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 ability to continue as a going concern, 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.
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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 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 45 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 September 30, 2024, we had an accumulated deficit of $1.5 billion. We had net losses of $45.6 million and $101.3 million for the nine months ended September 30, 2024 and 2023, respectively. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. See “Liquidity and Capital Resources” below for a further discussion of our liquidity and the conditions that raise substantial doubt regarding our ability to continue as a going concern.
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 the 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 in the 2029 Notes (as defined below) 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, (ii) our estimated credit spread and (iii) an estimate of when the warrants will be exercised based on an option pricing model.
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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 September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Product revenue, net
$
29,516
$
30,207
$
(691
)
(2
)%
$
83,554
$
86,955
$
(3,401
)
(4
)%
License and other revenue
9,267
5,802
3,465
60
%
31,141
25,331
5,810
23
%
Total revenue
38,783
36,009
2,774
8
%
114,695
112,286
2,409
2
%
Operating expenses:
Cost of sales
1,300
911
389
43
%
4,676
3,456
1,220
35
%
Research and development
36,134
35,553
581
2
%
109,930
99,369
10,561
11
%
Selling, general and administrative
27,632
30,805
(3,173
)
(10
)%
88,251
101,193
(12,942
)
(13
)%
Loss from operations
(26,283
)
(31,260
)
4,977
(16
)%
(88,162
)
(91,732
)
3,570
(4
)%
Other income (expense), net
(5,761
)
(3,234
)
(2,527
)
78
%
42,686
(9,337
)
52,023
(>100)%
Loss before income taxes
(32,044
)
(34,494
)
2,450
(7
)%
(45,476
)
(101,069
)
55,593
(55
)%
Income tax provision
(28
)
(12
)
(16
)
>100%
(166
)
(193
)
27
(14
)%
Net loss
$
(32,072
)
$
(34,506
)
$
2,434
(7
)%
$
(45,642
)
$
(101,262
)
$
55,620
(55
)%
Product Revenue, net (in thousands, except for percentages)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Product revenue, net
$
29,516
$
30,207
$
(691
)
(2
)%
$
83,554
$
86,955
$
(3,401
)
(4
)%
To date, our only source of product revenue has been from the U.S. sales of XPOVIO. Net product revenue for the three months ended September 30, 2024 decreased as compared to the three months ended September 30, 2023, primarily due to higher gross-to-net discounts driven by increased Medicare rebates and 340B discounts.
Net product revenue for the nine months ended September 30, 2024 decreased as compared to the nine months ended September 30, 2023, primarily due to decreased demand as a result of increasing competition and higher gross-to-net discounts driven by increased Medicare rebates and 340B discounts.
We expect net product revenue to remain relatively consistent in the fourth quarter of 2024 as compared to the third quarter of 2024.
License and Other Revenue (in thousands, except for percentages)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Menarini Group ("Menarini")
$
8,753
$
5,564
$
3,189
57
%
$
27,232
$
19,912
$
7,320
37
%
Antengene Therapeutics Limited ("Antengene")
273
80
193
>100%
1,272
1,952
(680
)
(35
)%
Other
241
158
83
53
%
2,637
3,467
(830
)
(24
)%
Total license and other revenue
$
9,267
$
5,802
$
3,465
60
%
$
31,141
$
25,331
$
5,810
23
%
License and other revenue for the three months ended September 30, 2024 increased by $3.5 million as compared to the three months ended September 30, 2023 primarily due to $6.0 million of milestone revenue recognized from Menarini during the three months ended September 30, 2024, partially offset by a $3.3 million decrease in revenue for the reimbursement of development-related expenses from Menarini due to the timing of the reimbursement we receive, up to a limit of $15.0 million per calendar year.
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License and other revenue for the nine months ended September 30, 2024 increased by $5.8 million as compared to the nine months ended September 30, 2023 primarily due to $10.0 million of milestone revenue recognized from Menarini during the nine months ended September 30, 2024, partially offset by a decrease of $3.5 million of license-related revenue from Menarini.
We expect license and other revenue to decrease in the fourth quarter of 2024 as compared to the third quarter of 2024 due to the maximum reimbursement revenue from Menarini already having been recognized, coupled with lower milestone revenue expected in the fourth quarter of 2024 compared to the third quarter of 2024.
Operating Expenses (in thousands, except for percentages)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Cost of sales
$
1,300
$
911
$
389
43
%
$
4,676
$
3,456
$
1,220
35
%
Research and development
36,134
35,553
581
2
%
109,930
99,369
10,561
11
%
Selling, general and administrative
27,632
30,805
(3,173
)
(10
)%
88,251
101,193
(12,942
)
(13
)%
Total operating expenses
$
65,066
$
67,269
$
(2,203
)
(3
)%
$
202,857
$
204,018
$
(1,161
)
(1
)%
Cost of Sales
Cost of sales in aggregate dollars were consistent for the three and nine months ended September 30, 2024 and 2023. We expect cost of sales to remain relatively consistent in the in the fourth quarter of 2024 as compared to the third quarter of 2024.
Research and Development Expenses (in thousands, except for percentages)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Clinical trial and related costs:
Selinexor in myelofibrosis
$
6,757
$
2,118
$
4,639
>100%
$
22,225
$
4,540
$
17,685
>100%
Selinexor in multiple myeloma
6,357
5,567
790
14
%
15,354
9,816
5,538
56
%
Selinexor in endometrial cancer
3,344
3,555
(211
)
(6
)%
11,511
10,797
714
7
%
Other programs
1,135
4,642
(3,507
)
(76
)%
2,403
10,661
(8,258
)
(77
)%
Non-program specific clinical trial and related costs
1,819
2,369
(550
)
(23
)%
5,701
7,529
(1,828
)
(24
)%
Total clinical trial and related costs
19,412
18,251
1,161
6
%
57,194
43,343
13,851
32
%
Unallocated costs:
Personnel
11,039
12,220
(1,181
)
(10
)%
34,492
39,247
(4,755
)
(12
)%
Consulting, professional and other
4,621
3,784
837
22
%
14,469
11,641
2,828
24
%
Stock-based compensation
1,062
1,298
(236
)
(18
)%
3,775
5,138
(1,363
)
(27
)%
Total unallocated costs
16,722
17,302
(580
)
(3
)%
52,736
56,026
(3,290
)
(6
)%
Total research and development expenses
$
36,134
$
35,553
$
581
2
%
$
109,930
$
99,369
$
10,561
11
%
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.
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Research and development expenses for the three months ended September 30, 2024 increased by $0.6 million as compared to the three months ended September 30, 2023 primarily due to increased activity in our ongoing pivotal Phase 3 trial in myelofibrosis, partially offset by decreases in clinical trial and related costs in other programs.
Research and development expenses for the nine months ended September 30, 2024 increased by $10.6 million as compared to the nine months ended September 30, 2023. The $13.9 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. The decrease in personnel costs of $4.8 million was primarily due to a reduction in headcount and contractors for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily due to our ongoing cost reduction initiatives.
We expect our research and development expenses to slightly decrease in the fourth quarter of 2024 as compared to the third quarter of 2024 primarily due to the reduced scope of our Phase 3 trial in multiple myeloma, as well as reduced headcount due to our ongoing cost reduction initiatives, partially offset by an expected increase in expenses related to our Phase 3 trial in myelofibrosis.
Selling, General and Administrative Expenses (in thousands, except for percentages)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Personnel costs
$
14,121
$
16,568
$
(2,447
)
(15
)%
$
44,619
$
52,593
$
(7,974
)
(15
)%
Consulting, professional and other costs
10,452
10,553
(101
)
(1
)%
33,022
37,492
(4,470
)
(12
)%
Stock-based compensation
3,059
3,684
(625
)
(17
)%
10,610
11,108
(498
)
(4
)%
Total selling, general and administrative expenses
$
27,632
$
30,805
$
(3,173
)
(10
)%
$
88,251
$
101,193
$
(12,942
)
(13
)%
Selling, general and administrative expenses for the three months ended September 30, 2024 decreased by $3.2 million as compared to the three months ended September 30, 2023. The decrease in personnel costs of $2.4 million was primarily due to a reduction in headcount and contractors.
Selling, general and administrative expenses for the nine months ended September 30, 2024 decreased by $12.9 million as compared to the nine months ended September 30, 2023. The decrease in personnel costs of $8.0 million was primarily due to a reduction in headcount and contractors. The $4.5 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 fourth quarter of 2024 as compared to the third quarter of 2024.
Other Income (Expense), net (in thousands, except for percentages)
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
2024
2023
$ Change
% Change
Interest expense
$
(11,385
)
$
(6,073
)
$
(5,312
)
87
%
$
(26,218
)
$
(17,615
)
$
(8,603
)
49
%
Interest income
1,832
2,750
(918
)
(33
)%
5,918
8,423
(2,505
)
(30
)%
Gain on extinguishment of debt
—
—
—
—
44,702
—
44,702
100
%
Other income (expense)
3,792
89
3,703
>100%
18,284
(145
)
18,429
(>100)%
Total other income (expense), net
$
(5,761
)
$
(3,234
)
$
(2,527
)
78
%
$
42,686
$
(9,337
)
$
52,023
(>100)%
Other income (expense), net for the three months ended September 30, 2024 decreased by $2.5 million, as compared to the three months ended September 30, 2023, primarily due to a $5.3 million increase in interest expense related to the new term loan and new secured convertible senior notes, partially offset by a gain of $4.0 million recognized during the three months ended September 30, 2024 from the remeasurement of embedded derivatives and liability classified common stock warrants, both of which are non-cash items.
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Other income (expense), net for the nine months ended September 30, 2024 increased by $52.0 million as compared to the nine months ended September 30, 2023, primarily due to a $44.7 million gain on extinguishment of debt from the Refinancing Transactions and a $18.3 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 related to the new term loan and new secured convertible senior notes.
We expect Other income (expense), net to remain relatively consistent in the fourth quarter of 2024 as compared to the third quarter of 2024, however 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 September 30, 2024, our principal source of liquidity was $133.5 million of cash, cash equivalents and investments. We have had recurring losses since inception and incurred a loss of $45.6 million for the nine months ended September 30, 2024.
We anticipate that we will continue to incur significant operating losses in the foreseeable future. Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date the accompanying condensed consolidated financial statements are issued. We expect that our cash, cash equivalents and investments as of September 30, 2024 will be sufficient to fund our current operating plans and debt obligation requirements into the fourth quarter of 2025. See “Liquidity and Capital Resources – Funding Requirements” below and Note 1 “ Nature of Business ” to the condensed consolidated financial statements included under Part I, Item I of this Quarterly Report on Form 10-Q for a further discussion of our liquidity and the conditions that raise substantial doubt regarding our ability to continue as a going concern.
The following table provides information regarding our cash flows (in thousands):
For the Nine Months Ended September 30,
2024
2023
$ Change
% Change
Net cash used in operating activities
$
(101,676
)
$
(74,138
)
$
(27,538
)
37
%
Net cash provided by (used in) investing activities
80,676
(18,903
)
99,579
(>100)%
Net cash provided by financing activities
40,966
860
40,106
>100%
Effect of foreign exchange rates
9
(123
)
132
(>100)%
Net increase (decrease) in cash, cash equivalents and restricted cash
$
19,975
$
(92,304
)
$
112,279
(>100)%
Operating activities. The $27.5 million increase in net cash used in operating activities for the nine months ended September 30, 2024 compared to the nine months ended September 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 $99.6 million increase in net cash provided by investing activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was driven by a $85.3 million decrease in purchases of investments and a $14.5 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 nine months ended September 30, 2024 compared to the nine months ended September 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
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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 nine months ended September 30, 2024 and 2023. As of September 30, 2024, $100.0 million of Shares was available for issuance and sale under the 2023 Open Market Sale Agreement.
During the nine months ended September 30, 2024, we received $17.7 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 $13.0 million of reimbursements under the Menarini Agreement during the nine months ended September 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. As of September 30, 2024, we expect to incur total lease costs of $3.9 million from September 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 nine months ended September 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.
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Based on our current business plan and current capital resources, combined with the uncertainty regarding the availability of additional funding, we have concluded that there is substantial doubt regarding our ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. See Note 1 “ Nature of Business ” to the condensed consolidated financial statements included under Part I, Item I of this Quarterly Report on Form 10-Q for a further discussion of the conditions that raise substantial doubt regarding our ability to continue as a going concern. We currently expect that cash, cash equivalents and investments as of September 30, 2024 will be sufficient to fund our current operating plans and debt obligation requirements into the fourth quarter of 2025 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 September 30, 2024 also include the following:
• Lease costs for our headquarters in Newton, Massachusetts of $3.9 million from September 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 $148.1 million over the next five years;
• Future obligations related to the Credit Agreement of $154.3 million; and
• Future royalty obligations to HCRx under the Amended Revenue Interest Agreement of $122.4 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 $133.5 million as of September 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.