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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to             

Commission file number: 001-36167

 

Karyopharm Therapeutics Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

26-3931704

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

85 Wells Avenue, 2nd Floor

Newton, MA

 

02459

(Address of principal executive offices)

 

(Zip Code)

 

(617) 658-0600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.0001 par value

 

KPTI

 

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  ☒

As of April 29, 2021, there were 75,092,567 shares of Common Stock, $0.0001 par value per share, outstanding.

 

1


Table of Contents

 

2


Table of Contents

TABLE OF CONTENTS

 

 

 

PART I - FINANCIAL INFORMATION

 

4

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

4

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

Condensed Consolidated Statements of Operations

 

5

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

6

 

 

Condensed Consolidated Statements of Cash Flows

 

7

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

8

 

 

Notes to Condensed Consolidated Financial Statements

 

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

25

Item 4.

 

Controls and Procedures

 

25

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

26

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

26

Item 1A.

 

Risk Factors

 

26

Item 6.

 

Exhibits

 

65

 

 

Signatures

 

66

 

3


Table of Contents

 

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except per share amounts)

 

 

 

March 31,
2021

 

 

December 31,
2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

88,471

 

 

$

85,918

 

Short-term investments

 

 

135,894

 

 

 

163,322

 

Accounts receivable

 

 

17,843

 

 

 

12,881

 

Inventory

 

 

3,114

 

 

 

2,644

 

Prepaid expenses and other current assets

 

 

9,374

 

 

 

9,285

 

Restricted cash

 

 

815

 

 

 

2,481

 

Total current assets

 

 

255,511

 

 

 

276,531

 

Property and equipment, net

 

 

1,984

 

 

 

2,219

 

Operating lease right-of-use assets

 

 

9,020

 

 

 

9,363

 

Long-term investments

 

 

7,676

 

 

 

24,215

 

Restricted cash

 

 

718

 

 

 

722

 

Total assets

 

$

274,909

 

 

$

313,050

 

Liabilities and stockholders’ (deficit) equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,040

 

 

$

4,450

 

Accrued expenses

 

 

55,611

 

 

 

52,930

 

Deferred revenue

 

 

 

 

 

297

 

Operating lease liabilities

 

 

1,997

 

 

 

1,917

 

Other current liabilities

 

 

1,360

 

 

 

609

 

Total current liabilities

 

 

62,008

 

 

 

60,203

 

Convertible senior notes

 

 

168,704

 

 

 

117,928

 

Deferred royalty obligation

 

 

73,088

 

 

 

73,088

 

Operating lease liabilities, net of current portion

 

 

10,749

 

 

 

11,285

 

Total liabilities

 

 

314,549

 

 

 

262,504

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000 shares authorized; none issued and
   outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000 shares authorized; 75,062 and
   
73,923 shares issued and outstanding at March 31, 2021 and December 31, 2020,
   respectively

 

 

8

 

 

 

7

 

Additional paid-in capital

 

 

1,072,025

 

 

 

1,119,632

 

Accumulated other comprehensive income

 

 

301

 

 

 

518

 

Accumulated deficit

 

 

(1,111,974

)

 

 

(1,069,611

)

Total stockholders’ (deficit) equity

 

 

(39,640

)

 

 

50,546

 

Total liabilities and stockholders’ equity

 

$

274,909

 

 

$

313,050

 

 

See accompanying notes to condensed consolidated financial statements.

4


Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended
March 31,

 

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

Product revenue, net

 

$

21,731

 

 

$

16,061

 

License and other revenue

 

 

1,529

 

 

 

2,077

 

Total revenues

 

 

23,260

 

 

 

18,138

 

Operating expenses:

 

 

 

 

 

 

Cost of sales

 

 

933

 

 

 

819

 

Research and development

 

 

37,050

 

 

 

33,997

 

Selling, general and administrative

 

 

37,650

 

 

 

30,678

 

Total operating expenses

 

 

75,633

 

 

 

65,494

 

Loss from operations

 

 

(52,373

)

 

 

(47,356

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

264

 

 

 

975

 

Interest expense

 

 

(5,095

)

 

 

(6,509

)

Other (expense) income, net

 

 

(61

)

 

 

25

 

Total other expense, net

 

 

(4,892

)

 

 

(5,509

)

Loss before income taxes

 

 

(57,265

)

 

 

(52,865

)

Income tax provision

 

 

(149

)

 

 

(66

)

Net loss

 

$

(57,414

)

 

$

(52,931

)

Net loss per share—basic and diluted

 

$

(0.77

)

 

$

(0.78

)

Weighted-average number of common shares outstanding used in
    net loss per share—basic and diluted

 

 

74,517

 

 

 

67,627

 

 

See accompanying notes to condensed consolidated financial statements.

5


Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

 

 

Three Months Ended
March 31,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(57,414

)

 

$

(52,931

)

Other comprehensive loss

 

 

 

 

 

 

Unrealized loss on investments

 

 

(132

)

 

 

(314

)

Foreign currency translation adjustment

 

 

(85

)

 

 

(69

)

Comprehensive loss

 

$

(57,631

)

 

$

(53,314

)

 

See accompanying notes to condensed consolidated financial statements.

6


Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(57,414

)

 

$

(52,931

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

235

 

 

 

242

 

Net amortization of premiums and discounts on investments

 

 

664

 

 

 

12

 

Amortization of debt discount and issuance costs

 

 

191

 

 

 

1,912

 

Stock-based compensation expense

 

 

7,359

 

 

 

5,152

 

Realized and unrealized gains on marketable equity securities

 

 

(14

)

 

 

 

Inventory obsolescence charge

 

 

82

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(4,962

)

 

 

(1,419

)

Inventory

 

 

(552

)

 

 

(624

)

Prepaid expenses and other current assets

 

 

(89

)

 

 

(268

)

Operating lease right-of-use assets

 

 

343

 

 

 

297

 

Accounts payable

 

 

(1,410

)

 

 

711

 

Accrued expenses and other liabilities

 

 

3,432

 

 

 

3,350

 

Deferred revenue

 

 

(297

)

 

 

(1,054

)

Operating lease liabilities

 

 

(456

)

 

 

(391

)

Net cash used in operating activities

 

 

(52,888

)

 

 

(45,011

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(10

)

Proceeds from maturities of investments

 

 

68,950

 

 

 

47,413

 

Purchases of investments

 

 

(25,764

)

 

 

(93,882

)

Net cash provided by (used in) investing activities

 

 

43,186

 

 

 

(46,479

)

Financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

9,903

 

 

 

162,096

 

Proceeds from the exercise of stock options and shares issued under employee
   stock purchase plan

 

 

773

 

 

 

2,733

 

Net cash provided by financing activities

 

 

10,676

 

 

 

164,829

 

Effect of exchange rate on cash, cash equivalents and restricted cash

 

 

(91

)

 

 

(80

)

Net increase in cash, cash equivalents and restricted cash

 

 

883

 

 

 

73,259

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

89,121

 

 

 

130,689

 

Cash, cash equivalents and restricted cash at end of period

 

$

90,004

 

 

$

203,948

 

Reconciliation of cash, cash equivalents and restricted cash reported within the
   condensed consolidated balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

$

88,471

 

 

$

202,247

 

Short-term restricted cash

 

 

815

 

 

 

987

 

Long-term restricted cash

 

 

718

 

 

 

714

 

Total cash, cash equivalents and restricted cash

 

$

90,004

 

 

$

203,948

 

Supplemental disclosures:

 

 

 

 

 

 

Deferred financing costs in accrued expenses

 

$

 

 

$

294

 

Cash paid for amounts included in the measurement of operating lease liabilities

 

$

815

 

 

$

796

 

Cash paid for interest on deferred royalty obligation

 

$

2,457

 

 

$

1,240

 

 

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(unaudited)

(in thousands)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders’
(Deficit) Equity

 

Balance at December 31, 2020

 

 

73,923

 

 

$

7

 

 

$

1,119,632

 

 

$

518

 

 

$

(1,069,611

)

 

$

50,546

 

Vesting of restricted stock

 

 

409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and shares issued
   under the employee stock purchase plan

 

 

92

 

 

 

 

 

 

773

 

 

 

 

 

 

 

 

 

773

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,359

 

 

 

 

 

 

 

 

 

7,359

 

Issuance of common stock, net of issuance costs

 

 

638

 

 

 

1

 

 

 

9,902

 

 

 

 

 

 

 

 

 

9,903

 

Cumulative effect adjustment for adoption of new accounting guidance

 

 

 

 

 

 

 

 

(65,641

)

 

 

 

 

 

15,051

 

 

 

(50,590

)

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

 

 

 

(132

)

Foreign currency cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(85

)

 

 

 

 

 

(85

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57,414

)

 

 

(57,414

)

Balance at March 31, 2021

 

 

75,062

 

 

$

8

 

 

$

1,072,025

 

 

$

301

 

 

$

(1,111,974

)

 

$

(39,640

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

65,370

 

 

$

7

 

 

$

923,142

 

 

$

(37

)

 

$

(873,338

)

 

$

49,774

 

Vesting of restricted stock

 

 

189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and shares issued
   under the employee stock purchase plan

 

 

348

 

 

 

 

 

 

2,733

 

 

 

 

 

 

 

 

 

2,733

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,152

 

 

 

 

 

 

 

 

 

5,152

 

Issuance of common stock, net of issuance
   costs

 

 

7,188

 

 

 

 

 

 

161,802

 

 

 

 

 

 

 

 

 

161,802

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(314

)

 

 

 

 

 

(314

)

Foreign currency cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(69

)

 

 

 

 

 

(69

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52,931

)

 

 

(52,931

)

Balance at March 31, 2020

 

 

73,095

 

 

$

7

 

 

$

1,092,829

 

 

$

(420

)

 

$

(926,269

)

 

$

166,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

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KARYOPHARM THERAPEUTICS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Basis of Presentation

Nature of Business

Karyopharm Therapeutics Inc., a Delaware corporation (collectively with its subsidiaries, the “Company,” “we,” “us,” or “our”), is a commercial-stage pharmaceutical company pioneering novel cancer therapies and dedicated to the discovery, development and commercialization of first-in-class drugs directed against nuclear export for the treatment of cancer and other diseases. We were incorporated in Delaware on December 22, 2008 and have a principal place of business in Newton, Massachusetts.

Our Selective Inhibitor of Nuclear Export (“SINE”) compounds function by binding with and inhibiting the nuclear export protein exportin 1 (“XPO1”). Our initial focus has been on seeking the regulatory approval and commercialization of our lead SINE compound, selinexor, as an oral agent in cancer indications with significant unmet clinical need. XPOVIO® (selinexor) received its initial U.S. approval from the U.S. Food and Drug Administration in July 2019 and is currently approved and marketed for the following indications: (i) in combination with bortezomib and dexamethasone for the treatment of adult patients with multiple myeloma who have received at least one prior therapy; (ii) in combination with dexamethasone for the treatment of 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, at least two immunomodulatory agents, and an anti-CD38 monoclonal antibody; and (iii) for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”), not otherwise specified, including DLBCL arising from follicular lymphoma, after at least two lines of systemic therapy. In addition, in March 2021, NEXPOVIO® (selinexor), the brand name for XPOVIO in Europe, was granted conditional marketing authorization by the European Commission, in combination with dexamethasone, to treat adult patients with multiple myeloma who have received at least four prior therapies and whose disease is refractory to at least two proteasome inhibitors, two immunomodulatory agents, and an anti-CD38 monoclonal antibody, and who have demonstrated disease progression on the last therapy.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2021. For further information, refer to the financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on February 24, 2021 (“Annual Report”).

Basis of Consolidation

The condensed consolidated financial statements at March 31, 2021 include the accounts of Karyopharm Therapeutics Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The significant accounting policies used in preparation of these condensed consolidated financial statements on Form 10-Q are consistent with those discussed in Note 2, “Summary of Significant Accounting Policies,” in our Annual Report.  

 

2. Recent Accounting Pronouncements and CARES Act Provisions

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 reduces complexity of accounting for convertible debt and other equity-linked instruments. The new standard is effective for companies that are SEC filers (excluding smaller reporting companies) for fiscal years beginning after December 15, 2021 and interim periods within that year. Companies can early adopt the standard at the start of a fiscal year beginning after December 15, 2020. The standard can either be adopted on a modified retrospective or a full retrospective basis. We early adopted the standard on January 1, 2021 using the modified retrospective basis. Upon adoption of ASU 2020-06, the

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carrying value of our convertible debt increased by approximately $50.6 million with a corresponding decrease to additional paid-in capital of $65.6 million and accumulated deficit of $15.0 million. Our deferred tax liability also decreased by approximately $11.8 million with a corresponding increase in the income tax valuation allowance. While the adoption does not have a material impact to our condensed consolidated statements of operations or condensed consolidated statements of cash flows, non-cash interest expense associated with the amortization of the debt discount will be significantly reduced in periods subsequent to adoption.

CARES Act

In March 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law and provided an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the U.S. economy. The business tax provisions of the CARES Act include temporary changes to income and non-income-based tax laws. Some of the key income tax provisions include (1) eliminating 80% of taxable income limitations by allowing corporate entities to fully utilize net operating loss (“NOL”) carryforwards to offset taxable income in 2020, 2019 or 2018 and reinstating it for tax years after 2020; (2) allowing NOLs generated in 2020, 2019 or 2018 to be carried back five years; (3) increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for the 2020 and 2019 tax years; (4) allowing taxpayers with alternative minimum tax credits to claim a refund for the entire amount of the credit instead of recovering the credit through refunds over a period of years, as required by the 2017 Tax Cut and Jobs Act; and (5) allowing entities to deduct more of their charitable cash contributions made during calendar year 2020 by increasing the taxable income limitation to 25% from 10%. Companies are required to account for these provisions in the period that includes the March 2020 enactment date (i.e., the first quarter for calendar year-end entities). We have assessed the impact of these provisions and they are not material to our condensed consolidated financial statements or related disclosures.

Measures not related to income-based taxes within the CARES Act include (1) allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020 over the following two years and (2) allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds. These measures of the CARES Act also are not material to our condensed consolidated financial statements or related disclosures.

3. Product Revenue

To date, our only source of product revenue has been from the U.S. sales of XPOVIO. Net product revenue, including provisions primarily consisting of distribution fees and cash discounts, as well as reserves for chargebacks, rebates and returns, were as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2021

 

 

2020

 

Gross product revenue

 

$

27,544

 

 

$

18,876

 

Provisions for product revenue

 

 

(5,813

)

 

 

(2,815

)

Total product revenue, net

 

$

21,731

 

 

$

16,061

 

 

As of March 31, 2021 and December 31, 2020, net product revenue of $17.0 million and $12.9 million, respectively, were included in accounts receivable. To date, we have had no bad debt write-offs and we do not currently have credit issues with any customers. There were no credit losses associated with our accounts receivables as of March 31, 2021 and December 31, 2020.

4. Inventory

The following table presents our inventory of XPOVIO (in thousands):

 

 

 

March 31,
2021

 

 

December 31,
2020

 

Raw materials

 

$

2,219

 

 

$

1,919

 

Work in process

 

 

781

 

 

 

646

 

Finished goods

 

 

114

 

 

 

79

 

Total inventory

 

$

3,114

 

 

$

2,644

 

 

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As of March 31, 2021 and December 31, 2020, all of our inventory was related to XPOVIO, which was initially approved by the FDA in July 2019 and at which time we began to capitalize costs to manufacture XPOVIO. Prior to FDA approval of XPOVIO, all costs related to the manufacturing of XPOVIO and related material were charged to research and development expense in the period incurred.

Inventory is stated net of inventory reserves of $0.4 million and $0.3 million, as of March 31, 2021 and December 31, 2020, respectively.

As of March 31, 2021, we recorded an excess and obsolescence provision of $0.1 million. We did not record an excess and obsolescence provision as of March 31, 2020.

5. License and Asset Purchase Agreements

In prior periods, we entered into out-licensing and asset purchase agreements with Anivive Lifesciences, Inc. (“Anivive”), Biogen MA Inc. (“Biogen”), Antengene Therapeutics Limited (“Antengene”), and FORUS Therapeutics Inc. (“FORUS”), all of which are accounted for within the scope of Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). For further details on the terms and accounting treatment considerations for these contracts, please refer to Note 11, “License and Asset Purchase Agreements,” to our consolidated financial statements contained in Item 8 of our Annual Report.

We recognized $0.8 million in license and other revenue for the three months ended March 31, 2021, related to the license agreements with Anivive and Antengene, including $0.3 million under the license agreement with Antengene that was recorded as short-term deferred revenue as of December 31, 2020. We recognized $1.6 million in license and other revenue pursuant to our license agreement with Antengene and a distributor, for the three months ended March 31, 2020.

 

6. Fair Value of Financial Instruments

Financial instruments, including cash, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses, are presented at amounts that approximate fair value at March 31, 2021 and December 31, 2020.

We are required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs:

Level 1 inputs - Quoted prices in active markets for identical assets or liabilities

Level 2 inputs - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3 inputs - Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability

Our cash equivalents are comprised of money market funds, U.S. government and agency securities, commercial paper and corporate debt securities as presented in the tables below. We measure these investments at fair value. The fair value of cash equivalents is determined based on “Level 1” or "Level 2" inputs.

Items classified as Level 2 within the valuation hierarchy consist of corporate debt securities, commercial paper, certificates of deposit and U.S. government and agency securities. We estimate the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. We validate the prices provided by our third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

In certain cases where there is limited activity or less transparency around inputs to valuation, the related assets or liabilities are classified as Level 3. The embedded derivative liability associated with our deferred royalty obligation, as discussed further in Note 11, “Long-Term Obligations”, is measured at fair value using an option pricing Monte Carlo simulation model and is included as a component of the deferred royalty obligation. The embedded derivative liability is subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other income (expense), net. The assumptions used in the

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option pricing Monte Carlo simulation model include: (1) our estimates of the probability and timing of related events; (2) the probability-weighted net sales of XPOVIO and any of our other future products, including worldwide net product sales, upfront payments, milestones and royalties; (3) our risk-adjusted discount rate that includes a company specific risk premium; (4) our cost of debt; (5) volatility; and (6) the probability of a change in control occurring during the term of the instrument. Our embedded derivative liability, as well as the estimated fair value of the deferred royalty obligation, is described in Note 2, “Summary of Significant Accounting Policies,” and Note 15, “Long-Term Obligations” to our consolidated financial statements contained in Item 8 of our Annual Report.

The following table presents information about our financial assets and liability that have been measured at fair value at March 31, 2021 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

 

Description

 

Total

 

 

Quoted
Prices
in Active
Markets for Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

21,954

 

 

$

21,954

 

 

$

 

 

$

 

Commercial paper

 

 

10,749

 

 

 

 

 

 

10,749

 

 

 

 

Corporate debt securities

 

 

3,000

 

 

 

 

 

 

3,000

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

114,948

 

 

 

 

 

 

114,948

 

 

 

 

Commercial paper

 

 

18,987

 

 

 

 

 

 

18,987

 

 

 

 

Certificate of deposit

 

 

1,056

 

 

 

 

 

 

1,056

 

 

 

 

U.S. government and agency securities

 

 

903

 

 

 

 

 

 

903

 

 

 

 

Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two-year maturity)

 

 

7,676

 

 

 

 

 

 

7,676

 

 

 

 

 

$

179,273

 

 

$

21,954

 

 

$

157,319

 

 

$

 

Financial liability

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivative liability

 

$

1,800

 

 

 

 

 

$

 

 

$

1,800

 

The following table presents information about our financial assets and liability that have been measured at fair value at December 31, 2020 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

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Table of Contents

 

Description

 

Total

 

 

Quoted
Prices
in Active
Markets for Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

3,586

 

 

$

3,586

 

 

$

 

 

$

 

U.S. government and agency securities

 

 

16,000

 

 

 

16,000

 

 

 

 

 

 

 

Commercial paper

 

 

8,999

 

 

 

 

 

 

8,999

 

 

 

 

Corporate debt securities

 

 

2,755

 

 

 

 

 

 

2,755

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

136,833

 

 

 

 

 

 

136,833

 

 

 

 

Commercial paper

 

 

23,487

 

 

 

 

 

 

23,487

 

 

 

 

U.S. government and agency securities

 

 

3,002

 

 

 

 

 

 

3,002

 

 

 

 

Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two-year maturity)

 

 

23,309

 

 

 

 

 

 

23,309

 

 

 

 

U.S. government and agency securities (one
   to two-year maturity)

 

 

906

 

 

 

 

 

 

906

 

 

 

 

 

$

218,877

 

 

$

19,586

 

 

$

199,291

 

 

$

 

Financial liability

 

 

 

 

 

 

 

 

 

 

 

 

Embedded derivative liability

 

$

1,800

 

 

 

 

 

$

 

 

$

1,800

 

 

7. Investments

The following table summarizes our investments in debt securities, classified as available-for-sale, as of March 31, 2021 (in thousands):

 

 

 

Amortized
Cost

 

 

Total
Unrealized
Gains

 

 

Total
Unrealized
Loss

 

 

Aggregate Fair Value

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

114,809

 

 

$

173

 

 

$

(34

)

 

$

114,948

 

Commercial paper

 

 

18,987

 

 

 

3

 

 

 

(3

)

 

 

18,987

 

Certificate of deposit

 

 

1,056

 

 

 

 

 

 

 

 

 

1,056

 

U.S. government and agency securities

 

 

895

 

 

 

8

 

 

 

 

 

 

903

 

Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two-year maturity)

 

 

7,672

 

 

 

9

 

 

 

(5

)

 

 

7,676

 

 

$

143,419

 

 

$

193

 

 

$

(42

)

 

$

143,570

 

The following table summarizes our investments in debt securities, classified as available-for-sale, as of December 31, 2020 (in thousands):

 

 

 

Amortized
Cost

 

 

Total
Unrealized
Gains

 

 

Total
Unrealized
Loss

 

 

Aggregate Fair Value

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

136,677

 

 

$

189

 

 

$

(33

)

 

$

136,833

 

Commercial paper

 

 

23,485

 

 

 

3

 

 

 

(1

)

 

 

23,487

 

U.S. government and agency securities

 

 

3,002

 

 

 

 

 

 

 

 

 

3,002

 

Long-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities (one to two-year
   maturity)

 

 

23,195

 

 

 

126

 

 

 

(12

)

 

 

23,309

 

U.S. government and agency securities (one
   to two-year maturity)

 

 

897

 

 

 

9