Puma Biotechnology, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 5, 2022. Puma is a biopharmaceutical company focused on developing and commercializing cancer therapies. Its principal commercial product is NERLYNX (neratinib), and the company reports one business segment.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Total revenue | $45.7 million | $98.2 million |
| Product revenue, net | $40.7 million | $45.8 million; down 11.1% |
| License revenue | None | $50.0 million |
| Royalty revenue | $5.0 million | $2.4 million; more than doubled |
| Operating costs and expenses | $46.5 million | $78.0 million |
| Operating income (loss) | $(0.7) million; approximately (1.6)% of revenue | $20.1 million; approximately 20.5% of revenue |
| Net income (loss) | $(3.4) million; $(0.08) per diluted share | $16.5 million; $0.40 per diluted share |
| Operating cash flow | $(26.9) million | $15.7 million |
Product revenue fell as NERLYNX bottle volume declined approximately 16.5%, partly offset by a 10% increase in gross selling price. International royalties increased with partner sales. The year-over-year revenue and operating-result comparisons are strongly affected by Q1 2021’s $50.0 million one-time license fee and $20.0 million expense related to termination of the CANbridge distribution agreement.
Operating expenses declined year over year: selling, general and administrative expense was $20.4 million, down 27.7%, and research and development expense was $15.2 million, down 24.7%. Management attributed reductions mainly to lower headcount and related stock compensation, reduced commercial support spending, and lower clinical-trial activity. Cost of sales was $10.8 million versus $29.6 million, largely reflecting the prior-year CANbridge charge.
At March 31, 2022, cash and cash equivalents were $63.9 million and marketable securities were $10.0 million, or $73.9 million combined. Working capital was $42.8 million, compared with $30.4 million at year-end 2021. Total assets were $200.7 million and total liabilities were $193.5 million; stockholders’ equity was $7.1 million. Cash, cash equivalents and restricted cash totaled $67.2 million at quarter-end, down $8.1 million during the quarter. The operating cash outflow primarily reflected the $27.1 million first installment of the Hsu settlement and other working-capital movements.
Long-term debt had $100.0 million principal outstanding under the Athyrium notes and a $97.4 million net carrying value. The notes mature July 23, 2026, bear interest at 8% plus three-month LIBOR subject to a 1.5% floor and 3.5% cap, and require principal payments beginning in June 2024, plus a 2% exit payment on principal repayments. Puma reported compliance with applicable debt covenants at March 31. A $10.0 million private placement completed in March generated $9.8 million net proceeds through the sale of 3,584,228 shares at $2.79 each.
Outlook, risks and notable items
- Management believes available cash, marketable securities and anticipated product and sublicense proceeds can fund operating cash needs for at least one year after filing. The company expects continued losses and remains dependent on commercialization and access to financing; no quantified revenue or earnings guidance is provided.
- The Athyrium agreement includes minimum product-revenue covenants and restrictions on debt, liens, asset sales and other activities. Management cautions that weaker sales or other developments could pressure covenant compliance and liquidity.
- COVID-19 restrictions have limited in-person engagement with healthcare providers and may affect NERLYNX sales and clinical-trial enrollment. Puma also relies on third parties to manufacture its products and has a single principal commercial product.
- The Hsu class-action settlement requires two $27.1 million payments: the first was paid in January 2022 and the second was due in June 2022. Final court approval was pending, with a hearing scheduled for July 28, 2022. The filing describes the settlement/judgment amounts inconsistently in places; the remaining payment and final obligation should be confirmed.
- In Eshelman, the Fourth Circuit vacated the prior damages award and remanded for a new damages trial; Puma accrued an estimated $2.9 million, but the actual amount and timing remain uncertain. The company also has pending patent litigation involving AstraZeneca, Sandoz and a prospective generic entrant in China.
- Potential sublicense milestone payments total approximately $579.8 million if all specified performance obligations are achieved; timing and achievement are uncertain. Pfizer royalties on licensed-product sales are generally in the low-to-mid teens of net sales.
- Disclosure controls and procedures were assessed as effective at March 31, 2022, with no material changes in internal control over financial reporting reported during the quarter.
Important facts for investors to verify
- NERLYNX prescription volume, net pricing, channel inventory and international partner sales underlying product and royalty revenue trends.
- Payment and final court approval of the Hsu settlement, and the eventual damages outcome in Eshelman.
- Cash burn, the timing of the June 2024 debt amortization, interest-rate exposure and compliance with Athyrium revenue covenants.
- Progress and outcomes in the Sandoz, China and AstraZeneca patent matters, including implications for generic competition and potential recoveries.
- Whether clinical-trial activity, COVID-related disruption, manufacturing dependencies or additional financing needs materially change the company’s stated liquidity outlook.