Puma Biotechnology, Inc. — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012. Puma was a development-stage biopharmaceutical company with no product sales or approved products. Its candidates were oral and intravenous neratinib (PB272) and PB357.
Financial performance and position
| Metric | Q3 2012 | Nine months 2012 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $17.8 million | $41.4 million |
| General and administrative expense | $8.0 million | $11.0 million |
| Operating loss | $25.9 million | $52.5 million |
| Net loss | $25.9 million | $52.4 million |
| Basic and diluted loss per share | $1.29 | $2.62 |
- There was no gross margin to report because the company had no revenue.
- At September 30, cash and cash equivalents were $33.3 million; restricted cash was $1.2 million. Net cash used in operations was $19.2 million for the nine months, and cash declined by $20.0 million.
- Current assets were $34.1 million and current liabilities $26.7 million, leaving working capital of approximately $7.5 million. Stockholders’ equity was $9.0 million.
- Total liabilities were $27.5 million, including $25.6 million of accrued expenses. The filing reports no borrowings or debt.
Changes versus the prior comparable period
- Q3 2011 net loss was $347,000; nine-month 2011 net loss was $386,000. The company said it had not begun meaningful operations in those periods, so the year-over-year increase mainly reflects expanded clinical development and operations.
- R&D expense rose from zero in the prior-year periods to $17.8 million for Q3 and $41.4 million for nine months. Management attributed about $4.3 million of nine-month R&D expense to duplicative licensor-transition work, which it expected to end by December 31, 2012.
- G&A increased to $8.0 million in Q3 and $11.0 million year to date. A major unusual component was the CEO warrant’s revaluation, adding approximately $6.5 million to Q3 G&A and $6.2 million to nine-month G&A.
Outlook, risks and unusual items
- In October 2012, after quarter-end, Puma completed a public offering of 8.625 million shares at $16 per share, receiving approximately $129.1 million net. The company said the proceeds and cash on hand were expected to fund anticipated expenditures for at least 24 months; earlier, management estimated funding through 2014 and into 2015 based on the planned development pace.
- The October financing established the CEO warrant at 2,116,250 shares exercisable at $16 through October 2021. Its fair value was approximately $25.8 million at closing; the roughly $12 million increase from the September valuation was expected to be recorded as a Q4 2012 expense.
- Management estimated spending over the next 12 months of $35–40 million for R&D and $6–7 million for G&A. It anticipated reducing costs for existing trials after reaching a licensor cost cap in Q4, while broader development spending could rise.
- An October CRO agreement for PB272 could cost up to approximately $22.8 million over its term and was cancellable on 45 days’ notice, subject to payment for services rendered.
- Management expected no product approval until approximately 2015, assuming no unforeseen safety issues. Clinical, regulatory, recruitment, manufacturing, financing, competition, intellectual-property, and reliance-on-third-party risks could delay development or prevent commercialization. The company expected continuing losses and negative operating cash flows.
- The company had no pending or known threatened legal proceedings. Management concluded disclosure controls were effective as of September 30, 2012; it reported no material change in internal control during the quarter.
Important facts for investors to verify
- Progress and cost of the PB272 clinical-trial transition, including whether duplicative licensor costs ended and how accrued transition and clinical costs were ultimately settled.
- Actual cash burn and development spending against management’s estimates, and whether the October offering proceeds support the stated runway.
- The Q4 accounting and expense impact of the CEO warrant, along with its potential dilution.
- Clinical results, trial timing, regulatory requirements, and any changes to the stated development plans for neratinib and PB357.
- Potential future financing needs and dilution; shares outstanding were 28.665 million as of November 9, 2012, following the offering.