Puma Biotechnology, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated results; filing dated May 4, 2023. Puma develops and commercializes cancer treatments, principally NERLYNX, and is responsible for global development and commercialization of alisertib.
Financial results and liquidity
Amounts below are in millions of dollars except per-share data. Margins are calculated from reported figures.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $52.8 | $45.7 |
| Product revenue, net | $46.8 | $40.7 |
| Royalty revenue | $6.0 | $5.0 |
| Gross profit / gross margin | $39.6 / 75.0% | $34.9 / 76.3% |
| Operating income (loss) / margin | $4.4 / 8.3% | $(0.7) / (1.6)% |
| Net income (loss) | $1.4 | $(3.4) |
| Diluted EPS | $0.03 | $(0.08) |
| Cash provided by (used in) operations | $2.6 | $(26.9) |
| Cash, cash equivalents and marketable securities at period end | $71.2 | Not stated here |
Cash, cash equivalents and restricted cash totaled $64.0 million at March 31, 2023. Working capital was $63.6 million. Long-term debt, net of issuance costs and discounts, was $98.6 million; the notes had $100.0 million principal plus a $2.0 million exit payment. The effective interest rate was 12.99%. Total liabilities were $170.4 million and stockholders’ equity was $25.8 million.
Changes versus the prior comparable period
- Revenue grew approximately 15%. Management attributed product revenue growth to a higher net selling price and 6.3% more NERLYNX bottles sold; royalty growth reflected increased sub-licensee sales.
- Cost of sales rose to $13.2 million from $10.8 million, reflecting higher royalties and amortization of the Pfizer commercial milestone. Gross margin consequently declined about 1.3 percentage points.
- SG&A increased 10.2% to $22.5 million, mainly from payroll and travel costs. R&D declined 16.6% to $12.7 million, primarily due to reduced clinical-trial expense following the reduction and closure of SUMMIT trial sites.
- Interest expense increased to $3.3 million from $2.7 million, primarily due to higher rates on Athyrium debt and imputed interest on the Eshelman settlement. Operating cash flow improved to positive $2.6 million, compared with negative $26.9 million, when the prior-year period included a large class-action settlement payment.
Outlook, risks and unusual items
- Management said cash, cash equivalents, marketable securities and expected product-sale and sub-license proceeds should fund operating cash needs for at least one year after the filing. It also cautioned that development and commercialization may require additional funding and that future financing is not assured.
- Athyrium debt is secured by substantially all company assets, bears floating-rate interest, and includes minimum cash and product-revenue covenants and other operating restrictions. The company reported compliance with applicable covenants at March 31, 2023. Scheduled principal payments begin June 30, 2024; the company may borrow up to an additional $25 million, subject to the agreement.
- Puma paid Pfizer $12.5 million in Q1 after reaching a 2022 worldwide-sales milestone; the payment was capitalized as an intangible asset and is being amortized. The final $8.0 million Eshelman settlement installment is due by November 1, 2024. Puma’s potential recovery in its intended legal-malpractice action is uncertain.
- NERLYNX remains the company’s principal commercial product, creating concentration risk. Puma also relies on third parties for manufacturing. Management identifies financing, commercialization, regulatory, clinical-development and intellectual-property risks.
- Patent proceedings include an AstraZeneca infringement case, with trial scheduled to begin on or after May 13, 2024, and multiple China proceedings involving proposed generic NERLYNX products. A Sandoz settlement permits generic sales on or around December 8, 2030, subject to adjustment under the agreement.
- Takeda may receive up to $287.3 million in future alisertib regulatory and commercial milestones plus royalties. Puma disclosed up to approximately $579.8 million in potential milestone payments to it under NERLYNX sub-license agreements; the timing and achievement of these milestones are uncertain. No specific 2023 revenue or earnings guidance is provided in the filing text.
Key facts for investors to verify
- Whether NERLYNX sales growth is sustained through both volume and pricing, and how gross margin evolves as royalties and intangible amortization affect cost of sales.
- Cash generation and covenant headroom, particularly given floating-rate debt, scheduled repayments beginning in 2024 and management’s stated potential need for additional funding.
- Alisertib development plans, trial timing and funding needs; the filing does not provide specific near-term trial milestones or financial guidance.
- Potential effects of generic competition and outcomes of the China and AstraZeneca patent proceedings.
- Timing and cash impact of the remaining Eshelman settlement payment and any future Pfizer, Takeda or sub-license milestone obligations or receipts.