10-Q 1 kpti-20220331.htm 10-Q 10-Q
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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, 2022

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, 2022, there were 79,418,349 shares of Common Stock, $0.0001 par value per share, outstanding.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

 

 

PART I - FINANCIAL INFORMATION

 

3

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

3

 

 

Condensed Consolidated Balance Sheets

 

3

 

 

Condensed Consolidated Statements of Operations

 

4

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

5

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

 

7

 

 

Notes to Condensed Consolidated Financial Statements

 

8

Item 2.

 

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

 

16

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

23

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

24

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

Item 1A.

 

Risk Factors

 

24

Item 6.

 

Exhibits

 

66

 

 

Signatures

 

67

 

2


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,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

153,256

 

 

$

190,459

 

Short-term investments

 

 

52,055

 

 

 

38,156

 

Accounts receivable, net

 

 

24,992

 

 

 

22,497

 

Inventory

 

 

3,874

 

 

 

4,106

 

Prepaid expenses

 

 

12,207

 

 

 

12,511

 

Other current assets

 

 

29,135

 

 

 

1,528

 

Restricted cash

 

 

1,014

 

 

 

6,349

 

Total current assets

 

 

276,533

 

 

 

275,606

 

Property and equipment, net

 

 

1,544

 

 

 

1,642

 

Operating lease right-of-use assets

 

 

7,518

 

 

 

7,915

 

Other assets

 

 

7,802

 

 

 

19,505

 

Restricted cash

 

 

636

 

 

 

637

 

Total assets

 

$

294,033

 

 

$

305,305

 

Liabilities and stockholders’ (deficit) equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,440

 

 

$

1,603

 

Accrued expenses

 

 

58,371

 

 

 

69,121

 

Operating lease liabilities

 

 

2,463

 

 

 

2,316

 

Other current liabilities

 

 

2,063

 

 

 

678

 

Total current liabilities

 

 

66,337

 

 

 

73,718

 

Convertible senior notes

 

 

169,491

 

 

 

169,293

 

Deferred royalty obligation

 

 

132,998

 

 

 

132,998

 

Operating lease liabilities, net of current portion

 

 

8,286

 

 

 

8,969

 

Total liabilities

 

 

377,112

 

 

 

384,978

 

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; 79,419 and
   
75,746 shares issued and outstanding at March 31, 2022 and December 31, 2021,
   respectively

 

 

8

 

 

 

8

 

Additional paid-in capital

 

 

1,136,873

 

 

 

1,098,776

 

Accumulated other comprehensive income

 

 

87

 

 

 

191

 

Accumulated deficit

 

 

(1,220,047

)

 

 

(1,178,648

)

Total stockholders’ deficit

 

 

(83,079

)

 

 

(79,673

)

Total liabilities and stockholders’ (deficit) equity

 

$

294,033

 

 

$

305,305

 

 

See accompanying notes to condensed consolidated financial statements.

3


Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

Product revenue, net

 

$

28,300

 

 

$

21,731

 

License and other revenue

 

 

19,370

 

 

 

1,529

 

Total revenues

 

 

47,670

 

 

 

23,260

 

Operating expenses:

 

 

 

 

 

 

Cost of sales

 

 

1,426

 

 

 

933

 

Research and development

 

 

42,062

 

 

 

37,050

 

Selling, general and administrative

 

 

38,768

 

 

 

37,650

 

Total operating expenses

 

 

82,256

 

 

 

75,633

 

Loss from operations

 

 

(34,586

)

 

 

(52,373

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

74

 

 

 

264

 

Interest expense

 

 

(6,684

)

 

 

(5,095

)

Other expense, net

 

 

(73

)

 

 

(61

)

Total other expense, net

 

 

(6,683

)

 

 

(4,892

)

Loss before income taxes

 

 

(41,269

)

 

 

(57,265

)

Income tax provision

 

 

(130

)

 

 

(149

)

Net loss

 

$

(41,399

)

 

$

(57,414

)

Net loss per share—basic and diluted

 

$

(0.53

)

 

$

(0.77

)

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

 

 

77,570

 

 

 

74,517

 

 

See accompanying notes to condensed consolidated financial statements.

4


Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(41,399

)

 

$

(57,414

)

Other comprehensive loss

 

 

 

 

 

 

Unrealized loss on investments

 

 

(14

)

 

 

(132

)

Foreign currency translation adjustment

 

 

(90

)

 

 

(85

)

Comprehensive loss

 

$

(41,503

)

 

$

(57,631

)

 

See accompanying notes to condensed consolidated financial statements.

5


Table of Contents

KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(41,399

)

 

$

(57,414

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

177

 

 

 

235

 

Net amortization of premiums and discounts on investments

 

 

45

 

 

 

664

 

Amortization of debt issuance costs

 

 

198

 

 

 

191

 

Stock-based compensation expense

 

 

7,336

 

 

 

7,359

 

Realized and unrealized gains on marketable equity securities

 

 

(2

)

 

 

(14

)

Inventory obsolescence charge

 

 

 

 

 

82

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(2,495

)

 

 

(4,962

)

Inventory

 

 

232

 

 

 

(552

)

Prepaid expenses and other current assets

 

 

(27,303

)

 

 

(89

)

Operating lease right-of-use assets

 

 

397

 

 

 

343

 

Other noncurrent assets

 

 

11,703

 

 

 

 

Accounts payable

 

 

1,837

 

 

 

(1,410

)

Accrued expenses and other liabilities

 

 

(9,387

)

 

 

3,432

 

Deferred revenue

 

 

 

 

 

(297

)

Operating lease liabilities

 

 

(536

)

 

 

(456

)

Net cash used in operating activities

 

 

(59,197

)

 

 

(52,888

)

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(79

)

 

 

 

Proceeds from sales and maturities of investments

 

 

21,584

 

 

 

68,950

 

Purchases of investments

 

 

(35,540

)

 

 

(25,764

)

Net cash (used in) provided by investing activities

 

 

(14,035

)

 

 

43,186

 

Financing activities

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

29,316

 

 

 

9,903

 

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

 

 

1,467

 

 

 

773

 

Net cash provided by financing activities

 

 

30,783

 

 

 

10,676

 

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

 

 

(90

)

 

 

(91

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(42,539

)

 

 

883

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

197,445

 

 

 

89,121

 

Cash, cash equivalents and restricted cash at end of period

 

$

154,906

 

 

$

90,004

 

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

 

 

 

 

 

 

Cash and cash equivalents

 

$

153,256

 

 

$

88,471

 

Short-term restricted cash

 

 

1,014

 

 

 

815

 

Long-term restricted cash

 

 

636

 

 

 

718

 

Total cash, cash equivalents and restricted cash

 

$

154,906

 

 

$

90,004

 

Supplemental disclosures:

 

 

 

 

 

 

Deferred financing costs in accrued expenses

 

$

22

 

 

$

 

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

 

$

841

 

 

$

815

 

Cash paid for interest on deferred royalty obligation

 

$

15,784

 

 

$

2,457

 

 

See accompanying notes to condensed consolidated financial statements.

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KARYOPHARM THERAPEUTICS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(unaudited)

(in thousands)

 

 

 

Common Shares

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Other
Comprehensive
Income

 

 

Accumulated
Deficit

 

 

Total
Stockholders’
(Deficit) Equity

 

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

75,746

 

 

$

8

 

 

$

1,098,776

 

 

$

191

 

 

$

(1,178,648

)

 

$

(79,673

)

Vesting of restricted stock

 

 

565

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

167

 

 

 

 

 

 

1,467

 

 

 

 

 

 

 

 

 

1,467

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,336

 

 

 

 

 

 

 

 

 

7,336

 

Issuance of common stock, net of issuance costs

 

 

2,941

 

 

 

 

 

 

29,294

 

 

 

 

 

 

 

 

 

29,294

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Foreign currency cumulative translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(90

)

 

 

 

 

 

(90

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(41,399

)

 

 

(41,399

)

Balance at March 31, 2022

 

 

79,419

 

 

$

8

 

 

$

1,136,873

 

 

$

87

 

 

$

(1,220,047

)

 

$

(83,079

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 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

)

 

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 scientific expertise is based upon an understanding of the regulation of intracellular communication between the nucleus and the cytoplasm. Our Selective Inhibitor of Nuclear Export (“SINE”) compounds function by binding with and inhibiting the nuclear export protein exportin 1 (“XPO1”). Our primary focus is on marketing XPOVIO® (selinexor) in its currently approved indications as well as developing and seeking the regulatory approval of selinexor as an oral agent in multiple myeloma, endometrial cancer, and myelofibrosis, eltanexor in myelodysplastic syndromes and selinexor and eltanexor in additional cancer indications with significant unmet medical need. Our lead asset, XPOVIO, received its initial U.S. approval from the U.S. Food and Drug Administration (“FDA”) 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 and May 2021, the European Commission and the United Kingdom’s Medicines & Healthcare Products Regulatory Agency granted conditional approval, respectively, of NEXPOVIO® (selinexor), the brand name for selinexor in Europe and the United Kingdom, 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. XPOVIO has also received regulatory approval in various indications in Australia, Singapore, Mainland China, South Korea and Israel.

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, 2022 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2022. 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, 2021 as filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022 (“Annual Report”).

Basis of Consolidation

The condensed consolidated financial statements at March 31, 2022 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 in this Form 10-Q are consistent with those discussed in Note 2, “Summary of Significant Accounting Policies,” in our Annual Report.

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2. 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):

 

 

 

For the Three Months
Ended March 31,

 

 

 

2022

 

 

2021

 

Gross product revenue

 

$

34,910

 

 

$

27,544

 

Provisions for product revenue

 

 

(6,610

)

 

 

(5,813

)

Total product revenue, net

 

$

28,300

 

 

$

21,731

 

 

As of March 31, 2022 and December 31, 2021, net product revenue of $21.6 million and $20.0 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, 2022 and December 31, 2021.

3. Inventory

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

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Raw materials

 

$

2,563

 

 

$

1,797

 

Work in process

 

 

926

 

 

 

1,895

 

Finished goods

 

 

385

 

 

 

414

 

Total inventory

 

$

3,874

 

 

$

4,106

 

 

As of March 31, 2022 and December 31, 2021, 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.

4. License and Asset Purchase Agreements

In prior periods, we entered into out-licensing and asset purchase agreements with Berlin-Chemie AG, an affiliate of the Menarini Group (“Menarini”), 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 10, “License and Asset Purchase Agreements,” to our consolidated financial statements contained in Item 8 of our Annual Report.

During the three months ended March 31, 2022, we recognized $8.6 million in milestone-related revenue from our partners and $7.1 million related to reimbursement of development related expenses from Menarini. With respect to the $8.6 million in milestone-related revenue, we recognized $7.8 million, net of tax, pursuant to our license agreement with Antengene and $0.8 million pursuant to our distribution agreement with Promedico Ltd. during the three months ended March 31, 2022. We recognized $0.8 million in license and other revenue pursuant to our license agreements with Antengene and others, for the three months ended March 31, 2021.

5. 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, 2022 and December 31, 2021.

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

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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 and commercial paper 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 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 10, “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 expense, net. The assumptions used in the 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 16, “Long-Term Obligations” to our consolidated financial statements contained in Item 8 of our Annual Report.

The following tables present information about our financial assets and liability that have been measured at fair value and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value (in thousands):

 

Description

 

As of March 31, 2022

 

 

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

 

$

45,209

 

 

$

45,209

 

 

$

 

 

$

 

U.S. government and agency securities

 

 

28,994

 

 

 

28,994

 

 

 

 

 

 

 

Commercial paper

 

 

23,985

 

 

 

 

 

 

23,985

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

 

11,127

 

 

 

 

 

 

11,127

 

 

 

 

Commercial paper

 

 

11,984

 

 

 

 

 

 

11,984

 

 

 

 

U.S. government and agency securities

 

 

28,944

 

 

 

 

 

 

28,944

 

 

 

 

 

 

$

150,243

 

 

$

74,203

 

 

$