PUMA BIOTECHNOLOGY INC

Previous wording

We are a biopharmaceutical company that develops and commercializes innovative products to enhance cancer care and improve treatment outcomes for patients. We are currently commercializing NERLYNX, an oral version of neratinib, for the treatment of certain HER2-positive breast cancers. Additionally, we recently in-licensed and are responsible for global development and commercialization of alisertib. Alisertib is a selective, small-molecule inhibitor of aurora kinase A that is designed to disrupt mitosis leading to apoptosis of rapidly proliferating tumor cells that are dependent on aurora kinase A. Prior to our licensing alisertib from Takeda, alisertib was tested in over 1,300 patients who were treated across 22 company-sponsored trials resulting in a large, well-characterized clinical safety database. Based on information in this database, we believe alisertib has potential application in the treatment of a range of different cancer types, including hormone receptor-positive breast cancer, triple-negative breast cancer and small cell lung cancer. We intend to pursue development of alisertib initially in small cell lung cancer and hormone receptor-positive breast cancer.

Current wording

We are a biopharmaceutical company that develops and commercializes innovative products to enhance cancer care and improve treatment outcomes for patients. We are currently commercializing NERLYNX®, an oral version of neratinib, for the treatment of certain HER2-positive breast cancers. Additionally, in 2022, we in-licensed and became responsible for the global development and commercialization of alisertib. Alisertib is a selective, small-molecule inhibitor of aurora kinase A that is designed to disrupt mitosis leading to apoptosis of rapidly proliferating tumor cells that are dependent on aurora kinase A. Prior to our licensing alisertib from Takeda, alisertib was tested in over 1,300 patients who were treated across 22 company-sponsored trials resulting in a large, well-characterized clinical safety database. Based on information in this database, we believe alisertib has potential application in the treatment of a range of different cancer types, including hormone receptor-positive breast cancer, triple-negative breast cancer and small cell lung cancer. We intend to pursue development of alisertib initially in small cell lung cancer and hormone receptor-positive breast cancer.

Previous wording

We currently market NERLYNX in the United States using our direct specialty sales force consisting of approximately 38 sales specialists. Our sales specialists are supported by an experienced sales leadership team consisting of regional managers and directors, as well as a commercial team of experienced professionals in marketing, access and reimbursement, managed markets, marketing research, commercial operations and sales force planning and management. Outside the United States, we seek to enter into exclusive sub-license agreements with third parties to pursue regulatory approval, if necessary, and commercialize NERLYNX, if approved. As of March 31 2024, NERLYNX has received approval for the treatment of certain patients with extended adjuvant or metastatic HER2-positive breast cancer in over 40 countries outside the United States. We are currently party to several sub-licenses in various regions outside the United States, including Europe (excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia, Israel, South Korea, and various countries and territories in Central America, South America and Africa.

Current wording

We currently market NERLYNX in the United States using our direct specialty sales force consisting of approximately 38 sales specialists. Our sales specialists are supported by an experienced sales leadership team consisting of several regional business leaders and a VP of sales as well as experienced professionals in marketing, managed markets, access and reimbursement, market research, and sales planning and operations. Outside the United States, we seek to enter into exclusive sub-license agreements with third parties to pursue regulatory approval, if necessary, and commercialize NERLYNX, if approved. As of June 30 2024, NERLYNX has received approval for the treatment of certain patients with extended adjuvant or metastatic HER2-positive breast cancer in over 40 countries outside the United States. We are currently party to several sub-licenses in various regions outside the United States, including Europe (excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia, Israel, South Korea, and various countries and territories in Central America, South America, Africa and the Middle East.

Previous wording

In September 2022, we entered into an exclusive license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) to license the worldwide research and development and commercial rights to alisertib. Alisertib is an investigational, reversible, ATP-competitive inhibitor that is designed to be highly selective for aurora kinase A. Inhibition of aurora kinase A can lead to disruption of mitotic spindle apparatus assembly, disruption of chromosome segregation, and inhibition of cell proliferation. In clinical trials to date, alisertib has shown single agent activity and activity in combination with other cancer drugs in the treatment of many different types of cancers, including hormone receptor-positive breast cancer, triple-negative breast cancer, small cell lung cancer and head and neck cancer. We initiated the ALISertib in CAncer (ALISCA-Lung1) Phase II trial (PUMA-ALI-4201) of alisertib monotherapy for the treatment of patients with extensive stage small cell lung cancer in February 2024, and we plan to commence the ALISCA-Breast 1 trial in the second half of 2024.

Current wording

In September 2022, we entered into an exclusive license agreement with Takeda Pharmaceutical Company Limited (“Takeda”) to license the worldwide research and development and commercial rights to alisertib. Alisertib is an investigational, reversible, ATP-competitive inhibitor that is designed to be highly selective for aurora kinase A. Inhibition of aurora kinase A can lead to disruption of mitotic spindle apparatus assembly, disruption of chromosome segregation, and inhibition of cell proliferation. In clinical trials to date, alisertibhas shown single agent activity and activity in combination with other cancer drugs in the treatment of many different types of cancers, including hormone receptor-positive breast cancer, triple-negative breast cancer, small cell lung cancer and head and neck cancer. We initiated the ALISertib in CAncer (ALISCA™ -Lung1) Phase II trial (PUMA-ALI-4201) of alisertib monotherapy for the treatment of patients with extensive stage small cell lung cancer in February 2024, and we plan to commence the ALISCA™ -Breast1 trial in the second half of 2024.

Previous wording

As of the date of the filing of this Quarterly Report, we believe there have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2024 from our accounting policies at December 31, 2023, as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Current wording

As of the date of the filing of this Quarterly Report, we believe there have been no material changes to our critical accounting policies and estimates during the six months ended June 30, 2024 from our accounting policies at December 31, 2023, as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Previous wording

Research and development expenses (“R&D expenses”) include costs associated with services provided by consultants who conduct and perform clinical services on our behalf and contract organizations for the manufacturing of clinical materials. During the three months ended March 31, 2024 and 2023, our R&D expenses consisted primarily of clinical research organization (“CRO fees”), fees paid to consultants; salaries and related personnel costs; and stock-based compensation. We expense our R&D expenses as they are incurred. Internal R&D expenses primarily consist of payroll-related costs and also include equipment costs, travel expenses and supplies.

Current wording

Research and development expenses (“R&D expenses”) include costs associated with services provided by consultants who conduct and perform clinical services on our behalf and contract organizations for the manufacturing of clinical materials. During the three and six months ended June 30, 2024 and 2023, our R&D expenses consisted primarily of clinical research organization (“CRO fees”), fees paid to consultants; salaries and related personnel costs; and stock-based compensation. We expense our R&D expenses as they are incurred. Internal R&D expenses primarily consist of payroll-related costs and also include equipment costs, travel expenses and supplies.

Previous wording

Total revenue for the three months ended March 31, 2024 was approximately $43.8 million, compared to $52.8 million for the three months ended March 31, 2023. This decrease in total revenue was primarily due to a decrease in product revenue, net of approximately $6.5 million and a decrease in royalty revenue of $2.5 million.

Current wording

Total revenue for the three months ended June 30, 2024 was approximately $47.1 million, compared to $54.6 million for the three months ended June 30, 2023. This decrease in total revenue was primarily due to a decrease in product revenue, net of approximately $7.2 million and a decrease in royalty revenue of $0.3 million.

Previous wording

Cost of sales was approximately $10.7 million for the three months ended March 31, 2024, compared to approximately $13.2 million for the three months ended March 31, 2023. The decrease was primarily due to lower royalty expense resulting from decreased worldwide net sales.

Current wording

Cost of sales was approximately $10.7 million for the three months ended June 30, 2024, compared to approximately $11.9 million for the three months ended June 30, 2023. The decrease was primarily due to lower royalty expense resulting from decreased worldwide net sales.

Previous wording

SG&A expenses were approximately $21.8 million for the three months ended March 31, 2024, compared to approximately $22.5 million for the three months ended March 31, 2023. SG&A expenses for the three months ended March 31, 2024 and 2023 were as follows:

Current wording

SG&A expenses were approximately $25.0 million for the three months ended June 30, 2024, compared to approximately $24.5 million for the three months ended June 30, 2023. SG&A expenses for the three months ended June 30, 2024 and 2023 were as follows:

Previous wording

R&D expenses were approxi mately$13.6 million for thethree months ended March 31, 2024, compared to approximately $12.7 million for the three months ended March 31, 2023. R&D expenses for the three months ended March 31, 2024 and 2023, were as follows:

Current wording

R&D expenses were approxi mately$13.6 million for thethree months ended June 30, 2024, compared to approximately $13.4 million for the three months ended June 30, 2023. R&D expenses for the three months ended June 30, 2024 and 2023, were as follows:

Previous wording

R&D expenses increased by approxim ately$0.9 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily attributable to the following:

Current wording

R&D expenses increased by approxim ately$0.3 million for the three months ended June 30, 2024, compared to the same period in 2023, primarily attributable to the following:

Previous wording

For the three months ended March 31, 2024, we recognized approximately $1.0 million in interest income, compared to approximately $0.5 million of interest income for the three months ended March 31, 2023. The increase in interest income was primarily the result of higher interest rates and increased cash equivalents and marketable securities.

Current wording

For the three months ended June 30, 2024, we recognized approximately $1.2 million in interest income, compared to approximately $0.7 million of interest income for the three months ended June 30, 2023. The increase in interest income was primarily the result of higher interest rates and increased cash equivalents and marketable securities.

Previous wording

Product revenue, net was approximately $40.3 million for the three months ended March 31, 2024, compared to $46.8 million for the three months ended March 31, 2023. This decrease in product revenue, net was primarily attributable a decrease of approximately 15.4% in bottles of NERLYNX sold compared to the three months ended March 31, 2023, and an increase in the related deductions to gross revenue for variable considerations for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, partially offset by an increase in net selling price compared to the three months ended March 31, 2023.

Current wording

Product revenue, net was approximately $84.7 million for the six months ended June 30, 2024, compared to $98.3 million for the six months ended June 30, 2023. This decrease in product revenue, net was primarily attributable to a decrease of approximately 16.1% in bottles of NERLYNX sold compared to the six months ended June 30, 2023, and an increase in the related dedu ctions to gross revenue for variable considerations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, partially offset by an increase in net selling price compared to the six months ended June 30, 2023.

Previous wording

Royalty revenue was approximately $3.5 million for the three months ended March 31, 2024, compared to approximately $6.0 million for the three months ended March 31, 2023. The decrease was due primarily to the timing of sales made in China by our sub-licensee.

Current wording

Royalty revenue was approximately $6.2 million for thesix months ended June 30, 2024, compared to approximately $9.0 million for the six months ended June 30, 2023. The decrease was primarily due to the timing of sales made in China by our sub-licensee.

Previous wording

SG&A expenses decreased by approximately $0.7 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily attributable to the following:

Current wording

SG&A expenses decreased by approximately $0.2 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily attributable to the following:

Previous wording

For the three months ended March 31, 2024, we recognized approximately $3.4 million in interest expense, compared to approximately $3.3 million of interest expense for the three months ended March 31, 2023.

Current wording

For the six months ended June 30, 2024, we recognized approximately $6.7 million in interest expense, compared to approximately $6.6 million of interest expense for the six months ended June 30, 2023.

Previous wording

The following table, which summarizes our liquidity and capital resources as of March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and 2023, is intended to supplement the more detailed discussion that follows:

Current wording

The following table, which summarizes our liquidity and capital resources as of June 30, 2024 and December 31, 2023 and for the six months ended June 30, 2024 and 2023, is intended to supplement the more detailed discussion that follows:

Previous wording

On October 26, 2023, we implemented a reduction in our workforce of approximately 5% across the Company. We incurred approximately $0.4 million in related costs, which include severance payments and insurance premiums. These costs were recorded in the fourth quarter of 2023. All payments related to this plan have been paid as of March 31, 2024.

Current wording

On October 26, 2023, we implemented a reduction in our workforce of approximately 5% across the Company. We incurred approximately $0.4 million in related costs, which include severance payments and insurance premiums. These costs were recorded in the fourth quarter of 2023. All payments related to this plan were paid as of March 31, 2024.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2024 was $11.2 million and consisted of a net loss of approximately $4.8 million, adjusted for non-cash items of approxi mately$5.4 million, including stock-based compensation of $2.4 million, depreciation and amortization of $2.9 million and provision for credit loss of $0.1 million. Total changes in cash flows from operations were due to an increase in working capital, primarily related to a decrease in accounts receivable, net of approximately $23.1 million and an increase in accounts payable of approximately $2.1 million, partially offset by a decrease in accrued expenses and other of approximately $15.0 million.

Current wording

Cash provided by operating activities for thesix months ended June 30, 2024 was$12.3 million and consisted of a net loss of approximately$9.3 million, adjusted for non-cash items of approximately$10.2 million, including stock-based compensation of $4.4 million, depreciation and amortization of $5.8 million and provision for credit loss of $0.1 million. Total changes in cash flows from operations were due to an increase in working capital, primarily related to a decrease in accounts receivable of approximately $19.8 million, a decrease in prepaid expenses and other of $1.4 million and an increase in accounts payable of approximately $6.6 million, partially offset by a decrease in accrued expenses and other of approximately $13.7 million and an increase in inventory of approximately $2.0 million.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2023 was $2.6 million and consisted of net income of approximately $1.4 million, a decrease of approximately $5.7 million of non-cash items, including stock-based compensation, and depreciation and amortization. Further changes in cash flows from operations included a decrease in accrued expenses and other of approximately $18.8 million related primarily an $8.0 million payment related to the Eshelman settlement, payments of $7.7 million for employee bonuses and a $4.0 million decrease in our Pfizer royalty accrual, partially offset by a decrease of $9.2 million in accounts receivable, a decrease $0.6 million in inventory, a decrease of $0.9 million in prepaid expenses and other, a decrease of $2.0 million in other current assets (related to receipt of CARES Act funds), a decrease in our post-marketing commitment liability of approximately $0.2 million and an increase of $2.1 million in accounts payable.

Current wording

Cash provided by operating activities for the six months ended June 30, 2023 was $5.9 million and consisted of net income of approximately $3.5 million, a decrease of approximately $11.5 million of non-cash items, including stock-based compensation, depreciation and amortization and provision for credit loss. Further changes in cash flows from operations included a decrease in accrued expenses and other of approximately $17.4 million primarily due to an $8.0 million payment related to the Eshelman settlement, net decrease of $4.3 million in the employee bonus accrual and a net decrease of $4.8 million in our Pfizer royalty accrual, and a decrease in our post-marketing commitment liability of approximately $0.5 million, partially offset by a decrease of $8.5 million in accounts receivable, an increase $3.1 million in inventory, a decrease of $0.6 million in prepaid expenses and other, a decrease of $1.9 million in other current assets (related to receipt of CARES Act funds), and an increase of $1.4 million in accounts payable.

Previous wording

Cash used in investing activities for thethree months ended March 31, 2024 was approximately$19.1 million, compared to net cash used by investing activities of approximately$17.5 million for the same period in 2023. Cash used in investing activities was primarily due to the purchase of available-for-sale securities of approximately $25.0 million, offset by the maturity of available-for-sale securities of approximately $5.9 million.

Current wording

Cash used in investing activities for thesix months ended June 30, 2024 was approximately$18.4 million, compared to net cash used by investing activities of approximately$22.1 million for the same period in 2023. Cash used in investing activities was primarily due to the purchase of available-for-sale securities of approximately $44.9 million, offset by the maturity of available-for-sale securities of approximately $26.5 million.

Previous wording

Cash used in investing activities for the three months ended March 31, 2023 was approximately $17.5 million. Cash used in investing activities was primarily due to the purchase of the intangible asset of $12.5 million, and the purchase of available-for-sale securities of approximately $5.0 million for the three months ended March 31, 2023.

Current wording

Cash used in investing activities for the six months ended June 30, 2023 was approximately $22.1 million. Cash used in investing activities was primarily due to the purchase of the intangible asset of $12.5 million, and the purchase of available-for-sale securities of approximately $10.5 million for the six months ended June 30, 2023.

Previous wording

There was no cash provided by or used in financing activities for both the three months ended March 31, 2024 and 2023.

Current wording

There was no cash provided by or used in financing activities for the six months ended June 30, 2023.

Previous wording

Following the effectiveness of the Third Amendment, the Athyrium Notes bear interest at an annual rate equal to the sum of (a) eight percent (8.00%) plus (b) the lesser of (i) the sum of (x) three-month term SOFR for an interest period of three months plus (y) 0.26161% (26.161 basis points) and (ii) three and one-half of one percent (3.50%) per annum. Interest is payable quarterly on the last business day of March, June, September and December each year. Beginning June 30, 2024, principal payments are required to be made quarterly at 11.11% of the original face amount with the remaining balance paid at maturity. Each principal payment will also include a 2.0% exit payment. As of March 31, 2024, the effective interest rate for the loan was 12.99%.

Current wording

Following the effectiveness of the Third Amendment, the Athyrium Notes bear interest at an annual rate equal to the sum of (a) eight percent (8.00%) plus (b) the lesser of (i) the sum of (x) three-month term SOFR for an interest period of three months plus (y) 0.26161% (26.161 basis points) and (ii) three and one-half of one percent (3.50%) per annum. Interest is payable quarterly on the last business day of March, June, September and December each year. As of June 30, 2024, we began paying the principal payments required to be made quarterly at 11.11% of the original face amount with the remaining balance paid at maturity. Each principal payment also includes a 2.0% exit payment. Each quarterly principal payment approximates $11.1 million, and each quarterly exit fee payment approximates $0.2 million. As of June 30, 2024, the effective interest rate for the loan was 12.99%.

Previous wording

As of March 31, 2024, the principal balance outstanding under the Athyrium Notes was $100.0 million, representing all of our debt. We were in compliance with all applicable covenants under the Athyrium Notes.

Current wording

As of June 30, 2024, the principal balance outstanding under the Athyrium Notes was $88.9 million, representing all of our debt. We are in compliance with all applicable covenants under the Athyrium Notes.

Previous wording

We may choose to begin new R&D efforts, or we may choose to launch additional marketing efforts. For example, we in-licensed alisertib from Takeda in 2022 and assumed sole responsibility for its global development and commercialization. These efforts will require funding in addition to the cash and cash equivalents totaling approximately $76.8 million and approximately $30.4 million in marketable securities available at March 31, 2024. While our consolidated financial statements have been prepared on a going concern basis, we may incur significant losses in the future and will need to generate significant revenue to sustain operations and successfully commercialize neratinib and develop alisertib. While we have been successful in raising financing in the past, there can be no assurance that we will be able to do so in the future. Our ability to obtain funding may be adversely impacted by uncertain market conditions, our success in commercializing neratinib, our success in developing alisertib, unfavorable decisions of regulatory authorities or adverse clinical trial results. The outcome of these matters cannot be predicted at this time. We believe that our existing cash and cash equivalents and marketable securities as of March 31, 2024, and proceeds that will become available to us through product sales and sub-license payments are sufficient to satisfy our operating cash and capital needs for at least one year after the filing of this Quarterly Report.

Current wording

We may choose to begin new R&D efforts, or we may choose to launch additional marketing efforts. For example, we in-licensed alisertib from Takeda in 2022 and assumed sole responsibility for its global development and commercialization. These efforts will require funding in addition to the cash and cash equivalents totaling approximately $67.1 million and approximately $29.7 million in marketable securities available at June 30, 2024. While our consolidated financial statements have been prepared on a going concern basis, we may incur significant losses in the future and will need to generate significant revenue to sustain operations and successfully commercialize neratinib and develop alisertib. While we have been successful in raising financing in the past, there can be no assurance that we will be able to do so in the future. Our ability to obtain funding may be adversely impacted by uncertain market conditions, our success in commercializing neratinib, our success in developing alisertib, unfavorable decisions of regulatory authorities or adverse clinical trial results. The outcome of these matters cannot be predicted at this time. We believe that our existing cash and cash equivalents and marketable securities as of June 30, 2024, and proceeds that will become available to us through product sales and sub-license payments are sufficient to satisfy our operating cash and capital needs for at least one year after the filing of this Quarterly Report.

Previous wording

In addition to our operating results, as calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) we use certain non-GAAP financial measures when planning, monitoring, and evaluating our operational performance. The following table presents our net (loss) income and net (loss) income per share, as calculated in accordance with GAAP, as adjusted to remove the impact of stock-based compensation. For the three months ended March 31, 2024, stock-based compensation represented approximately 6.7% of our operating expenses, compared to 8.1% for the same period in 2023, in each case excluding cost of sales and acquired in-process research and development. Our management believes that these non-GAAP financial measures are useful to enhance understanding of our financial performance, are more indicative of our operational performance and facilitate a better comparison among fiscal periods. These non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP reporting measures.

Current wording

In addition to our operating results, as calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) we use certain non-GAAP financial measures when planning, monitoring, and evaluating our operational performance. The following table presents our net (loss) income and net (loss) income per share, as calculated in accordance with GAAP, as adjusted to remove the impact of stock-based compensation. For the three and six months ended June 30, 2024, stock-based compensation represented approximately 5.3% and 6.0% of our operating expenses, respectively, compared to 6.4% and 7.2% for the same respective periods in 2023, in each case excluding cost of sales. Our management believes that these non-GAAP financial measures are useful to enhance understanding of our financial performance, are more indicative of our operational performance and facilitate a better comparison among fiscal periods. These non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP reporting measures.

Previous wording

(3) Non-GAAP adjusted basic net (loss) income per share was calculated based on 48,189,256 and 46,636,083 weighted-average shares of common stock outstanding for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(3) Non-GAAP adjusted basic net loss per share was calculated based on 48,292,414 and 48,240,835 weighted-average shares of common stock outstanding for the three and six months ended June 30, 2024 respectively.

Previous wording

(4) Non-GAAP adjusted diluted net (loss) income per share was calculated based on 48,189,256 and 47,157,904 weighted-average shares of common stock outstanding for the years ended Mach 31, 2024 and 2023, respectively.

Current wording

(6) Non-GAAP adjusted diluted net income per share was calculated based on 47,201,185 and 47,172,752 weighted-average shares of common stock outstanding for the three and six months ended June 30, 2023, respectively.