Puma Biotechnology(US:PBYI)2023-11-02 20:40PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Q3 2023 and 2022, including balance sheets, statements of operations, comprehensive income, stockholders' equity, cash flows, and explanatory notes Condensed Consolidated Balance Sheets Total assets decreased to $203.6 million by September 30, 2023, while total liabilities also decreased, and stockholders' equity increased to $38.7 million Balance Sheet Items (in thousands) | Balance Sheet Items (in thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $81,800 | $76,201 | | Total current assets | $125,354 | $134,281 | | Total assets | $203,605 | $222,059 | | Total current liabilities | $67,362 | $77,484 | | Total liabilities | $164,863 | $200,451 | | Total stockholders' equity | $38,742 | $21,608 | Condensed Consolidated Statements of Operations Q3 2023 net income significantly improved to $5.8 million from a prior-year loss, despite a slight revenue decrease, while nine-month net income grew to $9.3 million Statements of Operations (in thousands, except EPS) | Metric (in thousands, except EPS) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $56,116 | $57,102 | $163,459 | $162,356 | | Income from Operations | $8,585 | $2,393 | $17,842 | $13,704 | | Net Income (Loss) | $5,796 | $(360) | $9,323 | $5,608 | | Diluted EPS | $0.12 | $(0.01) | $0.20 | $0.13 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities for the nine months ended September 30, 2023, was $16.6 million, a significant turnaround from the prior year's cash usage Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $16,554 | $(23,510) | | Net cash (used in) provided by investing activities | $(10,955) | $18,977 | | Net cash provided by financing activities | $0 | $9,792 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes detail the company's cancer care business, accounting policies, debt, legal proceedings, and commitments, including license agreements and a recent workforce reduction - The company's business is focused on commercializing NERLYNX® for HER2-positive breast cancer and developing the newly in-licensed alisertib for various cancer types24 - The company has substantial milestone and royalty obligations to Pfizer for NERLYNX, and an upfront payment of $7.0 million was made to Takeda for alisertib in October 2022, with potential future milestones up to $287.3 million153154 - The company is involved in patent infringement litigation against AstraZeneca and has faced several ANDA filings for a generic version of NERLYNX® in China, with one generic approved in September 2023160165 - A workforce reduction of approximately 5% was implemented in October 2023, with expected related costs of $0.4 million to be recorded in Q4 2023173 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance for Q3 and nine months ended September 30, 2023, analyzing revenue, expenses, liquidity, capital resources, debt covenants, and non-GAAP measures Results of Operations Q3 2023 total revenue slightly decreased to $56.1 million due to lower NERLYNX sales, while nine-month revenue increased to $163.5 million, with improved operating income - Q3 2023 vs Q3 2022: Product revenue, net decreased by $2.7 million due to a ~10% drop in NERLYNX bottles sold, while royalty revenue increased by $1.7 million, primarily from sales in China195196197 - Nine Months 2023 vs 2022: Product revenue, net increased by $3.6 million due to higher net selling price, despite a 3.7% decrease in bottles sold, and royalty revenue decreased by $2.5 million205206207 - SG&A expenses decreased by $1.2 million in Q3 2023 YoY, mainly due to a $1.6 million reduction in professional fees and expenses, including legal and consulting costs199 - R&D expenses remained relatively flat at $11.4 million for Q3 2023 compared to $11.3 million in Q3 2022201 Liquidity and Capital Resources As of September 30, 2023, the company held $81.8 million in cash and $58.0 million in working capital, with $100.0 million in outstanding debt under Athyrium Notes Liquidity Metric (in thousands) | Liquidity Metric (in thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $81,800 | $76,201 | | Working capital | $57,992 | $56,797 | | Long-term debt | $76,634 | $98,307 | - Cash from operations for the nine months ended Sep 30, 2023 was $16.6 million, compared to cash used of $23.5 million in the same period of 2022, a positive swing driven by net income and changes in working capital216217 - The company has $100.0 million in principal debt outstanding under the Athyrium Notes as of Sep 30, 2023, and was in compliance with all applicable covenants228134 Non-GAAP Financial Measures Non-GAAP adjusted net income for Q3 2023 was $8.3 million ($0.17 per diluted share), significantly up from Q3 2022, reflecting operational performance excluding stock-based compensation Non-GAAP Metric (in thousands, except EPS) | Non-GAAP Metric (in thousands, except EPS) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP net income (loss) | $5,796 | $(360) | $9,323 | $5,608 | | Stock-based compensation adjustment | $2,545 | $2,830 | $7,815 | $9,198 | | Non-GAAP adjusted net income | $8,341 | $2,470 | $17,138 | $14,806 | | Non-GAAP adjusted diluted EPS | $0.17 | $0.05 | $0.36 | $0.33 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations, impacting its investment portfolio and variable-rate debt tied to SOFR, with a 1% rate increase potentially raising interest expense by $1.0 million - The company's primary market risk is interest rate risk affecting its cash equivalents and its $100.0 million in variable-rate debt tied to the SOFR241243 - A hypothetical 1% increase in interest rates in Q3 2023 would have increased interest expense by $1.0 million243 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during Q3 2023 - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2023245 - No material changes were made to internal control over financial reporting during Q3 2023246 PART II – OTHER INFORMATION Legal Proceedings This section details ongoing legal matters, including patent infringement litigation against AstraZeneca, challenges to NERLYNX patents in China, and a settled dispute with Sandoz - The company is suing AstraZeneca for infringement of two U.S. patents related to its product Tagrisso®, with a jury trial scheduled for May 2024251 - Patent infringement litigation against Sandoz regarding a generic version of NERLYNX was settled in December 2022, permitting Sandoz to begin selling a generic version around December 8, 2030252254 - Several companies (Acebright, Aosaikang, Convalife, Kelun) have filed for approval to market generic versions of NERLYNX in China, challenging the company's patents, with Acebright's generic version approved by the NMPA in September 2023257258260 Risk Factors No material changes to risk factors were reported since the 2022 Annual Report on Form 10-K, referring readers to that document for a comprehensive discussion - No material changes to risk factors were reported since the 2022 Annual Report on Form 10-K265 Other Part II Information (Items 2, 3, 4, 5, 6) This section confirms no unregistered equity sales, no defaults on senior securities, no mine safety disclosures, and no Rule 10b5-1 trading plan changes by directors or officers - No unregistered sales of equity securities or defaults on senior securities occurred during the period266268 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter270