Puma Biotechnology, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports unaudited fourth-quarter results. Puma is a biopharmaceutical company whose commercial business is primarily dependent on NERLYNX (neratinib), marketed in the U.S. for certain early-stage and metastatic HER2-positive breast cancer indications. Figures below are U.S. dollars.
Key financial results
| Metric | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $225.1 million | $272.3 million |
| Product revenue, net | $196.7 million | $211.6 million |
| License revenue | $22.7 million | $60.3 million |
| Royalty revenue | $5.7 million | $0.4 million |
| Cost of sales | $39.4 million | $36.8 million |
| Approximate gross profit / gross margin | $185.7 million / 82.5% | $235.4 million / 86.5% |
| Operating loss | $30.4 million | $39.0 million |
| Net loss | $60.0 million | $75.6 million |
| Basic and diluted loss per share | $1.52 | $1.95 |
| Cash from operating activities | $0.8 million | $22.4 million |
| Cash, cash equivalents and marketable securities at year-end | $93.4 million | $111.6 million |
| Working capital at year-end | $31.9 million | $75.5 million |
| Debt principal outstanding at year-end | $100.0 million | Not stated here |
Approximate gross profit and margin are calculated from reported total revenue less cost of sales; the filing does not present these as a separate headline measure. At December 31, 2020, total assets were $244.2 million, total liabilities $250.2 million, and stockholders’ deficit $6.0 million. Cash from investing activities was $23.4 million and cash from financing activities was approximately $0.1 million. Year-end cash and cash equivalents were $85.3 million; marketable securities were $8.1 million. Restricted cash of $12.2 million is reported separately and is not included in those available-liquidity figures.
Fourth-quarter results
For the three months ended December 31, 2020, revenue was $52.6 million and net loss was $15.0 million, or $0.38 per share. In fourth-quarter 2019, revenue was $62.9 million and net loss was $11.2 million, or $0.29 per share. Quarterly product revenue and gross margin are not separately provided in the quarterly table.
Changes versus the prior year
- Total revenue declined about 17% year over year. Net product revenue fell about 7%, reflecting approximately 21% fewer bottles sold and higher variable consideration, partly offset by price increases. Government rebates contributed to the higher variable consideration.
- License revenue decreased substantially, mainly because less upfront and milestone consideration was recognized in 2020. Royalty revenue increased as sublicensees expanded sales in their territories.
- R&D expense fell 26.5% to $97.7 million, primarily due to clinical-trial closeouts and reduced enrollment, as well as lower stock-based compensation. SG&A fell 16.3% to $118.5 million, including lower professional fees, travel and stock-based compensation.
- Net loss narrowed to $60.0 million from $75.6 million, but operating cash flow fell to $0.8 million from $22.4 million. Cash and marketable securities together declined by approximately $18.2 million.
- Interest expense was $14.0 million. Legal verdict expense was $16.2 million; 2019 also included an $8.1 million debt-extinguishment loss.
Outlook, risks and unusual items
- Management said existing cash, cash equivalents and marketable securities, together with anticipated product sales, royalties and sublicense payments, were expected to meet operating cash and capital needs for at least one year after the March 1, 2021 filing date. This depends on assumptions and is not a guarantee; the company expects continued losses and remains dependent on funding and NERLYNX commercialization.
- The $100 million Oxford credit facility matures June 1, 2024; its effective interest rate was 12.75% at year-end. Principal amortization was scheduled to begin in August 2021. The facility is secured by substantially all personal property other than intellectual property and includes minimum-revenue covenants and operating restrictions. Puma reported compliance at December 31, 2020; a covenant breach could trigger default remedies.
- COVID-19 affected sales and commercial engagement, with field activity largely virtual, and disrupted clinical-trial enrollment. Management reported that the company and key suppliers broadly maintained operations during 2020, but further effects remained uncertain.
- Two customers represented approximately 33% and 21% of FY2020 product revenue, respectively. Customer concentration, reimbursement and rebate estimates, and continued acceptance of NERLYNX are material commercial risks.
- The company recorded a $24.8 million accrual for the Hsu securities class action; claimed damages were about $50.5 million, and the company estimated the eventual amount could range from $24.8 million to $51.4 million, subject to claim challenges and appeals. A separate Eshelman judgment was $26.3 million including prejudgment interest; the company accrued $22.7 million and estimated potential damages up to approximately $27.7 million while appealing. Final outcomes and payment amounts remained uncertain.
- Subsequent event: On February 24, 2021, after fiscal year-end, Puma agreed to pay CANbridge a one-time $20 million termination fee to regain Greater China rights. Puma also amended its Pierre Fabre sublicense to cover Greater China, providing for a $50 million upfront payment, up to $240 million in potential milestones, and double-digit tiered royalties. These are post-period arrangements, not FY2020 revenue or cash receipts.
- NERLYNX is Puma’s principal commercial product, and the company relies on Pfizer-licensed intellectual property and third-party manufacturers. Neratinib-associated diarrhea remains an important tolerability risk. Product revenue is reported net of estimates for rebates, discounts and other variable consideration.
- The filing reports no specific revenue or earnings guidance. It states that losses are expected to continue and that additional financing may be needed if assumptions or business conditions change.
Most important facts for investors to verify
- Whether NERLYNX prescription volume and net product revenue stabilize or recover, and how price, rebates and customer concentration affect realized sales.
- Cash burn, unrestricted liquidity, upcoming Pfizer milestone installments, and the ability to satisfy Oxford’s revenue covenants and scheduled debt amortization.
- Final outcomes, timing and cash impact of the Hsu and Eshelman matters, including appeal and claims-challenge developments.
- Whether the Greater China rights transfer, $20 million CANbridge payment, and Pierre Fabre upfront and contingent payments proceed as described.
- Clinical-trial progress and data quality, including the impact of COVID-19, and whether neratinib can demonstrate additional approved uses while managing diarrhea-related risks.