Description

KPTI Long Equity Thesis

Karyopharm (KPTI) is a commercial stage oncology company trading at the extremely distressed valuation of 1.4x EV/2024E revenue. Despite generating $115M+ in sales early into its launch with multiple label expansion opportunities over the next two years, KPTI is universally hated as sales growth hiccuped and the tox/benefit profile is misunderstood.

Karyopharm developed and markets Selinexor (XPOVIO), a first/only in class Selective Inhibitor of Nuclear Export (SINE), initially approved in July 2019 for Multiple Melanoma (MM).  (XPOVIO Prescribing Label)  Peak sales for the currently approved 2nd line setting is hundreds of millions to $1B+. Beyond MM, KPTI has pivotal Phase 3 trials underway in endometrial cancer and myelofibrosis with the prior expected to readout next year. Both market opportunities are blockbuster large TAMs.  Management projects cash runway through year end 2025, which provides ample time for sales to resume growth in MM and line-of-sight to label expansion approvals in the new cancer indications.  KPTI stock is trading at an all-time low around $1.50 due to several factors including poor management, XPOVIO’s perceived challenging tolerability profile, a competitive Multiple Myeloma landscape, and recently lowered revenue guidance driven by the Inflation Reduction Act.  While some concerns are legitimate, they are addressable, misperceived, and temporary. Revenue potential of XPOVIO across a variety of oncology settings has priced KPTI too cheap to ignore. Ultimately, we expect a larger pharma company to acquire KPTI.

Multiple Myeloma

XPOVIO was approved in second line+ MM in combination with Velcade in December, 2020 and previously in fourth line+ MM in combination with dexamethasone in July, 2019.  Unlike many cancers, there is a wide variety of regiments available for patients with Multiple Myeloma.  See the NCCN guidelines for vast network of options (NCCN Multiple Myeloma Guidelines). While the treatment regiments are competitive, there are also a significant number of patients at 47,000 2L+ in the US annually, each with different needs.  

XPOVIO’s launch has been moderately successful, though 2023 hit a speed bump when management lowered FYE 2023 guidance from $125-$140M to $110-$125M when Q1 earnings were announced.   The guidance change was not a function of scripts or demand but was driven by increased use of the Karyopharm Assistance Program (KAP). The KAP provides free drug for patients that meet certain low-income eligibility thresholds. The KAP issue should resolve in 2024 as the Inflation Reduction Act changes to Medicare Part D will eliminate the existing 5% patient coinsurance requirement which negatively impacted KPTI’s 2023 guidance.  In 2023 to date, 20% of patients utilized the company’s co-pay assistance program vs. 5% historically.  Once a patient is on the KAP, they are on it for the duration of the year.  Since management was caught off-guard on this issue, we assume there is continued risk to the current 2023 guidance if more patients qualify for the program. However, it is essential to note the impact should be contained to the current year 2023 based on the regulatory change.    

While not in the prescribing label, the NCCN guidelines include an additional combination regiment of XPOVIO+pomalidomide+dexamethasone (SPd). KPTI has a pivotal, 222 patient, Phase 3 trial underway designed to formally introduce this combo treatment into the label. Trial readout is expected in 2H 24 (XPORT-MM-031).   Despite the inclusion in the NCCN guidelines, the formal label adoption should meaningfully expand the MM market for KPTI.  SPd is an all-oral combination making it desirable for both patients and docs. The combination utilizes a lower, 40mg dose of Selinexor which should aid tolerability and hence uptake.  Importantly, management will be able to promote the combination when it’s on-label. 

Ex-US, Selinexor is approved in Europe as NEXPOVIO and marketed by Menarini Group under a collaboration. KPTI received $75M upfront for the European license from Menarini in 2021. Going forward KPTI is entitled to royalties in the mid-teens to mid-twenties percentage of sales and additional sales milestones of up to $202.5M. Approval in EMA came in July 22 and reimbursement discussions with are underway. It’s early days but the European opportunity remains largely unvalued upside. 

Antegene licensed the rights to Selinexor in Australia, New Zealand, and Asia excluding Japan. Antegene paid $23.4M upfront, and owes undisclosed milestones and double-digit royalties on sales. Commercial launch began in mainland China in May of 22.  Like Europe it’s early days. 

There is concern that the already competitive landscape in MM will become increasingly dominated by CAR-T therapy and bispecific T-Cell engagers.  There are two approved MM CAR-Ts in the market: Carvykti (JNJ/LEGN) and Abecma (BMY/TSVT).  The market currently ascribes a $10B market cap to LEGN for a 50% interest in Carvykti. Their efficacy and durability are excellent, however both autologous CAR-T products are highly supply constrained and expected to remain so for years.  Further, CAR-T can only be administered in academic centers due to the complicated nature of the CAR-T process and management of common adverse events such as CRS and ICANS.  Only 30% of MM patients are treated in the academic setting vs. 70% in the community hospital setting.  If more patients were located near academic hospitals, only a subset of them would even be eligible for auto CAR-T due to the length of the process and patient fitness requirements.  Further, KPTI has been developing a thesis that since Selinexor is T-Cell sparing, it could be used in conjunction with, or prior to CAR-T.  Early T-Cell sparing data was recently presented at ASCO examining Selinexor post T-Cell engaging therapies ASCO abstract . 

The ultimate TAM in MM is enormous with 47K 2L+ patients, however pinpointing the potential for XPOVIO is challenging.  At $300K net per year of therapy each 1,000 patients could generate $300M in revenue.  We are unsure if the right number is $250M, $500M or $1B+ in the long term, but at today’s valuation the lowest bar provides significant upside to the equity. 

Endometrial oncology

Based on KPTI’s first Phase 3 trial SIENDO, Selinexor looks active in endometrial cancer.  KPTI now has a pivotal trial underway in a subset of endometrial cancer, the wild type TP53 variety, with top line data expected in H2 24.  There are 66,000 new annual cases of endometrial cancer in the US annually, 14,000 of which are classified as advanced. Post chemotherapy relapse PFS is historically very low at 4 months and watchful waiting is the post chemo standard of care.  Unlike MM, there is a limited selection of therapies post-chemo including checkpoint inhibitors, PARPs and tyrosine kinase inhibitors.  The efficacy of these therapies has been lackluster. For example, the combination of pembro+lenvatinib (a checkpoint plus a TKI) provided a PFS of 6.6 months vs. the chemo arm of 3.8 months.  

KPTI already ran one (arguably) successful 263-patient Phase 3 trial in endometrial cancer, SIENDO, that read-out in February, 2022.  CEO Richard Paulson mismanaged the communication here by announcing KPTI would submit an NDA based on the trial results.  One month later, he updated the market that the FDA required a new trial based on the subset described below. The SIENDO trial hit statistical significance in its primary endpoint of PFS in all-comer relapsed endometrial cancer, however the therapeutic effect was not large enough (per the FDA) to be clinically meaningful.  PFS in the Selinexor arm was 5.7 months vs. 3.8 months in the placebo arm with a p-value of 0.024 and a HR of 0.705.  The advantage doesn’t look dissimilar from the approved dual therapy pembro+lenvatinib described above.

The subset of wild type TP53 mutant patient data in the SIENDO trial was excellent and represents 50% of advanced or recurrent endometrial cancer.  The TP53 wild type population was prespecified and the data showed an incredible 20.8 months of PFS in the Selinexor arm vs. 5.2 months of PFS in the placebo arm. 

The current 220-patient Phase 3 trial (XPORT-EC-042 ) in p53 wild type endometrial cancer is expected to read out in H2 24.  Based on the SIENDO trial data, the outcome should be meaningfully de-risked.  The TAM is blockbuster in size, particularly since this would be the first therapy in the maintenance setting which implies longer treatment duration.

Myelofibrosis

Myelofibrosis (MF) is a hot space in oncology and Selinexor looks to be additive to the standard of care.  There are currently very few therapeutic options in MF.  If a patient is not eligible for allogenic stem cell transplant (HSCT), JAK inhibitors are the only approved option.  JAKs are not curative, but rather manage spleen volume reduction and other MF associated symptoms.  Ultimately, all patients fail JAKs or need to dose reduce due to thrombocytopenia and anemia. Survival post JAK therapy is less than one year.  Incyte’s ruxolitinib (rux or Jakifi) is a multi billion-dollar product in MF. Two other JAKs are approved, fedratinib (Inrebic) and pacritinib (Vonjo) while a third, momelotinib is expected to receive FDA approval in September. GSK acquired momelotinib developer Sierra Oncology for $2B in April 2022 and SOBI recently acquired pacritinib developer CTI Biopharma for $1.7B in May of 2023. 

Selinexor recently released impressive MF data combining ruxolitinib (Jakifi) +Selinexor in front line MF treatment where Jakfi monotherapy is the standard of care (XPORT-MF-034). For background, the percentage of patients achieving a Spleen Volume Reduction of at least 35% (SVR35) and the percentage of patients achieving a Total Symptom Score Reduction of at least 50% (TSS50) at 24 weeks are the FDA accepted primary endpoints in MF.  Ruxolitinib frontline monotherapy was approved achieving a 24 week SVR35 of 41.9% and TSS50 of 45.9%.  

While the Selinexor N is small, the improvement relative to ruxolitinib monotherapy appears meaningful.    As seen in the chart below, at the 60mg dose, Selinexor+rux achieved SVR35 of 91.7% in the evaluable patient population and 78.6% in the intent to treat (ITT) population.  The combination also achieved a TSS50 of 77.8% in the efficacy evaluable population and 58.3% in the ITT.  See the chart below for a more digestible comparison of MF data across therapies.

In addition, KPTI has two data sets that support the direct impact of Selinexor on MF.  A Phase 2 investigator sponsored MF study of patients using Selinexor as a monotherapy after patients failed rux (ESSENTIAL) showed 40% (4/10) of patients achieved a 24 week SVR35 and 60% (6/10) achieved SVR25 benefit.  (Phase 2 Essential ASH) 

Additionally, in the XPORT-MF-034 study, 5 patients in the 60mg Selinexor arm had to dose reduce their rux to 5mg (vs 20mg standard) due to AEs.  This is broadly accepted an ineffective dose but is commonly done as there is no alternative. All five of these patients still achieved 24 week SVR35 and 4 of 5 achieved TSS50.  Selinexor clearly demonstrates activity in MF. 

KPTI recently launched its Phase 3 with the following straightforward trial design. 

Morphosys’ (MOR) Pelabresib, a novel BET inhibitor is also conducting a Phase 3 trial in frontline MF combining with ruxolitinib.  Part of the Phase 2 Manifest data is in the summary chart below.  The MOR Phase 3, Manifest-2 is effectively the same trial design as KPTI’s with the same endpoints.  Manifest-2 will read out by the end of 2023.  Earlier data looks a bit shy of Selinexor’s early data though it’s further along in development.  MOR stock valuation highlights the value of a novel MF agent as MOR has a market cap of over $1B.

Management

KPTI was founded in 2008 by the husband/wife team Michael Kauffman and Sharon Shacham who developed Selinexor and brought it through FDA approvals.  The husband-and-wife team was succeeded by Richard Paulson, the former CEO of Ipsen North America.  Shareholders have not been inspired by KPTI’s leadership at any point in time.  The founders were not liked by the investment community and as noted above, the current CEO Paulson flubbed communication around the SIENDO trial.  The recent revenue guide down associated with the Karyopharm Assistance Program was another failure. The KAP should not have blindsided a management team that was paying attention.  Corporate quarterly operating expenses of $70M should be lower, though on this front some progress is moving along as operating expenses are down 16% YoY and Paulson aims to lower expenses further by cutting nonpriority programs.  More costs should, and can be reduced. 

The May 2022 hiring of Dr. Reshma Rangwala as Chief Medical Officer has us excited.  Dr. Rangwala is qualified and competent, having participated in the development of mega blockbuster Keytruda while Executive Clinical Director at Merck. We know her from her prior role as CMO at Aravive where she executed a Phase 3 ovarian cancer trial that will read out shortly.  

IP

Selinexor intellectual property is strong with composition of matter and other worldwide patents that go to a minimum of 2032. Hatch-Waxman and additional method of use patents will likely extend the IP lifecycle.

Tolerability

XPOVIO’s tolerability continue to plague the company as nausea and gastrointestinal AEs are common causing some docs to avoid the therapy.  However, a significant portion of the AE severity was driven by the higher dosing regiments which were initially studied.  

The actual approval is Selinexor is for 100mg per week and prior trials were run at 160mg per week.  However, all three current pivotal trials are with significantly lower doses including 60mg in Endometrial, 60mg in Myelofibrosis and 40mg in MM.  The AE profile of the therapy is much improved at the lower doses while still providing very good efficacy.  Further, the use of prophylactic antiemetic has mitigated tolerability issues. Unfortunately, KPTI has the burden of changing the perception around the tolerability profile. 

Capital Structure

KPTI’s $260M of cash provides a runway through the end of 2025.  From a debt perspective they have a $173M convertible bond that comes due in October 2025 and a royalty financing agreement (common in biotech) that is paid back with 12.5% royalties on Selinexor, with a possible $30Mish true-up needed at the end of 2024 to keep the payback on track.  Depending on how one accounts for the royalty financing agreement the enterprise value is either $85M or $220M.  Relative to the early launch revenue of $115M and the significant medium term label expansion opportunities KPTI is mispriced. 

Conclusion

Karyopharm is a dirt cheap commercial stage oncology company with a novel, only-in-class SINE MOA trading at 1.4x 2024E revenue of $155M based on a stock price of $1.50 and an enterprise value of $220M. 

Revenue should expand dramatically in 2024 as less use of the Karyopharm Assistance Program next year takes effect, organic growth in multiple myeloma continues and the white space label expansion opportunities in endometrial and myelofibrosis read out over the next 2 years.  The business has had self-inflicted and management related issue that are neither fatal nor long term in impact.  The market will appreciate the value of Selinexor and KPTI as the story plays out or more likely, a larger player acquires them. 

Catalyst

• Significant sales growth of XPOVIO in 2024 in multiple myeloma due reduction in co-pay assistance use
• Selinexor label expansion to to formally include SPd all-oral multiple myeloma treatment regiment 
• Selinexor data in endometrial cancer and pricing in the commensurate label expansion
• Selinexor data in myelofibrosis and pricing in the commensurate label expansion