Karyopharm Therapeutics Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We have established disclosure controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms prescribed by the Securities and Exchange Commission and is accumulated and communicated to management, including the principal executive officer (our Chief Executive Officer) and principal financial officer (our Senior Vice President, Chief Financial Officer and Treasurer), to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of our Chief Executive Officer and Senior Vice President, Chief Financial Officer and Treasurer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on such evaluation, our Chief Executive Officer and Senior Vice President, Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules13a-15(f) and15d-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our internal control over financial reporting is a process designed under the supervision of our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Under the supervision and with the participation of management, including our principal executive officer and principal financial officer we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under that framework, management concluded that our internal control over financial reporting was effective as of December 31, 2020. Our independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K has issued an attestation report on our internal control over financial reporting, which is included below. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 128 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Karyopharm Therapeutics Inc. Opinion on Internal Control Over Financial Reporting We have audited Karyopharm Therapeutics Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Karyopharm Therapeutics Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated February 24, 2021 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Boston, Massachusetts February 24, 2021 129 Table of Contents Item 9B. Other Information None. 130 Table of Contents PART III Certain information required by Part III is omitted from this Annual Report on Form 10-K and is incorporated by reference from our definitive proxy statement relating to our 2021 annual meeting of stockholders, pursuant to Regulation 14A of the Exchange Act, which we refer to as our 2021 Proxy Statement. We expect to file our 2021 Proxy Statement with the SEC within 120 days of December 31, 2020. Item 10. Directors, Executive Officers and Corporate Governance Information regarding our directors, including the audit committee and audit committee financial experts, and compliance with Section 16(a) of the Exchange Act, if applicable, will be included in our 2021 Proxy Statement and is incorporated herein by reference. Information regarding our executive officers is set forth in “ Business—Information about Our Executive Officers ” in Part I, Item 1 of this Annual Report on Form 10-K. We have adopted a Code of Business Conduct and Ethics for all of our directors, officers and employees as required by Nasdaq governance rules and as defined by applicable SEC rules. Stockholders may locate a copy of our Code of Business Conduct and Ethics on our website at www.karyopharm.com or request a copy without charge from: Karyopharm Therapeutics Inc. Attention: Investor Relations 85 Wells Avenue, 2 nd Floor Newton, MA 02459 We will post to our website any amendments to the Code of Business Conduct and Ethics and any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq. Item 11. Executive Compensation The information required by this Item 11 of Form 10-K regarding executive compensation will be included in our 2021 Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item 12 of Form 10-K regarding security ownership of certain beneficial owners and management and securities authorized for issuance under equity compensation plans will be included in our 2021 Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item 13 of Form 10-K regarding certain relationships and related transactions and director independence will be included in our 2021 Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services The information required by this Item 14 of Form 10-K regarding principal accountant fees and services will be included in our 2021 Proxy Statement and is incorporated herein by reference. 131 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a)(1) Financial Statements The financial statements listed below are filed as a part of this Annual Report on Form 10-K. Page number Report of Independent Registered Public Accounting Firm 133 Consolidated Balance Sheets as of December 31, 2020 and 2019 135 Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018 136 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019 and 2018 137 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018 138 Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018 139 Notes to Consolidated Financial Statements 140 (a)(2) Financial Statement Schedules All financial schedules have been omitted because the required information is either presented in the consolidated financial statements or the notes thereto or is not applicable or required. (a)(3) Exhibits The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report on Form 10-K are listed in the Exhibit Index immediately preceding the signature page of this Annual Report on Form 10-K and are incorporated herein. Item 16. Form 10-K Summary None. 132 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Karyopharm Therapeutics Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Karyopharm Therapeutics Inc. (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 24, 2021 expressed an unqualified opinion thereon. Adoption of ASU No. 2016-02 As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases , and related amendments. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 133 Table of Contents Accrued Research and Development Costs Description of the Matter The Company’s accrued research and development costs totaled $15.1 million at December 31, 2020. As discussed in Note 2 to the consolidated financial statements, the Company’s accrued research and development costs are recognized based on various inputs, including an evaluation of the progress to complete specific tasks using data such as clinical site activations, patient enrollment, and other information provided to the Company by its service providers based on their actual costs incurred. Payments for these activities are based on the terms of individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheet as accrued expenses. Auditing the Company’s accrued research and development costs is especially challenging due to the significant volume of information received from service providers that conduct research and development activities on the Company’s behalf. While the Company’s estimates of accrued research and development costs are primarily based on information received related to each study or ongoing work order from its service providers, the Company may need to make an estimate for additional costs incurred. Finally, due to the duration of certain of the Company’s ongoing research and development activities and the timing of invoicing received from third parties, the actual amounts incurred are not typically known by the report date. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over the Company’s process for recording accrued research and development costs. These procedures included controls over management’s review of inputs used, as well as the completeness and accuracy of the underlying data, in calculating the accrual. To test accrued research and development costs, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used to calculate accrued research and development costs, as well as evaluating the assumptions and estimates used by management. To assess the nature and extent of services incurred, we corroborated the progress of clinical trials with the Company’s research and development personnel that oversee the clinical trials and obtained information from service providers regarding costs incurred to date. We also tested subsequent invoices received and inspected the Company’s contracts with service providers and any pending change orders to assess the effect on the accrual. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. Boston, Massachusetts February 24, 2021 134 Table of Contents Karyopharm Therapeutics Inc. Consolidated Balance Sheets (in thousands, except per share amounts) December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 85,918 $ 128,858 Short-term investments 163,322 133,098 Accounts receivable 12,881 7,862 Inventory 2,644 346 Prepaid expenses and other current assets 9,285 7,289 Restricted cash 2,481 1,117 Total current assets 276,531 278,570 Property and equipment, net 2,219 3,046 Operating lease right-of-use assets 9,363 10,617 Long-term investments 24,215 2,016 Restricted cash 722 714 Total assets $ 313,050 $ 294,963 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,450 $ 985 Accrued expenses 52,930 40,878 Deferred revenue 297 2,341 Operating lease liabilities 1,917 1,646 Other current liabilities 609 500 Total current liabilities 60,203 46,350 Convertible senior notes 117,928 109,857 Deferred royalty obligation 73,088 73,588 Operating lease liabilities, net of current portion 11,285 13,202 Deferred revenue, net of current portion — 2,192 Total liabilities 262,504 245,189 Stockholders’ equity: Preferred stock, $ 0.0001 par value; 5,000 shares authorized; no ne issued and outstanding — — Common stock, $ 0.0001 par value; 200,000 shares authorized; 73,923 and 65,370 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively 7 7 Additional paid-in capital 1,119,632 923,142 Accumulated other comprehensive income (loss) 518 ( 37 ) Accumulated deficit ( 1,069,611 ) ( 873,338 ) Total stockholders’ equity 50,546 49,774 Total liabilities and stockholders’ equity $ 313,050 $ 294,963 The accompanying notes are an integral part of these consolidated financial statements. 13 5 Table of Contents Karyopharm Therapeutics Inc. Consolidated Statements of Operations (in thousands, except per share amounts) For the Years Ended December 31, 2020 2019 2018 Revenues: Product revenue, net $ 76,210 $ 30,540 $ — License and other revenue 31,875 10,353 30,336 Total revenues 108,085 40,893 30,336 Operating expenses: Cost of sales 2,705 2,407 — Research and development 150,813 122,340 161,372 Selling, general and administrative 126,417 105,421 48,847 Total operating expenses 279,935 230,168 210,219 Loss from operations ( 171,850 ) ( 189,275 ) ( 179,883 ) Other income (expense): Interest income 2,820 5,422 4,028 Interest expense ( 27,140 ) ( 15,647 ) ( 2,493 ) Other income (expense), net 206 ( 50 ) ( 33 ) Total other (expense) income, net ( 24,114 ) ( 10,275 ) 1,502 Loss before income taxes ( 195,964 ) ( 199,550 ) ( 178,381 ) Income tax provision ( 309 ) ( 40 ) ( 26 ) Net loss $ ( 196,273 ) $ ( 199,590 ) $ ( 178,407 ) Net loss per share—basic and diluted $ ( 2.72 ) $ ( 3.22 ) $ ( 3.14 ) Weighted-average number of common shares outstanding used to compute net loss per share—basic and diluted 72,044 61,955 56,780 The accompanying notes are an integral part of these consolidated financial statements. 13 6 Table of Contents Karyopharm Therapeutics Inc. Consolidated Statements of Comprehensive Loss (in thousands) For the Years Ended December 31, 2020 2019 2018 Net loss $ ( 196,273 ) $ ( 199,590 ) $ ( 178,407 ) Comprehensive income (loss): Unrealized gains on investments 288 207 39 Foreign currency translation adjustments 267 — ( 66 ) Comprehensive loss $ ( 195,718 ) $ ( 199,383 ) $ ( 178,434 ) The accompanying notes are an integral part of these consolidated financial statements. 1 37 Table of Contents Karyopharm Therapeutics Inc. Consolidated Statements of Stockholders’ Equity (in thousands) Common Shares Shares Amount Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders’ Equity Balance at December 31, 2017 49,533 $ 5 $ 625,017 $ ( 217 ) $ ( 495,341 ) $ 129,464 Vesting of restricted stock 114 — — — — — Exercise of stock options and shares issued under the employee stock purchase plan 657 — 3,519 — — 3,519 Stock-based compensation expense — — 17,275 — — 17,275 Issuance of common stock, net of issuance costs 10,525 1 145,704 — — 145,705 Equity component of convertible senior notes — — 67,850 — — 67,850 Equity component of deferred financing costs for convertible senior notes — — ( 2,209 ) — — ( 2,209 ) Unrealized gain on investments — — — 39 — 39 Foreign currency translation adjustment — — — ( 66 ) — ( 66 ) Net loss — — — — ( 178,407 ) ( 178,407 ) Balance at December 31, 2018 60,829 6 857,156 ( 244 ) ( 673,748 ) 183,170 Vesting of restricted stock 18 — — — — — Exercise of stock options and shares issued under the employee stock purchase plan 811 — 4,505 — — 4,505 Stock-based compensation expense — — 15,291 — — 15,291 Issuance of common stock, net of issuance costs 3,712 1 46,190 — — 46,191 Unrealized gain on investments — — — 207 — 207 Net loss — — — — ( 199,590 ) ( 199,590 ) Balance at December 31, 2019 65,370 7 923,142 ( 37 ) ( 873,338 ) 49,774 Vesting of restricted stock 204 — — — — — Exercise of stock options and shares issued under the employee stock purchase plan 1,161 — 10,307 — — 10,307 Stock-based compensation expense — — 24,407 — — 24,407 Issuance of common stock, net of issuance costs 7,188 — 161,776 — — 161,776 Unrealized gain on investments — — — 288 — 288 Foreign currency translation adjustment — — — 267 — 267 Net loss — — — — ( 196,273 ) ( 196,273 ) Balance at December 31, 2020 73,923 $ 7 $ 1,119,632 $ 518 $ ( 1,069,611 ) $ 50,546 The accompanying notes are an integral part of these consolidated financial statements. 1 38 Table of Contents Karyopharm Therapeutics Inc. Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2020 2019 2018 Operating activities Net loss $ ( 196,273 ) $ ( 199,590 ) $ ( 178,407 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 972 974 735 Net amortization of premiums and discounts on investments 1,419 ( 1,382 ) 29 Amortization of debt discount and issuance costs 8,071 7,193 1,420 Stock-based compensation expense 24,407 15,291 17,275 Realized and unrealized gain on marketable equity securities ( 15 ) — — Inventory obsolescence charge 329 — — Change in fair value of embedded derivative liability ( 500 ) — — Changes in operating assets and liabilities: Accounts receivable ( 5,019 ) ( 7,862 ) — Inventory ( 2,627 ) ( 346 ) — Prepaid expenses and other current assets ( 1,996 ) ( 868 ) ( 4,663 ) Operating lease right-of-use assets 1,254 1,094 — Accounts payable 3,465 ( 3,301 ) ( 1,380 ) Accrued expenses and other liabilities 12,161 8,512 11,255 Deferred revenue ( 4,236 ) ( 9,362 ) ( 8,027 ) Deferred rent — — 2,646 Operating lease liabilities ( 1,646 ) ( 1,175 ) — Net cash used in operating activities ( 160,234 ) ( 190,822 ) ( 159,117 ) Investing activities Purchases of property and equipment ( 145 ) ( 206 ) ( 2,363 ) Proceeds from maturities of investments 221,037 257,145 137,510 Purchases of investments ( 274,577 ) ( 178,489 ) ( 242,811 ) Net cash (used in) provided by investing activities ( 53,685 ) 78,450 ( 107,664 ) Financing activities Proceeds from issuance of convertible senior notes, net of issuance costs — — 166,885 Proceeds from issuance of common stock, net of issuance costs 161,776 46,191 145,705 Proceeds from the exercise of stock options and shares issued under employee stock purchase plan 10,307 4,505 3,519 Proceeds from deferred royalty obligation, net — 73,609 — Net cash provided by financing activities 172,083 124,305 316,109 Effect of exchange rate on cash, cash equivalents and restricted cash 268 19 ( 78 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 41,568 ) 11,952 49,250 Cash, cash equivalents and restricted cash at beginning of period 130,689 118,737 69,487 Cash, cash equivalents and restricted cash at end of period $ 89,121 $ 130,689 $ 118,737 Reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets Cash and cash equivalents $ 85,918 $ 128,858 $ 118,021 Short-term restricted cash 2,481 1,117 — Long-term restricted cash 722 714 716 Total cash, cash equivalents and restricted cash $ 89,121 $ 130,689 $ 118,737 Supplemental disclosures: Cash paid for interest on convertible debt $ 5,175 $ 5,175 $ — Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ — $ 11,711 $ — Cash paid for amounts included in the measurement of operating lease liabilities $ 3,200 $ 2,889 $ — Cash paid for interest on deferred royalty obligation $ 6,014 $ — $ — The accompanying notes are an integral part of these consolidated financial statements. 1 39 Table of Contents Karyopharm Therapeutics Inc. Notes to Consolidated Financial Statements 1. Organization and Operations The Company 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 S elective I nhibitor of N uclear E xport ( SINE ) compounds function by binding with and inhibiting the nuclear export protein exportin 1 (“XPO1”). Our initial focus has been on seeking the regulatory approval and commercialization of our lead SINE compound, selinexor, as an oral agent in cancer indications with significant unmet clinical need. We were incorporated in Delaware on December 22, 2008 and have a principal place of business in Newton, Massachusetts. Our lead asset, XPOVIO ® (selinexor), received its initial U.S. approval from the U.S. Food and Drug Administration (the “FDA”) in July 2019 and is currently approved and marketed for the following indications: (i) in combination with bortezomib and dexamethasone for the treatment of adult patients with multiple myeloma who have received at least one prior therapy; (ii) 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; and (iii) 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. While we began to generate revenue from the sales of XPOVIO in July 2019, to date, we have financed our operations through a combination of product revenue sales and through private placements of our preferred stock, proceeds from our initial public offering and follow-on offerings of common stock, proceeds from the issuance of convertible debt, proceeds pursuant to a revenue interest financing agreement (deferred royalty obligation), and cash generated from our business development activities. As of December 31, 2020, we had an accumulated deficit of $ 1.1 billion. We expect to continue to incur significant expenses and we will need to continue to rely on additional financing to achieve our business objectives. We expect that our cash, cash equivalents and investments at December 31, 2020 will be sufficient to fund our current operating plans and capital expenditure requirements for at least twelve months from the date of issuance of these financial statements. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, in deciding how to allocate resources and in assessing performance. We view our operations and manage our business in one operating segment, which is the business of discovering, developing and commercializing drugs to treat cancer and certain other diseases. All of our revenue to date has been derived in the U.S. All of our material long-lived assets reside in the U.S. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of 14 0 Table of Contents contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including estimates related to our net product revenue, clinical trial accruals, stock-based compensation expense, interest expense on our deferred royalty obligation and other reported amounts of expenses during the reported period. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Although we regularly assess these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known. Principles of Consolidation The consolidated financial statements at December 31, 2020 include the accounts of (i) Karyopharm Therapeutics Inc., (ii) Karyopharm Securities Corp. (“KPSC”, our wholly-owned Massachusetts corporation incorporated in December 2013), (iii) Karyopharm Europe GmbH (our wholly-owned German limited liability company, incorporated in September 2014), (iv) Karyopharm Therapeutics (Bermuda) Ltd. (our limited liability company, registered in Bermuda in March 2015), and (v) Karyopharm Israel Ltd. (our wholly-owned Israeli subsidiary formed in June 2018). All intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents Cash and cash equivalents consist primarily of demand deposit accounts and deposits in short-term money market funds. Cash equivalents are stated at cost, which approximates fair value. We consider all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. We do not hold any money market funds with significant liquidity restrictions that would be required to be excluded from cash equivalents. Investments We determine the appropriate classification of our investments in debt securities at the time of purchase. All of our securities are classified as available-for-sale and are reported as short-term investments or long-term investments based on maturity dates and whether such assets are reasonably expected to be realized in cash or sold or consumed during the normal cycle of business. Available-for-sale investments are recorded at fair value. Short-term and long-term investments are composed of corporate debt securities, commercial paper and U.S. government and agency securities. We review investments whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. We evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for a credit loss is recorded on our consolidated balance sheet, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that is not related to a credit loss is recognized in other comprehensive income (loss). Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when we believe the uncollectability of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Concentrations of Credit Risk and Off-Balance Sheet Risk Financial instruments which potentially subject us to credit risk consist primarily of cash, cash equivalents and investments. We hold these investments in highly rated financial institutions, and, by policy, limit the 14 1 Table of Contents amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. We have not experienced any credit losses in such accounts and do not believe we are exposed to any significant credit risk on these funds. We have no off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements. Fair Value Measurements Financial instruments, including cash, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses, are presented at amounts that approximate fair value at December 31, 2020 and 2019. We are required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs: Level 1 inputs: Quoted prices in active markets for identical assets or liabilities Level 2 inputs: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 inputs: Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability Our cash equivalents are comprised of money market funds, U.S. government and agency securities, commercial paper and corporate debt securities. We measure these investments at fair value. The fair value of cash equivalents held in money market funds and U.S. government and agency securities is determined based on “Level 1” inputs. Items classified as Level 2 within the valuation hierarchy consist of commercial paper, corporate debt securities, and U.S. government and agency securities. We estimate the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. We validate the prices provided by our third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances. In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. The embedded derivative liability associated with our deferred royalty obligation is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation. The embedded derivative liability is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other income (expense), net. The assumptions used in the option pricing Monte Carlo simulation model include: (i) our estimates of the probability and timing of related events; (ii) the probability-weighted net sales of XPOVIO and any of our other future products, including worldwide net product sales and upfront payments, milestone payments and royalties; (iii) our risk-adjusted discount rate that includes a company specific risk premium; (iv) our cost of debt; (v) volatility; and (vi) the probability of a change in control occurring during the term of the instrument. Our embedded derivative liability, as well as the estimated fair value of the deferred royalty obligation, is described in Note 15, “ Long-Term obligations .” 14 2 Table of Contents The following table presents information about our financial assets and liability that have been measured at fair value at December 31, 2020 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands): Description Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial assets Cash equivalents: Money market funds $ 3,586 $ 3,586 $ — $ — U.S. government and agency securities 16,000 16,000 — — Commercial paper 8,999 — 8,999 — Corporate debt securities 2,755 — 2,755 — Investments: Short-term: Corporate debt securities 136,833 — 136,833 — Commercial paper 23,487 — 23,487 — U.S. government and agency securities 3,002 — 3,002 — Long-term: Corporate debt securities (one to two-year maturity) 23,309 — 23,309 — U.S. government and agency securities (one to two-year maturity) 906 — 906 — $ 218,877 $ 19,586 $ 199,291 $ — Financial liability Embedded derivative liability $ 1,800 $ — $ — $ 1,800 The following table presents information about our financial assets that have been measured at fair value at December 31, 2019 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands): Description Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial assets Cash equivalents: Money market funds $ 71,380 $ 71,380 $ — $ — Investments: Short-term: Corporate debt securities 89,079 — 89,079 — Commercial paper 39,022 — 39,022 — U.S. government and agency securities 4,997 — 4,997 — Long-term: Corporate debt securities (one to two-year maturity) 2,016 — 2,016 — $ 206,494 $ 71,380 $ 135,114 $ — Financial liability Embedded derivative liability $ 2,300 $ — $ — $ 2,300 14 3 Table of Contents The following table sets forth a summary of the changes in the estimated fair value of our embedded derivative liability during the year ended December 31, 2020 (in thousands): Embedded Derivative Liability Balance as of December 31, 2019 $ 2,300 Change in fair value of derivative since issuance ( 500 ) Balance as of December 31, 2020 $ 1,800 Our Level 3 embedded derivative liability, as well as the estimated fair value of the deferred royalty obligation, is described in Note 15, “ Long-Term Obligations ”. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets, generally three to five years . Leasehold improvements are amortized over the shorter of the lease term or the estimated useful economic lives of the related assets. Expenditures for maintenance and repairs are charged to expense while the costs of significant improvements are capitalized. Upon retirement or sale, the costs of the assets disposed of and the related accumulated depreciation or amortization is eliminated from the balance sheets and any related gains or losses are reflected in the consolidated statements of operations. Leases We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) , as well as subsequent amendments, which were codified in ASC 842, on January 1, 2019, using the optional transition method. Pursuant to the guidance under ASU 2016-02, we elected the optional package of practical expedients to leases that commenced prior to the effective date, which allowed us to not reassess: (i) whether expired or existing contracts contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The new standard also allows entities to make certain policy elections, some of which we elected, including: (i) a policy to not record right-of-use assets and leases on the balance sheet for short-term leases that qualify and (ii) a policy to not separate lease and non-lease components for certain classes of underlying assets on contracts entered into or modified after the effective date. We did not elect the use of hindsight in estimating the lease term for leases subject to transition to the new standard. The standard had a material impact on our consolidated balance sheet as of December 31, 2019, specifically through recognition of right-of-use assets of $ 11.7 million and lease liabilities of $ 16.0 million for our existing operating lease for office space in Newton, MA on the effective date. The difference between the operating lease right-of-use assets and operating lease liabilities is due to the change in classification of deferred rent and lease incentives through December 31, 2018 of $ 4.3 million from liabilities to a reduction in our operating lease right-of-use assets. The standard did not have a material impact on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2019, as expense for our existing operating leases continues to be recognized consistent with the recognition pattern before adoption of the new standard. At the inception of an arrangement, we determine if an arrangement is, or contains, a lease based on the unique facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease we (i) identify lease and non-lease components, (ii) determine the consideration in the contract, (iii) determine whether the lease is an operating or financing lease; and (iv) recognize lease right-of-use assets and liabilities. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and as such, we use 14 4 Table of Contents our incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment. Most leases include options to renew and, or, terminate the lease, which can impact the lease term. The exercise of these options is at our discretion and we do not include any of these options within the expected lease term as we are not reasonably certain we will exercise these options. Fixed, or in substance fixed, lease payments on our operating lease are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed, or in substance fixed, are recognized as incurred. Fixed and variable lease expense on our operating lease is recognized within operating expenses within our consolidated statements of operations. Long-Lived Assets We review the carrying values of our long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair values less costs to sell. We have not recorded an impairment in any period since inception. Accrued Research and Development Costs As part of the process of preparing our consolidated financial statements, we estimate our accrued research and development costs. This process involves reviewing quotes and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. Most of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued research and development costs at each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development costs include fees paid to contract research organizations (“CROs”), and contract manufacturing organizations (“CMOs”), in connection with research and development activities for which we have not yet been invoiced. We base our expenses related to CROs and CMOs on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs and CMOs that conduct research and development activities on our behalf. The payment terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our service providers will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimates, we adjust the accrual or prepayment accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. Our estimates have not been materially different than amounts actually incurred to date. Revenue Recognition We adopted ASU 2014-09, Revenue from Contracts with Customers , as well as subsequent amendments, which were codified in ASC 606, on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. The adoption of ASC 606 did not have a material impact on our consolidated financial position, results of operations, stockholder’s equity or cash flows as of the adoption date, as no transition adjustment for any of our contracts with customers was required. 14 5 Table of Contents ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements, and financial instruments. Under ASC 606, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Product Revenue Recognition In the third quarter of 2019, we began to ship XPOVIO in the U.S. to specialty pharmacies and specialty distributors, collectively referred to as our customers, under a limited number of distribution arrangements with such third parties. Our specialty pharmacy customers resell XPOVIO directly to patients, while our specialty distributor customers resell XPOVIO to healthcare entities, who then resell to patients. In connection with negotiating and executing contracts with our customers, our policy is to expense incremental costs of obtaining a contract when incurred, if the expected amortization period of the asset that we would have recognized is one year or less. However, no such costs have been incurred to date. In addition to distribution agreements with our customers, we enter into certain arrangements with group purchasing organizations and/or other payors that provide for government mandated and/or privately negotiated rebates, chargebacks, and discounts with respect to the purchase of our products. In the context of ASC 606, each unit of XPOVIO that is ordered by our customers represents a distinct performance obligation that is completed when control of the product is transferred to the customer. Accordingly, we recognize product revenue when the customer obtains control of our product, which occurs at a point in time, generally upon delivery pursuant to our agreements with our customers. If taxes should be collected from customers relating to product sales and remitted to governmental authorities, they will be excluded from revenue. Revenue from product sales is recorded at the net sales price, which includes estimates of variable consideration for which reserves are reported. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are generally classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). Certain of the amounts noted are known at the time of sale based on contractual terms and, therefore, are recorded pursuant to the most likely amount method under ASC 606. Other amounts are estimated and take into consideration a range of possible outcomes, which are probability-weighted and recorded in accordance with the expected value method in ASC 606 for relevant factors, such as current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the respective underlying contracts. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contracts with our customers will not occur in a future period. The following are the components of variable consideration related to product revenue: Cash discounts and distributor fees: We provide customary discounts on XPOVIO sales to our customers for prompt payment, terms for which are explicitly stated in our contracts with such customers. We also pay fees 14 6 Table of Contents for distribution services to our customers for sales order management, data, and distribution services, terms for which are also explicitly stated in our contracts with such customers. Such fees are not for a distinct good or service and, accordingly, are recorded as a reduction of revenue, as well as a reduction to accounts receivable (cash discounts) or as a component of accrued expenses (distributor fees). Product returns: Consistent with industry practice, we offer our customers and other indirect purchasers a limited right of return for purchased units of XPOVIO for damage, defect, recall, and/or product expiry (beginning three months prior to the product’s expiration date and ending twelve months after the product’s expiration date). We estimate the amount of product sales that will be returned using a probability-weighted estimate, initially calculated based on data from similar products and other qualitative considerations, such as visibility into the inventory remaining in the distribution channel. Reserves for estimated returns are recorded as a reduction of revenue in the period that the related revenue is recognized, as well as a component of accrued expenses. Based on the distribution model for XPOVIO, contractual inventory limits with our customers, the price of XPOVIO, and limited contractual return rights, we currently believe there will be minimal XPOVIO returns. However, we will update our estimated return liability each reporting period based on actual shipments of XPOVIO subject to contractual return rights, changes in expectations about the amount of estimated and/or actual returns, and other qualitative considerations. Chargebacks: Chargebacks for fees and discounts represent the estimated obligations resulting from our contractual commitments to provide products to qualified healthcare entities at prices lower than the list prices charged to our customers who purchase XPOVIO directly from us. Our customers charge us for the discount provided to the healthcare entities. Chargebacks are generally determined at the time of resale to the qualified healthcare provider by our customers. Accordingly, reserves for chargebacks consist of credits that we expect to issue for units that remain in the distribution channel inventory at the end of the reporting period that we expect will be sold to qualified healthcare entities, as well as chargebacks that customers have claimed, but for which we have not yet issued a credit. We record reserves for chargebacks based on contractual terms in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. We generally issue credits to the customer for such amounts within a few weeks after the customer notifies us of the resale to a discount-eligible healthcare entity. Government rebates : We are subject to discount obligations under state Medicaid programs, Medicare, the Department of Veterans Affairs, the Department of Defense, and others. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included as a component of accrued expenses. For Medicare, we estimate the number of patients in the prescription drug coverage gap for whom we will owe an additional liability under Medicare Part D. Our liability for these rebates consists of invoices received for claims from prior and current quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but which remains in distribution channel inventories at the end of the reporting period. Other incentives: Other incentives offered by us include co-payment assistance, which we provide as financial assistance to patients with commercial insurance that requires prescription drug co-payments by the patient. We calculate the accrual for co-payment assistance based on estimates of claims and the average co-payment assistance amounts per claim that we expect to receive associated with sales of XPOVIO that have been recognized as revenue but remain in distribution channel inventories at the end of the reporting period. Such estimates are based on industry experience with similar products, as well as actual amounts from our product sales to date. Any adjustments to such estimated liabilities on units in the distribution channel at period end, as well as actual amounts incurred on units sold through the distribution channel during the period, are recorded in the same period that the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included as a component of accrued expenses. 1 47 Table of Contents Product revenue reserves and allowances: As noted above, cash discounts and chargebacks are recorded as reductions of accounts receivable and product returns, distributor fees, government rebates, and other incentives are recorded as a component of accrued expenses. To date, we have determined a material reversal of revenue would not occur in a future period, for the estimates detailed above, as of December 31, 2020 and, therefore, the transaction price was not reduced further during the year ended December 31, 2020. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect product revenue, net and earnings in the period in which such variances become known. License and Asset Purchase Agreements We generate revenue from license or similar agreements with pharmaceutical companies for the development and commercialization of certain of our product candidates. Such agreements may include the transfer of intellectual property rights in the form of licenses, transfer of technological know-how, delivery of drug substances, research and development services, and participation on certain committees with the counterparty. Payments made by the customers may include non-refundable upfront fees, payments upon the exercise of customer options, payments based upon the achievement of defined milestones, and royalties on sales of product candidates if they are successfully approved and commercialized. If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize the transaction price allocated to the license as revenue upon transfer of control of the license. We evaluate all other promised goods or services in the agreement to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct. Optional future services where any additional consideration paid to us reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations. If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as performance obligations. We utilize judgment to determine the transaction price. In connection therewith, we evaluate contingent milestones at contract inception to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Milestone payments that are not within our control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, we re-evaluate the probability of achieving development milestone payments that may not be subject to a material reversal and, if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment. We then determine whether the performance obligations or combined performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress, as applicable, for each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded within deferred revenue. Contract liabilities within deferred revenue are recognized as revenue after control of the goods or services is transferred to the customer and all revenue recognition criteria have been met. 1 48 Table of Contents For arrangements that include sales-based royalties, including sales-based milestone payments, and a license of intellectual property that is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of when the related sales occur or when the performance obligation to which some or all of the royalties have been allocated has been satisfied (or partially satisfied). Accounts Receivable In general, accounts receivable consists of amounts due from customers, net of customer allowances for cash discounts and chargebacks. Our contracts with customers have standard payment terms that generally require payment within 30 days for specialty pharmacy customers and 65 days for specialty distributor customers. We analyze accounts for collectability, and periodically evaluate the creditworthiness of our customers. As of December 31, 2020 and 2019, respectively, we determined there were no credit losses associated with our accounts receivable based upon our review of contractual payment terms and individual customer circumstances, and therefore, an allowance for doubtful accounts was not required. Inventory Prior to regulatory approval, we expense costs relating to the production of inventory as research and development expense in the period incurred. We capitalize the costs to manufacture our products incurred after regulatory approval when, based on our judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Such costs are generally recorded as costs of sales upon shipment. In connection therewith, we value our inventories at the lower of cost or estimated net realizable value. We determine the cost of our inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. Raw materials and work in process includes all inventory costs prior to packaging and labelling, including raw material, active pharmaceutical ingredient, and drug product. Finished goods include packaged and labelled products. Raw materials and work in process that may be used for either research and development or commercial sale are classified as inventory until the material is consumed or otherwise allocated for research and development. If the material is intended to be used for research and development, it is expensed as research and development once that determination is made. Prior to FDA approval of XPOVIO, all costs related to the manufacturing of XPOVIO that could potentially be available to support the commercial launch of our products were charged to research and development expense in the period incurred, as there was no alternative future use. We analyze our inventory levels for recoverability each reporting period. In the period in which there is an impairment identified, we write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value, and inventory in excess of expected sales requirements as cost of sales. The determination of whether inventory costs will be realizable is based on our estimates. If actual market conditions are less favorable than we project, additional write-downs of inventory may be required, which would be recorded as cost of sales. Cost of Sales Cost of sales includes the cost of producing and distributing inventories that are related to product revenue during the respective period, including salaryrelated and stock-based compensation expense for employees involved with production and distribution, freight, and indirect overhead costs, as well as third-party royalties payable on net product revenue. In addition, shipping and handling costs for product shipments are recorded in cost of sales as incurred. Finally, cost of sales may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances. 1 49 Table of Contents Deferred Royalty Obligation We treat the liability related to net revenues, as discussed further in Note 15, “ Long-term obligations” , as a deferred royalty obligation, amortized under the effective interest rate method over the estimated life of the revenue streams. We recognize interest expense thereon using the effective rate, which is based on our current estimates of future revenues over the life of the arrangement. In connection therewith, we periodically assess our expected revenues using internal projections, impute interest on the carrying value of the deferred royalty obligation, and record interest expense using the imputed effective interest rate. To the extent our estimates of future revenues are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will account for any such changes by adjusting the effective interest rate on a prospective basis, with a corresponding impact to the reclassification of our deferred royalty obligation. The assumptions used in determining the expected repayment term of the deferred royalty obligation and amortization period of the issuance costs requires that we make estimates that could impact the short-term and long-term classification of such costs, as well as the period over which such costs will be amortized. Research and Development Expenses Research and development costs are charged to expense as incurred and include, but are not limited to: • employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; • expenses incurred under agreements with contract research organizations, contract manufacturing organizations and consultants that help conduct clinical trials and preclinical studies; • the cost of acquiring, developing and manufacturing clinical trial materials, including comparator drugs; • facility, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies; and • costs associated with preclinical activities and regulatory operations. Costs for certain research and development activities, such as clinical trials, are recognized based on various inputs, including an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, and other information provided to us by our vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are accordingly reflected in the financial statements as prepaid or accrued research and development costs. Comprehensive Loss Comprehensive loss consists of net loss and changes in equity during a period from transactions and other equity and circumstances generated from non-owner sources, and currently consists of net loss, unrealized gains and losses on investments and foreign currency translation adjustments. Foreign Currency Transactions The functional currency of our subsidiaries in Germany and Israel are the Euro and Shekel, respectively. Foreign currency transaction gains and losses are recorded in the consolidated statements of operations. Net foreign exchange losses of $ 0.3 million were recorded in other income (expense), net for the year ended December 31, 2020. Net foreign exchange losses of less than $ 0.1 million were recorded in other income (expense), net for the years ended December 31, 2019 and 2018. 15 0 Table of Contents Income Taxes We use the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We provide a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. We have evaluated available evidence and concluded that we may not realize the benefit of our deferred tax assets; therefore, a valuation allowance has been established for the full amount of the deferred tax assets. We recognize interest and/or penalties related to income tax matters in income tax expense. Our state tax provision pertains to income generated by our KPSC entity. Our foreign tax provision pertains to foreign income taxes due by our German and Israel subsidiaries, both of which operate on a cost-plus profit margin basis. Accounting for Stock-Based Compensation We account for our stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees and non-employees, including grants of employee stock options, restricted stock and restricted stock units, as well as modifications to existing stock options and shares issued under our employee stock purchase plan (“ESPP”), to be recognized in the consolidated statements of operations based on their fair values. We use the Black-Scholes option pricing model to determine the fair value of options granted. Compensation expense related to awards to employees and non-employees with service based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the requisite service period of the award, which is generally the vesting term. Forfeitures are recognized as they occur. Net Loss Per Share Basic and diluted net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Our potential dilutive shares, stock options, unvested restricted stock and restricted stock units are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. The following potentially dilutive securities were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands): As of December 31, 2020 2019 2018 Outstanding stock options 11,276 9,843 8,917 Unvested restricted stock units 1,674 787 25 We have the option to settle the conversion obligation for our 3.00% convertible senior notes due 2025 (the “Notes”) in cash, shares or any combination of the two. As the Notes were not convertible as of December 31, 2020, they were not participating securities and they did not have an impact on the calculation of basic earnings or loss per share. Based on our net loss position, there was no impact on the calculation of dilutive loss per share during the year ended December 31, 2020. Recently Adopted Accounting Standards In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Certain amendments thereto were also issued by the FASB. ASU 2016-13 and the related amendments require that credit losses be reported as an allowance using an expected loss model, representing the 15 1 Table of Contents entity’s current estimate of credit losses expected to be incurred. The previous accounting guidance, as applied by us through December 31, 2019, was based on an incurred loss model. For available-for-sale debt securities with unrealized losses, ASU 2016-13 and the related amendments now require allowances to be recorded instead of reducing the amortized cost of the investment. ASU 2016-13 and the related amendments were effective for interim and annual fiscal periods beginning after December 15, 2019. We adopted this guidance effective January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement — Disclosure Framework-Changes to the Disclosure Requirement for Fair Value Measurement (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in Accounting Standards Codification (“ASC”) 820, Fair Value Measurement , based on the concepts in the FASB Concepts Statement, including the consideration of costs and benefits. The amendments under ASU 2018-13 were effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. We adopted this guidance effective January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements. Recently Issued Accounting Standards In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 reduces complexity of accounting for convertible debt and other equity-linked instruments. The new standard is effective for companies that are SEC filers (excluding smaller reporting companies) for fiscal years beginning after December 15, 2021 and interim periods within that year, and two years later for other companies. Companies can early adopt the standard at the start of a fiscal year beginning after December 15, 2020. The standard can either be adopted on a modified retrospective or a full retrospective basis. We plan to early adopt the standard on January 1, 2021 using the modified retrospective basis. Upon adoption of ASC 2020-06, we expect the carrying value of our convertible debt will increase by approximately $ 50.6 million with a corresponding decrease to additional paid-in capital of $ 65.6 million and a decrease to accumulated deficit of $ 15.0 million. Our deferred tax liability is also expected to decrease by approximately $ 11.8 million with a corresponding increase in the income tax valuation allowance. While we do not expect a material impact to our consolidated statements of operations and consolidated statements of cash flows upon adoption, non-cash interest expense associated with the amortization of debt discounts will be significantly reduced in future periods. CARES Act In March 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law and provides an estimated $ 2.2 trillion to fight the COVID-19 pandemic and stimulate the U.S. economy. The business tax provisions of the CARES Act include temporary changes to income and non-income-based tax laws. Some of the key income tax provisions include (i) eliminating 80% of taxable income limitations by allowing corporate entities to fully utilize net operating loss (“NOL”) carryforwards to offset taxable income in 2020, 2019 or 2018 and reinstating it for tax years after 2020; (ii) allowing NOLs generated in 2020, 2019 or 2018 to be carried back five years; (iii) increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for the 2020 and 2019 tax years; (iv) allowing taxpayers with alternative minimum tax credits to claim a refund for the entire amount of the credit instead of recovering the credit through refunds over a period of years, as required by the 2017 Tax Cut and Jobs Act; and (v) allowing entities to deduct more of their charitable cash contributions made during calendar year 2020 by increasing the taxable income limitation to 25% from 10%. Companies are required to account for these provisions in the period that includes the March 2020 enactment date (i.e., the first quarter for calendar year-end entities). We have assessed the impact of these provisions and they are not material to our consolidated financial statements or related disclosures. 15 2 Table of Contents Measures not related to income-based taxes within the CARES Act include (i) allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020 over the following two years and (ii) allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds. These measures of the CARES Act also are not material to our consolidated financial statements or related disclosures. 3. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): December 31, Estimated Useful Life (In Years) 2020 2019 Laboratory equipment 4 $ 610 $ 593 Furniture and fixtures 5 654 654 Office and computer equipment 3 702 598 Leasehold improvements Lesser of useful life or lease term 5,441 5,443 7,407 7,288 Less accumulated depreciation and amortization ( 5,188 ) ( 4,242 ) $ 2,219 $ 3,046 Depreciation and amortization expense recorded for the years ended December 31, 2020, 2019, and 2018 was $ 1.0 million, $ 1.0 million and $ 0.7 million, respectively. 4. Investments The following table summarizes our investments in debt securities, classified as available-for-sale as of December 31, 2020 (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Short-term: Corporate debt securities $ 136,677 $ 189 $ ( 33 ) $ 136,833 Commercial paper 23,485 3 ( 1 ) 23,487 U.S. government and agency securities 3,002 — — 3,002 Long-term: Corporate debt securities (one to two-year maturity) 23,195 126 ( 12 ) 23,309 U.S. government and agency securities (one to two-year maturity) 897 9 — 906 $ 187,256 $ 327 $ ( 46 ) $ 187,537 15 3 Table of Contents The following table summarizes our investments in debt securities, classified as available-for-sale as of December 31, 2019 (in thousands): Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Fair Value Short-term: Corporate debt securities $ 89,110 $ 12 $ ( 43 ) $ 89,079 Commercial paper 39,004 18 — 39,022 U.S. government and agency securities 4,990 7 — 4,997 Long-term: Corporate debt securities (one to two-year maturity) 2,017 — ( 1 ) 2,016 $ 135,121 $ 37 $ ( 44 ) $ 135,114 At December 31, 2020 and 2019, we held 37 and 27 debt securities, respectively, that were in an unrealized loss position. The unrealized losses at December 31, 2020 and 2019 are attributable to changes in interest rates and we do no t believe any unrealized losses represent credit losses. We do not intend to sell these securities and it is not more likely than not that we will be required to sell them before recovery of their amortized cost basis. The following table summarizes our debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): Less than 12 Months 12 Months or Longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Commercial paper $ 2,496 $ ( 1 ) $ — $ — $ 2,496 $ ( 1 ) Corporate debt securities 85,984 ( 45 ) — — 85,984 ( 45 ) Total $ 88,480 $ ( 46 ) $ — $ — $ 88,480 $ ( 46 ) The following table summarizes our debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): Less than 12 Months 12 Months or Longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Corporate debt securities $ 63,845 $ ( 44 ) $ — $ — $ 63,845 $ ( 44 ) Total $ 63,845 $ ( 44 ) $ — $ — $ 63,845 $ ( 44 ) 5. Inventory The following table presents our inventory of XPOVIO (in thousands): December 31, 2020 2019 Raw materials $ 1,919 $ — Work in process 646 273 Finished goods 79 73 Total inventory $ 2,644 $ 346 15 4 Table of Contents At December 31, 2020 and 2019, all of our inventory was related to XPOVIO, which was approved by the FDA in July 2019, at which time we began to capitalize costs to manufacture XPOVIO. Prior to FDA approval of XPOVIO, all costs related to the manufacturing of XPOVIO and related material were charged to research and development expense in the period incurred. During 2020, we recorded an inventory-related excess and obsolescence provision of $ 0.3 million. We did no t record such a provision in 2019. 6. Accrued Expenses Accrued expenses consisted of the following (in thousands): December 31, 2020 2019 Payroll and employee-related costs $ 16,214 $ 13,630 Research and development costs 15,087 13,122 Interest 12,250 4,371 Professional fees 5,229 6,172 Other 4,150 3,583 $ 52,930 $ 40,878 7. Related Party Transactions We paid consulting expenses of $ 0.3 million, $ 0.2 million and $ 0.2 million for the years ended December 31, 2020, 2019 and 2018, respectively, for consulting services with certain related parties, including a family member of management and a board member. At both December 31, 2020 and 2019, there was less than $ 0.1 million included in accounts payable and accrued expenses due to related parties. 8. Stockholders’ Equity Underwritten Offerings On March 6, 2020, we completed a follow-on offering under our shelf registration statement on Form S-3 pursuant to which we issued an aggregate of 7,187,500 shares of common stock, which included the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 24.00 per share. We received aggregate net proceeds of approximately $ 161.8 million from the offering after deducting the underwriting discounts and commissions and other offering expenses. On May 7, 2018, we completed a follow-on offering under our shelf registration statement on Form S-3 (File No. 333-222726) pursuant to which we issued an aggregate of 10,525,424 shares of common stock, which included the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 14.75 per share. We received aggregate net proceeds of approximately $ 145.7 million from the offering after deducting the underwriting discounts and commissions and other offering expenses. Open Market Sale Agreement On August 17, 2018, we entered into an Open Market Sale Agreement (the “Open Market Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which we may issue and sell shares of our common stock having an aggregate offering price of up to $ 75.0 million from time to time through Jefferies (the “Open Market Offering”). On May 5, 2020, we entered into Amendment No. 1 to the Open Market Sale Agreement, pursuant to which we increased the maximum aggregate offering price of shares of our common stock that we may issue and sell from time to time through Jefferies, by $ 100.0 million, from $ 75.0 million to up to $ 175.0 million (the “Open Market Shares”). 15 5 Table of Contents Under the Open Market Sale Agreement, Jefferies may sell the Open Market Shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). We may sell the Open Market Shares in amounts and at times to be determined by us from time to time subject to the terms and conditions of the Open Market Sale Agreement, but we have no obligation to sell any of the Open Market Shares in an Open Market Offering. We or Jefferies may suspend or terminate the offering of Open Market Shares upon notice to the other party and subject to other conditions. We have agreed to pay Jefferies commissions for its services in acting as agent in the sale of the Open Market Shares in the amount of up to 3.0 % of gross proceeds from the sale of the Open Market Shares pursuant to the Open Market Sale Agreement. We have also agreed to provide Jefferies with customary indemnification and contribution rights. During the year ended December 31, 2020, we did no t sell any shares under the Open Market Sale Agreement. During the year ended December 31, 2019, we sold an aggregate of 3,712,359 shares of our common stock under the Open Market Sale Agreement, for net proceeds of approximately $ 46.2 million. 9. Commitments and Contingencies 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 $ 0.6 million. The amount is classified within long-term restricted cash. Upon the adoption of ASU 2016-02, we recorded an operating lease right-of-use asset of $ 11.7 million and corresponding lease liability of $ 16.0 million related only to the Newton, MA Lease. As of December 31, 2018, there was a balance of $ 1.7 million and $ 2.6 million related to unamortized deferred rent and tenant incentive allowances, respectively, for the Newton, MA Lease, both accounted for as liabilities. These balances were deducted from the lease liability on the Newton, MA Lease in arriving at the right-of-use asset upon adoption of ASU 2016-02 on January 1, 2019. The Newton, MA Lease provides for increases in future minimum annual rental payments, as defined in the lease agreement. The Newton, MA Lease also includes real estate taxes and common area maintenance (“CAM”) charges in the annual rental payments. As these charges were included in minimum annual rental payments as part of our accounting for the Newton, MA Lease under ASC 840 through December 31, 2018, we have included such amounts in the calculation of the operating lease liability, consistent with ASC 842 and our accounting policy elections thereunder. The operating lease cost for the Newton, MA Lease for both the years ended December 31, 2020 and 2019 was $ 2.8 million, of which approximately $ 1.0 million and $ 0.9 million, respectively, were charges for CAM. 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 the years ended December 31, 2020 and 2019. 15 6 Table of Contents Lease Commitments As of December 31, 2020, future minimum lease payments under non-cancellable operating lease agreements for which we have recognized operating lease right-of-use assets and liabilities are as follows (in thousands): Years ending December 31, Future Minimum Payments 2021 $ 3,277 2022 3,447 2023 3,718 2024 3,817 2025 and thereafter 2,918 Total minimum lease payments $ 17,177 Less: present value adjustment ( 3,975 ) Present value of minimum lease payments $ 13,202 As of December 31, 2020, the remaining lease term on the Newton, MA Lease was 4.8 years. The lease has a renewal option for an additional five years, although there is no economic penalty for failure to exercise the option. However, because we did not elect the use of hindsight in estimating the lease term for leases subject to transition to the new standard, and the renewal option was not previously considered in our assessment of the lease term for the Newton, MA Lease before adoption of ASC 842, the renewal option was not considered as part of the lease term in calculating the operating lease right-of-use assets and liabilities as of January 1, 2019. As a discount rate was not directly observable for our Newton, MA Lease, the discount rate used to calculate the net present value of future payments was our incremental borrowing rate calculated at transition based on the remaining lease term. Upon adoption and through December 31, 2020, the discount rate used to calculate the operating lease liability was 11 %. The incremental borrowing rate is the rate of interest that we would expect to pay to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment. In determining the incremental borrowing rate, we considered (i) our estimated public credit rating, (ii) our observable debt yields, as well as other bonds in the market issued by other companies with similar credit ratings as us, and (iii) adjustments necessary for collateral, lease term, and inflation or foreign currency. Litigation From time to time we may face legal claims or actions in the normal course of business. We were named as a defendant in a securities class action litigation filed on July 23, 2019 in the U.S. District Court for the District of Massachusetts. The complaint was filed by the Allegheny County Employees’ Retirement System, against us and certain of our current and former executive officers and directors as well as the underwriters of our public offerings of common stock conducted in April 2017 and May 2018. This complaint was voluntarily dismissed on March 12, 2020. A second complaint was filed by Heather Mehdi on September 17, 2019, in the same court and against the same defendants with the exception of the underwriters. In April 2020, the court appointed a lead plaintiff, Myo Thant (“Plaintiff”), who filed an amended complaint on June 29, 2020. The amended complaint alleges violations of federal securities laws based on our disclosures related to the results from the Phase 2 SOPRA study and Part 2 of the Phase 2b STORM study, and seeks unspecified compensatory damages, including interest; reasonable costs and expenses, including attorneys’ and expert fees; and such equitable/injunctive relief or other relief as the court may deem just and proper. We have reviewed the allegations and believe they are without merit. We moved to dismiss the complaint on July 31, 2020 and concluded related briefing in September 2020. Before the court ruled on this motion to dismiss, Plaintiff filed a second amended complaint. We moved to dismiss the second amended complaint on November 2, 2020. On December 14, 2020, we were named as a 1 57 Table of Contents defendant in a shareholder derivative suit based on allegations substantially similar to those in the class action litigation. The suit was filed in the U.S. District Court for the District of Massachusetts, by Plaintiff Vladimir Gusinsky Revocable Trust, against us and certain of our current and former executive officers and directors. On January 12, 2021, the shareholder derivative suit was stayed pending the outcome of further proceedings in the securities class action. We intend to defend vigorously against this litigation. 10. Product Revenue To date, our only source of product revenue has been from the U.S. sales of XPOVIO, which we began shipping to our customers in July 2019. The following table summarizes activity in each of the product revenue allowance and reserve categories (in thousands): Discounts and Chargebacks Fees, Rebates, and Other Incentives Returns Total Beginning balance at July 3, 2019 $ — $ — $ — $ — Provision related to sales in the current year 2,657 2,318 234 5,209 Credit and payments made ( 1,655 ) ( 499 ) — ( 2,154 ) Ending balance at December 31, 2019 1,002 1,819 234 3,055 Provision related to sales in the current year 9,754 4,263 435 14,452 Credits and payments made ( 8,677 ) ( 3,889 ) — ( 12,566 ) Ending balance at December 31, 2020 $ 2,079 $ 2,193 $ 669 $ 4,941 Discounts and chargebacks are recorded as reductions of accounts receivable, and returns, fees, rebates, and other incentives are recorded as a component of accrued expenses. As of December 31, 2020 and 2019, net product revenue of $ 12.9 million and $ 7.9 million, respectively, were included in accounts receivable. To date, we have had no bad debt write-offs and we do not currently have credit issues with any customers. There were no credit losses associated with our accounts receivables as of December 31, 2020 and 2019. 11. License and Asset Purchase Agreements During 2020, we were a party to the following license and other strategic agreements: Antengene License Agreement In May 2020, we entered into an amendment to our May 2018 license agreement (the “Original Antengene Agreement” and, as amended, the “Amended Antengene Agreement”) with Antengene Therapeutics Limited, a corporation organized and existing under the laws of Hong Kong (“Antengene”) and a subsidiary of Antengene Corporation Co. Ltd., a corporation organized and existing under the laws of the People’s Republic of China, pursuant to which we expanded the territory licensed to Antengene in the Original Antengene Agreement for the exclusive development and commercialization rights of selinexor, eltanexor and KPT-9274, each for the diagnosis, treatment and/or prevention of all human oncology indications, as well as verdinexor for the diagnosis, treatment and/or prevention of certain human non-oncology indications (“Antengene Licensed Compounds”). Under the terms of the Amended Antengene Agreement, Antengene has the exclusive development and commercialization rights for the Antengene Licensed Compounds in mainland China, Taiwan, Hong Kong, Macau, South Korea, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, 1 58 Table of Contents Vietnam, Australia and New Zealand (the “Antengene Territory”). Under the terms of the Original Antengene Agreement, we received an upfront cash payment of $ 11.7 million in 2018 and in June 2020 we received a one-time upfront cash payment of $ 11.7 million in connection with the Amended Antengene Agreement. We are also entitled to future milestone payments from Antengene if certain development, regulatory and commercialization goals are achieved. Finally, we are also eligible to receive tiered double-digit royalties based on future net sales of selinexor and eltanexor, and tiered single- to double-digit royalties based on future net sales of verdinexor and KPT-9274 in the Antengene Territory. In addition, upon Antengene’s election and the parties’ full execution of a manufacturing technology transfer plan and satisfaction of other specified conditions (the “Antengene Manufacturing Election”), we will grant to Antengene non-exclusive rights to manufacture the Antengene Licensed Compounds and products containing such compounds in or outside of the Antengene Territory solely for development and commercialization in the fields in the Antengene Territory. As part of the Amended Antengene Agreement, Antengene will also have the right to participate in global clinical studies of the Antengene Licensed Compounds and will bear the cost and expense for patients enrolled in clinical studies in the Antengene Territory. Antengene is responsible for seeking regulatory and marketing approvals for the Antengene Licensed Compounds in the Antengene Territory, as well as any development of the products specifically necessary to obtain such approvals. Antengene is also responsible for the commercialization of the Antengene Licensed Compounds in the Oncology Field and Non-Oncology Field, as applicable, in the Antengene Territory at its own cost and expense. Until such time as Antengene elects to manufacture its own drug substance, we will furnish clinical supplies of drug substance to Antengene for use in Antengene’s development efforts pursuant to a clinical supply agreement between us and Antengene, and Antengene may elect to have us provide commercial supplies of drug product to Antengene pursuant to a commercial supply agreement between us and Antengene, in each case the costs of which will be borne by Antengene. The Amended Antengene Agreement will continue in effect on a product-by-product, country-by-country basis until the later of the tenth anniversary of the first commercial sale of the applicable product in such country or the expiration of specified patent protection and regulatory exclusivity periods for the applicable product in such country. However, the Amended Antengene Agreement may be terminated earlier by (i) either party for breach of the Amended Antengene Agreement by the other party or in the event of the insolvency or bankruptcy of the other party, (ii) Antengene on a product-by-product basis for certain safety reasons or on a product-by-product, country-by-country basis for any reason with 180 days’ prior notice or (iii) us in the event Antengene challenges or assists with a challenge to certain of our patent rights . We assessed the Amended Antengene Agreement in accordance with ASC 606 and concluded that the amendment was a contract modification. We further concluded that the performance obligations under the Amended Antengene Agreement were the same performance obligations identified in the Original Antengene Agreement, including the following material promises under the contract: (i) exclusive licenses for each Antengene Licensed Compound; (ii) initial data transfers for each Antengene Licensed Compound, which consisted of regulatory data compiled by us for the Antengene Licensed Compounds as of May 2018 (the “Antengene Effective Date”); and (iii) obligations to stand-ready to provide an initial clinical supply for each Antengene Licensed Compound. We also identified immaterial promises under the contract relating to information exchanges and participation on operating committees and other working groups. Separately, we also identified certain customer options that would create an obligation for us if exercised by Antengene, including (i) additional data transfers for each Antengene Licensed Compound, which would consist of the transfer of additional regulatory data compiled by us for each Antengene Licensed Compound after the Antengene Effective Date; (ii) obligations to provide additional clinical supply and related substance supply for each Antengene Licensed Compound upon request by Antengene; (iii) manufacturing technology transfers and licenses for each Antengene Licensed Compound under the Antengene Manufacturing Election, as detailed above; and (iv) options for a backup compound, which represents Antengene’s option to select a replacement compound in the event it elects to discontinue the development of the Antengene Licensed Compounds (the “Antengene Transfer Options”). The 1 59 Table of Contents Antengene Transfer Options individually represent material rights, as they were offered at a significant and incremental discount. Therefore, they were further assessed as performance obligations under the Amended Antengene Agreement. Finally, we also identified certain other customer options that would create a manufacturing obligation for us if exercised by Antengene, including for commercial supply. These options do not represent a material right, as they are not offered at a significant and incremental discount. In further evaluating the promises detailed above, we determined that the exclusive licenses, initial data transfers, and stand-ready obligation to provide initial clinical supply for each Antengene Licensed Compound were not distinct from one another, and must be combined as four separate performance obligations (the “Antengene Combined License Obligation for selinexor,” “Antengene Combined License Obligation for eltanexor,” “Antengene Combined License Obligation for KPT-9274” and “Antengene Combined License Obligation for verdinexor”). This is because, for each Antengene Licensed Compound, Antengene requires the initial data transfer and initial clinical supply to derive benefit from the exclusive licenses, since we did not grant manufacturing licenses to any of the Antengene Licensed Compounds at contract inception. We also determined that each of the Antengene Transfer Options represents a distinct performance obligation. Based on these determinations, we identified eight performance obligations at the inception of the Antengene License Agreement, including (i) the Antengene Combined License Obligation for selinexor; (ii) the Antengene Combined License Obligation for eltanexor; (iii) the Antengene Combined License Obligation for KPT-9274; (iv) the Antengene Combined License Obligation for verdinexor; and the four components of the Antengene Transfer Options, including (v) the material right for additional data transfer; (vi) the material right for additional clinical supply and related substance supply; (vii) the material right for manufacturing technology transfer and license; and (viii) the material right for the option for a backup compound. We further determined that the up-front payment of $ 11.7 million, received upon execution of the Original Antengene Agreement, constituted the entirety of the consideration included in the transaction price at contract inception, which was allocated to the performance obligations based on their relative stand-alone selling prices. We determined that substantially all of the total standalone selling price in the arrangement was derived from the four Antengene Combined License Obligations for selinexor, eltanexor, KPT-9274 and verdinexor. In connection therewith, we also estimated the standalone selling price for each of the material rights within the Antengene Transfer Options, and determined that such amounts were insignificant, and, therefore, immaterial for purposes of allocation. Accordingly, we allocated the $ 11.7 million transaction price among the Antengene Combined License Obligations as follows: $ 9.4 million for selinexor, $ 1.1 million for eltanexor, $ 1.0 million for KPT-9274, and $ 0.2 million for verdinexor. We believe that a change in the assumptions used to determine our best estimate of the stand-alone selling prices for any of the identified performance obligations would not have a significant effect on the allocation of the underlying transaction price to the performance obligations. Under the Original Antengene Agreement, we had already fulfilled all of our promises under the combined performance obligations for selinexor and KPT-9274 as of the effective date of the Amended Antengene Agreement. We recognized $ 1.0 million under the Original Antengene Agreement during the first quarter of 2020 and had recognized $ 9.4 million under the Original Antengene Agreement in 2019. Accordingly, the licenses to the incremental territories for selinexor and KPT-9274 were considered distinct from the promised goods and services already provided. By contrast, we have not yet fulfilled all of our promises under the combined performance obligations for eltanexor and verdinexor under the Original Antengene Agreement. Accordingly, the licenses to the incremental territories for eltanexor and verdinexor are not distinct from promised goods and services already provided. Based on the conclusions noted above, we updated the transaction price, which included the $ 1.3 million unrecognized deferred revenue from the $ 11.7 million upfront payment we received from Antengene under the terms of the Original Antengene Agreement, and the $ 11.7 million upfront payment we received from Antengene under the terms of the Amended Antengene Agreement, and allocated the total, or $ 13.0 million, to the remaining performance obligations based on their estimated standalone selling prices as of the effective date of the Amended Antengene Agreement. Since we had already fulfilled all of our promises under the combined 16 0 Table of Contents performance obligations for selinexor and KPT-9274 as of the effective date of the Amended Antengene Agreement, we recognized a cumulative adjustment to license revenue of $ 12.7 million during the year ended December 31, 2020. For the remaining promises to be fulfilled under the combined performance obligation for eltanexor, we adjusted short-term deferred revenue to $ 0.3 million as of December 31, 2020. We will recognize such revenue when initial clinical supply of eltanexor is delivered to Antengene, which we expect to be within twelve months from December 31, 2020. For the remaining promises to be fulfilled under the combined performance obligation for verdinexor, none of the transaction price was allocated thereto, as it was assessed as immaterial in comparison to the other combined performance obligations under the Amended Antengene Agreement. Finally, we also reassessed other promised goods and services within the modified contract, including customer options and material rights, ultimately concluding such promised goods and services continue to be immaterial. The future development and regulatory milestones and cost reimbursement for providing additional clinical supply of the Antengene Licensed Compounds, all of which represent variable consideration, were evaluated under the most likely amount method, and were not included in the transaction price at contract inception and/or through December 31, 2020, because the amounts were fully constrained as of December 31, 2020. As part of our evaluation of the constraint, we considered numerous factors, including that receipt of such amounts is outside of our control. Separately, any consideration related to sales-based milestones, as well as royalties on net sales upon commercialization of XPOVIO by Antengene, will be recognized when the related sales occur, as they were determined to relate predominantly to the intellectual property licenses granted to Antengene and, therefore, have also been excluded from the transaction price in accordance with the sales-based royalty exception, as well as our accounting policy. We will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. During 2020 and 2019, we recognized $ 13.7 million and $ 9.4 million, respectively, in revenue under the Amended Antengene Agreement. In addition, in December 2020, we received $ 9.8 million in regulatory milestone payments from Antengene following certain regulatory filings by Antengene for selinexor in both multiple myeloma and DLBCL indications in Australia, Singapore and South Korea. Biogen Asset Purchase Agreement On January 24, 2018, we entered into an Asset Purchase Agreement (the “APA”) and Letter Agreement with Biogen MA Inc., a Massachusetts corporation and subsidiary of Biogen, Inc. (“Biogen”). Under the terms of the APA and Letter Agreement, we sold to Biogen exclusive worldwide rights to develop and commercialize our oral SINE compound KPT-350 and certain related assets with an initial focus in amyotrophic lateral sclerosis (“ALS”) (the “Transfer of IP”), and also granted Biogen: (i) an exclusive worldwide license under certain of our intellectual property to manufacture or have manufactured KPT-350 (the “Manufacturing License”), (ii) a technology transfer package, consisting of information and our know-how regarding the manufacture of KPT-350 (the “Manufacturing Technology Transfer”), (iii) a right, at Biogen’s request, to have us provide transition assistance regarding manufacturing and other matters (the “Transition Assistance”), (iv) existing inventory of KPT-350 (the “Inventory”), (v) an initial supply of KPT-350 (the “Initial Supply”), and (vi) a right, at Biogen’s request, to have us manufacture and supply the active pharmaceutical ingredient for an additional supply of KPT-350 (the “Additional Supply”). In consideration for these rights, we received an upfront payment of $ 10.0 million in 2018, and we are eligible to receive additional payments of up to $ 142.0 million based on the achievement by Biogen of future specified development and regulatory milestones, and up to $ 65.0 million based on the achievement by Biogen of future specified commercial milestones. We will also be eligible to receive tiered royalty payments that reach low double-digits based on future net sales until the later of the tenth anniversary of the first commercial sale of the applicable product and the expiration of specified patent protection for the applicable product, determined on a country-by-country basis. We and Biogen have made customary representations and warranties and agreed to customary covenants in the APA, including covenants requiring Biogen to use commercially reasonable efforts to develop KPT-350 in 16 1 Table of Contents specified neurological indications, including ALS, in any of the U.S., United Kingdom, France, Spain, Germany or Italy. The APA will continue in effect until the expiration of all royalty obligations, provided that the APA may be terminated earlier by Biogen, subject to the requirements that Biogen (i) negotiate in good faith with us regarding an assignment or license back to us of the purchased assets and (ii) not transfer or license the purchased assets to a third party unless such third party assumes Biogen’s obligations to us under the APA. We assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Biogen, is a customer. We identified the following material promises in the arrangement: the Transfer of IP and the Manufacturing License. We also identified immaterial promises under the contract that were not deemed performance obligations. We further determined that other promises for Additional Supply and Transition Assistance represented customer options, which would create an obligation for us if exercised by Biogen. Since no additional or material consideration is owed to us by Biogen upon exercise of the customer options for Additional Supply and Transition Assistance, we determined that both are offered at significant and incremental discounts. Accordingly, they were assessed as material rights and, therefore, separate performance obligations in the arrangement. We then determined that the Transfer of IP and the Manufacturing License were not distinct from one another and must be combined as a performance obligation (the “Combined Performance Obligation”). This is because Biogen requires the Manufacturing License to derive benefit from the Transfer of IP. Based on these determinations, as well as the considerations noted above with respect to the material rights for Additional Supply and Transition Assistance, we identified three distinct performance obligations at the inception of the contract: (i) the Combined Performance Obligation, (ii) the material right for Additional Supply, and (iii) the material right for Transition Assistance. We further determined that the up-front payment of $ 10.0 million constituted the entirety of the consideration included in the transaction price at contract inception, which was allocated to the performance obligations based on their relative stand-alone selling prices. In connection therewith, we estimated the stand-alone selling price of the (i) Combined Performance Obligation, (ii) material right for Additional Supply, and (iii) material right for Transition Assistance, and determined that the stand-alone selling price of the material rights for Additional Supply and Transition Assistance were insignificant based on various quantitative and qualitative considerations. Accordingly, we further determined that the allocation of the transaction price to the material rights for Additional Supply and Transition Assistance was insignificant. Based on the estimates of the stand-alone selling prices for each of the performance obligations, we determined that substantially all of the $ 10.0 million transaction price should be allocated to the Combined Performance Obligation. We believe that a change in the assumptions used to determine our best estimate of the stand-alone selling prices for the identified performance obligations would not have a significant effect on the allocation of the underlying transaction price to the performance obligations. Upon execution of the APA, the transaction price included only the $ 10.0 million up-front payment owed to us. We may receive further payments upon the achievement of certain regulatory and sales milestones, as detailed above, as well as tiered royalty payments that reach low double-digits based on future net sales. We expect to receive the next milestone payment under this agreement, which is $ 2.0 million, when the fifth patient in a Phase 1 Multiple Ascending Dose Trial in the U.S. of a product in ALS is dosed. The future development and regulatory milestones, which represent variable consideration, were evaluated under the most likely amount method, and were not included in the transaction price, because the amounts were fully constrained as of December 31, 2020. As part of our evaluation of the constraint, we considered numerous factors, including that receipt of such milestones is outside our control. Separately, any consideration related to sales-based milestones, as well as royalties on net sales upon commercialization by Biogen, will be recognized when the related sales occur, as they were determined to relate predominantly to the intellectual property and, therefore, have also been excluded from the transaction price in accordance with the sales-based royalty exception, as well as our accounting policy. We will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. We recognized $ 10.0 million of revenue during the first quarter of 2018, which was when we had satisfied our promises under the Combined Performance Obligation by transferring the underlying promised goods. 16 2 Table of Contents Ono License Agreement In April 2020, we terminated our October 2017 license agreement with Ono Pharmaceutical Co., Ltd., a corporation organized and existing under the laws of Japan (“Ono”), for the development and commercialization of selinexor and eltanexor for all human oncology indications in Japan, South Korea, Taiwan, Hong Kong, and the countries in the Association of Southeast Asian Nations. Subsequent to termination, all rights to selinexor and eltanexor were returned to us and no further consideration was exchanged between the parties. Accordingly, we recognized $ 2.2 million in license and other revenue during the year ended December 31, 2020, which represented the deferred revenue on the contract as of the date of termination. FORUS Therapeutics Inc. Distribution Agreement In December 2020, we entered into an exclusive distribution agreement (“FORUS Agreement”) for the commercialization of XPOVIO in Canada with FORUS Therapeutics Inc. (“FORUS”). Under the terms of the FORUS Agreement, we granted exclusive rights to FORUS as our sole and exclusive distributor of selinexor within Canada (the “FORUS Territory”). Pursuant to the terms of the FORUS Agreement, we received an upfront payment of $ 5.0 million in the fourth quarter of 2020. We are also eligible to receive additional payments if certain prespecified regulatory and commercial milestones are achieved by FORUS, as well as double-digit royalties on future net sales of XPOVIO in Canada. We have retained the exclusive production rights and will supply finished products to FORUS for commercial use in Canada. We assessed the FORUS Agreement in accordance with ASC 606 and concluded that the contract counterparty, FORUS, is a customer. We identified the following material promises under the contract: (i) transfer of exclusive rights to distribute XPOVIO in Canada; and (ii) initial data transfer, which consisted of development and regulatory data compiled by us. We also identified immaterial promises under the contract relating to ongoing regulatory cooperation from us in order to support FORUS in the regulatory approval process. Separately, we also identified a customer option, which is our obligation to provide commercial supply to FORUS throughout the term of the FORUS Agreement. This option does not represent a material right, as it is not offered at a significant and incremental discount. In further evaluating the promises detailed above, we determined that the exclusive license and initial data transfer were not distinct from one another, and must be combined as a single, distinct performance obligation. We further determined that the up-front payment of $5.0 million, received upon execution of the FORUS Agreement, constituted the entirety of the consideration included in the transaction price at contract inception, which we allocated to the performance obligation. During 2020, we recognized $ 5.0 million in revenue under the FORUS Agreement, as the performance obligation was satisfied when the initial data transfer was delivered during the fourth quarter. The future regulatory milestones, which represent variable consideration, were evaluated under the most likely amount method, and were not included in the transaction price at contract inception and/or through December 31, 2020, because the amounts were fully constrained as of December 31, 2020. As part of our evaluation of the constraint, we considered numerous factors, including that the receipt of such amounts is outside of our control. Separately, any consideration related to commercial milestones, as well as royalties on net sales upon commercialization of XPOVIO by FORUS, will be recognized when the related sales occur, as they were determined to relate predominantly to the intellectual property licenses granted to FORUS and, therefore, have also been excluded from the transaction price in accordance with the sales-based royalty exception, as well as our accounting policy. We will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. 16 3 Table of Contents The following revenue was recognized in 2020 that was included as a contract liability as of December 31, 2019 (in thousands): December 31, 2019 Additions Revenue recognized in 2020 December 31, 2020 Short-term Deferred Revenue Original Antengene Agreement $ 2,341 $ — $ ( 2,341 ) $ — Amended Antengene Agreement — 297 — 297 Total short-term deferred revenue $ 2,341 $ 297 $ ( 2,341 ) $ 297 Long-term Deferred Revenue Ono License Agreement $ 2,192 $ — $ ( 2,192 ) $ — Total long-term deferred revenue $ 2,192 $ — $ ( 2,192 ) $ — Total deferred revenue $ 4,533 $ 297 $ ( 4,533 ) $ 297 12. Stock-based Compensation In October 2013, the Board adopted and our stockholders approved the 2013 Stock Incentive Plan (the “2013 Plan”), which succeeded our 2010 Stock Incentive Plan, which has expired and under which no further grants will be made. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock-based awards. The number of shares of common stock reserved for issuance under the 2013 Plan is equal to the sum of (1) 969,696 shares plus (2) the number of shares (up to 2,126,377 shares) equal to the sum of the number of shares of common stock then available for issuance under the 2010 Plan and the number of shares of common stock subject to outstanding awards under the 2010 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2014 and continuing until, and including, the fiscal year ending December 31, 2023, equal to the lesser of (A) 1,939,393 shares of common stock, (B) 4 % of the number of shares of common stock outstanding on the first day of such fiscal year, or (C) an amount determined by the Board. In each of the first quarters of 2020, 2019 and 2018, the number of shares available for issuance under the 2013 Plan was increased by 1,939,393 shares of common stock. As of December 31, 2020, we had 1,716,897 shares available for issuance under the 2013 Plan. During 2020, 2019 and 2018, we also granted stock options through inducement grants outside of our equity compensation plans to certain employees to induce them to accept employment with us (collectively, “Inducement Grants”). The stock options were granted at an exercise price equal to the fair market value of a share of our common stock on the respective grant dates and are exercisable over four years with 25% of the total number of shares underlying the option vesting on the one year anniversary of the respective grant dates and in equal monthly installments thereafter. The foregoing grants were made pursuant to inducement grants outside of our stockholder approved equity plans as permitted under the NASDAQ Stock Market listing rules. We assessed the terms of these awards and determined there was no possibility that we would have to settle these awards in cash and therefore, equity accounting was applied. 16 4 Table of Contents Stock-based Compensation Expense In connection with all share-based payment awards, total stock-based compensation expense recognized was as follows (in thousands): Year Ended December 31, 2020 2019 2018 Cost of goods sold $ 126 $ 51 $ — Research and development 10,215 6,406 8,686 Selling, general and administrative 14,066 8,834 8,589 Total $ 24,407 $ 15,291 $ 17,275 The total stock-based compensation expense related to employee and non-employee stock options for the years ended December 31, 2020, 2019 and 2018 was $ 17.0 million, $ 12.6 million and $ 16.4 million, respectively. The total stock-based compensation expense related to restricted stock units (“RSU”) for the years ended December 31, 2020, 2019 and 2018 was $ 6.0 million, $ 1.6 million and $ 0.4 million, respectively. For the years ended December 31, 2020, 2019 and 2018, we recorded stock-based compensation expense related to the Employee Stock Purchase Plan (“ESPP”) of $ 1.4 million, $ 1.1 million and $ 0.4 million, respectively. Stock Options The following table summarizes stock option activity related to both the 2013 Plan and Inducement Grants for employees and non-employees: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (year) Aggregate Intrinsic Value (in thousands) Options outstanding at December 31, 2019 9,843,094 $ 12.40 7.0 $ 82,134 Granted 3,022,700 17.78 Exercised ( 911,464 ) 8.13 Forfeited ( 678,014 ) 14.25 Options outstanding at December 31, 2020 11,276,316 $ 14.08 6.8 $ 44,028 Options exercisable at December 31, 2020 6,463,238 $ 13.80 5.4 $ 32,154 The total intrinsic value of stock options exercised for the years ended December 31, 2020, 2019 and 2018 was $ 9.4 million, $ 2.2 million and $ 6.0 million, respectively. The fair value of each stock option granted to employees is estimated on the date of grant and for non-employees on each reporting date and upon vesting using the Black-Scholes option-pricing model. The following table summarizes the assumptions used in calculating the fair value of the awards: Year Ended December 31, 2020 2019 2018 Volatility 78 %- 82 % 79 %- 81 % 79 %- 81 % Expected term (in years) 6.0 5.5 - 6.0 5.5 - 9.8 Risk-free interest rate 0.30 %- 1.52 % 1.42 %- 2.58 % 2.50 %- 3.05 % Dividend — % — % — % 16 5 Table of Contents We use the simplified method to calculate the expected term as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for options granted to employees and non-employees. The expected term is applied to the stock option grant group as a whole, as we do not expect substantially different exercise or post-vesting termination behavior among our employee population. Our expected stock price volatility assumption for the year ended December 31, 2020 is based on the historical volatility of our publicly traded stock, given we now have five years of publicly available stock trading activity. Our stock price volatility assumption for the years ended December 31, 2019 and 2018 is based on historical volatility of a representative group of companies with similar characteristics to us and who have similar risk profiles and positions within the industry. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. We account for forfeitures as they occur. Using the Black-Scholes option-pricing model, the weighted-average grant date fair values of options granted during the years ended December 31, 2020, 2019 and 2018 was $ 12.17 , $ 6.01 and $ 8.91 per share, respectively. At December 31, 2020, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted under the 2013 Plan and Inducement Grants was $ 41.1 million, which we expect to recognize over a weighted-average period of approximately 2.6 years. Restricted Stock Units A RSU represents the right to receive one share of our common stock upon vesting of the RSU. The fair value of each RSU is based on the closing price of our common stock on the date of grant. We grant RSUs with service conditions that vest in two or four equal annual installments provided that the employee remains employed with us. During the year ended December 31, 2020, we granted 1,375,840 RSUs under the 2013 Plan. The following is a summary of RSU activity for the 2013 Plan for the years ended December 31, 2020 and 2019: Number of Shares Underlying RSUs Weighted-Average Grant Date Fair Value Unvested at December 31, 2019 787,320 $ 9.28 Granted 1,375,840 17.58 Forfeited ( 285,149 ) 15.57 Vested ( 204,288 ) 9.28 Unvested at December 31, 2020 1,673,723 $ 15.03 As of December 31, 2020, there was $ 19.5 million of unrecognized compensation costs related to unvested RSUs under the 2013 Plan, which are expected to be recognized over a weighted average period of 2.7 years. Employee Stock Purchase Plan We have an ESPP that permits eligible employees to enroll in six-month offering periods. Participants may purchase shares of our common stock, through payroll deductions, at a price equal to 85 % of the fair market value of the common stock on the first or last day of the applicable six-month offering period, whichever is lower. Purchase dates under the ESPP occur on or about May 1 and November 1 each year. In 2013, our shareholders approved an increase in the number of shares of common stock authorized for issuance pursuant to the ESPP to 242,424 shares of common stock, plus an annual increase to be added on the first day of each fiscal year, commencing on January 1, 2015 and ending on December 31, 2023, equal to the lesser of 484,848 shares of our common stock, 1 % of the number of outstanding shares on such date, or an amount determined by the Board. 16 6 Table of Contents During the years ended December 31, 2020, 2019 and 2018, $ 2.9 million, $ 1.7 million and $ 0.9 million, respectively, was withheld from employees, on an after-tax basis, in order to purchase 249,228 , 415,257 and 98,770 shares of our common stock, respectively. As of December 31, 2020, 855,104 shares of our common stock remained available for issuance under the ESPP. As of December 31, 2020, there was $ 0.5 million of total unrecognized stock-based compensation expense related to the ESPP. The expense is expected to be recognized over a period of four months . The fair value of the option component of the shares purchased under the ESPP was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions: Year Ended December 31, 2020 2019 2018 Volatility 58 %- 110 % 61 %- 104 % 48 %- 61 % Expected term (in years) 0.5 0.5 0.5 Risk-free interest rate 0.1 % 2.4 %- 2.5 % 1.3 %- 2.1 % Dividend — % — % — % 13. 401(k) Plan We have a 401(k) retirement and profit-sharing plan (the “401(k) Plan”) covering all qualified employees. The 401(k) Plan allows each participant to contribute a portion of their base wages up to an amount not to exceed an annual statutory maximum. Effective January 1, 2011, we adopted a Safe Harbor Plan that provides a Company match up to 4 % of salary. We contributed a match of $ 2.9 million, $ 1.7 million and $ 1.1 million to the 401(k) Plan for the years ended December 31, 2020, 2019 and 2018, respectively. 14. Income Taxes For the years ended December 31, 2020, 2019 and 2018, we recorded an income tax expense of $ 0.3 million, which pertains to income generated by our KPSC entity, as well as foreign income taxes due by our German and Israel subsidiaries, both of which operate on a cost-plus profit margin. The components of our current income tax provision were $ 0.1 million in state tax expense and $ 0.2 million in foreign tax expense for the year ended December 31, 2020. Our current income tax provision consisted of less than $ 0.1 million in foreign income tax expense for the years ended December 31, 2019 and 2018, respectively. We did no t have a deferred income tax provision for the years ended December 31, 2020, 2019 and 2018. The components of loss before income taxes were as follows (in thousands): Year Ended December 31, 2020 2019 2018 Foreign $ ( 37,088 ) $ ( 23,350 ) $ ( 28,689 ) U.S. ( 158,876 ) ( 176,200 ) ( 149,692 ) Totals $ ( 195,964 ) $ ( 199,550 ) $ ( 178,381 ) 1 67 Table of Contents Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of our deferred tax assets are comprised of the following (in thousands): Year Ended December 31, 2020 2019 Deferred tax assets: U.S. and state net operating loss carryforwards $ 179,462 $ 150,909 Stock-based compensation 13,814 11,914 Accruals and other temporary differences 4,970 4,212 Research and development credits 75,189 62,374 Capitalized research and development 708 1,021 Fixed assets and intangible assets 9,602 5,893 Deferred revenue — 1,051 Foreign net operating loss carryforwards — 4 Lease liability 3,084 3,443 Deferred royalty embedded derivative 421 533 AHYDO Interest 1,017 — Interest Expense - Sec 163(j) 1,321 — Unicap - Sec 263A 190 — Transaction Costs 92 — Valuation allowance ( 275,389 ) ( 224,943 ) Total deferred tax assets 14,481 16,411 Deferred tax liabilities: Convertible debt amortization ( 11,825 ) ( 13,431 ) Right-of-use asset ( 2,188 ) ( 2,462 ) Deferred royalty obligation ( 468 ) ( 518 ) Total deferred tax liabilities ( 14,481 ) ( 16,411 ) Net deferred tax assets $ — $ — We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets. Based on our history of operating losses, we have concluded that it is more likely than not that the benefit of our deferred tax assets will no t be realized. Accordingly, we have provided a full valuation allowance for deferred tax assets as of December 31, 2020, 2019 and 2018. The valuation allowance increased by approximately $ 50.5 million during the year ended December 31, 2020 to $ 275.4 million, from $ 224.9 million during the year ended December 31, 2019, primarily due to the generation of net operating losses. 168 Table of Contents A reconciliation of income tax expense computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows: Year Ended December 31, 2020 2019 2018 Federal income tax expense at statutory rate 21.0 % 21.0 % 21.0 % State income tax, net of federal benefit 1.6 % 1.7 % 0.7 % Permanent differences ( 1.0 )% ( 0.5 )% — % Research and development credit 6.5 % 6.0 % 7.8 % Foreign rate differential ( 4.1 )% ( 2.5 )% ( 3.4 )% Change in valuation allowance ( 25.7 )% ( 25.9 )% ( 28.2 )% Provision to return adjustments 0.3 % 0.6 % 2.4 % Other 1.2 % ( 0.4 )% ( 0.6 )% Federal rate change — % — % 0.3 % Effective Income Tax rate ( 0.2 )% — % — % As of December 31 , 2020 , 2019 and 2018 , we had U.S. federal net operating loss carryforwards of approximately $ 698.8 million, $ 576.5 million and $ 427.0 million, respectively, which may be able to offset future income tax liabilities. Of the $ 698.8 million carryforward as of December 31 , 2020 , $ 405.9 million of the carryforward has an indefinite life and $ 292.9 million will expire at various dates through 2037 . As of December 31 , 2020 , 2019 and 2018 , we had U.S. state net operating loss carryforwards of approximately $ 575.2 million, $ 502.3 million and $ 414.8 million, respectively, which may be available to offset future state income tax liabilities and expire at various dates through 2040 . As of December 31 , 2020 , 2019 and 2018 , we did no t have any foreign net operating loss carryforwards to offset future foreign income tax liabilities. As of December 31, 2020, 2019 and 2018, we had federal research and development tax credit carryforwards of approximately $ 69.8 million, $ 58.5 million and $ 46.9 million, respectively, available to reduce future tax liabilities, which expire at various dates through 2040. As of December 31, 2020, 2019 and 2018, we had state research and development tax credit carryforwards of approximately $ 6.8 million, $ 4.9 million and $ 3.0 million, respectively, available to reduce future tax liabilities, which expire at various dates through 2035. We completed a study of R&D tax credits through December 31, 2019 and adjusted our deferred tax asset for the result of that study. For the year ending December 31, 2020, we generated research credits but have not conducted a study to document the qualified activities. This study may result in an adjustment to our research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against our research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance. Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of us immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. Previously, we have completed several financings since our inception, which have resulted in changes in control as defined by Sections 382 and 383 of the Internal Revenue Code. We reduced our deferred tax assets for tax attributes we believe will expire unused. In the future, we may complete financings that could result in a change in control, which will reduce our deferred tax assets for tax attributes we believe will expire unused due to the change in control limitations. 1 69 Table of Contents We will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2020, 2019 and 2018, we had no accrued interest or penalties related to uncertain tax positions and no such amounts have been recognized. We or one of our subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. Our federal, state and foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2017 through December 31, 2020. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. 15. Long-term obligations 3.00% Convertible Senior Notes due 2025 On October 16, 2018, we completed an offering of $ 150.0 million aggregate principal amount of our 3.00 % convertible senior notes due 2025 (the “Notes”). In addition, on October 26, 2018, we issued an additional $ 22.5 million aggregate principal amount of the Notes pursuant to the full exercise of the option to purchase additional Notes granted to the initial purchasers in the offering. The Notes were sold in a private offering to qualified institutional buyers in reliance on Rule 144 A under the Securities Act. In accordance with accounting guidance for debt with conversion and other options, we separately accounted for the liability component (“Liability Component”) and the embedded conversion option (“Equity Component”) of the Notes by allocating the proceeds between the Liability Component and the Equity Component, due to our ability to settle the Notes in cash, shares of our common stock or a combination of cash and shares of our common stock, at our option. In connection with the issuance of the Notes, we incurred approximately $ 5.6 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs between the Liability Component and the Equity Component based on the allocation of the proceeds. Of the total debt issuance costs, $ 2.2 million was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $ 3.4 million was allocated to the Liability Component and recorded as a reduction of the Notes. The portion allocated to the Liability Component is amortized to interest expense using the effective interest method over seven years . The Notes are senior unsecured obligations and bear interest at a rate of 3.00 % per year payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2019. Upon conversion, the Notes will be converted into cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. The Notes will be subject to redemption at our option, on or after October 15, 2022, in whole or in part, if the conditions described below are satisfied. The Notes will mature on October 15, 2025 , unless earlier converted, redeemed or repurchased in accordance with their terms. Subject to satisfaction of certain conditions and during the periods described below, the Notes may be converted at an initial conversion rate of 63.0731 shares of common stock per $ 1 principal amount of the Notes (equivalent to an initial conversion price of approximately $ 15.85 per share of common stock). Holders of the Notes may convert all or any portion of their Notes, in multiples of $ 1 principal amount, at their option at any time prior to the close of business on the business day immediately preceding June 15, 2025 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2018 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the Notes on each applicable trading day; (2) during the five business day period immediately after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $ 1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; 170 Table of Contents (3) if we call the Notes for redemption, until the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events as described within the indenture governing the Notes. As of December 31, 2020, none of the ab o ve circumstances had occurred and as such, the Notes could not have been converted. We may not redeem the Notes prior to October 15, 2022. On or after October 15, 2022, we may redeem for cash all or part of the Notes at our option if the last reported sale price of our common stock equals or exceeds 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending within five trading days prior to the date on which we send any notice of redemption. The redemption price will be 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any. In addition, calling any convertible note for redemption will constitute a make-whole fundamental change with respect to that convertible note, in which case the conversion rate applicable to the conversion of that convertible note, if it is converted in connection with the redemption, will be increased in certain circumstances. The initial carrying amount of the Liability Component of $ 101.2 million w a s calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected our non-convertible borrowing rate for similar debt. The Equity Component of the Notes of $ 67.9 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the Notes of $ 172.5 million and the fair value of the liability of the Notes of approximately $ 104.7 million on their respective dates of issuance. The excess of the principal amount of the Liability Component over its carrying amount is amortized to interest expense using the effective interest method over seven years . The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification. The outstanding balances of the Notes as of December 31, 2020 consisted of the following (in thousands): Outstanding Balances Liability component: Principal $ 172,500 Less: debt discount and issuance costs, net ( 54,572 ) Net carrying amount $ 117,928 Equity component: $ 65,641 171 Table of Contents We determined the expected life of the Notes was equal to its seven-year term. The effective interest rate on the Liability Component of the Notes was 11.85 %. As of December 31, 2020, the “if-converted value” did not exceed the remaining principal amount of the Notes. The fair value of the Notes was determined based on data points other than quoted prices that are observable, either directly or indirectly, and has been classified as Level 2 within the fair value hierarchy. The fair value of the Notes, which differs from their carrying value, is influenced by market interest rates, our stock price and stock price volatility. The estimated fair value of the Notes as of December 31, 2020 was approximately $ 215.8 million. The following table sets forth total interest expense recognized related to the Notes (in thousands): Year Ended December 31, 2020 2019 2018 Contractual interest expense $ 5,175 $ 5,175 $ 1,078 Amortization of debt discount 7,685 6,849 1,353 Amortization of debt issuance costs 386 344 68 Total interest expense $ 13,246 $ 12,368 $ 2,499 Future minimum payments on the Notes as of December 31, 2020 were as follows (in thousands): Years ended December 31, Future Minimum Payments 2021 $ 5,175 2022 5,175 2023 5,175 2024 5,175 2025 177,675 Total minimum payments $ 198,375 Less: interest ( 25,875 ) Less: unamortized discount ( 54,572 ) Convertible senior notes $ 117,928 Deferred Royalty Obligation In September 2019, we entered into a deferred royalty obligation pursuant to a Revenue Interest Financing Agreement with HealthCare Royalty Partners III, L.P. and HealthCare Royalty Partners IV, L.P. (“HCR”) whereby HCR will receive payments from us at a tiered percentage (the “Applicable Tiered Percentage”) of future net revenues of XPOVIO and any of our other future products, including worldwide net product sales and upfront payments, milestones, and royalties. We received $ 75.0 million upon closing (the “First Investment Amount”) and have the right to receive an additional $ 75.0 million (the “Second Investment Amount” and together with the First Investment Amount, the “Investment Amount”) upon the achievement of future regulatory and commercial milestones and subject to the approval of both parties and customary closing conditions. In exchange for the First Investment Amount, HCR will receive tiered royalty payments in the mid-single digits based on worldwide net revenues of XPOVIO and any of our other future products, including worldwide net product sales and upfront payments, milestones, and royalties. The Applicable Tiered Percentages are subject to reduction in the future if a target based on cumulative U.S. net sales is met. Total royalty payments are capped at 185 % of the Investment Amount. If HCR has not received 65 % of the Investment Amount by December 31, 2022 or 100 % of the Investment Amount by December 31, 2024, we must make a cash payment sufficient to gross up the payments to such minimum amounts. 172 Table of Contents As the repayment of the funded amount is contingent upon worldwide net product sales and upfront payments, milestones, and royalties, the repayment term may be shortened or extended depending on actual worldwide net product sales and upfront payments, milestones, and royalties. The repayment period commenced on October 1, 2019 and expires on the earlier of (i) the date in which HCR has received cash payments totaling an aggregate of 185 % of the Investment Amount or (ii) the legal maturity date of October 1, 2031. If HCR has not received payments equal to 185 % of the Investment Amount by the twelve-year anniversary of the initial closing date, we shall pay an amount equal to the Investment Amount plus a specific annual rate of return less payments previously received by HCR. In the event of a change of control, we are obligated to pay HCR an amount equal to 185 % of the Investment Amount less payments previously received by HCR. In addition, upon the occurrence of an event of default, including, among others, our failure to pay any amounts due to HCR under the deferred royalty obligation, insolvency, our failure to pay indebtedness when due, the revocation of regulatory approval of XPOVIO in the U.S. or our breach of any covenant contained in the Revenue Interest Financing Agreement and our failure to cure the breach within the prescribed time frame, we are obligated to pay HCR an amount equal to 185 % of the Investment Amount less payments previously received by HCR. In addition, upon an event of default, HCR may exercise all other rights and remedies available under the Revenue Interest Financing Agreement, including foreclosing on the collateral that was pledged to HCR, which consists of all of our present and future assets relating to XPOVIO. We have evaluated the terms of the deferred royalty obligation and concluded that the features of the Investment Amount are similar to those of a debt instrument. Accordingly, we have accounted for the transaction as long-term debt. We have further evaluated the terms of the debt and determined that the repayment of 185 %of the Investment Amount, less any payments made to date, upon a change of control is an embedded derivative that requires bifurcation from the debt instrument and fair value recognition. We determined the fair value of the derivative using an option pricing Monte Carlo simulation model taking into account the probability of change of control occurring and potential repayment amounts and timing of such payments that would result under various scenarios, as further described in Note 2, “ Summary of Significant Accounting Policies” . The aggregate fair value of the embedded derivative was $ 1.8 million and $ 2.3 million as of December 31, 2020 and 2019, respectively. We recorded a $ 0.5 million gain on the embedded derivative in other (income) expense, net during 2020 and did not incur a gain or loss on the embedded derivative during 2019. We will remeasure the embedded derivative to fair value each reporting period until the time the features lapse and/or termination of the deferred royalty obligation. The effective interest rate as of December 31, 2020 was 18.5 %. In connection with the deferred royalty obligation, we incurred debt issuance costs totaling $ 1.4 million. Debt issuance costs have been netted against the debt and are being amortized over the estimated term of the debt using the effective interest method, adjusted on a prospective basis for changes in the underlying assumptions and inputs. The assumptions used in determining the expected repayment term of the debt and amortization period of the issuance costs requires that we make estimates that could impact the short and long-term classification of these costs, as well as the period over which these costs will be amortized. The carrying value of the deferred royalty obligation at December 31, 2020 and 2019 was $ 71.3 million based on $ 75.0 million of proceeds, net of the fair value of the bifurcated embedded derivative liability upon execution of the Revenue Interest Financing Agreement, and debt issuance costs incurred. The carrying value of the deferred royalty obligation approximates fair value at December 31, 2020 and 2019 and was measured using Level 3 inputs. The estimated fair market value was calculated using an option pricing Monte Carlo simulation model with inputs consistent with those used in determining the embedded derivative values as described in Note 2 “ Summary of Significant Accounting Policies”. 17 3 Table of Contents EXHIBIT INDEX Exhibit Number Description of Exhibit 3.1 Restated Certificate of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on August 7, 2019) 3.2 Second Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on December 17, 2020) 4.1 Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 28, 2013) 4.2 Indenture (including form of Note) with respect to the Registrant’s 3.00% convertible senior notes due 2025, dated as of October 16, 2018, between the Registrant and Wilmington Trust, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on October 16, 2018) 4.3 Description of Securities Registered under Section 12 of the Exchange Act 10.1* 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 4, 2013) 10.2* Forms of Non-Qualified Stock Option Agreement under 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 4, 2013) 10.3* 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 28, 2013) 10.4* Form of Incentive Stock Option Agreement under 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 28, 2013) 10.5* Form of Nonstatutory Stock Option Agreement under 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 28, 2013) 10.6* Form of Restricted Stock Unit Agreement under the 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on November 9, 2015) 10.7* Form of Nonstatutory Stock Option Agreement for Inducement Grants (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on May 10, 2018) 10.8* Form of Incentive Stock Option Agreement under 2013 Stock Incentive Plan adopted August 25, 2020 (incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on November 2, 2020) 10.9* Form of Nonstatutory Stock Option Agreement under 2013 Stock Incentive Plan adopted August 25, 2020 (incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q (File No.001-36167) filed with the Commission on November 2, 2020) 174 Table of Contents Exhibit Number Description of Exhibit 10.10* Form of Restricted Stock Unit Agreement under 2013 Stock Incentive Plan adopted August 25, 2020 (incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q (File No.001-36167) filed with the Commission on November 2, 2020) 10.11* Form of Nonstatutory Stock Option Agreement for Inducement Grants adopted August 25, 2020 (incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q (File No.001-36167) filed with the Commission on November 2, 2020) 10.12* 2020 Israeli Equity Incentive Sub Plan to the 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s Quarterly Report on Form 10-Q (File No.001-36167) filed with the Commission on November 2, 2020) 10.13* Form of Option Agreement under 2020 Israeli Equity Incentive Sub Plan to the 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form 10-Q (File No.001-36167) filed with the Commission on November 2, 2020) 10.14* Form of Restricted Stock Unit Agreement under 2020 Israeli Equity Incentive Sub Plan to the 2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.15 to the Registrant’s Quarterly Report on Form 10-Q (File No.001-36167) filed with the Commission on November 2, 2020) 10.15* 2013 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 28, 2013) 10.16* Form of Indemnification Agreement between the Registrant and each of its Directors (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (File No. 333-191584) filed with the Commission on October 4, 2013) 10.17* Amended and Restated Letter Agreement, dated as of August 31, 2020, between the Registrant and Michael Kauffman, M.D., Ph.D. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on August 31, 2020) 10.18* Amended and Restated Letter Agreement, dated as of August 31, 2020, between the Registrant and Sharon Shacham, Ph.D., M.B.A. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on August 31, 2020) 10.19* Amended and Restated Letter Agreement, dated as of August 31, 2020, between the Registrant and Christopher B. Primiano (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on August 31, 2020) 10.20* Transition Agreement, dated as of September 25, 2020, between the Registrant and Christopher B. Primiano (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on September 25, 2020) 10.21* Consulting Agreement, dated as of September 25, 2020, between the Registrant and Christopher B. Primiano (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on September 25, 2020) 10.22* Offer Letter, dated February 3, 2019, between the Registrant and Michael Mason (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on February 25, 2019) 175 Table of Contents Exhibit Number Description of Exhibit 10.23* Letter Agreement, dated as of August 31, 2020, between the Registrant and Michael Mason (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on August 31, 2020) 10.24* Nonstatutory Stock Option Agreement, dated February 25, 2019, between the Registrant and Michael Mason (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on February 25, 2019) 10.25 Office Lease Agreement between NS Wells Acquisition LLC and the Registrant, dated March 27, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on April 1, 2014) 10.26 First Amendment to Lease, dated December 31, 2014, by and between the Registrant and NS Wells Acquisition LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on January 5, 2015) 10.27 Second Amendment to Lease, dated October 22, 2015, by and between the Registrant and NS Wells Acquisition LLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on November 9, 2015) 10.28 Third Amendment to Lease, dated February 28, 2018, by and between the Registrant and AG-JCM Wells Avenue Property Owner, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on May 10, 2018) 10.29 Fourth Amendment to Lease, dated June 6, 2018, by and between the Registrant and AG-JCM Wells Avenue Property Owner, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on August 7, 2018) 10.30 Fifth Amendment to Lease, dated as of August 13, 2020, by and between the Registrant and AG-JCM Wells Avenue Property Owner, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on November 2, 2020) 10.31 Open Market Sale Agreement, dated August 17, 2018, by and between the Registrant and Jefferies LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on August 17, 2018) 10.32 Amendment No. 1 to the Open Market Sale Agreement, by and between the Registrant and Jefferies LLC, dated May 5, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on May 5, 2020) 10.33† Asset Purchase Agreement, dated January 24, 2018, by and between the Registrant and Biogen MA Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on May 10, 2018) 10.34† License Agreement, dated May 23, 2018, by and between the Registrant and Antengene Therapeutics Limited (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on August 7, 2018) 10.35*** Amendment to License Agreement, dated May 1, 2020, by and between Antengene Therapeutics Limited and the Registrant (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on August 8, 2020). 176 Table of Contents Exhibit Number Description of Exhibit 10.36 Parent Company Guarantee, dated May 23, 2018, by and between the Registrant and Antengene Therapeutics Limited (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on August 7, 2018) 10.37* Karyopharm Therapeutics Inc. Annual Bonus Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-36167) filed with the Commission on August 6, 2019) 10.38*** Revenue Interest Financing Agreement, dated September 14, 2019, between the Registrant and HealthCare Royalty Partners III, L.P. and HealthCare Royalty Partners IV, L.P. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-36167) filed with the Commission on November 4, 2019) 21.1** Subsidiaries of the Registrant 23.1** Consent of Ernst & Young LLP (Independent registered public accounting firm for the Registrant) 31.1** Certification of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2** Certification of Senior Vice President, Chief Financial Officer and Treasurer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, by Michael G. Kauffman, M.D., Ph.D., Chief Executive Officer of the Registrant, and Michael Mason, Senior Vice President, Chief Financial Officer and Treasurer of the Registrant 101.INS The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. 101.SCH Inline XBRL Schema Document 101.CAL Inline XBRL Calculation Linkbase Document 101.LAB Inline XBRL Labels Linkbase Document 101.PRE Inline XBRL Presentation Linkbase Document 101.DEF Inline XBRL Definition Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) † Confidential treatment has been granted as to portions of the exhibit. * Indicates a management contract or compensatory plan or arrangement. ** Filed with this Annual Report on Form 10-K. *** Certain portions of this exhibit (indicated by “***”) have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. 177 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 24, 2021 KARYOPHARM THERAPEUTICS INC. By: /s/ Michael G. Kauffman Michael G. Kauffman, M.D., Ph.D. Chief Executive Officer and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Michael G. Kauffman Chief Executive Officer and Director February 24, 2021 Michael G. Kauffman, M.D., Ph.D. (Principal Executive Officer) /s/ Michael Mason Michael Mason Senior Vice President, Chief Financial Officer and Treasurer February 24, 2021 (Principal Financial and Accounting Officer) /s/ Garen G. Bohlin Director February 24, 2021 Garen G. Bohlin /s/ Mikael Dolsten Director February 24, 2021 Mikael Dolsten, M.D., Ph.D. /s/ Barry E. Greene Director February 24, 2021 Barry E. Greene /s/ Mansoor Raza Mirza Director February 24, 2021 Mansoor Raza Mirza /s/ Christy J. Oliger Director February 24, 2021 Christy J. Oliger /s/ Deepika R. Pakianathan Director February 24, 2021 Deepika R. Pakianathan Ph.D. /s/ Richard Paulson Director February 24, 2021 Richard Paulson /s/ Chen Schor Director February 24, 2021 Chen Schor 178