Puma Biotechnology, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Puma is a clinical-stage biopharmaceutical company developing neratinib and other oncology drug candidates. It reported no product sales; financial results primarily reflect research, development and corporate costs.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Revenue | No product sales | No product sales to date |
| Research and development expense | $60.2 million | $44.7 million; up 34.6% |
| General and administrative expense | $11.0 million | $7.9 million; up 40.2% |
| Operating loss | $71.2 million | $52.6 million |
| Net loss | $71.0 million | $52.5 million |
| Basic and diluted loss per share | $2.19 | $1.66 |
| Net cash used in operating activities | $35.0 million | $50.0 million |
| Cash and cash equivalents | $78.2 million | $31.6 million at Dec. 31, 2015 |
| Marketable securities | $103.0 million | $184.3 million at Dec. 31, 2015 |
Cash, cash equivalents and marketable securities totaled approximately $181.2 million at March 31, 2016, down from approximately $215.9 million at year-end. Working capital was $150.5 million, versus $191.1 million at year-end. Current liabilities were $38.9 million; the filing reports no debt balance. No meaningful operating margin is available because the company had no revenue.
Stock-based compensation was $29.5 million, or approximately 41.6% of GAAP net loss. Puma also presented non-GAAP adjusted net loss of $41.5 million, excluding stock-based compensation; this measure is not a substitute for GAAP results.
Changes and operating cash flow
- Net loss widened by approximately $18.5 million year over year as operating expenses increased. R&D costs rose with clinical and drug-supply activity, staffing and stock-based compensation; G&A growth included higher professional fees, personnel and stock compensation.
- Operating cash use improved by approximately $15.0 million year over year, while net loss increased. Non-cash expenses, notably stock-based compensation, and working-capital movements explain part of the difference.
- Q1 investing activities provided $81.5 million, principally from $118.3 million of security sales and maturities, offset by $36.8 million of purchases. Financing provided $0.2 million, mainly option exercises; the prior-year period included $205.2 million of public-offering proceeds.
Outlook, risks and unusual items
- Puma said its liquidity was expected to fund planned clinical development through 2016 and into 2017, but stated that additional financing may be needed. No committed financing sources were in place; future equity financing could dilute shareholders.
- For the next 12 months, management estimated R&D spending of $115–$130 million, excluding stock-based compensation, and G&A spending of $30–$35 million, also excluding stock-based compensation. The company expected significant losses to continue.
- The Phase III ExteNET trial of neratinib in extended adjuvant HER2-positive breast cancer was completed. Management expected to submit a U.S. NDA in mid-2016 and an EU marketing application in Q2 2016. These were forward-looking expectations, not reported approvals.
- Management was evaluating commercialization approaches and said existing inventory was expected to support at least the first year of commercialization in the extended-adjuvant setting. It also expected expenses to rise as commercialization preparations proceeded.
- Clinical development, regulatory timing, manufacturing supply, financing availability and the possibility of future dilution are material uncertainties. The company cautioned that trial duration and costs are difficult to predict.
- Legal matters include a putative securities class action, a defamation lawsuit, and two derivative suits filed in April 2016. Puma said it intended to defend them; outcomes are uncertain and could require significant expense and management attention.
- On April 1, 2016, Puma took possession of additional leased office space, increasing its Los Angeles and South San Francisco space by approximately 26,000 and 13,000 square feet, respectively.
Key investor verification points
- Confirm subsequent regulatory filing dates and outcomes for the neratinib NDA and EU application, and review clinical and regulatory developments.
- Track cash burn, marketable-security balances, spending against management’s estimates, and whether additional capital is required.
- Assess commercialization plans, product supply readiness, and the costs associated with expanded facilities and preparations for launch.
- Monitor stock-based compensation and potential dilution, including outstanding options and warrants.
- Follow the status and potential financial impact of the disclosed lawsuits and verify developments after the filing date.