KPTI - Karyopharm's Revenue Woes: PAPs And Other Factors Impacting Xpovio's Outlook (Maintain 'Sell')

2023-05-05 14:28:53 ET

Summary

• Karyopharm Therapeutics cut its 2023 guidance, resulting in a 25% drop in stock price.
• Increased use of Patient Assistance Programs (PAPs) was cited as the primary reason for reduced revenue projections.
• Other potential factors, in my view, include Xpovio's toxicity, competition in the multiple myeloma market, and pricing and reimbursement challenges.
• The company may need to adjust its pricing strategy or explore alternative payment models to improve revenue outlook.
• Karyopharm's guidance cut reaffirms my concerns. My recommendation remains "Sell" due to ongoing challenges and poor investment prospects.

Introduction

Karyopharm Therapeutics (KPTI), the commercial-stage pharmaceutical company known for its lead drug Xpovio (selinexor), has recently experienced a 25% drop in its stock price after cutting its revenue guidance for 2023. The updated guidance for the full year 2023 indicates total revenue to be in the range of $145 million to $160 million, compared to the previous range of $160 million to $175 million.

In my previous analysis of Karyopharm, I highlighted that the company, founded in 2008, has encountered a $1.3 billion accumulated deficit. Selinexor, their primary drug, remains unprofitable due, in part, to its toxicity, leading to a preference for clinical trials in some instances (per UpToDate recommendations in multiple myeloma patients). Karyopharm's diminishing valuation reflects low investor confidence, and ongoing net losses, alongside elevated R&D and SG&A expenses, are expected to persist. My recommendation was to "Sell," and since then, Karyopharm's stock has dropped by ~20%.

The purpose of this article is to provide investors with the latest updates on Karyopharm's recent earnings, which will be discussed in detail below.

Karyopharm's Financials

Before we begin, let's quickly review the company's most recent financial report . Karyopharm's total revenue for the first quarter of 2023 was $38.7 million, lower than the same period last year due to a decline in licensing and other revenue. Net product revenue remained consistent at $28.3 million. The company's research and development expenses decreased while selling, general and administrative expenses remained relatively stable. Karyopharm reported a net loss of $34.1 million for the quarter. The company's cash position as of March 31, 2023, was $261.9 million. The company expects its cash runway to last through late 2025.

Karyopharm Revises Guidance for Xpovio Revenue Due to Increased Use of Patient Assistance Programs

Karyopharm has updated its guidance for U.S. Xpovio net product revenue, now projecting a range of $110 million to $125 million, down from the previous estimate of $125 million to $140 million. The primary reason cited for this decrease is the increased reliance on Patient Assistance Programs (PAPs), including a cumulative effect from refills.

PAPs aim to help patients with limited financial resources or inadequate insurance coverage access medications at reduced costs or for free. Pharmaceutical companies, such as Karyopharm, often offer these programs to enhance patient access to their products.

The heightened use of PAPs for Xpovio suggests that a considerable number of patients might be struggling to afford the drug, potentially due to elevated prices, insufficient insurance coverage, or financial difficulties. Although PAPs can improve patient access to medications, they may also adversely affect revenue generated by the drug, as companies often provide the medication at a lower price or for free.

Karyopharm's mention of the cumulative effect from refills implies that patients' financial burdens could be ongoing, leading to a sustained dependence on PAPs. Consequently, Karyopharm might be experiencing decreased revenue from Xpovio due to a combination of lower prices and increased PAP usage.

To tackle this issue, Karyopharm could consider revising their pricing strategy for Xpovio, investigating alternative payment models, or collaborating with payers and policymakers to enhance the drug's affordability and diminish the reliance on PAPs. By taking these steps, the company might potentially improve its revenue prospects while preserving patient access to Xpovio.

Other Potential Reasons for Reduced Xpovio Guidance

There is a possibility that the lowered revenue projections for Xpovio may be influenced by factors other than the increased reliance on PAPs, despite the company's claims of higher earlier-line utilization of the drug. These factors, as discussed in my previous article on Karyopharm, include concerns about Xpovio's toxicity and its impact on patients' quality of life, competitive pressures within the multiple myeloma market, and challenges related to pricing and reimbursement for multiple myeloma treatments.

The concerns regarding toxicity and the adverse effect on patients' quality of life could render Xpovio less appealing to both patients and healthcare providers, resulting in decreased prescription rates and reduced revenue. Moreover, intense competition in the multiple myeloma market from other drugs boasting superior safety profiles, higher efficacy, or more convenient administration may further impede Xpovio's growth potential and contribute to the downgraded guidance.

Challenges surrounding pricing and reimbursement are closely tied to the growing use of PAPs. The steep cost of Xpovio, coupled with stringent reimbursement policies, might not only prompt a heavier dependence on PAPs but also potentially dissuade some patients from accessing the drug at all. This could lead to a diminished patient pool and contribute to the lowered revenue expectations. To overcome these obstacles, it is essential for Karyopharm to address these concerns holistically, which could improve Xpovio's market position and financial performance in the multiple myeloma market.

My Analysis & Recommendation

In light of Karyopharm Therapeutics' recent downward revision of their 2023 revenue guidance, my concerns about the company's financial prospects remain valid. While Karyopharm attributes the reduced guidance primarily to the increased utilization of Patient Assistance Programs, it is crucial to consider other contributing factors, such as Xpovio's toxicity, patient quality of life concerns, competition in the multiple myeloma market, and pricing and reimbursement challenges associated with multiple myeloma treatments. It is worth noting that although some degree of PAP usage was anticipated, its significance may not have been as noticeable if Xpovio had been selling well.

Given the recent 25% drop in stock price, the company's $1.3 billion accumulated deficit, the poor market prospects of their lead drug Xpovio, and the ongoing hurdles Karyopharm faces in terms of profitability and market competition, my recommendation for Karyopharm Therapeutics continues to be "Sell." Investors may find better opportunities by exploring other options within the pharmaceutical sector.

Risks to Thesis

When the facts change, I change my mind.

While my pessimistic outlook on Karyopharm Therapeutics is based on valid concerns, there are several risks to this thesis that could potentially lead to a more favorable outcome for the company:

1. Regulatory approvals and expanded indications: If Karyopharm secures additional regulatory approvals for Xpovio or expands its indications to other malignancies, it could potentially increase the drug's market size and revenue prospects, thereby improving the company's financial performance.

2. Successful pipeline development: Karyopharm has other drug candidates in its pipeline. If the company successfully develops and commercializes these drugs, it could diversify its revenue streams and reduce its dependence on Xpovio, thus mitigating some of the concerns associated with its primary drug.

3. Strategic partnerships and collaborations: Karyopharm could form strategic partnerships or collaborations with other pharmaceutical companies to share the costs and risks of drug development. This could potentially improve the company's financial position and accelerate its growth prospects.

4. Effective cost management: If Karyopharm manages to reduce its R&D and SG&A expenses while maintaining or enhancing its drug development efforts, it could potentially achieve profitability sooner than anticipated, which would benefit the company's valuation.

5. Positive clinical trial results: If future clinical trials demonstrate improved safety, efficacy, or ease of use for Xpovio or other drugs in Karyopharm's pipeline, it could lead to increased adoption and higher revenues, thus improving the company's financial outlook.

6. Changes in pricing and reimbursement landscape: Changes in the pricing and reimbursement landscape for multiple myeloma treatments, either through policy changes or market dynamics, could potentially make Xpovio more affordable and accessible to a larger patient population, thereby increasing its revenue potential.

7. M&A activity: Karyopharm could be an attractive acquisition target for larger pharmaceutical companies looking to expand their oncology portfolios. A potential acquisition could provide a premium to the current stock price, benefiting shareholders.

For further details see: