Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. 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 and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on February 29, 2024 (“Annual Report ” ).
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, contains forward-looking statements regarding the expectations of Karyopharm Therapeutics Inc., herein referred to as “Karyopharm,” the “Company,” “we,” or “our,” with respect to the possible achievement of discovery and development milestones, our future discovery and development efforts, including regulatory submissions and approvals, our commercialization efforts, our partnerships and collaborations with third parties, our future operating results and financial position, our business strategy, and other objectives for future operations. We often use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” and other words and terms of similar meaning to help identify forward-looking statements, although not all forward-looking statements contain these identifying words. You also can identify these forward-looking statements by the fact that they do not relate strictly to historical or current facts. There are a number of important risks and uncertainties that could cause actual results or events to differ materially from those indicated by forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Part II, Item 1A - Risk Factors of this Quarterly Report on Form 10-Q. 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.
References to XPOVIO ® (selinexor) also refer to NEXPOVIO ® (selinexor) when discussing its approval and commercialization in certain countries or territories outside of the U.S.
OVERVIEW
We are a commercial-stage pharmaceutical company pioneering novel cancer therapies and dedicated to the discovery, development and commercialization of first-in-class drugs directed against nuclear export for the treatment of cancer and other diseases. Our scientific expertise is based upon an understanding of the regulation of intracellular communication between the nucleus and the cytoplasm. We have discovered and are developing and commercializing novel, small molecule S elective I nhibitor of N uclear E xport (“SINE”) compounds that inhibit the nuclear export protein exportin 1 (“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 with high unmet medical need. Our lead asset, XPOVIO ® (selinexor), was the first oral XPO1 inhibitor to receive marketing approval, receiving its initial U.S. approval from the U.S. Food and Drug Administration (“FDA”) in July 2019, and is currently approved and marketed in the U.S. for the following indications:
• 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 ( 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. Approval in this indication was based on the results from the STORM ( S elinexor T reatment of R efractory M yeloma) trial; and
• For the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”), not otherwise specified, including DLBCL arising from follicular lymphoma, after at least two lines of systemic therapy. This indication was approved under accelerated approval based on response rate and was based on the results from the SADAL ( S elinexor A gainst D iffuse A ggressive L ymphoma) trial. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial.
The commercialization of XPOVIO in the U.S. is currently supported by sales representatives, nurse liaisons, and a market access team, as well as KaryForward, an extensive patient and healthcare provider support program. Our commercial efforts are also
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supplemented by patient support initiatives coordinated by our dedicated network of participating specialty pharmacy providers. We plan to continue to educate physicians, other healthcare providers and patients about XPOVIO’s clinical profile and unique mechanism of action as we continue to expand XPOVIO use.
The commercialization of XPOVIO and NEXPOVIO ® (selinexor) (the brand name for selinexor in Europe and the United Kingdom) outside of the U.S. is managed by our partners in their respective territories. XPOVIO/NEXPOVIO has received regulatory approval in various indications in over 40 countries outside the U.S. and is commercially available in a growing number of countries as our partners continue to secure reimbursement approvals.
Our primary focus is on marketing XPOVIO in its currently approved indications as well as developing and seeking the regulatory approval of selinexor as an oral agent targeting multiple high unmet need cancer indications, including our core programs in endometrial cancer, multiple myeloma, and myelofibrosis. We plan to continue to conduct clinical trials and to seek additional approvals for the use of selinexor as a single agent or in combination with other oncology therapies to expand the patient populations that are eligible for treatment with selinexor. 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 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 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.
CRITICAL ACCOUNTING 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 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 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.
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RESULTS OF OPERATIONS
The following table summarizes our results of operations (in thousands, except for percentages):
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Product revenue, net
$
28,032
$
28,460
$
(428
)
(2
)%
$
54,038
$
56,748
$
(2,710
)
(5
)%
License and other revenue
14,754
9,119
5,635
62
%
21,874
19,529
2,345
12
%
Total revenue
42,786
37,579
5,207
14
%
75,912
76,277
(365
)
(0
)%
Operating expenses:
Cost of sales
1,465
1,194
271
23
%
3,376
2,545
831
33
%
Research and development
38,371
31,477
6,894
22
%
73,796
63,816
9,980
16
%
Selling, general and administrative
31,070
34,481
(3,411
)
(10
)%
60,619
70,388
(9,769
)
(14
)%
Loss from operations
(28,120
)
(29,573
)
1,453
(5
)%
(61,879
)
(60,472
)
(1,407
)
2
%
Other income (expense), net
51,979
(2,930
)
54,909
(>100%)
48,447
(6,103
)
54,550
(>100)%
Income (loss) before income taxes
23,859
(32,503
)
56,362
(>100%)
(13,432
)
(66,575
)
53,143
(80
)%
Income tax provision
(67
)
(127
)
60
(47
)%
(138
)
(181
)
43
(24
)%
Net income (loss)
$
23,792
$
(32,630
)
$
56,422
(>100%)
$
(13,570
)
$
(66,756
)
$
53,186
(80
)%
Product Revenue, net (in thousands, except for percentages)
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Product revenue, net
$
28,032
$
28,460
$
(428
)
(2
)%
$
54,038
$
56,748
$
(2,710
)
(5
)%
To date, our only source of product revenue has been from the U.S. sales of XPOVIO. 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 June 30,
For the Six Months Ended June 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Menarini Group ("Menarini")
$
12,073
$
5,611
$
6,462
>100%
$
18,479
$
14,348
$
4,131
29
%
Antengene Therapeutics Limited ("Antengene")
488
760
(272
)
(36
)%
999
1,872
(873
)
(47
)%
Other
2,193
2,748
(555
)
(20
)%
2,396
3,309
(913
)
(28
)%
Total license and other revenue
$
14,754
$
9,119
$
5,635
62
%
$
21,874
$
19,529
$
2,345
12
%
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.
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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 June 30,
For the Six Months Ended June 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Cost of sales
$
1,465
$
1,194
$
271
23
%
$
3,376
$
2,545
$
831
33
%
Research and development
38,371
31,477
6,894
22
%
73,796
63,816
9,980
16
%
Selling, general and administrative
31,070
34,481
(3,411
)
(10
)%
60,619
70,388
(9,769
)
(14
)%
Total operating expenses
$
70,906
$
67,152
$
3,754
6
%
$
137,791
$
136,749
$
1,042
1
%
Cost of Sales
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 June 30,
For the Six Months Ended June 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Clinical trial and related costs:
Selinexor in myelofibrosis
$
9,086
$
1,437
$
7,649
>100%
$
15,468
$
2,422
$
13,046
>100%
Selinexor in endometrial cancer
3,760
3,825
(65
)
(2
)%
8,167
7,243
924
13
%
Selinexor in multiple myeloma
4,960
2,818
2,142
76
%
8,997
4,249
4,748
>100%
Other programs
833
2,258
(1,425
)
(63
)%
1,268
6,019
(4,751
)
(79
)%
Non-program specific clinical trial and related costs
1,763
2,713
(950
)
(35
)%
3,882
5,159
(1,277
)
(25
)%
Total clinical trial and related costs
20,402
13,051
7,351
56
%
37,782
25,092
12,690
51
%
Unallocated costs:
Personnel
11,565
12,854
(1,289
)
(10
)%
23,453
27,027
(3,574
)
(13
)%
Consulting, professional and other
5,112
3,670
1,442
39
%
9,848
7,857
1,991
25
%
Stock-based compensation
1,292
1,902
(610
)
(32
)%
2,713
3,840
(1,127
)
(29
)%
Total unallocated costs
17,969
18,426
(457
)
(2
)%
36,014
38,724
(2,710
)
(7
)%
Total research and development expenses
$
38,371
$
31,477
$
6,894
22
%
$
73,796
$
63,816
$
9,980
16
%
At any one time, we have a number of ongoing clinical development programs that we are conducting independently or in collaboration with third parties. 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, 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 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.
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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 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 June 30,
For the Six Months Ended June 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Personnel costs
$
14,531
$
17,204
$
(2,673
)
(16
)%
$
30,498
$
36,025
$
(5,527
)
(15
)%
Consulting, professional and other costs
12,483
13,223
(740
)
(6
)%
22,570
26,939
(4,369
)
(16
)%
Stock-based compensation
4,056
4,054
2
0
%
7,551
7,424
127
2
%
Total selling, general and administrative expenses
$
31,070
$
34,481
$
(3,411
)
(10
)%
$
60,619
$
70,388
$
(9,769
)
(14
)%
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.
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,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Interest expense
$
(8,949
)
$
(5,784
)
$
(3,165
)
55
%
$
(14,833
)
$
(11,542
)
$
(3,291
)
29
%
Interest income
1,930
2,824
(894
)
(32
)%
4,086
5,673
(1,587
)
(28
)%
Gain on extinguishment of debt
44,702
—
44,702
100
%
44,702
—
44,702
100
%
Other income (expense)
14,296
30
14,266
>100%
14,492
(234
)
14,726
(>100)%
Total other income (expense), net
$
51,979
$
(2,930
)
$
54,909
(>100%)
$
48,447
$
(6,103
)
$
54,550
(>100)%
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.
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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
Cash Flows
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 Six Months Ended June 30,
2024
2023
$ Change
% Change
Net cash used in operating activities
$
(82,223
)
$
(44,608
)
$
(37,615
)
84
%
Net cash provided by (used in) investing activities
73,202
(11,218
)
84,420
(>100)%
Net cash provided by financing activities
40,966
860
40,106
>100%
Effect of foreign exchange rates
(27
)
(71
)
44
(62
)%
Net increase (decrease) in cash, cash equivalents and restricted cash
$
31,918
$
(55,037
)
$
86,955
(>100)%
Operating activities. 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 $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
On September 14, 2019, we and certain of our subsidiaries entered into the Revenue Interest Financing Agreement with HealthCare Royalty Partners III, L.P. and HealthCare Royalty Partners IV, L.P. (“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 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.
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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 received $5.8 million of reimbursements under the Menarini Agreement during the six months ended June 30, 2024.
Commitments, Contingencies and Contractual Obligations
Operating Leases
We are party to an operating lease of 98,502 square feet of office and research space in Newton, Massachusetts with a term through September 30, 2025 (the “Newton, MA Lease”). 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 $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 six months ended June 30, 2024 and 2023.
Contractual Obligations
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
We expect to continue to incur costs related to our clinical development programs as we rapidly advance three pivotal Phase 3 trials, as well as commercialization expenses related to sales, marketing, manufacturing and distribution of our approved products, to the extent that these functions are not the responsibility of our collaborators.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. In addition, our product candidates for which we receive marketing approval may not achieve commercial success. 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. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. We may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. 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 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. Our future long-term capital requirements will depend on many factors, as described more fully in the risk factor entitled “ We will need additional funding to achieve our business objectives. 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 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;
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• 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; and
• Future royalty obligations to HCRx under the Amended Revenue Interest Agreement of $124.9 million.
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Item 3. 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 $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. interest rates. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point shift in interest rates would not have a material effect on the fair market value of our investment portfolio.
We do not believe our cash, cash equivalents and investments have significant risk of default or illiquidity. While we believe our cash, cash equivalents and investments do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in securities at one or more financial institutions that are in excess of federally insured limits. Given the potential instability of financial institutions, we cannot provide assurance that we will not experience losses on these deposits and investments.
We are also exposed to market risk related to changes in foreign currency exchange rates. We contract with contract research organizations and contract manufacturing organizations that are located in Canada, the United Kingdom and Europe, which are denominated in foreign currencies. We also contract with a number of clinical trial sites outside of the U.S., and our budgets for those studies are frequently denominated in foreign currencies. We are subject to fluctuations in foreign currency rates in connection with these agreements. We do not currently hedge our foreign currency exchange rate risk.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.