Revisiting Karyopharm Therapeutics
Jul. 8, 2019 2:57 PM ET | About: Karyopharm Therapeutics Inc. (KPTI)
Summary
One of the biggest risers in the market last week was a small oncology concern called Karyopharm Therapeutics, which was up some 45%.
An early and unexpected FDA approval triggered the big rise in the shares.
We revisit Karyopharm in the paragraphs below and highlight some other potential catalysts on the horizon.
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"A ship is safe in harbor, but that's not what ships are for." - John A. Shedd
One of the big winners in the market last week and for the model portfolio of The Busted IPO Forum was a small-cap oncology concern named Karyopharm Therapeutics (KPTI). The stock soared just over 45% this week on the unexpected early FDA approval for its primary drug candidate selinexor.
Today, we revisit the investment case for Karyopharm now that a major uncertainty has been removed for the company.
Company Overview
Karyopharm Therapeutics is a now a "Tier 3" biotech concern based in Massachusetts. The firm is focused on creating novel, first-in-class drugs directed against nuclear transport and related targets for the treatment of cancer and other diseases. With last week's rally, the stock currently has a market capitalization of just under $550 million and trades just south of $9.00 share.
FDA Approval
On Wednesday, the FDA approved selinexor whose brand name will be XPOVIO for the treatment of penta-refractory multiple myeloma. XPOVIO will be "list" priced at $22,000 per month and will start being marketed this month. Approval on July 3rd was unexpected given the PDUFA date was July 6th. In addition, the Ad Comm Panel for XPOVIO voted 8-5 to delay recommendation for approval until results of a large-scale study known as "BOSTON" came out. This data will not be disclosed until late this year or early 2020.
Source: Company Presentation
XPOVIO is an oral, first-in-class, reversible, potent, selective inhibitor of nuclear export (SINE) that specifically blocks XPO1
Source: Company Presentation
The myeloma market is quite large with multiple players and an annual spend north of $17 billion annually. The niche Karyopharm is targeting is already significant and projected to grow rapidly in the coming years.
Analyst Commentary & Balance Sheet
On Friday, H.C. Wainwright reiterated its Buy rating and $32 price target on KPTI with the following updated view on the company:
"We find the label compelling and in line with expectations. Commercial launch for Xpovio expected next week. Karyopharm has developed a strategic plan going forward in order to ensure a successful launch of Xpovio, which management believes gives support to future launches in other indications as well. The company hired over 70 employees, with an average of about 20 years pharmaceutical experience and approximately five years of MM experience, in sales and nursing liaison positions in January 2019. The sales team plans on educating professionals and patients regarding how to effectively administer the drug and guiding them through the drug's side effect profile. Karyopharm is working with payors and is attempting to minimize access barriers for appropriate patients as well as helping them stay on treatment."
Wedbush also reissued its Buy rating Friday, but with a more subdued $11 price target. In addition, William R. Baird boosted its target by 10 bucks a share to $25. The analyst there is modeling $150 million peak annual sales for the later-line approval and states that accelerated approval de-risks the market in second-line relapsed multiple myeloma which is more meaningful market.
RBC Capital also maintained its buy rating on KPTI, but raised its target to $22 from $16 previously. RBC's analyst noted "the label includes no boxed warning, a win, and while it describes in detail the many AEs (adverse events) associated with Xpovio and the need for monitoring, it provides clear dose- adjustment schemes and guidelines for AE management."
The company ended the first quarter with approximately $265 million in cash and marketable securities on the balance sheet.
Verdict
Source: Company Presentation
Thanks to approval, the investment case for Karyopharm is now considerably derisked. The company also has several potential catalysts on the horizon. Obviously, the BOSTON data will be heavily scrutinized when it comes out. Karyopharm also plans to file an NDA for XPOVIO to treat cancer - diffuse large B-cell lymphoma (DLBCL) in the first half of 2020.
In addition, top line Phase 3 data for XPOVIO studies for treating Dedifferentiated liposarcoma should be out sometime in 2020 as well. While the stock had a good rally this week, the shares are still significantly below 52-week price targets as well as recently revised analyst price targets. This investment story could have further to go in the weeks and months ahead.
Option Strategy
Image result for Stock Purchase
An efficient way to add exposure or to KPTI is via a Buy-Write order. Using the November $10 call strikes, fashion a Buy-Write order with a net debit in the $6.80 to $7.00 range (net stock price - option premium). This mitigates some downside risk and sets up a more than solid potential return for its just over four month hold period.
"So we shall let the reader answer this question for himself: who is the happier man, he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed?" - Hunter S. Thompson
Busted IPO Forum writes on Seeking Alpha and runs The Busted IPO Forum on the Seeking Alpha Marketplace, our platform for guided investing communities and research services.
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum and Insiders Forum.
Busted IPO Forum writes on Seeking Alpha and runs The Busted IPO Forum on the Seeking Alpha Marketplace, our platform for guided investing communities and research services. Here’s a little bit about the service.
Author's note: I present and update my best small-cap Busted IPO stock ideas only to subscribers of my exclusive marketplace, The Busted IPO Forum. Try a free 2-week trial today by clicking on our logo below! As of market close 07/05/2019, our 18 stock model portfolio has generated an overall return of 31.22% since its launch in the summer of 2017. The Russell 2000 has produced a return of 4.17% over the same time frame.
Disclosure: I am/we are long KPTI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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