Puma Biotechnology, Inc. — Q3 2014 Form 10-Q
Reporting period: Three and nine months ended September 30, 2014. Puma is a development-stage biopharmaceutical company focused on cancer drug development. It had no product sales or revenue.
Financial results and liquidity
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | None reported | |||
| R&D expense | $32.1m | $12.1m | $83.4m | $32.0m |
| G&A expense | $3.9m | $2.3m | $11.3m | $6.8m |
| Net loss | $35.8m | $14.3m | $94.5m | $38.7m |
| Net loss per share | $1.19 | $0.50 | $3.16 | $1.35 |
Cash used in operating activities was $58.7m for the first nine months, versus $41.5m in the comparable 2013 period. The filing also reports Q3 operating cash use of approximately $24.3m. Cash and cash equivalents were $28.3m at September 30; marketable securities were $125.6m, and licensor receivable was $1.8m. Working capital was $130.7m. Total liabilities were $30.5m, primarily current liabilities; the filing reports no borrowings or debt balance. Stockholders’ equity was $141.6m. Gross and operating margins are not meaningful because Puma reported no revenue.
Changes versus the prior period
- Q3 net loss increased to $35.8m from $14.3m; nine-month net loss rose to $94.5m from $38.7m.
- Nine-month R&D expense increased 160%, reflecting expanded clinical activity, staffing, manufacturing, stock-based compensation, and Puma’s assumption of legacy-trial costs under the Pfizer license amendment.
- Stock-based compensation was $22.8m for the first nine months, up from $4.4m; this included $18.7m in R&D and $4.1m in G&A.
- Cash and cash equivalents declined from $43.0m at year-end 2013, while marketable securities increased from $40.9m. The company raised $129.4m net through a February 2014 public stock offering.
Outlook, risks, and unusual items
- Management estimated $85m–$100m of R&D spending and $8m–$9m of G&A spending over the next 12 months, both excluding stock-based compensation. It believed available cash, cash equivalents, marketable securities, and licensor receivable would fund operations through 2015 and into 2016; additional capital may be needed thereafter or earlier.
- Management expected continued losses and operating cash outflows. It anticipated filing an NDA with the FDA and an MAA with the European Medicines Agency during 2015; the company cautioned that approval timing and development outcomes are uncertain.
- A July 2014 Pfizer license amendment made Puma responsible for costs incurred or accrued after December 31, 2013, for ongoing legacy clinical trials. Puma expected approximately $15m of additional costs over the trials’ remaining life, with a significant portion expected in the following two quarters. The amendment also set future royalties at a fixed rate in the “low to mid teens,” replacing a tiered 10%–20% rate.
- Key risks include clinical-trial results, regulatory approval, rising development costs, financing availability, and potential dilution from future equity issuance. Puma stated that no material legal proceedings were pending and that there had been no material change to its previously disclosed risk factors.
- Management concluded disclosure controls and procedures were effective as of September 30, 2014; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Clinical and regulatory progress for neratinib (oral and intravenous) and PB357, including the stated 2015 filing plans.
- Actual legacy-trial costs and the timing of the expected additional approximately $15m in spending under the amended Pfizer agreement.
- Cash burn, investment balances, and whether management’s runway estimate through 2015 and into 2016 remains achievable.
- Potential dilution and the substantial non-cash stock-based compensation included in reported losses.