Puma Biotechnology(PBYI) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) Puma Biotechnology reported a $3.4 million net loss in Q1 2022, a reversal from $16.5 million net income in Q1 2021, primarily due to the absence of $50 million license revenue Condensed Consolidated Statements of Operations (Q1 2022 vs Q1 2021) | Financial Metric | Three Months Ended March 31, 2022 ($ thousands) | Three Months Ended March 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Total Revenue | $45,736 | $98,169 | | Product revenue, net | $40,718 | $45,816 | | License revenue | $0 | $50,000 | | Royalty revenue | $5,018 | $2,353 | | Total operating costs and expenses | $46,483 | $78,023 | | (Loss) income from operations | ($747) | $20,146 | | Net (loss) income | ($3,403) | $16,528 | | Net (loss) income per share—basic | ($0.08) | $0.41 | | Net (loss) income per share—diluted | ($0.08) | $0.40 | Condensed Consolidated Balance Sheets | Balance Sheet Item | March 31, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Total Assets | $200,685 | $226,585 | | Cash and cash equivalents | $63,913 | $63,131 | | Total current assets | $117,570 | $140,022 | | Total Liabilities | $193,540 | $229,031 | | Total current liabilities | $74,789 | $109,586 | | Long-term debt, net | $97,381 | $97,092 | | Total stockholders' equity (deficit) | $7,145 | ($2,446) | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2022 ($ thousands) | Three Months Ended March 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($26,895) | $15,661 | | Net cash provided by (used in) investing activities | $8,982 | ($5,301) | | Net cash provided by financing activities | $9,845 | $0 | | Net (decrease) increase in cash | ($8,068) | $10,360 | Note 1: Business and Basis of Presentation Puma Biotechnology develops and commercializes NERLYNX® for cancer care, reporting a $3.4 million net loss and $26.9 million cash used in operations in Q1 2022 - The company's primary focus is the development and commercialization of NERLYNX® (neratinib), an oral tyrosine kinase inhibitor for HER2-positive breast cancer and other HER2 mutated cancers[24] - For the three months ended March 31, 2022, the company reported a net loss of approximately $3.4 million and used approximately $26.9 million in cash from operations[32] - Management believes that its cash, cash equivalents, and marketable securities of approximately $73.9 million as of March 31, 2022, along with product sales and sub-license payments, are sufficient to fund operations for at least one year[32][33] Note 2: Significant Accounting Policies Key accounting policies cover revenue recognition for product and license sales, expensing R&D as incurred, and amortizing intangible assets related to the Pfizer license - Product revenue is recognized upon delivery to specialty pharmacies and distributors, net of estimated variable consideration such as rebates, chargebacks, and returns[45][46][49] - As of March 31, 2022, potential milestone payments due to the company under its sub-license agreements total approximately $579.8 million, though the timing and probability of achievement are uncertain[63] - Intangible assets related to the Pfizer license agreement are amortized to cost of sales. Amortization expense was $2.0 million for Q1 2022, with estimated future annual amortization of approximately $8.0 million from 2023 through 2029[104] Note 8: Accrued Expenses Total accrued expenses decreased to $62.6 million as of March 31, 2022, primarily due to a payment for the Hsu v. Puma class action lawsuit settlement Breakdown of Current Accrued Expenses | Expense Category | March 31, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Accrued legal verdict expense | $30,030 | $57,137 | | Accrued royalties | $8,477 | $8,829 | | Accrued variable consideration | $10,807 | $11,406 | | Accrued bonus | $1,496 | $5,083 | | Accrued compensation | $4,207 | $3,878 | | Total Current Accrued Expenses | $61,837 | $92,575 | - The company reached a settlement in the Hsu v. Puma Biotechnology, Inc. class action lawsuit. The first payment of $27.1 million was made in January 2022, with the balance due in June 2022[121] Note 9: Debt The company's long-term debt totaled $97.4 million as of March 31, 2022, comprising $100.0 million in senior notes maturing in 2026 with variable interest - The company's long-term debt consists of $100.0 million in senior notes from the Athyrium Note Purchase Agreement, with a net carrying value of $97.4 million as of March 31, 2022[126][135][140] Future Minimum Principal and Exit Payments | Year | Amount ($ thousands) | | :--- | :--- | | 2022 (remaining) | $0 | | 2023 | $0 | | 2024 | $33,997 | | 2025 | $45,329 | | 2026 | $22,674 | | Total | $102,000 | Note 10: Stockholders' Equity Stockholders' equity improved to a positive balance in Q1 2022, primarily due to a private placement that raised $10.0 million from the sale of 3,584,228 common shares - On March 10, 2022, the company closed a private placement, selling 3,584,228 shares of common stock at $2.79 per share for gross proceeds of approximately $10.0 million[145] - The purchasers in the private placement were CEO Alan H. Auerbach and Athyrium Opportunities IV Co-Invest 2 LP, each purchasing approximately $5.0 million worth of shares[145] Note 12: Commitments and Contingencies The company faces significant commitments, including potential $187.5 million milestone payments to Pfizer, and is involved in multiple legal proceedings, including a $54.2 million class action settlement and patent infringement lawsuits - The company has reached a settlement in principle in the Hsu v. Puma class action lawsuit for approximately $54.2 million, payable in two installments. The first payment of $27.1 million was made in January 2022[163] - In the Eshelman v. Puma defamation case, the U.S. Court of Appeals vacated a $22.4 million damages award against the company, remanding the case for a new trial on damages. The company estimates the high end of potential damages could be approximately $2.9 million[165] - The company has filed patent infringement lawsuits against AstraZeneca regarding its product Tagrisso® and against Sandoz regarding its ANDA for a generic version of NERLYNX[170][172] Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenue decreased significantly in Q1 2022 due to the absence of a $50.0 million license fee in Q1 2021, while operating expenses declined due to headcount reductions and reduced clinical activity - The COVID-19 pandemic continues to impact operations by reducing the sales force's access to healthcare providers and potentially disrupting clinical trial enrollments, which has adversely impacted NERLYNX sales[186][188] - In March 2022, the company raised approximately $10.0 million in gross proceeds through a private placement of common stock to its CEO and an affiliate of its lender, Athyrium[184] Results of Operations Total revenue decreased to $45.7 million in Q1 2022 from $98.2 million in Q1 2021, primarily due to the absence of a $50.0 million license fee, while operating expenses also declined Revenue Breakdown (Q1 2022 vs Q1 2021) | Revenue Source | Q1 2022 ($ millions) | Q1 2021 ($ millions) | | :--- | :--- | :--- | | Product revenue, net | $40.7 | $45.8 | | License revenue | $0.0 | $50.0 | | Royalty revenue | $5.0 | $2.4 | | Total Revenue | $45.7 | $98.2 | Operating Expenses Breakdown (Q1 2022 vs Q1 2021) | Expense Category | Q1 2022 ($ millions) | Q1 2021 ($ millions) | | :--- | :--- | :--- | | Cost of sales | $10.8 | $29.6 | | Selling, general and administrative | $20.4 | $28.2 | | Research and development | $15.2 | $20.2 | - The decrease in SG&A expenses was primarily due to lower professional fees ($3.1 million), reduced payroll costs ($2.9 million), and lower stock-based compensation ($1.4 million) following headcount reductions in 2021[205] - The decrease in R&D expenses was driven by lower internal R&D costs ($2.5 million) and stock-based compensation ($1.3 million) due to lower headcount, as well as reduced consultant and clinical trial expenses[207][211] Liquidity and Capital Resources As of March 31, 2022, the company held $63.9 million in cash and equivalents, with working capital increasing to $42.8 million, despite $26.9 million cash used in operations due to a legal settlement Liquidity Summary | Metric | March 31, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $63,913 | $63,131 | | Marketable securities | $9,994 | $18,975 | | Working capital | $42,781 | $30,436 | - Cash used in operating activities was $26.9 million, primarily driven by a net loss of $3.4 million and a $30.9 million decrease in accrued expenses, which included a $27.1 million legal settlement payment[216] - Cash provided by financing activities was $9.8 million, representing net proceeds from the March 2022 private placement with the CEO and an affiliate of Athyrium[220] - The company's $100 million debt facility with Athyrium requires compliance with covenants, including minimum product revenue targets. As of March 31, 2022, the company was in compliance with all covenants[231][233] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its $100.0 million variable-rate Athyrium Notes, where a 100 basis point increase would raise interest expense by $1.0 million - The company's primary market risk is interest rate fluctuations affecting its variable-rate debt under the Athyrium Notes[247] - A 100 basis point increase in interest rates during the quarter ended March 31, 2022, would have increased the company's interest expense by $1.0 million[247] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during Q1 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[249] - No material changes were made to the internal control over financial reporting during the three months ended March 31, 2022[250] PART II – OTHER INFORMATION Legal Proceedings The company is involved in significant legal proceedings, including a $54.2 million class action settlement, a vacated $22.4 million defamation damages award, and multiple patent infringement lawsuits - Hsu v. Puma: A settlement for ~$54.2 million was reached. The first payment of $27.1 million was made in January 2022, with the balance due in June 2022. A final settlement hearing is set for July 28, 2022[253] - Eshelman v. Puma: The U.S. Court of Appeals affirmed the liability verdict but vacated the $22.4 million damages award as excessive, remanding the case for a new trial on damages[254] - Patent Litigation: The company is actively pursuing patent infringement lawsuits against AstraZeneca, Sandoz, and Shanghai Acebright to defend its intellectual property for NERLYNX and related compounds[258][259][261] Risk Factors No material changes to the company's risk factors were reported for the period, consistent with the Annual Report on Form 10-K - No material changes to risk factors were reported for the period[263] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during Q1 2022, apart from the previously disclosed private placement - No unregistered sales of equity securities occurred during the quarter, other than what was previously reported on Form 8-K[264] Exhibits This section lists exhibits filed with the Form 10-Q, including amended bylaws, CEO/CFO certifications, and Inline XBRL data files