Puma Biotechnology, Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015. Puma is a clinical-stage biopharmaceutical company developing cancer treatments, principally neratinib (PB272); it reported no product sales.
Financial results and liquidity
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $59.4 million | $35.0 million | $104.1 million | $51.3 million |
| General and administrative expense | $5.5 million | $3.9 million | $13.4 million | $7.4 million |
| Net loss | $64.7 million | $38.8 million | $117.1 million | $58.6 million |
| Net loss per share, basic and diluted | $2.01 | $1.29 | $3.68 | $1.96 |
| Cash used in operating activities | Not stated separately | Not stated separately | $84.6 million | $34.4 million |
At June 30, 2015, cash and cash equivalents were $59.8 million and marketable securities were $222.5 million, totaling approximately $282.4 million. Working capital was $261.7 million; total assets were $302.4 million and total liabilities were $27.6 million. The balance sheet reports no debt. Operating margins are not meaningful because the company had no revenue.
Six-month investing cash outflow was $120.8 million, primarily reflecting purchases of marketable securities net of maturities; financing provided $226.7 million, including $205.1 million net proceeds from a January public offering and $21.5 million from option exercises. Cash and cash equivalents increased $21.3 million.
Changes versus comparable periods
- Six-month net loss approximately doubled year over year, while R&D expense increased 103% and G&A expense increased 80%.
- Stock-based compensation rose to $48.3 million for the first half from $12.3 million a year earlier; it represented a substantial noncash component of reported losses. Management also presented adjusted losses excluding this expense, but those measures are non-GAAP.
- Operating cash use increased to $84.6 million from $34.4 million. Management attributed $16.4 million of the 2015 outflow to payroll taxes paid in January on employee option exercises, with other cash use reflecting expanded clinical activity and NDA preparation.
- The January offering and option exercises increased issued shares to 32.2 million at June 30, from 30.5 million at December 31, 2014.
Outlook, risks and notable items
- Management estimated next-12-month R&D spending of $115–$130 million, excluding stock-based compensation, and G&A spending of $10–$12 million, excluding stock-based compensation. It expected to file an FDA NDA in Q1 2016 and said available cash and securities should fund development through 2016 and into 2017.
- The company expects continued losses and negative operating cash flow and may need additional financing. No committed financing was disclosed; future equity issuance could dilute shareholders. Development spending and timelines depend on clinical results, enrollment, manufacturing and regulatory outcomes.
- In July 2015, Puma agreed to expand its Los Angeles and South San Francisco offices. The leases are expected to begin around April 1, 2016, for 10 years, with initial additional rent of approximately $111,000 and $45,000 per month, respectively, and annual increases of about 3%; the amendments were expected to be countersigned in August.
- A purported securities class action filed June 3, 2015 alleges misleading statements and omissions concerning the company and certain executives. Puma said it intends to defend the case; outcome and potential costs are uncertain.
- Management reported disclosure controls were effective as of June 30, 2015 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, trial results and regulatory timing for neratinib, including the stated Q1 2016 NDA target.
- Whether actual cash burn and clinical-development costs remain within management’s estimates and support the stated runway.
- The magnitude and future recognition of stock-based compensation, including its effect on reported losses and dilution.
- Execution and full terms of the expanded leases, and the eventual financial and operational impact of the securities litigation.
- Availability and terms of any future financing, and the resulting effect on liquidity and shareholder ownership.