Puma Biotechnology, Inc. — Q2 2014 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2014. Puma is a development-stage biopharmaceutical company developing cancer drug candidates, including oral and intravenous neratinib (PB272) and PB357. It had no product sales or revenue.
Financial results and liquidity
| Metric | Q2 2014 | Six months 2014 | Comparable 2013 |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $35.0 million | $51.3 million | $10.4 million and $20.0 million, respectively |
| General and administrative expense | $3.9 million | $7.4 million | $2.3 million and $4.5 million, respectively |
| Net loss | $38.8 million | $58.6 million | $12.7 million and $24.4 million, respectively |
| Net loss per share, basic and diluted | $1.29 | $1.96 | $0.44 and $0.85, respectively |
| Cash used in operating activities | Approximately $17.4 million, per note disclosure | $34.4 million | $29.5 million for six months |
Margins are not meaningful because Puma reported no revenue. Interest income was $66,000 for Q2 and $112,000 for the first half. At June 30, cash and cash equivalents were $55.4 million, marketable securities $123.0 million, working capital $155.7 million, and stockholders’ equity $167.0 million. The filing reports no debt balance. Cash, cash equivalents, and marketable securities totaled approximately $178.4 million; a $1.8 million licensor receivable was also reported.
Changes versus the prior comparable periods
- Q2 R&D expense rose 235% year over year; first-half R&D rose 157%. The company attributed the increase to greater clinical-trial activity, staffing, stock compensation, and the license amendment described below.
- Q2 G&A expense increased 72%; first-half G&A increased 64%, reflecting higher compensation, facilities, and stock-based compensation.
- First-half net loss increased to $58.6 million from $24.4 million. First-half operating cash use increased to $34.4 million from $29.5 million.
- A February public offering generated $129.4 million in net proceeds. Shares outstanding were 30,117,819 at June 30, versus 28,991,289 at year-end 2013.
Outlook, material items, and risks
- In July 2014, after quarter-end, Puma amended its license agreement: it became solely responsible for expenses incurred or accrued on ongoing legacy trials after December 31, 2013. Future royalties changed from a tiered 10%–20% to a fixed rate in the low-to-mid teens.
- The amendment affected reported 2014 R&D expense: management attributed approximately $14.3 million of the year-over-year R&D increase to it. The filing also says $3.5 million of first-quarter excess-cap costs previously recorded as an offset to R&D were recognized as period expense in Q2 and the first half.
- Management estimated R&D spending of $85–$100 million over the next 12 months, excluding stock-based compensation, and G&A spending of $8–$9 million, also excluding stock-based compensation. It expected R&D expense to rise further and anticipated an NDA filing with the FDA during 2015.
- Management believed available cash and securities would fund planned clinical development through 2015 and into 2016, but expected ongoing losses and negative operating cash flow. No committed future financing was in place; additional capital may be needed and could dilute shareholders. Funding estimates and development timelines are subject to trial, safety, enrollment, manufacturing, and regulatory uncertainties.
- Stock-based compensation was $7.2 million in Q2 and $12.3 million in the first half. Management reported effective disclosure controls as of June 30 and no material change in internal control over financial reporting during the quarter. No material legal proceedings were reported.
Important facts for investors to verify
- Progress and results of neratinib and other clinical trials, and the timing and feasibility of the planned 2015 NDA submission.
- Actual legacy-trial costs under the amended license, the licensor receivable’s collectability, and the final royalty terms.
- Cash burn against the stated development budget and runway, including the impact of stock-based compensation and any financing or dilution.
- Whether the filing’s stated product-candidate count and development plans remain consistent; its overview lists three licensed candidates, while the liquidity discussion refers to six product candidates.