 2024 increased by $2.3 million as compared to the six months ended June 30, 2023 primarily due to a $3.3 million increase in revenue for the reimbursement of development-related expenses from Menarini due to an increase in the corresponding expenses.

We expect license and other revenue to decrease slightly in the second half of 2024 as compared to the first half of 2024 due to a decrease in the reimbursement of development-related expenses from Menarini partially offset by an increase in expected milestone revenue.

Operating Expenses (in thousands, except for percentages)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Cost of sales

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Cost of Sales

Cost of sales were consistent for the three months ended March 31, 2024 and 2023.

We expect cost of sales to continue to remain relatively consistent in the second quarter of 2024 as compared to the first quarter of 2024.

Cost of sales were consistent for the three and six months ended June 30, 2024 and 2023.

We expect cost of sales to remain relatively consistent in the second half of 2024 as compared to the first half of 2024.

Research and Development Expenses (in thousands, except for percentages)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Clinical trial and related costs:

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We track our external clinical trial and related costs on a program-by-program basis.

Our major programs include our three core clinical development programs in myelofibrosis, multiple myeloma and endometrial cancer.

Our major programs include our three core clinical development programs in myelofibrosis, endometrial cancer and multiple myeloma.

To the extent that external clinical trial and related costs are not attributable to a major program, they are included in “ Other programs ” and to the extent external clinical trial and related costs cannot be allocated to a specific program, they are included in “ Non-program specific clinical trial and related costs .” We also have unallocated research and development costs, which we do not track on a program-by-program basis.

These costs represent costs that are incurred across multiple programs or to support our general research and development operations.

Research and development expenses for the three months ended March 31, 2024 increased by $3.1 million as compared to the three months ended March 31, 2023.

Research and development expenses for the three months ended June 30, 2024 increased by $6.9 million as compared to the three months ended June 30, 2023.

The $7.4 million increase in clinical trial and related costs was primarily due to increased activity in our ongoing pivotal Phase 3 trials in myelofibrosis and multiple myeloma, including increased purchases of comparator drugs.

These increases were partially offset by decreases of clinical trial and related costs in other programs, primarily KPT-1200, our IL-12 compound that we sold to Libo Pharma Corp.

in December 2023.

Research and development expenses for the six months ended June 30, 2024 increased by $10.0 million as compared to the six months ended June 30, 2023.

The $12.7 million increase in clinical trial and related costs was primarily due to increased activity in each of our three ongoing pivotal Phase 3 trials, including increased purchases of comparator drugs.

These increases were partially offset by decreases of clinical trial and related costs in other programs, primarily KPT-1200, our IL-12 product that we sold to Libo Pharma Corp.

in December 2023, and eltanexor.

The decrease in personnel costs of $2.3 million was primarily due to a reduction in headcount and contractors for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

We expect our research and development expenses to increase slightly in the second quarter of 2024 as compared to the first quarter of 2024 as we continue to progress our three pivotal Phase 3 trials.

These increases were partially offset by decreases of clinical trial and related costs in other programs, primarily KPT-1200, our IL-12 compound, and eltanexor.

The decrease in personnel costs of $3.6 million was primarily due to a reduction in headcount and contractors for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

We expect our research and development expenses to be relatively consistent in the second half of 2024 as compared to the first half of 2024.

Selling, General and Administrative Expenses (in thousands, except for percentages)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Personnel costs

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Total selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2024 decreased by $6.4 million as compared to the three months ended March 31, 2023.

Selling, general and administrative expenses for the three months ended June 30, 2024 decreased by $3.4 million as compared to the three months ended June 30, 2023.

The decrease in personnel costs of $2.7 million was primarily due to a reduction in headcount and contractors.

The $3.6 million decrease in consulting, professional and other costs was primarily due to our ongoing cost reduction initiatives.

We expect our selling, general and administrative expenses to remain relatively consistent in the second quarter of 2024 as compared to the first quarter of 2024.

Other Expense, net (in thousands, except for percentages)

For the Three Months Ended March 31,

Selling, general and administrative expenses for the six months ended June 30, 2024 decreased by $9.8 million as compared to the six months ended June 30, 2023.

The decrease in personnel costs of $5.5 million was primarily due to a reduction in headcount and contractors.

The $4.4 million decrease in consulting, professional and other costs was primarily due to our cost reduction initiatives.

Selling, general and administrative expenses for the three and six months ended June 30, 2024 also included approximately $1.2 million of expenses related to the Refinancing Transactions, of which $0.8 million was included in stock-based compensation and $0.4 million was included in consulting, professional and other costs.

We expect our selling, general and administrative expenses to remain relatively consistent in the second half of 2024 as compared to the first half of 2024.

Other Income (Expense), net (in thousands, except for percentages)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Interest expense

Interest income

Gain on extinguishment of debt

Other income (expense)

Total other expense, net

Other expense, net for the three months ended March 31, 2024 increased by $0.4 million, as compared to the three months ended March 31, 2023, primarily due to a $0.7 million decrease in interest income resulting from lower investment balances during the three months ended March 31, 2024.

We expect other expense, net to increase slightly in the second quarter of 2024 as compared to the first quarter of 2024, due to the interest payments on the new term loan and new secured convertible senior notes, offset by a decrease in payments to HCRx.

Total other income (expense), net

Other income (expense), net for the three months ended June 30, 2024 increased by $54.9 million, as compared to the three months ended June 30, 2023 and for the six months ended June 30, 2024 increased by $54.6 million as compared to the six months ended June 30, 2023.

The increases for the three and six month periods were primarily due to a $44.7 million gain on extinguishment of debt from the Refinancing Transactions and a $14.3 million gain from the remeasurement of embedded derivatives and liability classified common stock warrants, both of which are non-cash items.

These gains were partially offset by an increase in interest expense due to the new term loan and new secured convertible senior notes.

We expect Other income (expense), net to decrease in the second half of 2024 as compared to the first half of 2024, as the $44.7 million gain on extinguishment of debt is a non-recurring gain.

This will be partially offset by an increase in interest expense on the new term loan and new secured convertible senior notes.

The future impact from remeasurements of the embedded derivatives and liability classified common stock warrants will depend on a variety of factors, including movements in our stock price.

LIQUIDITY AND CAPITAL RESOURCES

To date, we have financed our operations primarily through a combination of product revenue sales, private placements of our common stock, proceeds from public offerings of our common stock, proceeds from the issuance of convertible debt, proceeds pursuant to the deferred royalty obligation, proceeds from a term loan, and cash generated from our business development activities.

As of March 31, 2024, our principal source of liquidity was $148.6 million of cash, cash equivalents and investments.

We have had recurring losses since inception and incurred a loss of $37.4 million for the three months ended March 31, 2024.

We expect that our cash, cash equivalents and investments at March 31, 2024 will be sufficient to fund our current operating plans and capital expenditure requirements for at least twelve months from the date of issuance of the financial statements contained in this Quarterly Report on Form 10-Q.

We have historically financed our operations primarily through a combination of proceeds from (i) product revenue sales, (ii) public and private placements of equity securities, (iii) the issuance of convertible debt, (iv) a term loan, (v) our deferred royalty obligation, (vi) at the market offerings and (vii) business development activities.

As of June 30, 2024, our principal source of liquidity was $152.1 million of cash, cash equivalents and investments.

We have had recurring losses since inception and incurred a loss of $13.6 million for the six months ended June 30, 2024.

We expect that our cash, cash equivalents and investments at June 30, 2024 will be sufficient to fund our current operating plans and capital expenditure requirements for at least twelve months from the date of issuance of the financial statements contained in this Quarterly Report on Form 10-Q.

The following table provides information regarding our cash flows (in thousands):

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Effect of foreign exchange rates

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Operating activities.

The $24.8 million increase in net cash used in operating activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily driven by the collection of $22.4 million of milestone payments from Antengene in the first quarter of 2023.

The $37.6 million increase in net cash used in operating activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily driven by working capital changes, including the collection of $22.4 million of milestone payments from Antengene in the first quarter of 2023.

Investing activities.

The $54.3 million decrease in net cash used in investing activities for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was driven by a $25.8 million increase in proceeds from the sales and maturities of investments and a $28.7 million decrease in purchases of investments.

The $84.4 million increase in net cash provided by investing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was driven by a $60.0 million decrease in purchases of investments and a $24.6 million increase in proceeds from the maturities of investments.

Financing activities.

The $40.1 million increase in net cash provided by financing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was driven by $83.3 million of proceeds from our new term loan, partially offset by a $40.5 million payment of our deferred royalty obligation and a $2.6 million payment of debt issuance costs related to the Refinancing Transactions.

Sources of Liquidity

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and HealthCare Royalty Partners IV, L.P.

(“HCRx”), which was subsequently amended on June 23, 2021, August 1, 2023 and May 2024 (the “Revenue Interest Agreement” and, as amended, the “Amended Revenue Interest Agreement”).

Pursuant to the Revenue Interest Agreement, HCRx paid us $75.0 million, less certain transaction expenses, on September 27, 2019, and pursuant to the Amended Revenue Interest Agreement, HCRx paid us $60.0 million, less certain transaction expenses, on June 23, 2021.

(“HCRx”), which was subsequently amended on June 23, 2021, August 1, 2023 and May 8, 2024 (the “Revenue Interest Agreement” and, as amended, the “Amended Revenue Interest Agreement”), pursuant to which, HCRx paid us a total of $135.0 million, less certain transaction expenses.

For additional information on the Amended Revenue Interest Agreement, see Note 10, “ Long-Term Obligations ”, to the condensed consolidated financial statements included under Part I, Item I of this Quarterly Report on Form 10-Q.

On May 8, 2024, we entered into a credit and guaranty agreement (the “Credit Agreement”) with certain existing lenders and HCRx, which provides for a senior secured term loan facility of $100.0 million.

For additional information, see Note 10, “ Long-Term Obligations ”, to the condensed consolidated financial statements included under Part I, Item I of this Quarterly Report on Form 10-Q.

On February 17, 2023, we entered into an Open Market Sale Agreement (the “2023 Open Market Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”).

Under the 2023 Open Market Sale Agreement, we may issue and sell shares of our common stock having an aggregate offering price of up to $100.0 million (the “Shares”) from time to time through Jefferies.

We did not sell any Shares under the 2023 Open Market Sales Agreement during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, $100.0 million of Shares was available for issuance and sale under the 2023 Open Market Sale Agreement.

During the three months ended March 31, 2024, we received $7.1 million in milestone and upfront payments under our license and distribution agreements pursuant to which we are entitled to receive additional milestone payments, if certain development goals and sales milestones are achieved as well as royalties on future net sales of the licensed and sold products in the territories under such arrangements.

We did not sell any Shares under the 2023 Open Market Sales Agreement during the three and six months ended June 30, 2024 and 2023.

As of June 30, 2024, $100.0 million of Shares was available for issuance and sale under the 2023 Open Market Sale Agreement.

During the six months ended June 30, 2024, we received $13.0 million in milestone payments under our license and distribution agreements pursuant to which we are entitled to receive additional milestone payments, if certain development goals and sales milestones are achieved as well as royalties on future net sales of the licensed and sold products in the territories under such arrangements.

In addition, under the license agreement we entered into with Menarini in December 2021 (the “Menarini Agreement”), Menarini will reimburse us for 25% of all documented expenses we incur for the global development of selinexor from 2022 through 2025, provided that such reimbursements shall not exceed $15.0 million per calendar year.

We did not receive any reimbursements under the Menarini Agreement during the three months ended March 31, 2024.

We received $5.8 million of reimbursements under the Menarini Agreement during the six months ended June 30, 2024.

Commitments, Contingencies and Contractual Obligations

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Pursuant to the Newton, MA Lease, we have provided a security deposit in the form of a cash-collateralized letter of credit in the amount of $0.3 million which is classified in long-term restricted cash on our condensed consolidated balance sheets.

We expect to incur total lease costs of $5.8 million from March 31, 2024 to September 30, 2025.

We expect to incur total lease costs of $4.8 million from June 30, 2024 to September 30, 2025.

In addition, we are party to certain short-term leases having a term of twelve months or less at the commencement date.

We recognize short-term lease expense on a straight-line basis and do not record a related right-of-use asset or lease liability for such leases.

These costs were insignificant for both the three months ended March 31, 2024 and 2023.

These costs were insignificant for both the six months ended June 30, 2024 and 2023.

Contractual Obligations

We have contractual obligations under our 3.00% Convertible Senior Notes due 2025 (the “Notes”) and under our Amended Revenue Interest Agreement as disclosed in Note 10, “ Long-Term Obligations ”, to the condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

We have contractual obligations under (i) our 3.00% Convertible Senior Notes due 2025 (the “2025 Notes”);

(ii) our Credit Agreement, (iii) our 6.00% Convertible Senior Notes due 2029 (the “2029 Notes”), and (iv) our Amended Revenue Interest Agreement as disclosed in Note 10, “ Long-Term Obligations ”, to the condensed consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q.

Funding Requirements

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Our ability to become and remain profitable depends on our ability to generate revenue.

There can be no assurance as to the amount or timing of any such revenue, and we may not achieve profitability for several years, if at all, as described

more fully in the risk factor entitled “ We have incurred significant losses since inception, expect to continue to incur significant losses, and may never achieve or maintain profitability ,” under the heading “ Risk Factors ” in this Quarterly Report on Form 10-Q.

There can be no assurance as to the amount or timing of any such revenue, and we may not achieve profitability for several years, if at all, as described more fully in the risk factor entitled “ We have incurred significant losses since inception, expect to continue to incur significant losses, and may never achieve or maintain profitability ,” under the heading “ Risk Factors ” in this Quarterly Report on Form 10-Q.

Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

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If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or commercialization efforts.

We currently expect that cash, cash equivalents and investments at March 31, 2024 will be sufficient to fund our current operating plans and capital expenditure requirements for at least twelve months from the date of issuance of the financial statements contained in this Quarterly Report on Form 10-Q while we continue to commercialize XPOVIO in the U.S.

We currently expect that cash, cash equivalents and investments at June 30, 2024 will be sufficient to fund our current operating plans and capital expenditure requirements for at least twelve months from the date of issuance of the financial statements contained in this Quarterly Report on Form 10-Q while we continue to commercialize XPOVIO in the U.S.

and continue the clinical trials of our product candidates.

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If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay, reduce or eliminate our research and development programs and/or commercialization efforts ,” under the heading “Risk Factors ” in this Quarterly Report on Form 10-Q.

In addition to the expenses required to fund our operations described above, our funding requirements as of March 31, 2024 also include the following:

• Lease costs for our headquarters in Newton, Massachusetts with a term through September 30, 2025.

We expect to incur total lease costs of $5.8 million from March 31, 2024 to September 30, 2025;

• Future long-term debt obligations related to the 2025 Notes of $182.9 million over the next two years;

In addition to the expenses required to fund our operations described above, our funding requirements as of June 30, 2024 also include the following:

• Lease costs for our headquarters in Newton, Massachusetts of $4.8 million from June 30, 2024 to September 30, 2025;

• Future obligations related to the 2025 Notes of $25.6 million over the next two years;

• Future obligations related to the 2029 Notes of $150.8 million over the next five years;

• Future obligations related to the Credit Agreement of $154.2 million;

• Future royalty obligations to HCRx under the Amended Revenue Interest Agreement of $124.9 million.

Please refer to Note 10 “ Long-Term Obligations ”, to the condensed consolidated financial statements contained within Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of the refinancing transactions we entered into subsequent to March 31, 2024 which affect the above funding requirements.

Quantitative and Qualitati ve Disclosures About Market Risk.

We are exposed to market risk related to changes in interest rates.

We had cash, cash equivalents and investments of $148.6 million as of March 31, 2024.

We had cash, cash equivalents and investments of $152.1 million as of June 30, 2024.

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis