Puma Biotechnology, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; filed May 11, 2015. Puma is a clinical-stage biopharmaceutical company focused on cancer drug development. It reported no product sales and is primarily developing neratinib, alongside intravenous neratinib and PB357.
Financial results
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | No product sales | No product sales |
| R&D expense | $44.7 million | $16.3 million; up 174.5% |
| G&A expense | $7.9 million | $3.5 million; up 123.3% |
| Total operating expenses / operating loss | $52.6 million | $19.8 million |
| Net loss | $52.5 million | $19.8 million |
| Net loss per share, basic and diluted | $1.66 | $0.67 |
| Net cash used in operations | $50.0 million | $17.0 million |
Margins: Not meaningful to calculate from the filing’s reported results because Puma had no product sales. Q1 2015 stock-based compensation totaled $20.1 million, compared with $5.2 million in Q1 2014; the company’s non-GAAP adjusted net loss, excluding this compensation, was $32.4 million, or $1.02 per share.
Liquidity at March 31, 2015: Cash and cash equivalents were $155.5 million; marketable securities were $154.9 million; working capital was $290.6 million; and stockholders’ equity was $304.3 million. Total liabilities were $27.5 million. The balance sheet does not report borrowings or debt.
Cash flows: Investing activities used $52.7 million, principally reflecting purchases of marketable securities net of maturities. Financing activities provided $219.6 million, including $205.2 million net proceeds from a January public offering and $14.4 million from option exercises. Cash and cash equivalents increased $116.9 million during the quarter.
Changes and significant items
- Net loss widened by $32.7 million year over year. R&D costs increased with expanded clinical programs, preparation for a planned NDA submission, and higher staffing; R&D headcount rose to 107 from 73.
- G&A growth reflected higher stock compensation, increased headcount, and professional fees. Overall, stock-based compensation accounted for a substantial portion of the year-over-year expense increase.
- The January 2015 offering sold 1.15 million shares at $190 per share and generated approximately $205.2 million net. Shares outstanding were 32.1 million at quarter-end, versus 30.5 million at December 31, 2014.
- Operating cash use included a $16.4 million payment of payroll taxes withheld in December 2014 on employee option exercises. Accrued expenses declined $16.0 million during the quarter.
- The company reported a $1.8 million licensor receivable, classified as non-current at quarter-end and described as fully collectible. The amended license provides for a future royalty rate in the low-to-mid-teens upon commercialization.
Outlook, risks, and other disclosures
- Management estimated spending over the next 12 months of $115–$130 million for R&D and $10–$12 million for G&A, both excluding stock-based compensation. It expected R&D and certain operating costs to increase as trials and regulatory preparations advance.
- Management said cash, cash equivalents, marketable securities, and the licensor receivable at March 31 were expected to fund anticipated expenditures through 2016 and into 2017. This is an estimate; Puma said it may need additional capital and had no committed financing sources.
- The company was preparing for a U.S. NDA filing in Q1 2016 and an EU Marketing Authorization Application. It stated that product approval was not expected until approximately 2016, assuming no unforeseen safety issues; timing and outcome remain uncertain.
- Key risks include clinical-trial results, regulatory approval, rising development costs, the ability to obtain financing or a partner, potential dilution from future equity issuance, and the possibility that funding constraints could delay or curtail development.
- Puma reported no material pending legal proceedings, no material change in its previously disclosed risk factors, and no material change in internal control over financial reporting. Management concluded disclosure controls were effective as of March 31, 2015.
Important facts for investors to verify
- Subsequent clinical-trial progress, safety and efficacy results, and the status and timing of planned regulatory submissions.
- Whether actual cash burn and the stated development and administrative spending estimates remain consistent with management’s runway assessment.
- Future financing plans, including potential equity dilution, debt financing, partnerships, or licensing arrangements.
- The composition and liquidity of the investment portfolio, and collection and classification of the licensor receivable.
- The effect of stock-based compensation on reported losses and future expenses; approximately $200 million of unrecognized option compensation remained at quarter-end.