Karyopharm Therapeutics Inc. Q4 FY2020 Earnings Call

Good morning. My name is Vaishnavi, and I will be your conference operator for today. At this time, I would like to welcome everyone to Karyopharm Therapeutics' Fourth Quarter and Full Year 2020 Financial Results Conference Call. Please be advised that this call is being recorded at the company's request. I would now like to turn the call over to Mr. Ian Karp, Karyopharm's Senior Vice President, Investor and Public Relations. Please go ahead.

Thanks so much and thank you all for joining us on today's conference call, to discuss Karyopharm's fourth quarter and full year 2020 financial results and business update. This is Ian Karp, and I'm joined today by Dr. Michael Kauffman, our Chief Executive Officer; Mr. Mike Mason, Chief Financial Officer; Mr. John Demaree, Chief Commercial Officer; Dr. Jatin Shah, Chief Medical Officer; and Mr. Steve Mitchener, Chief Business Officer. On the call today, Mike will provide an overview of key recent corporate developments and an update on our commercial progress, and then Mike Mason will provide an overview of the fourth quarter and full year 2020 financial results. We will conclude with the Q&A portion of the call. Earlier this morning, we issued a press release detailing Karyopharm's results for the fourth quarter and full year 2020. This release along with a slide presentation that we will reference is available on our website at karyopharm.com. Before we begin our formal comments, I'll remind you that various remarks we will make today constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995 as outlined on Slide 3. These include statements about our future expectations, clinical developments and regulatory matters and timelines, the potential success of our products and product candidates, including our expectations related to the commercialization of XPOVIO, financial projections, and our plans and prospects. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent quarterly report on Form 10-Q, which is on file with the SEC, and in other filings that we may make with the SEC in the future. Any forward-looking statements represent our views as of today only. While we may elect to update these forward-looking statements at some point, we specifically disclaim any obligation to do so even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. With that I'll now turn the call over to Michael Kauffman, Chief Executive Officer.

Thank you, Ian. And good morning, everyone. 2020 was a pivotal year for Karyopharm and I'm extremely proud of the significant progress our team has made towards our commercial, clinical development, and operational objectives, with the ultimate goal of having a positive impact on the lives of patients battling cancer.

Thank you, Michael. Since we had issued a press release earlier today with full financial results, I will just focus on the highlights, which begin on Slide 12: Net product revenue for the fourth quarter of 2020 was $20.2 million, compared to $17.7 million for the fourth quarter of 2019. Net product revenue for the year ended December 31, 2020, was $76.2 million compared to $30.5 million for the year ended 2019. The estimated gross to net discount for XPOVIO in 2020 fell within our estimated range of 15% to 20%. License and other revenue for the fourth quarter of 2020 was $14.9 million compared to $0.4 million for the fourth quarter of 2019. This increase was driven by a $9.8 million payment for managing for milestone payments associated with regulatory filings in Asia, as well as a $5 million upfront payment from Forest Therapeutics upon the execution of a commercial distribution agreement for Canada. License and other revenue in 2020 were $31.9 million, compared to $10.4 million in 2019. R&D expenses for the fourth quarter of 2020 were $37.2 million, compared to $31.6 million for the fourth quarter of 2019. R&D expenses for the year ended 2020 were $158 million compared to $122.3 million for the year ended 2019. The increase in R&D expenses in 2020 compared to 2019 was primarily attributed to costs associated with our COVID-19 trial activity, which will not reoccur in 2021, and continued activity in our other ongoing clinical trials and regulatory activities. Selling general and administrative expense for the fourth quarter of 2020 was $33.9 million, compared to $28.4 million for the fourth quarter of 2019. The increase in SG&A expenses compared to the prior year is primarily due to activities to support the U.S. commercialization of XPOVIO. On Slide 13, you can see that cash, cash equivalents, and restricted cash investments as of December 31, 2020, totaled $276.7 million compared to $265.8 million as of December 31, 2019. Finally, based on our current operating plans, Karyopharm expects non-GAAP R&D and SG&A expenses, which exclude stock-based compensation expense for the full year of 2021 to be in the range of $280 to $300 million. The company expects that its existing cash, cash equivalents and investments and the revenue it expects to generate from XPOVIO product sales and other license revenues will be sufficient to fund its planned operations into late 2022.

Thank you, Mike. Before moving to the Q&A, let me highlight some of the key commercial, clinical, and regulatory milestones that we expect for 2021, as shown on slide 14. First, we are actively in the process of launching XPOVIO into the second- and third-line settings in myeloma in the U.S., and we expect a significant increase in annual sales of 2021 as compared to 2020. Next, we anticipate a decision on the conditional approval of XPOVIO in Europe based on the STORM data in April and plan to submit the Boston data via Type II variations shortly thereafter, which could result in expanded approval in Europe later this year. Finally, in the second half of this year, we expect top-line data from the Phase 3 SIENDO study in endometrial cancer, as well as multiple clinical trial initiations and the presentation of additional combination data with XPOVIO and other cancer therapies at various medical meetings. Before we open the call to questions, I do recognize our full Karyopharm team for a truly remarkable 2020. We've already started the New Year off strongly, and I'm confident that we are well positioned to execute on the commercial, clinical, and operational goals and growth opportunities outlined today. We appreciate your ongoing support and look forward to keeping you updated on our future progress. I'll now turn the call over to the operator for the questions.

We will now begin the question-and-answer session. The first question comes from Maury Raycroft with Jefferies. Please go ahead.

Hi, good morning, everyone. And congrats on the progress. Thanks for taking my question. So, for sales, we likely won't see a major rise in the number of refills at least in the next quarter. And so if the numbers are presented in aggregate, would you consider breaking out that number or other sales numbers by line of treatment in 2021? Do you plan on providing more granularity going forward?

Let me turn it to Ian to start.

Yes, Maury, I think for now, the reality is in terms of the clarity of data we get, we don't see from our distributors, and especially pharmacies, we don't get a level of data that tells us what line of therapy the external prescription was given. So right now we don't have that clarity. We do get some of that information from market research, which we'll do later in the year and will be available later in the year. So I think we'll let the launch play out. And as we get more information, I think it will be more specific in terms of where the growth is coming from.

Got it. Okay. And then one follow-up just on potential BD opportunities in Europe. Just wondering if you could say anything additional on that, and if that could take place prior to the Boston acceptance and approval there?

Let me turn that over to Stephen Mitchener, our Chief Business Officer. Steven?

Yes. Hi, good morning, Maury. It's a great question. And certainly, since we've gotten the positive opinion in Europe, there's been a lot of great momentum. So we're currently under a number of discussions for both Europe and Japan, and we're looking to make some decisions hopefully in the next few months when we can bring that effectively to our European patients. I think the other thing I would add is that on a positive note, we've had a lot of interest beyond just the multiple myeloma indications, and we're looking to expose and help out beyond just the first part of our hematology portfolio.

The next question comes from Brian Abrahams with RBC Capital Markets. Please go ahead.

Hey, good morning. Thanks for taking my questions. Congrats on all the progress. So, I'm curious what some of the key metrics that you guys are going to be looking for in order to assess earlier line uptake? I guess beyond new patient starts? Is this primarily duration? Is there anything that you might be able to tell from dose levels, just given the spread on that already? And I understand you're not looking for or not expecting a major inflection until closer to the back half of the year. But how quickly might you expect some of these potential leading indicating signals to manifest themselves? Are you starting to see any initial trends here since December? Now that we're close to mid-February?

Yes, let me start with Ian, and then move it over to John, our Chief Commercial Officer. Ian?

Yes, Abraham, great question. I mean, clearly, one of the most obvious indicators will be new patient starts, and for some of the data that we received, we did mention on the call that we have seen an uptick in, or certainly growth in new patient starts. So that's certainly encouraging. And we'll continue to follow that. We've also seen a reduction in the percentage of XPOVIO prescriptions at the 80 milligram twice a week dose, and an increase in the doses that would indicate that XPOVIO is being used in combination, so doses lower than 80 milligrams twice a week. So we think that's also another positive indicator that more physicians are likely choosing to use XPOVIO as a combination regimen. Now, we don't have visibility as to what percent of that is with Velcade, what percent of that is with another anti-myeloma agent. But certainly, we're encouraged that the percentage of prescriptions written for the 80 milligram dose is coming down quite significantly. So those are the kinds of things that we're looking at. And I think we mentioned, as we get into probably the second half of the year, we'll really be looking at duration of treatment. And that is a metric that we can follow with at least half of our business that goes through the specialty pharmacies, we can see what the numbers of prescriptions that each individual patient is getting. But again, that's a number that we wouldn't expect to materially increase until we get to the back half of the year, as we start to benefit from the duration of treatment. I don't know, John, if there's anything that you'd add to that.

Yes, thank you. In addition to duration of therapy, and the SKU mix to look at what combinations we're getting, we also are doing monthly ATU readouts to look at intent to prescribe by line of therapy, and by combination, so that'll be a leading indicator of uptake. We also have pulse research going on, on a regular basis to measure physician opinions and prescribing intent, as well as the number of advisory boards to track perception and perception changes over time, all of which will be leading indicators to the launch success and our uptake in the Boston space.

Great. And what are you seeing on some of those, I guess, just initially, as with the label expansion and NCCN guidelines, inclusion?

John?

Yes, well, of course, we're still less than two months into the launch. We're very encouraged by what we're seeing there. The feedback we're receiving from physicians in the one-on-one meetings, in the market research, in the advisory boards has been quite positive. And we're already seeing an increase in prescription demand relative to what we saw, as mentioned, for October and November. We were able to launch immediately at approval across all functions in the company, which was imperative, and we're seeing the impact of that, in the context of the rapid promotional efforts. We're already seeing the shifts that Ian mentioned in terms of dosage in more patients now starting on XVd than starting on XD. So, early signs from the market research and from the advisory boards are positive. Again, it's early, but our leading indicators are headed in the right direction.

That's really helpful, then maybe just a quick follow-up, if I could. With respect to the competitive landscape. I'm curious what your market research and on-the-ground physician discussions are telling you are some of the key considerations for docs in their choice of the new myeloma treatment to add on in later stage refractory patients? I'll hop in the queue. Thanks.

Yes, let me start here, and then we'll turn it over to some of the others on the call. I think the main point here is that while there are a number of different therapies people can take in the second- and third-line settings, the XVd regimen is really unique in many ways. First of all, it is the therapy that appears to have the fewest number of overall doses and the least amount of clinic time that a patient is required to spend. And that's a super important point at any time, especially when you consider three quarters of the patients are over 70 years old, and really don't have ease of transportation and so on. And most, in fact, no patient really wants to spend a lot of time at the hospital. And that's even more important during COVID. The second point is the data we get from this study are potentially very relevant to the real world. The fact that we used once weekly Velcade in the experimental arm. This is the only study that's resulted in a Velcade-based approval that's used actually what doctors are treating with. So, it's a very unique regimen. The last point to make is, and I think John's research has really honed this carefully for us is that we represent the fourth independent mechanism for use in the early levels of disease. Obviously, the Proteasome inhibitors, IMiDs, and CD38 monoclonal antibodies are very important in these areas. But when patients go through them, and sometimes now in frontline patients are getting all three of these regimens plus steroids, it begs the question of what to do in the second and third lines. And we represent the fourth independent mechanism that's now approved in combination for use there and not only approved for Velcade but has NCCN guidance beyond that with data, of course, with Kyprolis. Jatin, do you want to add anything and then John?

No, I think you're exactly right, Michael. The key consideration is really novel, not transactional. They have their image that they're giving including C-38 in the first line. New mechanisms are key consideration, and then convenience at the end of the day, because a lot of these patients will live for many years. And so having something that's well tolerated without residual long-term side effects is key for this formula. They're thinking about sequencing and what they're looking at earlier lines of therapy. So those are the two key considerations and I think uniquely positioned with this combination well.

The next question comes from Peter Lawson with Barclays. Please go ahead.

Hi, thanks for taking my questions. I guess the first one is just around what the current duration of treatment is, if you can give us any kind of sense around that? And where that could potentially increase to over time.

Sure, Ian?

Well, what we've said, and certainly we said it on the call; it's about three months right now through 2020. And that's been consistent for probably the last couple of quarters and also consistent with the data that we saw coming out of the original STORM study that showed about a three-month average duration of treatment. And remember, there will be patients that are on for a month, and there will be patients that are on for over a year, but the average is about three. What we do see in the BOSTON study was that the average was about 10 months on therapy. So I think that gives you sort of the range from the clinical studies. And our hope is that, obviously we're able to grow the average duration of therapy from a three months today to something closer to 10 months. But obviously, time will tell how effective we are at moving as many patients as we can into longer durations of treatment. So that's where the numbers stand today. And I think that gives you some sense of how high they could possibly go.

Is there any kind of sense that they are picked up? Or do you think that's more of a back half year event?

It's way too early to know that. Yes, the 10 months I was talking about was from the BOSTON study just to give you a reference. Yes, again, it's way too soon to know if there's been any changes to the average duration of treatment.

Okay, thank you. And then is there any way of quantifying the COVID impact on whether it's the number of scripts or the number of new docs and kind of what gives you the confidence that this is a temporary event versus a hidden penetration?

John, do you want to talk about that?

Yes, we do think the COVID impact is having multiple impacts. We know in-person visits by our sales force to care teams and key stakeholders continue to be impacted in most parts of the country. Research estimates that we've seen are that 15% to 20% of HCPs can be seen in person. We continue to believe that it's challenging to educate physicians in this environment and are putting in place multiple tactics, both digitally and with additional training on virtual engagements to try and enhance that. We also know the impact of COVID includes reduced patient visits that we saw from different data sources, particularly with the spike that was mentioned in the fourth quarter. So, the dual impact we saw from COVID in the context of the fourth quarter.

But it sounds like this is definitely a temporary issue, as opposed to you kind of capping out on multiple myeloma.

Yes, absolutely. We're seeing a lot more doctors get interested in this. And remember, this is a fundamentally different asset now, in the second and third line setting, with patients now getting a new option, a very convenient option, a very real-life set of data which to base the clinical decision to administer XVD and then as we said, additional support with the other. So we absolutely believe this is the beginning of a fundamentally new asset and ramp for XPOVIO in myeloma.

The next question comes from Jonathan Chang with SVB Leerink. Please go ahead.

Good morning, and thanks for taking my questions. My first question, why wouldn't we see an inflection in sales until the second half of BOSTON? As I understand the first half numbers may not fully reflect a longer duration of treatment. But should that reflect the significantly increased number of patients available in the earlier line settings?

Yes, I'll turn that to Ian to start.

Yes, we certainly do expect that. I'm not sure, so I'm sorry if that wasn't clear. We actually do expect growth beginning in this first quarter of this year. So absolutely, we expect to see growth. Because to your point, we should have additional patients that are now eligible to treat, and that's a much larger patient pool. So we absolutely expect to see growth relative to the fourth quarter of last year. I think the point that we're making is that that growth should accelerate throughout the year, and certainly as we get into the second half of the year, because not only do you have the benefit of more patients, but you have the benefit of the longer duration of treatment for patients that are getting treated today.

Understood. Just one follow-up to that. Could BOSTON and the earlier line sales cannibalize the STORM opportunity? And are you seeing any evidence of that? Thank you.

Yes, I mean, most, nearly all drugs are used multiple times in a given patient during their journey on therapy. And so the real use of XPOVIO will not be really the STORM administration, but it'll be in earlier lines, we expect it will be mostly XPOVIO Velcade with some XPOVIO Pomalyst, if someone wants to use an NCCN-guided oral therapy. And then later on, it could be XPOVIO or XPOVIO Kyprolis in a later line. So, we do expect that we will see multiple uses of XPOVIO. We don't have any data on it yet. Anecdotally, we've heard of a couple of patients who are getting their second course of XPOVIO to their treatment journey. But right now it's still too small numbers.

Got it. Thank you.

The next question comes from Eric Joseph with JP Morgan. Please go ahead.

Good morning. This is for Eric, thanks for taking our questions. Just a couple from us. So first, what is the status of commercial preparations for XPOVIO on the EU? Are you scaling for the penta-refractory population or scaling or in anticipation of accessing the third and second line patient populations with a Boston admission? And then I have another one after that.

Yes, Steve, you want to take that?

Sure. So, as we mentioned before, we are very excited that we got a positive opinion on the STORM indication. They are having a number of discussions right now, both internally and with external partners. On the best way to leverage that opportunity with the pending Boston indication that should hopefully come by the end of this year. So it's something that we're just really working through in terms of how to best bring that asset to that market appropriately, with all the different pricing implications and sequencing that we can work through. So hopefully that answers your question.

I guess to add, we absolutely will make the drug available once it gets European Commission approval, assuming that that goes well. The real market opportunity here is clearly in the Boston type population. And so the big push that we're going to have is going to be for the Boston hopes for the Boston approval by the end of the year, but we will have the drug available for patients on time.

Okay. Great. Thank you. That's helpful. And then also in that vein, do you expect that physician prescribing patterns will differ between the EU and the U.S.? Just preliminary thoughts on that?

Jatin, do you want to take that?

In terms of prescribing patterns.

I can just jump in and just real quick, one of the problems in Europe is that - one of the challenges is that there's a lot less reimbursement for off-label use. And so physicians tend to be restricted to what's on label, at least in certain countries. There are some countries that are more liberal, and provided that the line of therapy is appropriate, physicians would be using the drug as they see fit. But I think the main difference will be just on the restricted access or reimbursement. John, do you want to pick up on that?

I would say, while prescribing patterns may differ somewhat across the U.S. and Europe, early research that we've done does get a positive reaction for the XCD or Boston profile. So we do expect to have good penetration in the European market as well once we launch that application.

The next question comes from Mike Ulz with Baird. Please go ahead.

Hi, guys. Thanks for taking the questions. And congratulations on all the progress as well. Maybe I could just ask the follow-up on some of the prior questions related to XPOVIO trends. You guys sort of mentioned an increase in demand starting in December and also in January. So just curious the month-over-month trend, we're seeing an acceleration there? And then I have a follow-up.

I think we'll leave it at that. Again, we don't want to get too much into the weeds in terms of weekly or monthly prescription trends. So, we'll leave that to our quarterly summation when we have these kinds of calls. I think suffice it to say, we are pleased with the early indicators and the growth that we're seeing since approval. And again, I think, when we get to our full Q1 numbers, it'll be much clearer in terms of how we've done overall for the full first quarter.

Got it. That's fair. And then maybe just to follow up on NCCN guidelines. Obviously, you've got a recommendation in combination with Velcade, which is on label but you've also got recommendations off label with Pomalyst and Darzalex. I know it's early but just since those guideline updates, have you noticed in sort of an off-label use in those combinations? Thanks.

John, do you want to take that?

Sure. Our sales team and marketing team will of course only promote XPOVIO on its approved FDA label, which is the XVd combination. We do know that many physicians and payers rely on the NCCN guidelines to help make treatment decisions and as you mentioned, NCCN recently added three different XPOVIO regimens, the bortezomib regimen or XVd in combination with Pomalyst or XPd. Importantly, the once-weekly XVd regimen was approved with category one recommendation which represents the highest level assigned by the NCCN. And as we track secondary market researchers is mentioned, and we're doing going forward we will look at a breakout and see how much use it is in XVd versus XPd versus XKd etcetera. Generally, we do not have data to date but those are data we'll gather from market research as we go throughout the year.

Next question comes from Ed White with H.C. Wainwright. Please go ahead.

Good morning, everyone. Maybe if I can ask a question on the pipeline. If you can list your priorities and solid tumors, you had mentioned the endometrial and metastatic melanoma studies. I just wanted to get an update for lung, colorectal cancer, and GBM?

Yes, well, those are all, these are all sort of equal priorities where we're enrolling patients into our own studies in all the ones that you mentioned, lung, colorectal and GBM have single-agent activity and GBM, which we've talked about has a 10% response rate. And we've seen activity as well in colorectal. And we've seen an investigator-sponsored trial that's been ongoing now with some activity along. So, this drug seems to be a very important add-on therapy or addition to some of the active drugs that are used across multiple different indications. And that's because there's a fundamental mechanism, we attack upon the mechanism of cancer, which is the inactivation of tumor suppressor proteins, and we reactivate those tumor suppressor proteins. And then of course, don't forget, we have the SIENDO Phase 3 study readout, by the end of this year, where we're using XPOVIO versus placebo in the maintenance setting after frontline therapy. So broadly active drug and we're being very careful about how we use our precious resources, but we see it across a number of different therapies, and we'll pick the best winners and move them forward as expeditiously as possible.

Great, thanks, Michael. And maybe just talking about resources. Question for Mike or Ian, did you use the ATM in the fourth quarter or thus far in 2021? And are you including any proceeds from the ATM in the cash runway guidance?

Mike?

Yes, so we certainly don't comment on ongoing fundraising with anything. We definitely did not use it during the fourth quarter. And we don't include that in our guidance. It's more on current, improving indications plus current collaborations that we already have in place offset by spend, which we guys who would be somewhere between $280 and $300 million in 2021.

Okay, thanks Mike. And also just as far as that guidance goes, does that include any milestone payment or potential milestone payment from a European partnership?

So, we don't include any new collaboration in that guidance. But obviously something that's a big part of even focus for 2021 for the entire company to make sure we're ready to commercialize in Europe. But no, it does not include any significant payments for new alliances.

This concludes our Q&A session. I would like to turn the conference back over to Michael Kauffman, CEO for any closing remarks.

Thank you, everybody, for joining today's call. And we do look forward to updating you on our progress as soon as we can. Talk to you soon. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.