Even More Implied Analyst Upside for Karyopharm Therapeutics After Royalty Pact

Health and Healthcare

Published: September 17, 2019 10:05 am

Last Updated: January 6, 2020 2:26 am

Karyopharm Therapeutics Inc. (NASDAQ: KPTI) posted a solid gain on Monday despite the pressure in the broader markets. It turns out that biotech and emerging health stocks can surge on almost sort of negative day if they have game-changing news. Karyopharm had risen as much as about 12% on news of a royalty agreement with HealthCare Royalty Partners (HCR) that could bring as much as $150 million in new capital to the company, and one analyst sees much higher upside on the heels of the news.

The royalty terms showed that Karyopharm will receive $75 million at closing and it is eligible to receive an additional $75 million upon achieving certain future regulatory and commercial milestones. HCR will receive a tiered royalty in the mid-single digits based on worldwide net revenues of Xpovio and any other future products.

What matters here is that this now gives Karyopharm ample capital for a longer period without the need to tap the capital markets. The company said that it expects the initial $75 million and its existing capital and liquidity, along with the cash expected to be generated from product sales, is sufficient enough to fund its operations into the middle of 2021.

Wedbush Securities reiterated its Outperform rating and raised the price target to $15 from $11. While the company also addresses this meeting the company’s capital needs, the firm’s David Nierengarten said:

We’re increasing our price target to $15 (from $11) as we incorporate the impact of KPTI’s recent royalty agreement with Healthcare Royalty Partners (HCR), while we also increase our XPOVIO sales estimates in multiple myeloma (MM) following a re-assessment of the drug’s market opportunity. First, per the royalty agreement with HCR, KPTI will receive $75 million upfront in exchange for tiered royalties based on ww net revenues of XPOVIO and any other future products, or 7% on annual net revenues up to $250 million, 2.625% on revenues between $250 million and $500 million and 1% on revenues over $500 million. KPTI is also eligible to receive an additional $75 million upon the achievement of certain future (non-disclosed) regulatory and commercial milestones. Overall, we believe the agreement shows validation for the commercial prospects of XPOVIO and is an important source of non-dilutive funding that alleviates near-term financing risk, thereby extending the company’s cash runway to mid-2021.

Even in July, JP Morgan raised its rating on Karyopharm Therapeutics to Overweight from Neutral, and it had a $16 target at the time. The shares were closer to $8.50 then.

Karyopharm Therapeutics closed up 7.4% at $11.85 on almost 4 million shares traded on Monday. Its 52-week range is $3.92 to $19.19, and the posted consensus target was above $19.