Puma Biotechnology, Inc. — FY 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. This annual report covers the full year, not only 2015 Q4. Puma is a clinical-stage biopharmaceutical company focused on oncology; it had no approved products or product revenue.
Financial performance and liquidity
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $208.5 million | $122.9 million |
| General and administrative expense | $31.8 million | $19.4 million |
| Operating loss | $240.3 million | $142.3 million |
| Net loss | $239.3 million | $142.0 million |
| Net loss per share, basic and diluted | $7.45 | $4.73 |
| Cash used in operating activities | $154.5 million | $77.2 million |
- At year-end, cash and cash equivalents were $31.6 million and marketable securities were $184.3 million. Restricted cash was $4.3 million.
- Total assets were $239.8 million, total liabilities $33.8 million, and stockholders’ equity $206.0 million. The balance sheet lists no borrowings; debt metrics are not otherwise presented.
- No operating margin is meaningful because the company reported no revenue. Stock-based compensation was $94.9 million, a substantial non-cash component of expense. Excluding it, management reported non-GAAP adjusted net loss of $144.4 million, or $4.49 per share; these are non-GAAP measures.
Material changes and business developments
- R&D expense rose 69.6% year over year, primarily reflecting expanded clinical activity, staffing and stock-based compensation. G&A expense rose 64.3%.
- Operating cash use approximately doubled. The company raised $205.1 million net in a January 2015 stock offering and received $28.2 million from option exercises; financing cash flow was $233.4 million.
- Puma’s lead candidate is oral neratinib, licensed from Pfizer. The July 2014 license amendment made Puma responsible for legacy-trial costs after 2013 and reduced royalties to a fixed low-to-mid-teens rate. The agreement also provides for up to $187.5 million in milestone payments if all milestones are achieved.
Outlook, trials, and risks
- The Phase III ExteNET trial met its primary endpoint in the extended adjuvant setting: at two years, invasive disease-free survival was 93.9% with neratinib versus 91.6% with placebo (hazard ratio 0.67; p=0.009). An exploratory, non-preplanned three-year analysis reported rates of 92.0% versus 89.9% (hazard ratio 0.74; p=0.023).
- Management expected to submit for U.S. approval in Q1 2016 and EU approval in the first half of 2016. These were forward-looking plans, not approvals or completed filings reported here. The filing anticipated product approval no earlier than approximately 2017 and no product revenue for at least 12–18 months, if ever.
- Management estimated R&D spending of $140–150 million over the next 12 months, excluding stock-based compensation, and said cash and marketable securities at year-end should fund operations through 2016 and into 2017. Funding beyond that period is uncertain; additional financing could dilute shareholders.
- Grade 3 or higher diarrhea was a significant neratinib safety concern: approximately 39.9% of neratinib-treated ExteNET patients experienced it without prophylactic antidiarrheal treatment. Puma was evaluating high-dose loperamide prophylaxis; interim results in a separate Phase II study showed grade 3 diarrhea in 13% of patients under an amended regimen.
- Other material risks include regulatory and clinical-trial uncertainty, dependence on neratinib and Pfizer-licensed intellectual property, reliance on third-party manufacturers and CROs, lack of commercial sales and marketing capabilities, reimbursement and competition risks, and substantial ongoing losses.
- The company disclosed a securities class action concerning statements made from July 22, 2014 to May 29, 2015, and a defamation lawsuit filed in February 2016. It intended to defend both; the filing said potential losses could not be estimated.
- Long-term operating lease obligations totaled $43.8 million. Two office expansions expected to begin in April 2016 were projected to add substantial rent commitments.
Key facts investors should verify
- Whether and when U.S. and EU regulatory applications were filed, and subsequent regulatory decisions and labeling requirements.
- Full ExteNET results, including the exploratory nature of the three-year analysis, patient subgroups, and the incidence and management of diarrhea.
- Actual cash burn against management’s forecast, financing needs, and available liquidity beyond the stated runway.
- Commercial manufacturing readiness, launch strategy, expected costs, and the impact of Pfizer royalties and milestone obligations.
- Developments and potential financial exposure in the disclosed lawsuits, plus the effect of expanded leases and stock-based compensation.