Puma Biotechnology, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2016. Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context
Puma is a clinical-stage biopharmaceutical company focused primarily on developing oral neratinib, including for HER2-positive breast cancer. It reported no product sales. The company submitted a European Marketing Authorization Application in June 2016 and a U.S. New Drug Application in July 2016 for neratinib in the extended adjuvant setting.
Financial performance and liquidity
- Revenue: No product sales to date; the filing does not report product revenue.
- Q2 2016: Operating expenses were $66.5 million and net loss was $66.6 million, versus $64.9 million and $64.7 million, respectively, in Q2 2015. Basic and diluted loss per share was $2.05, versus $2.01.
- First half 2016: Operating expenses were $137.7 million and net loss was $137.6 million, versus $117.5 million and $117.1 million in the first half of 2015. Loss per share was $4.23, versus $3.68.
- Expense mix: Q2 research and development (R&D) expense fell 8.7% to $54.2 million, while general and administrative (G&A) expense rose 121.7% to $12.3 million. For the six-month period, R&D rose 9.9% to $114.4 million and G&A rose 73.9% to $23.3 million. The filing does not provide meaningful sales margins because there were no product sales.
- Cash flow: Operating cash use was $65.8 million in the first half, compared with $84.6 million a year earlier. Investing activities provided $91.9 million, largely reflecting net sales and maturities of marketable securities; financing activities provided $0.2 million. Cash and cash equivalents increased $26.3 million to $57.8 million.
- Liquidity: Cash, cash equivalents and marketable securities totaled $143.8 million at June 30, 2016, versus $215.9 million at December 31, 2015. Working capital was $114.8 million. Management said available funds were sufficient for planned clinical development through 2016 and into 2017.
- Debt and equity: The balance sheet reports no debt line item; total liabilities were $43.8 million, including $39.0 million of current liabilities. Stockholders’ equity was $127.1 million. Common shares outstanding were 32,493,092 at June 30.
Changes, outlook and risks
- Management attributed higher first-half losses mainly to increased R&D and G&A spending. Headcount and stock-based compensation increased; stock-based compensation was $58.2 million for the first half and represented a substantial non-cash expense.
- For the next 12 months, management estimated R&D spending of $115–130 million and G&A spending of $15–20 million, both excluding stock-based compensation. Planned sales and marketing spending, including commercialization preparation, was $80–100 million, with most expected to begin in late 2016 or early 2017.
- The company expected continued losses and negative operating cash flows. It had no committed financing and warned that additional capital might not be available on acceptable terms or at all; equity financing could dilute shareholders. Management’s runway estimate depends on spending, development and commercialization plans.
- Management expected product approval approximately in 2017, subject to development and regulatory risks. The filing provides no assurance of approval or commercialization timing.
- Legal matters include a securities class action, two derivative actions and a defamation suit against the company. Management intends to defend them; outcomes are uncertain and could require significant spending and management resources.
- An approximately $0.4 million loss on disposal of leasehold improvements was recorded following office-space changes. The company also took possession of additional office space, increasing leased area in Los Angeles and South San Francisco.
- Disclosure controls and procedures were assessed as effective as of June 30, 2016; the company reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Regulatory review and outcome of the U.S. NDA and European MAA for neratinib, and any subsequent changes to anticipated timing.
- Actual cash burn and commercialization spending compared with management’s estimates, including the $80–100 million sales and marketing plan.
- Available liquidity and any financing needs, especially if development, regulatory or launch plans change.
- Clinical development progress, trial results and potential costs for neratinib and other candidates.
- Developments in the class action, derivative actions and defamation litigation, including any financial or operational impact.
- Magnitude and duration of stock-based compensation and potential shareholder dilution from future equity issuance or outstanding awards.