Karyopharm Therapeutics Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this quarterly report and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, or Annual Report. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding possible achievement of discovery and development milestones, including regulatory submissions and approvals, our future discovery and development efforts, our commercialization efforts, our collaborations and partnering agreements with third parties, our strategy, our future operations, financial position and revenues, projected costs, prospects, plans and objectives of management, are forward looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and our actual results could differ materially from the plans, intentions, expectations or results discussed in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, our ability to successfully commercialize XPOVIO ® (selinexor) tablets; the impact of the ongoing COVID-19 pandemic on our business, including decreasing sales of XPOVIO, interrupting or delaying research and development efforts, impacting the ability to procure sufficient supply for the development and commercialization of selinexor or other product candidates, delaying ongoing or planned clinical trials, impeding the execution of business plans, planned regulatory milestones and timelines, or inconveniencing patients; the adoption of XPOVIO in the commercial marketplace; adverse results in our drug discovery and clinical development activities; decisions made by the U.S. Food and Drug Administration, or FDA, and other regulatory authorities with respect to the development and commercialization of our drug candidates; our ability to raise additional capital to support our clinical development program and other operations; our ability to develop products of commercial value and to identify, discover and obtain rights to additional potential product candidates; our ability to obtain, maintain and enforce our intellectual property rights; the outcome of research and development activities and the fact that the preclinical and clinical testing of our compounds may not be predictive of the success of later clinical trials; our reliance on third-parties; competitive developments; the effect of current and future legislation and regulation and regulatory actions; as well as other risks described in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, or SEC, on February 26, 2020, and other filings with the SEC. As a result of these and other factors, we may not actually achieve the plans, intentions, expectations or results disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. OVERVIEW We are a commercial-stage pharmaceutical company pioneering novel cancer therapies and dedicated to the discovery, development and commercialization of novel, first-in-class drugs directed against nuclear transport and related targets for the treatment of cancer and other major diseases. Our scientific expertise is based upon an understanding of the regulation of intracellular communication between the nucleus and the cytoplasm. We have discovered and are developing and commercializing novel, small molecule S elective I nhibitor of N uclear E xport ( SINE ) compounds that inhibit the nuclear export protein exportin 1, or XPO1. These SINE compounds represent a new class of drug candidates with a novel mechanism of action that have the potential to treat a variety of high unmet medical need diseases. Our SINE compounds were the first oral XPO1 inhibitors in clinical development and to receive marketing approval in the U.S. In July 2019, our lead asset, XPOVIO, received marketing approval by the FDA in combination with dexamethasone to treat 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, or PIs, at least two immunomodulatory agents, or IMiDs, and an anti-CD38 monoclonal antibody. We refer to myeloma that is refractory to these five agents as penta-refractory myeloma. This indication was approved under the FDA’s Accelerated Approval Program based on response rate and was supported by data from the STORM ( S elinexor T reatment of R efractory M yeloma) study. In addition to the FDA approval of our first New Drug Application, or NDA, we also filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMA, in January 2019, based on the STORM data, as discussed in more detail below. Continued approval in the U.S. for this indication is contingent upon verification and description of clinical benefit in a confirmatory trial. The FDA has agreed that the randomized Phase 3 BOSTON ( Bo rtezomib, S elinexor and Dexame t has on e) study evaluating selinexor in combination with Velcade ® (bortezomib) and low-dose dexamethasone in patients with multiple myeloma after at least one prior line of therapy could serve as the confirmatory trial 19 based on the positive top - line data announced in March 2020. In July 2020, t he FDA accepted our supplemental new drug application, or sNDA, for XPOVIO , based on the BOSTON study, to treat patients with multiple myeloma after at least one prior line of therapy . The FDA has assigned an action date of March 19, 2021 under the Prescription Drug User Fee Act , or PDUFA, and, if approved, we expect to launch the expanded indication immediately thereafter . In June 2020, XPOVIO was approved by the FDA for a second indication to treat adult patients with relapsed or refractory diffuse large B-cell lymphoma, or DLBCL, not otherwise specified, including DLBCL arising from follicular lymphoma, after at least two lines of systemic therapy. We began commercialization of this indication in June 2020. This indication was approved under the FDA’s Accelerated Approval Program based on response rate and was supported by data from the SADAL ( S elinexor A gainst D iffuse A ggressive L ymphoma) study. Continued approval for this indication may be contingent upon verification and description of clinical benefit in a confirmatory trial. The FDA has agreed that the XPORT-DLBCL-030 study could serve as the confirmatory trial for evaluating selinexor in DLBCL. This trial will assess the effect of selinexor or placebo added to a standard backbone immunochemotherapy of rituximab-gemcitabine-dexamethasone-platinum, or R-GDP, in patients with one to two prior treatments for DLBCL. Selinexor has received orphan drug designation from the FDA for the DLBCL indication. We expect that the XPORT-DLBCL-030 study will begin by the end of 2020. With respect to an MAA submission to the EMA for DLBCL based on the SADAL study, we are continuing to evaluate the optimal regulatory and access strategy. Our focus is on marketing XPOVIO in its currently approved indications as well as seeking the regulatory approval and potential commercialization of selinexor as an oral agent in additional cancer indications with significant unmet medical needs. We plan to conduct additional clinical trials and seek additional approvals for the use of selinexor in combination with other oncology therapies to expand the patient populations that are eligible to be treated with selinexor. Thus, we are currently advancing the clinical development of selinexor in multiple hematological malignancies and solid tumor indications. Ongoing clinical trials evaluating selinexor include the Phase 1b/2 STOMP ( S elinexor and Backbone T reatments o f M ultiple Myeloma P atients) study in combination with standard therapies in multiple myeloma, the randomized Phase 2/3 SEAL ( Se linexor in A dvanced L iposarcoma) study evaluating single agent selinexor versus placebo in patients with previously treated, advanced unresectable dedifferentiated liposarcoma following at least two prior therapies, and the randomized Phase 3 SIENDO ( S elinexor/Placebo After Combination Chemotherapy I n Patients with Advanced or Recurrent ENDO metrial Cancer) study evaluating selinexor as maintenance therapy in endometrial cancer. On November 2, 2020, we announced positive top-line results from the Phase 3 portion of the randomized, double blind, placebo controlled, cross-over, SEAL study. The SEAL study met its primary endpoint of a statistically significant increase in progression-free survival (hazard ratio=0.70; p=0.023). These data indicate that treatment with XPOVIO reduced the risk of disease progression or death by approximately 30%, compared to placebo. The trial allowed patients on placebo with objective progression to cross over to the XPOVIO treatment arm. Among those patients who received XPOVIO, there was a trend towards an improvement in the median overall survival compared to those patients who began on the placebo arm of the study and never crossed over to the XPOVIO treatment arm of the study. The safety profile for XPOVIO was consistent with previous clinical studies with fewer hematologic and infectious adverse events as compared to XPOVIO studies in patients with multiple myeloma and DLBCL. We expect to submit an NDA in the first quarter of 2021 requesting FDA approval of XPOVIO to treat the patient population studied in SEAL. In April 2020, we initiated a global randomized Phase 2 clinical trial for low dose oral selinexor in hospitalized patients with severe COVID-19, or XPORT-CoV-1001. While the results of this study demonstrated encouraging anti-viral and anti-inflammatory activity in an important subset of treated patients, the interim analysis indicated that the trial was unlikely to meet its pre-specified primary endpoint across the entire patient population studied, and the trial was discontinued. Although the FDA’s opinion was that the benefit-risk ratio was not favorable in the heterogenous patient population evaluated in XPORT-CoV-1001, which evaluated selinexor versus placebo in hospitalized patients with COVID-19 and included patients with more severe disease, we remain encouraged by the potential mechanistic activity of XPO1 inhibition and believe that these results warrant additional research of XPO1 inhibitors in COVID-19 and other infectious diseases. In June 2020, the first patient was dosed in a Phase 1/2 clinical study evaluating oral selinexor in combination with standard of care therapy in patients with newly diagnosed or recurrent glioblastoma, or GBM. This global study is expected to enroll approximately 400 patients at clinical sites in the U.S., Europe, and Israel. The randomized, multi-center, Phase 1/2 study is expected to be conducted in two phases: a Phase 1 dose finding study followed by a Phase 2 randomized efficacy exploration study, designed to independently evaluate three different combination regimens in three treatment arms in patients with newly diagnosed GBM (Arms A and B) or with recurrent GBM (Arm C). Arms A and B will investigate selinexor in combination with radiation therapy with or without the addition of temozolomide, while Arm C will evaluate the combination of selinexor and lomustine. The primary endpoint of the Phase I study is to establish the maximum tolerated dose, and the primary endpoint of the Phase 2 study is progression-free survival in patients with newly diagnosed GBM and overall survival in patients with recurrent GBM. 20 In addition to selinexor, we are also advancing a pipeline of novel drug candidates including our other oral SINE compounds eltanexor and verdinexor, as well as our oral dual PAK4/NAMPT inhibitor, KPT-9274. We began clinical testing of eltanexor, a second-generation SINE compound, in late 2015. Our clinical development program for eltanexor includes myelodysplastic syndrome, or MDS, colorectal cancer and metastatic castration-resistant prostate cancer. Based on clinical results to date and resource prioritization, we are continuing to focus on the development of eltanexor in MDS. In August 2020, safety and efficacy results from a Phase 2 study of selinexor in patients with MDS or oligoblastic acute myeloid leukemia refractory to hypomethylating agents were published in The Lancet Haematology. Currently, no standard therapy for such patients exists. In the 23 evaluable patients, the overall response rate was 26% (95% CI 10 - 48) in six patients with marrow complete remission, with an additional 12 patients (52%, 95% CI 31 - 73) achieving stable disease. The most common grade 3 or 4 adverse events were thrombocytopenia (eight , or 32% , of 25 patients) and hyponatraemia (five , or 20% , of 25 patients ). There were no drug-related serious adverse events and no treatment-related deaths. In addition, w e have be e n evaluating KPT-9274 in patients with hematologic or solid tumors since 2016 and in July 2020 , dosed the first patient in a Phase 1 /2 clinical study of KPT-9274 in combination with an anti-PD1 monoclonal antibody . Finally, verdinexor is our lead compound that is being evaluated as a potential therapy for viral, rare disease and autoimmune indications in humans and by a collaborator as a potential therapy for cancers in companion animals. In May 2020, we agreed with Antengene Therapeutics Limited, or Antengene, to an expansion of their development and commercial rights to our compounds in parts of Asia, Australia and New Zealand by entering into an amendment to the May 2018 license agreement between us and Antengene, or the Original Antengene Agreement, and as amended, the Amended Antengene Agreement. We granted Antengene, our existing partner in China and other regions in Asia, the exclusive right to develop and commercialize selinexor and eltanexor in all human oncology indications in the following geographies comprising the Antengene Territory: Australia, New Zealand, South Korea, Taiwan, Hong Kong and the countries in the Association of Southeast Asian Nations, which are currently comprised of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The Amended Antengene Agreement also includes the development and commercialization of KPT-9274 in all human oncology indications and verdinexor in human non-oncology indications in Australia and New Zealand. Under the terms of the Amended Antengene Agreement, we received a one-time upfront payment of $11.7 million from Antengene in June 2020. We are also eligible to receive additional payments if certain future prespecified development, regulatory and commercialization milestones are achieved by Antengene. In addition, 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. Certain countries in the Antengene Territory became available due to the reacquisition of exclusive development and commercial rights from Ono Pharmaceutical Co., Ltd. in April 2020. As of September 30, 2020, we had an accumulated deficit of $1.0 billion. We had net losses of $152.9 million and $150.9 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we have generated $86.5 million to date in net product sales from XPOVIO, which first became commercially available in the U.S. in July 2019. Commercialization of XPOVIO in the United States The commercialization of XPOVIO, for both the multiple myeloma and the DLBCL indications, is being supported by approximately 70 sales representatives and nurse liaisons as well as KaryForward TM , an extensive patient and healthcare provider support program. Our commercial efforts are also being supplemented by patient support initiatives coordinated by our dedicated network of participating specialty pharmacy providers. As of September 30, 2020, nearly 4,200 XPOVIO prescriptions have been filled since launch, driven by strong demand from both academic and community-based physicians. Net product sales for XPOVIO were $56.0 million and $12.8 million for the nine months ended September 30, 2020 and 2019, respectively. We plan to continue to build upon XPOVIO’s early commercial success in the late-line relapsed or refractory multiple myeloma market by continuing to educate physicians, healthcare providers and patients about XPOVIO’s clinical profile and unique mechanism of action. Based on the positive results from the BOSTON trial, which we announced in early March 2020, our commercial team is preparing for XPOVIO’s potential expansion into the second line multiple myeloma market, subject to the FDA’s review and approval of our sNDA based on the data from the BOSTON trial, which has been assigned a March 19, 2021 PDUFA date. 21 Commercialization Outside of the United States In January 2019, based on the results of the Phase 2b STORM study, we submitted an MAA to the EMA requesting conditional approval for selinexor in combination with dexamethasone as a treatment for patients with triple class refractory multiple myeloma, meaning patients who have received at least three prior therapies and whose disease is refractory to at least one PI, one IMiD, and one anti-CD38 monoclonal antibody. In 2019, we received feedback from EMA’s Committee for Medicinal Products for Human Use, or CHMP, including an integrated inspection report, based on site audits and a sponsor inspection. In January 2020, we were granted a three-month extension from CHMP to provide additional time to respond to the CHMP’s outstanding questions related to the application. In September 2020, we submitted our responses following an additional extension of time due to the impact of the COVID-19 pandemic. In October 2020, we received a further updated list of outstanding issues, or LOI, from CHMP summarizing the remaining topics for us to address and indicating that, as part of its assessment of the safety and efficacy of selinexor based on the STORM study, the CHMP intends to consult its Scientific Advisory Group for additional advice in the fourth quarter of 2020. The LOI indicates that the CHMP is continuing to assess the Independent Review Committee’s adjudicated responses from the STORM study and asks us to justify the positive benefit-risk in the intended indication, which CHMP has also requested that we update to be more closely aligned with the patient population evaluated in the STORM study. The LOI further requests that we demonstrate that selinexor provides an advantage over approved therapies in the relevant indication and that we provide a summary of top-line data from the BOSTON study and the context of such data for the current application. We are currently in the process of preparing responses to the LOI, and we continue to expect to receive an opinion from CHMP with respect to this MAA before the end of 2020. In addition, contingent upon and following receipt of CHMP’s opinion, we plan to submit an MAA before the end of 2020 with a request for conditional approval of selinexor in combination with Velcade ® (bortezomib) and low-dose dexamethasone in patients with multiple myeloma after at least one prior line of therapy based on data from our BOSTON study. To commercialize selinexor following any regulatory approval outside of the U.S., we will work with existing and potential future partners to establish the appropriate commercial infrastructure outside of the U.S., or we may, in certain geographies, elect to establish the commercial infrastructure ourselves. We maintain complete commercial rights to selinexor in all territories outside of the Antengene Territory and Israel, including the U.S., Canada, Europe, Japan, and Latin America. Uncertainty Relating to the COVID-19 Pandemic The COVID-19 pandemic has and will continue to affect economies and businesses around the world. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including the impact on our employees, patients and business operations. We have and may continue to experience disruptions in the future that could impact our results of operations and financial condition. Although we do not currently expect that the ongoing COVID-19 pandemic will have a material impact on our business plans or results of operations, we are unable to predict the impact that the COVID-19 pandemic will have on our operating results and financial condition due to numerous uncertainties. These uncertainties include the geographic spread of the pandemic, the severity of the virus, the duration of the outbreak, governmental, business or other actions, travel restrictions and social distancing, business closures or business disruptions, or changes to our operations, among others. We will continue to monitor the COVID-19 situation closely and intend to follow health and safety guidelines as they evolve. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, as well as other unanticipated consequences remain unknown. The situation surrounding the COVID-19 pandemic remains fluid and continues to rapidly evolve, and we are actively managing our response and assessing potential impacts to our operating results and financial condition, as well as adverse developments in our business. For further information regarding the impact of the COVID-19 pandemic on us, see Item 1A - Risk Factors included in this Quarterly Report on Form 10-Q. CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates - which also would have been reasonable - could have been used, which would have resulted in different financial results. There were no changes to the critical accounting policies we identified in our Annual Report. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in our Annual Report. 22 RESULTS OF OPERATIONS Comparison of the Three Months Ended September 30, 2020 and September 30, 2019 For the Three Months Ended September 30, 2020 2019 $ Change % Change (in thousands) Product revenue, net $ 21,330 $ 12,821 $ 8,509 66 % License and other revenue 3 328 (325 ) (99 )% Operating expenses: Cost of sales 438 1,013 (575 ) (57 )% Research and development 37,037 26,270 10,767 41 % Selling, general and administrative 30,967 25,267 5,700 23 % Loss from operations (47,109 ) (39,401 ) (7,708 ) 20 % Other expense, net (6,342 ) (1,946 ) (4,396 ) 226 % Loss before income taxes (53,451 ) (41,347 ) (12,104 ) 29 % Income tax provision (44 ) (20 ) (24 ) 120 % Net loss $ (53,495 ) $ (41,367 ) $ (12,128 ) 29 % Product revenue, net. We recognized $21.3 million and $12.8 million of net product revenue in the three months ended September 30, 2020 and 2019, respectively, from U.S. commercial sales of XPOVIO. We began to record net product revenue in the third quarter of 2019 following the July 2019 FDA approval of XPOVIO and its subsequent commercial launch in the U.S. License and other revenue. We recognized an insignificant amount of license and other revenue for the three months ended September 30, 2020 and $0.3 million of license and other revenue for the three months ended September 30, 2019. We expect license and other revenue to increase slightly in the fourth quarter. Cost of sales. Cost of sales includes the cost of producing and distributing inventories that are related to U.S. XPOVIO product revenue during the respective period (including salary-related and stock-based compensation expenses for employees involved with XPOVIO production and distribution) and third-party royalties payable on our net product revenue for XPOVIO. We began capitalizing XPOVIO inventory costs during the third quarter of 2019 subsequent to FDA approval, as our expectation was that such costs will be recoverable through commercialization of XPOVIO. Prior to the capitalization of XPOVIO inventory costs, such costs were recorded as research and development expenses in the period incurred. During the three months ended September 30, 2020 and 2019, we recorded $0.4 million and $1.0 million, respectively, of cost of sales, including $0.1 million and $0.7 million, respectively, related to royalties. The cost of sales during the three months ended September 30, 2020 and 2019 only reflects a portion of the costs related to the manufacturing of XPOVIO and related materials, since, prior to FDA approval, these costs were expensed. The manufacturing costs of XPOVIO on-hand upon FDA approval amounted to approximately $2.8 million. At September 30, 2020, we had $2.1 million of this previously expensed XPOVIO and related material on-hand. We expect to utilize zero cost inventory with respect to XPOVIO for an extended period of time. We expect cost of sales to remain relatively consistent in the fourth quarter compared to the third quarter. Research and development expense. Research and development expense increased approximately $10.7 million to $37.0 million for the three months ended September 30, 2020 from approximately $26.3 million for the three months ended September 30, 2019. The increase was primarily related to: • an increase of $7.0 million in clinical trial costs, primarily related to COVID-19 trial activity as well as continued activity in our ongoing clinical trials; • an increase of $3.4 million in personnel costs, primarily related to an increase in headcount; and • an increase of $0.9 million in facility and IT infrastructure costs; partially offset by • a decrease of $0.6 million in travel, consulting and professional costs. 23 We expect our research and development expense to remain relatively consistent in the fourth quarter when compared to the third quarter , with possible fluctuation due to timing of clinical trial study starts and related clinical trial enrollment. Selling, general and administrative expense. Selling, g eneral and administrative expense increased approximately $5.7 million to $31.0 million for the three months ended September 30, 2020 from approximately $25.3 million for the three months ended September 30, 2019. The increase was primarily related to: • an increase of $3.9 million in personnel costs, primarily related to an increase in headcount; • an increase of $2.8 million in commercial-related activities; and • an increase of $0.1 million in facility and IT infrastructure costs; partially offset by • a decrease of $1.1 million in travel, consulting and professional costs. We expect our selling, general and administrative expenses to remain relatively consistent in the fourth quarter when compared to the third quarter as a result of decreased travel and corporate events due to COVID-19 impacts, offset by costs expected to be incurred in anticipation of the launch, if approved, of the expanded indication for XPOVIO, based on the BOSTON study, to treat patients with multiple myeloma after at least one prior line of therapy. Other expense, net. Other expense, net increased from $1.9 million for the three months ended September 30, 2019 to $6.3 million for the three months ended September 30, 2020. The net increase of approximately $4.4 million was primarily due to an increase in interest expense of $3.7 million, coupled with a decrease in interest income of $0.5 million. Of the $3.7 million increase in interest expense, $3.4 million was related to our Revenue Interest Financing Agreement, or deferred royalty obligation, and $0.3 million was related to our 3.00% senior convertible notes due 2025, or Notes. We expect interest expense to increase slightly in the fourth quarter when compared to the third quarter, related to the imputed interest on our deferred royalty obligation. Comparison of the nine months ended September 30, 2020 and September 30, 2019 Nine Months Ended September 30, 2020 2019 $ Change % Change (in thousands) Product revenue, net $ 55,992 $ 12,821 $ 43,171 337 % License and other revenue 16,993 9,976 7,017 70 % Operating expenses: Cost of sales 1,653 1,013 640 63 % Research and development 113,628 90,761 22,867 25 % Selling, general and administrative 92,488 77,032 15,456 20 % Loss from operations (134,784 ) (146,009 ) 11,225 (8 )% Other expense, net (17,821 ) (4,896 ) (12,925 ) 264 % Loss before income taxes (152,605 ) (150,905 ) (1,700 ) 1 % Income tax provision (247 ) (38 ) (209 ) 550 % Net loss $ (152,852 ) $ (150,943 ) $ (1,909 ) 1 % Product revenue, net. We recognized $56.0 million and $12.8 million of net product revenue in the nine months ended September 30, 2020 and 2019, respectively, from U.S. commercial sales of XPOVIO. We began to record net product revenue in the third quarter of 2019 following the 2019 FDA approval of XPOVIO and its subsequent commercial launch in the U.S. We did not generate any revenue from product sales prior to July 2019. License and other revenue. License and other revenue for the nine months ended September 30, 2020 was $17.0 million compared to $10.0 million for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, we recognized $13.8 million pursuant to the Antengene Agreement, $2.2 million upon reacquisition of the exclusive development and commercial rights from Ono, and $1.0 million related to clinical supply provided to various partners, as well as grant revenue pursuant to a government grant arrangement. During the nine months ended September 30, 2019, we recognized $9.4 million in revenue pursuant to the Original Antengene Agreement, $0.2 million in revenue for clinical supply provided to various partners, and $0.3 million in grant revenue pursuant to a government grant arrangement. 24 Cost of sales. During the nine months ended September 30, 2020 and 2019 , we recorded $ 1.7 million and $ 1.0 million, respectively, of cost of sales, including $ 1.0 million and $0.7 million, respectively, related to royalties. Research and development expense. Research and development expense increased approximately $22.8 million to $113.6 million for the nine months ended September 30, 2020 from approximately $90.8 million for the nine months ended September 30, 2019. The increase was primarily related to: • an increase of $12.7 million in clinical trial costs, primarily related to COVID-19 trial activity as well as continued activity in our ongoing clinical trials; • an increase of $9.5 million in personnel costs, primarily related to an increase in headcount; and • an increase of $2.6 million in facility and IT infrastructure costs; partially offset by • a decrease of $2.0 million in travel, consulting and professional costs. Selling, general and administrative expense. Selling, general and administrative expense increased approximately $15.5 million to $92.5 million for the nine months ended September 30, 2020 from approximately $77.0 million for the nine months ended September 30, 2019. The increase was primarily related to: • an increase of $10.3 million in commercial-related activities; • an increase of $8.2 million in personnel costs, primarily related to an increase in headcount; and • an increase of $0.5 million in facility and IT infrastructure costs; partially offset by • a decrease of $3.5 million in travel, consulting and professional costs. Other expense, net. Other expense, net increased from $4.9 million for the nine months ended September 30, 2019 to $17.8 million for the nine months ended September 30, 2020. The increase of approximately $12.9 million was primarily due to an increase in interest expense of $10.9 million, coupled with a decrease in interest income of $2.0 million. $10.2 million of the increase in interest expense was related to our deferred royalty obligation and $0.7 million of the increase was attributable to our Notes. LIQUIDITY AND CAPITAL RESOURCES Sources of Liquidity During the third quarter of 2019, we began generating revenues from product sales, as XPOVIO first became commercially available in the U.S. in July 2019. We have had limited revenues to date from product sales and have financed our operations principally 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 the deferred royalty obligation, and cash generated from our business development activities. Although we do not currently expect that the ongoing COVID-19 pandemic will have a material impact on our business plans or results of operations, we are continually monitoring our liquidity and capital requirements in light of the evolving situation. At September 30, 2020, our principal source of liquidity was $302.4 million of cash, cash equivalents and investments. We have had recurring losses and incurred a loss of $152.9 million for the nine months ended September 30, 2020. Net cash used in operations for the nine months ended September 30, 2020 was $129.6 million. We expect that our cash, cash equivalents and investments at September 30, 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 the financial statements contained in this Quarterly Report on Form 10-Q. On May 5, 2020, we entered into Amendment No. 1 to the Open Market Sale Agreement, dated August 17, 2018, or the Open Market Sale Agreement , with Jefferies LLC, as agent, or Jefferies, 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. We did not sell any shares under the Open Market Sale Agreement during the third quarter of 2020. As of October 30, 2020, we have sold an aggregate of 3,712,359 shares under the Open Market Sale Agreement, for net proceeds of approximately $46.2 million, all of which were sold in 2019. 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. 25 On September 14, 2019, we entered into a deferred royalty obligation , with HealthCare Royalty Partners III, L.P. and HealthCare Royalty Partners IV, L.P, or HCR. Pursuant to the deferred royalty obligation , HCR paid us $75.0 million, less certain transaction expenses, at the initial closing, which occurred on September 27, 2019, as disclosed in Note 11 to the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q. Cash Flows The following table provides information regarding our cash flows (in thousands): Nine Months Ended September 30, 2020 2019 Net cash used in operating activities $ (129,600 ) $ (151,333 ) Net cash (used in) provided by investing activities (85,082 ) 111,969 Net cash provided by financing activities 168,115 89,369 Effect of exchange rate changes (15 ) (26 ) Net (decrease) increase in cash, cash equivalents and restricted cash $ (46,582 ) $ 49,979 Operating activities. The net cash used in operating activities in both periods resulted primarily from our net losses adjusted for non-cash charges and changes in the components of working capital. The decrease in cash used in operating activities during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, was primarily driven by our decreased loss from operations during that period. Investing activities. The net cash (used in) provided by investing activities during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, primarily reflects a $157.6 million increase in the purchases of investments, coupled with a $39.6 million decrease in proceeds from the maturities of investments. Financing activities. The net cash provided by financing activities for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, reflects an increase of $78.7 million. The increase was primarily related to the net cash proceeds of $161.8 million from the sale of shares of our common stock from the follow-on offering under our shelf registration statement on Form S-3 during the first quarter of 2020, coupled with a $5.2 million increase in proceeds from the exercise of stock options and shares issued under our Employee Stock Purchase Program in the first nine months of 2020 compared to the first nine months of 2019, partially offset by the $73.7 million net proceeds received in the third quarter of 2019 from the execution of our deferred royalty obligation in the third quarter of 2019. Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to commercialize XPOVIO and continue the clinical trials of, and as we seek marketing approval for, our drug candidates. In addition, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution of any of our drug candidates for which we obtain marketing approval, to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of any collaborator that we may have at such time for any such drug candidate. Furthermore, we expect to continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or commercialization efforts. Our future capital requirements will depend on many factors, including: • revenue generated from commercial sales of XPOVIO; • costs related to the sales and marketing of XPOVIO; • the costs, timing and outcome of regulatory review of our drug candidates; • the costs of future commercialization activities, including drug sales, marketing, manufacturing and distribution, for any of our drug candidates for which we receive marketing approval, to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of any collaborator that we may have at such time; • the amount of revenue received from commercial sales of our drug candidates for which we receive marketing approval; • the progress and results of our current and planned clinical trials of selinexor; 26 • the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our other drug candidates; • our ability to establish and maintain collaborations on favorable terms, if at all; • the success of any collaborations that we may enter into with third parties; • the extent to which we acquire or in-license other drugs and technologies; • the costs associated with legal activities, including litigation, arising in the course of business activities and our ability to prevail in any such legal disputes; and • the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims. Identifying potential drug candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete. In addition, our drug candidates for which we receive marketing approval may not achieve commercial success. Our ability to become and remain profitable depends on our ability to generate revenue. While we began to generate revenue from the sales of XPOVIO in July 2019, there can be no assurance as to the amount or timing of any such revenue, and we may not achieve profitability for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. We may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. OFF-BALANCE SHEET ARRANGEMENTS We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.