Description

Summary

We think Karyopharm is a potential x3 or x5 within three years. Anticipated label expansion of its key drug Xpovio in March 2021 will expand Total Addressable Market by a factor of 10 as it moves from “last resort “therapy to lucrative second line treatment in Multiple Myeloma. The US sales opportunity in this condition alone would point to blockbuster status: USD 1bln. The lack of enthusiasm, very high short interest, and ultimately low odds of commercial success baked in today’s market price can be explained by a general misperception that the Xpovio compound is a subpar and maybe outright unnecessary treatment option, competing within an already crowded and fast-moving treatment landscape in hematologic cancers; by the mono-drug risk profile of its owner; by past controversy on the novel compound, including fears of toxicity and negative Adcom before the drug’s first approval in 2019, and more recently by some pretty damning Key Opinion Leader reviews in another approved indication ( DLBCL). Our variant view is that selinexor, with its truly Novel Mechanism of Action, highly convenient oral route, is a highly desirable asset, scalable on many indications including solid tumours, with manageable toxicity side-effects and synergistic potential in combination with existing treatments, and should ultimately attract big pharma’s interests if Karyopharm continues to execute smoothly.

Thesis

Karyopharm Therapeutics (“KPTI”) is a post-clinical, commercial stage biopharma company focussed on blood cancers. Since its first FDA approval in July 2019 to treat Multiple Myeloma, KPTI is selling Xpovio, (underlying molecule is selinexor), an oral blood cancer drug pill (note that oral is much more convenient than intravenous) taken once a week that extends survival of patients.

First Indication: Multiple Myeloma

Multiple Myeloma (“MM”) is the second most common blood cancer in the United States with more than 32,000 new cases each year and over 140,000 patients living with the disease that develops in the bone marrow, the soft, spongy tissue found in the center of many bones where blood cells are produced.  

The current treatment paradigm for Multiple Myeloma

Beyond stem cell transplant, the main types of drug therapies used to treat MM are immunomodulatory drugs, proteasome inhibitors, antibodies, steroids, and chemotherapy; Xpovio/selinexor belongs to another emerging category of Novel Mechanisms of Action.

Proteasome inhibitors such as Velcade (bortezombib), Kyprolis (carfilzombib), Ninlaro (ixazomib)  target specific enzymes called proteasomes that digest proteins in the cells. Because myeloma cells produce a lot of proteins they are particularly vulnerable to this type of drug.

Immunomodulatory drugs: such as Revlimid (lenalidomide), Pomalyst (pomalidomide) stimulate the immune system and keep new blood vessels from forming and feeding myeloma cells.

Monoclonal antibodies such as Darzalex (dartumumab) bind to myeloma cells and label them for removal by the person's own immune system. 

Steroids such as Dexamethasone, Prednisone are very effective at reducing the burden of plasma cells,  but this effect is only temporary.

Chemotherapy:  generic molecules like cyclophosphamide, doxorubicin, etoposide destroy cancer cells, usually by keeping the cancer cells from growing, dividing, and making more cells.

Novel Mechanisms of Action:

Nuclear export inhibitors : the only one approved is Xpovio (selinexor), a selective inhibitor of nuclear export that binds to and interferes with the function of a nuclear export protein called XPO1; interfering with this protein ultimately leads to myeloma cell death. 

Histone deacetylase inhibitors:  Farydak (panobinostat) is the only one approved.

KPTI’s compound, selinexor, branded Xpovio, was first approved by the FDA in July 2019 as a 4/5th line therapy to treat Multiple Myeloma following the “STORM” study, and subsequent “BOSTON” study early data, and commercially launched shortly thereafter. 

The STORM study was quite controversial, with a negative Adcom that still taints the drug negatively. The premise of the Storm trial was that despite novel therapies, Multiple Myeloma remains largely incurable; with about 13,000 deaths anticipated in the USA annually. A growing number of patients develop penta-exposed and triple class refractory MM (refractory to PIs, IMiDs, and daratumumab) and have a dismal prognosis with a median overall survival as short as 1.3 to 3.5 months. The single arm clinical trial enrolled 123 patients between May 2015 and March 2018 at 60 sites in the United States and Europe. Patients had a median 8 prior therapies (and some had significant comorbidities) and were treated with selinexor at 80 mg and dexamethasone twice weekly.  The primary endpoint for efficacy was measured by the Overall Response Rate: the proportion of patients whose tumor is destroyed or significantly reduced by the drug. The  ORR came at 26% and the second endpoint: Median Progression Free Survival was 3.7 months. The safety data showed quite a lot of adverse reactions, and a rate of fatal adverse reactions at 8.9%, which is high. The toxicities seemed significant, but somewhat mitigated by the high dose needed at this aggressive stage of the diseases, and the poor condition of patients.

The 26% ORR can seem a bit underwhelming. This compares with the MM-003 trial supporting Pomalidomide which showed a 31.5% ORR; and the GEN-501 Sirius trial supporting Daratumumab which showed an ORR of 31.1%. In both trials, patients had a median of five or more prior lines of therapy and the Progression Free survival was slightly higher : 4.0 months.  To summarize, I believe the STORM trial was never considered a “home run”. That explains why the  AdCom hearing in February 2019 actually voted 8 to 5 against accelerated approval of Xpovio, delaying approval until phase III BOSTON early data was available to assuage the toxicity profile concerns. BOSTON, targeting 2nd to 4th line treatment, was enrolling a less refractory population,  and with the drug given at a lower dose. The FDA finally approved Xpovio for 5th line in July 2019, seemingly satisfied that this level of toxicity was acceptable given the unmet need of the last-resort setting.

BOSTON Phase III data, released in March 2020, showed materially better convenience & outcomes versus 2nd/3rd line Multiple Myeloma standard of care with a clear and convincing difference in progression-free survival. The trial, enrolling 402 patients, assessed once-weekly selinexor (Xpovio) along with once-weekly bortezomib (Velcade) and low-dose dexamethasone against standard twice-weekly Velcade plus low-dose dexamethasone . The selinexor/bortezomib/dexamethasone group showed significantly prolonged median progression-free survival compared with the doublet: 13.93 months vs 9.46 months. This 47 percent increase in progression-free survival means they lived 47 percent longer without their disease worsening. Note that those patients had been previously treated with far fewer therapies (median two prior therapies versus eight in STORM) and suffered from a disease far less refractory to treatment than in STORM.   Some attribute the efficacy to the mechanistic approach of combining two drugs with different and additive or synergistic mechanisms of action (XPO1 inhibitor plus Proteasome Inhibitor). Also, this treatment requires 40% fewer clinic visits, and remember, Xpovio is an oral drug so highly convenient.

Regarding safety, adverse events rates were higher in the selinexor arm but as there is an additional therapy in its arm (three versus two in the control arm), this should not be totally unexpected. Also, the company noted, this time in Xpovios’ favour, fewer rates of peripheral neuropathy, 32.3% versus 47.1%, one of the adverse events associated with Velcade; possibly because patients in the Xpovio arm received 40% less Velcade and also 25% less dexamethasone, along with fewer clinic site visits during the first 24 weeks in the study.

KPTI strategy: slowly but surely moving from 4th line to 2d line of treatment

After the STORM early BOSTON trial data, and FDA subsequent first approval to market in July 2019, Xpovio is effectively the last resort drug for a U.S. population of approximately 6,000 patients who have failed the 1st to 4th line existing standard treatments.  Thanks to the resounding success of the BOSTON study we think Xpovio is highly likely to receive FDA approval in March 2021 to extend its drug label from 4th line to 2d or 3d line of therapy.  As the company’s graph below shows, that would extend the addressable market from 6,000 to 31,000 patients in the USA alone, a 5 fold TAM expansion which means that Xpovio could have blockbuster potential (in pharma, blockbuster status equates to more than 1 billion annual sales) rather than the current niche opportunity in the 4th line setting.

The opportunity gets even more compelling when we realize that the market is fragmented - Revlimid is a true leader in the first-line setting, but there are no dominant players in other lines of therapy and most drugs each achieve US$ 1 billion sales.  As per the company’s presentation highlights below, 

Immunomodulatory Agents: Revlimid : (ex Celgene now owned by BMS):  is by far the top seller with $10.82 billion in annual sales;  Pomalyst (from BMS) runs above $620m sales per quarter; call it annual sales of $2.5 billion.

Proteasome Inhibitors: Velcade (from Takeda): sales are declining somewhat but run rate is above $1 billion (2019: $1. 6 bln); Kyprolis (from Amgen): $1 billion run rate.

Monoclonal Antibodies: Darzalex (from Janssen/Genmab): reported Q1 2020 sales at $937m so let’s say $4 billion annual sales

Furthermore, MM market dynamics, as complex and fast-moving as they are given the number of potential combinations, could also foster increased adoption of Xpovio. On June 27, 2019, following a successful Phase 3 trial,  the FDA approved daratumumab (Darzalex; Janssen) in combination with lenalidomide (Revlimid; Celgene) and dexamethasone for the first-line treatment of patients with multiple myeloma, and this combo could become the first-line therapy Standard Of Care. Revlimid and Darzalex today occupy the top positions in second line therapy; Darzalex enjoys already 10% first line, 43% second line, 34% third line and 20% fourth-line market share and is gaining market share in the first line. We can surmise that in the future patients who will fail/relapse after receiving Darzalex in first line will probably need a different mechanism and not a “repeat”, and that pleads in favour of selixinor-Xpovio in the second line landscape which will effectively be more “opened”..

Figuring out Xpovio’s TAM in second-line MM

As per the company’s presentation, 6,000 patients are in the 4th line of treatment annually in the US, the current niche market for Xpovio; and patients in the second and third line of therapy amount to an additional 30,000 to 32,000.  This is a 5 fold increase.

A longer duration of treatment….doubles the number of prescriptions per patient

In the STORM the median duration of treatment was 9 weeks, against around 10 months in the BOSTON study. So, prescriptions could x3.3 or more thanks to the duration of treatment alone, but then we also need to adjust for reduced dosing: 100mg once weekly per BOSTON protocol versus 80mg twice weekly per STORM protocol. Let’s call it a 2X+ increase in the expected number of prescriptions per patient.

We know that Xpovio net sales currently run at $21.3 million (with a 15% difference between gross and net), thanks to the 18% market share achieved in 4th line therapy since approval in summer 2019. Simple maths:  if we double the number of prescriptions on a market 5 times bigger, sales would expand 10x. No calculator needed here: should gross sales run at $25 million  per quarter, we can justify a $1 billion sales potential. 

Sanity check : we take further comfort when we analyse a loan that was extended in Q2 2020 to KPTI by Healthcare Royalty Partners: the loan amortization schedule, based on Xpovio sales royalties, infer a sales path towards $300 million per year in the first years.

Second indication: diffuse large B-cell lymphoma or DLBCL

DLCL is a blood cancer that develops in cells of the immune system called lymphocytes.Xpovio, following successful SADAL studies, has just been approved on DLBCL in June 2020, as a third-line treatment; 9,000 patients are concerned, with longer time on therapy, and there maybe lies some market opportunity for KPTI. In a podcast released in July 2020,  Vinay Prasad, a distinguished hematologist-oncologist, discussed the SADAL study and his critics are damning: a poor ORR; no control arm; very odd and unusual selection filter  in inclusion criteria; patients were not truly so refractory, more survivors without much side effects; this drug does not cater for an unmet need, there are already dozens of options; and should not have been approved by FDA;  “how low the bar has fallen”. “This approval is a disservice to patients”. This doctor claims there is no evidence the drug  improves lifes, and calls it a  “very sad for people of oncology if drugs like this get approved”. He does not forecast any substantive use and calls it a “capitulation of FDA regulator”!    https://soundcloud.com/plenarysession/ep259. I will err on the side of caution, and for the sake of simplicity and to stay on the conservative side, I will side with this KOL and ignore any potential sales here. 

Third indication: solid tumours,  the SEAL study on liposarcoma

Solid tumor cancers typically describe an abnormal mass of tissue The most advanced KPTI study in the field is in patients with liposarcoma, which is a rare form of cancer that arises in a patient’s fat cells. On November 3d 2020, KPTI published  positive phase 3 topline results of Xpovio in patients with advanced unresectable dedifferentiated liposarcoma (the SEAL study). The study met the primary endpoint of a statistically significant increase in progression-free survival (‘PFS’) with a hazard ratio (‘HR’) of 0.70 and a p-value of 0.023. The data indicate Xpovio reduced the risk of disease progression in these patients by 30% compared to placebo. The safety profile of 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 diffuse large B-cell lymphoma. KPTI plans to  submit a New Drug Application in Q1 2021.

Xpovio’s commercial potential on liposarcoma is negligible in our thesis, as the addressable patient population is only about 2,000 per year. However this somewhat derisks Xpovio in the solid tumor field, liposarcoma can be seen as an entry point into the solid tumor treatment landscape and may encourage new trials (on top of the ongoing pivotal endometrial cancer study, with topline results expected in Q4 2021); remember that nine of the top 10 most common and fatal forms of cancer are solid tumors. 

Valuation

At the current $15 share price, KPTI’s Market Cap is a mere $1.1 billion, with more than $300 million in cash, enough to drive the company until 2022 without dilutive capital raises. That market price looks far too cheap: industry M&A valuations for oncology pharma companies are usually a x3 to x5 multiple of peak estimated revenues, sometimes even higher; for instance, Gilead is currently offering $21 Billion to acquire Immunomedics, which key breast cancer drug Trodelvy is forecast to bring peak sales of $3 billion (but is just being launched after approval in June 2020). If we use a x5 multiple on peak sales of 1 billion, we get a $75 price target for KPTI. Again, no spreadsheet needed here.

Why does this opportunity exist?

The short interest is extremely high at 21% of the float. Even though I tend to view this a positive technical set-up,  the main bear thesis seem to hinge on several key arguments:

Karyopharm is basically a one trick pony, all about a  single concentrated bet on selinexor (we can not count on the rest of the pipeline Eltanexor, KPT-9274 and Verdinexor).

Karyopharma is post clinical, but still in the very first stages of the commercial phase of its  one and only product, and in the  biotech space, this means often a purgatory period of low valuation and low general interest.

A general misperception that the Selixinor compound is a subpar and maybe outright unnecessary treatment option, within an already crowded and fast-moving treatment landscape in hematologic cancers.  The negative Adcom certainly weighs very negatively, and critics may have a point after all- there are indeed  better treatments for multiple myeloma; Xpovio is just not the best drug out there; and the FDA regime may have been somewhat complacent in the first approval; but even if Xpovio reaches a rather mediocre 20% market share in second-line MM therapy, that would bring sales to blockbuster status. 

Fears of toxicity raised in STORM fail to subside. However, In the last conf call, the company highlighted that the side-effect profile can typically be manageable, and reversible with dose modifications and prophylactic treatments.

Patent protection: my understanding is that it is holds until 2032; a variant view could exist on the strength of the IP.  

Risks

Commercial execution.  Competition in the hematologic cancers and in particular in multiple myeloma space is fierce, with heavy-hitters Bristol-Myers Squibb, Janssen, Takeda; and new candidates are constantly emerging.

Regulatory risks- as always in biotech the FDA, EMA could reject pending submissions based on the BOSTON,STORM and SADAL studies

Catalyst

Catalysts

March 2021: PDUFA date for potential label expansion of Xpovio in 2d line therapy of MM

EMA : approval in refractory MM based on STORM

Europe: potential partnership in MM to distribute Xpovio