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OFFON

PUMA BIOTECHNOLOGY, INC.

(PBYI)
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PUMA BIOTECHNOLOGY : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/05/2021 | 04:35pm EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the notes thereto included in Item 1 in
this Quarterly Report on Form 10-Q, or this Quarterly Report. The following
discussion should also be read in conjunction with our audited consolidated
financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in our
Annual Report on Form 10-K for the year ended December 31, 2020.

Unless otherwise provided in this Quarterly Report, references to the "Company,"
"we," "us," and "our" refer to Puma Biotechnology, Inc., a Delaware corporation,
together with its wholly owned subsidiaries.

Overview


We are a biopharmaceutical company with a focus on the development and
commercialization of innovative products to enhance cancer care. We in-license
from Pfizer, Inc., or Pfizer, the global development and commercialization
rights to PB272 (neratinib, oral), PB272 (neratinib, intravenous) and PB357.
Neratinib is a potent irreversible tyrosine kinase inhibitor, or TKI, that
blocks signal transduction through the human epidermal growth factor receptors,
HER1, HER2 and HER4. Currently, we are primarily focused on the development and
commercialization of the oral version of neratinib, and our most advanced drug
candidates are directed at the treatment of HER2-positive breast cancer and HER2
mutated cancers. We believe neratinib has clinical application in the treatment
of several other cancers as well, including other tumor types that over-express
or have a mutation in HER2 or EGFR, such as breast cancer, cervical cancer, lung
cancer or other solid tumors.



Prior to 2017, our efforts and resources had been focused primarily on acquiring
and developing our pharmaceutical technologies, raising capital and recruiting
personnel. In 2017, the U.S. Food and Drug Administration, or FDA, approved
NERLYNX, formally known as PB272 (neratinib, oral), for the extended adjuvant
treatment of adult patients with early stage HER2-overexpressed/amplified breast
cancer following adjuvant trastuzumab-based therapy. In February 2020, NERLYNX
was also approved by the FDA in combination with capecitabine for the treatment
of adult patients with advanced or metastatic HER2-positive breast cancer who
have received two or more prior anti-HER2-based regimens in the metastatic
setting. In 2018, the European Commission, or EC, granted marketing
authorization for NERLYNX in the European Union for the extended adjuvant
treatment of adult patients with early-stage hormone receptor positive
HER2-overexpressed/amplified breast cancer and who are less than one year from
the completion of prior adjuvant trastuzumab-based therapy.



We have entered into exclusive sub-license agreements with various parties to
pursue regulatory approval, if necessary, and commercialize NERLYNX, if
approved, in numerous regions outside the United States, including Europe
(excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia,
Israel, Mexico, South Korea, and various countries and territories in Central
and South America. We plan to continue to pursue commercialization of NERLYNX in
other countries outside the United States, if approved.



During the three months ended June 30, 2021, Puma received FDA approval for an
alternate dosing regimen (two-week dose escalation) to be incorporated into the
U.S. prescribing information. In addition, the FDA approved the commercial
distribution of a new SKU (133 count) to support use of this regimen. In June
2021, the Company's Canadian partner, Knight Therapeutics, Inc., received Health
Canada's approval of NERLYNX in combination with capecitabine for the treatment
of adult patients with advanced or metastatic HER2-positive breast cancer who
have received two or more prior anti-HER2-based regimens in the metastatic
setting.

Our expenses to date have been related to hiring staff, commencing
company-sponsored clinical trials and the build out of our corporate
infrastructure and, since 2017, the commercial launch of NERLYNX. Accordingly,
our success depends not only on the safety and efficacy of our product
candidates, but also on our ability to finance product development. To date, our
major sources of working capital have been proceeds from product and license
revenue, public offerings of our common stock, proceeds from our credit facility
and sales of our common stock in private placements.

Impact of COVID-19


Our priorities during the COVID-19 pandemic continue to be focused on protecting
the health and safety of our employees while delivering on our mission to
develop and commercialize innovative products to enhance cancer care.
Substantially all geographic regions in which our U.S. sales force operates have
imposed restrictions and may in the future change or impose additional
restrictions to control or limit the spread of COVID-19 and its variants. These
restrictions include, but are not limited to "shelter-in-place" orders,
quarantines, testing requirements or similar orders or restrictions. These types
of restrictions may deter or prevent cancer patients from traveling to see their
doctors and result in a decline in revenue for NERLYNX, our only commercial
product. Additionally, the impact of COVID-19 has significantly reduced the
ability of our commercial team and our sales force to travel and interact
personally with physicians and members of the extended healthcare team. This has
reduced our commercial team's access to

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healthcare providers, and a large portion of its promotional activities are now
being conducted virtually. Although we have seen some recent easing of local
restrictions, these have been inconsistent and have not led to a broad
relaxation of requirements. These types of restrictions have adversely impacted
our ability to engage with our customers and have adversely impacted sales of
NERLYNX, and they may continue to do so. The respective commercial teams
affiliated with certain companies to which we sub-license the commercial rights
to NERLYNX, and on which we rely for our international sales, have chosen or
have been forced to take similar action, and other sub-licensees of NERLYNX may
choose or be forced to take similar action in the future. Furthermore, the
COVID-19 pandemic has resulted in dramatic increases in unemployment rates,
which may result in a substantial number of people becoming uninsured or
underinsured. Any of these developments may have an adverse effect on our
revenue. We have observed disruptions in patient enrollments in the United
States and in our Phase II SUMMIT basket trial. If the COVID-19 pandemic
continues to spread in the geographies in which we are conducting clinical
trials, we may experience additional disruptions in those clinical trials, which
could have a material adverse impact on our clinical trial plans and timelines.

Our ability to continue to operate without any significant negative impacts will
in part depend on the length and severity of the COVID-19 pandemic and our
ability to protect our employees and our supply chain. We continue to follow and
monitor recommended actions of government and health authorities to protect our
employees worldwide. For the six months ended June 30, 2021, we and our key
third-party suppliers and manufacturers were able to broadly maintain
operations. We rely exclusively on third-party manufacturers to manufacture
NERLYNX.

We intend to satisfy our near-term liquidity requirements through a combination
of our existing cash and cash equivalents and marketable securities as of June
30, 2021 and proceeds that will become available to us through product sales,
royalties and sub-license milestone payments. However, this intention is based
on assumptions that may prove to be wrong. Changes may occur that would consume
our available capital faster than anticipated, including the length and severity
of the COVID-19 pandemic and measures taken to control the spread of COVID-19,
as well as changes in and progress of our development activities, the impact of
commercialization efforts, acquisitions of additional drug candidates and
changes in regulation. Some of these developments have had and may continue to
have an adverse effect on our revenue and thus could have an adverse effect on
our ability to satisfy the minimum revenue covenants in our Note Purchase
Agreement.

Critical Accounting Policies


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, 2021 from our accounting policies at
December 31, 2020, as reported in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020. We accounted for the following related to
sub-license agreements during the six months ended June 30, 2021:

License Revenue:


We recognize license revenue under certain of our sub-license agreements that
are within the scope of ASC 606. The terms of these agreements may contain
multiple performance obligations, which may include licenses and research and
development activities. We evaluate these agreements under ASC 606 to determine
the distinct performance obligations. Non-refundable, up-front fees that are not
contingent on any future performance and require no consequential continuing
involvement by us, are recognized as revenue when the license term commences and
the licensed data, technology or product is delivered. We defer recognition of
non-refundable upfront license fees if the performance obligations are not
satisfied.

Prior to recognizing revenue, we make estimates of the transaction price,
including variable consideration that is subject to a constraint. Amounts of
variable consideration are included in the transaction price to the extent that
it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur and when the uncertainty associated with the variable
consideration is subsequently resolved. Variable consideration may include
nonrefundable upfront license fees, payments for research and development
activities, reimbursement of certain third-party costs, payments based upon the
achievement of specified milestones, and royalty payments based on product sales
derived from the collaboration.

If there are multiple distinct performance obligations, we allocate the
transaction price to each distinct performance obligation based on its relative
standalone selling price. The standalone selling price is generally determined
based on the prices charged to customers or using expected cost-plus margin.
Revenue is recognized by measuring the progress toward complete satisfaction of
the performance obligations.

Legal Contingencies and Expense:


For legal contingencies, we accrue a liability for an estimated loss if the
potential loss from any claim or legal proceeding is considered probable and the
amount can be reasonably estimated. Legal fees and expenses are expensed as
incurred based on invoices or estimates provided by legal counsel. We
periodically evaluate available information, both internal and external,
relative to such contingencies and adjust the accrual as necessary. We determine
whether a contingency should be disclosed by assessing whether a

                                       30

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material loss is deemed reasonably possible. In determining whether a loss
should be accrued, we evaluate, among other factors, the degree of probability
of an unfavorable outcome and the ability to make a reasonable estimate of the
amount of the loss (see Note 13-Commitments and Contingencies in the
accompanying notes to the financial statements).



Summary of Income and Expenses

Product revenue, net:


Product revenue, net consists of revenue from sales of NERLYNX. We sell NERLYNX
to a limited number of specialty pharmacies and specialty distributors in the
United States. We record revenue at the net sales price, which includes an
estimate for variable consideration for which reserves are established. Variable
consideration consists of trade discounts and allowances, product returns,
provider chargebacks and discounts, government rebates and other incentives.

License revenue:

License revenue consists of consideration earned for performance obligations satisfied pursuant to our sub-license agreements.

Royalty revenue:


Royalty revenue consists of consideration earned related to product sales made
by our sub-licensees in their respective territories pursuant to our sub-license
agreements.

Cost of sales:

Cost of sales consists of third-party manufacturing costs, freight, and indirect
overhead costs associated with sales of NERLYNX. Cost of sales also includes
period costs related to royalty charges payable to Pfizer, the amortization of
milestone payments made to Pfizer, certain inventory manufacturing services,
inventory adjustment charges, unabsorbed manufacturing and overhead costs, and
manufacturing variances.

Selling, general and administrative expenses:


Selling, general and administrative expenses, or SG&A Expenses, consist
primarily of salaries and payroll-related costs, stock-based compensation
expense, professional fees, business insurance, rent, general legal activities,
credit loss expense and other corporate expenses. We expense SG&A Expenses as
they are incurred.

Research and development expenses:


Research and development expenses, or R&D Expenses, include costs associated
with services provided by consultants who conduct clinical services on our
behalf, contract organizations for the manufacturing of clinical materials and
clinical trials. During the three and six months ended June 30, 2021 and 2020,
our R&D Expenses consisted primarily of clinical research organization, or 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.

Results of Operations

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Total revenue:

For the three months ended June 30, 2021, total revenue was approximately $53.4 million, compared to $70.6 million for the three months ended June 30, 2020.

Product revenue, net:


Product revenue, net was approximately $48.9 million for the three months ended
June 30, 2021, compared to $48.8 million for the three months ended June 30,
2020. The increase in product revenue, net was primarily attributable to an
increase in gross selling price that occurred in the third quarter of 2020 and
in the first quarter of 2021; offset by a volume decrease of approximately 10.0%
in bottles of NERLYNX sold, and an increase in reserves for variable
consideration from approximately 14.4% of product revenue, net for the three
months ended June 30, 2020 to approximately 17.7% of product revenue, net for
the three months ended

                                       31
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June 30, 2021. The increase in reserves for variable consideration is primarily
due to an increase in Medicaid claims and government chargebacks as a percentage
of gross revenue.

License revenue:

License revenue was approximately $0.3 million for the three months ended June
30, 2021, compared to approximately $20.7 million for the three months ended
June 30, 2020. During the three months ended June 30, 2020, the Company
recognized one-time license revenue of $20.7 million for an upfront payment and
for satisfaction of two performance-based milestones related to sub-license
agreements.

Royalty revenue:


Royalty revenue was approximately $4.3 million for the three months ended June
30, 2021, compared to $1.1 million for the three months ended June 30, 2020. The
increase was due to increased product sales by our sub-licensees as they
continue to commercialize NERLYNX in additional territories.

Cost of sales:


Cost of sales was approximately $12.0 million for the three months ended June
30, 2021, compared to $9.4 million for the three months ended June 30, 2020. The
increase was primarily attributable to the increase in the amortization of the
intangible asset under our license agreement with Pfizer and increased royalty
expense due to Pfizer.

Selling, general and administrative expenses:




For the three months ended June 30, 2021, SG&A Expenses were approximately $39.4
million, compared to approximately $29.3 million for the three months ended June
30, 2020. SG&A Expenses for the three months ended June 30, 2021 and 2020 were
as follows:



(in thousands)                         June 30,                 $               %
                                   2021         2020        2021/2020       2021/2020
Payroll and related costs        $ 10,088     $ 10,817     $      (729 )          -6.7 %
Professional fees and expenses      9,633       10,551            (918 )          -8.7 %
Travel and meetings                 1,030          517             513            99.2 %
Facilities and equipment costs      1,401        1,427             (26 )          -1.8 %
Stock-based compensation           16,731        4,730          12,001           253.7 %
Other                                 527        1,305            (778 )         -59.6 %
                                 $ 39,410     $ 29,347     $    10,063            34.3 %



For the three months ended June 30, 2021, SG&A Expenses increased by approximately $10.1 million compared to the same period in 2020, primarily attributable to the following:

? an increase in stock-based compensation expense of approximately $12.0

million primarily due to the $13.6 million incremental expense resulting

         from the modification to the term of Mr. Auerbach's warrant and
         approximately $1.2 million from new grants, partially offset by the
         decrease of approximately $2.2 million for stock awards that have fully
         vested and a decrease of approximately $0.6 million from stock awards
         forfeited; and




      ?  an increase in travel and meetings of approximately $0.5 million as some
         travel restrictions due to the COVID-19 pandemic have been lifted.

These increases were partially offset by:



      ?  a decrease in professional fees and expenses of approximately $0.9
         million, consisting primarily of a decrease of approximately $1.1 million
         for professional fees, primarily related to decreased consultancy efforts

related to marketing and commercialization support, partially offset by

an increase of approximately $0.2 million in insurance premiums and legal

         fees in connection with various lawsuits;




      ?  a decrease in other expenses of $0.8 million due to lower bad debt
         expenses, partially offset by higher sponsorship fees; and




  ? a decrease in payroll and related costs of approximately $0.7 million.




                                       32
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Research and development expenses:


For the three months ended June 30, 2021, R&D Expenses were approximately $18.6
million, compared to approximately $24.7 million for the three months ended June
30, 2020. R&D Expenses for the three months ended June 30, 2021 and 2020 were as
follows:


Research and development expenses For the Three Months Ended

         Change
(in thousands)                                  June 30,                       $                %
                                        2021                2020           2021/2020        2021/2020
Clinical trial expense              $       6,982       $       7,062     $        (80 )           -1.1 %
Internal R&D                                8,209               9,894           (1,685 )          -17.0 %
Consultant and contractors                  1,940               1,835              105              5.7 %
Stock-based compensation                    1,507               5,900           (4,393 )          -74.5 %
                                    $      18,638       $      24,691     $     (6,053 )          -24.5 %

For the three months ended June 30, 2021, R&D Expenses decreased by approximately $6.1 million compared to the same period in 2020, primarily attributable to the following:



      ?  a decrease in stock-based compensation expense of approximately $4.4
         million, primarily due to a decrease of approximately $3.8 million for
         stock awards that fully vested and a decrease of approximately $1.1

million from stock award forfeitures, partially offset by an increase of

         approximately $0.5 million from new grants and other immaterial
         fluctuations; and



? a decrease in Internal R&D of approximately $1.7 million, primarily due

         to a decrease in payroll and payroll-related expenses as a result of a
         reduction in headcount.




Other income (expenses):



Other income (expenses)              For the Three Months Ended                    Change
(in thousands)                                June 30,                       $                %
                                      2021                2020           2021/2020        2021/2020
Interest income                   $         121       $          66     $         55            83.3 %
Interest expense                         (3,518 )            (3,784 )            266            -7.0 %
Legal verdict (expense) credit           14,902                 (93 )         14,995        -16123.7 %
Other income                                 60                  77              (17 )         -22.1 %
                                  $      11,565       $      (3,734 )   $     15,299          -409.7 %




Interest expense:



For the three months ended June 30, 2021, we recognized approximately $3.5
million in interest expense, compared to $3.8 million of interest expense for
the three months ended June 30, 2020. The decrease in interest expense was
primarily the result of the interest expense for the milestone payments being
paid to Pfizer in installments.



Legal verdict (expense) credit:




For the three months ended June 30, 2021, we reduced our legal expense accrual
by $20.0 million with respect to the Eshelman v. Puma Biotechnology, Inc., et
al. judgment, and we increased our legal expense accrual by $5.1 million with
respect to the Hsu v. Puma Biotechnology, Inc., et.al judgment, which resulted
in a $14.9 million net credit in legal verdict expense for the period.



Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Total revenue:

For the six months ended June 30, 2021, total revenue was approximately $151.6 million, compared to $121.8 million for the six months ended June 30, 2020.

Product revenue, net:


Product revenue, net was approximately $94.7 million for the six months ended
June 30, 2021, compared to $97.4 million for the six months ended June 30, 2020.
The decrease in product revenue, net was attributable to a volume decrease of
approximately

                                       33
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15.0% in bottles of NERLYNX sold, and an increase in reserves for variable
consideration from approximately 15.3% of product revenue for the six months
ended June 30, 2020 to approximately 18.3% of product revenue for the six months
ended June 30, 2021. The increase in reserves for variable consideration is
primarily due to an increase in Medicaid claims and government chargebacks as a
percentage of gross revenue. The decrease in product revenue, net was partially
offset by an increase in gross selling price that occurred in the third quarter
of 2020 and in the first quarter of 2021.

License revenue:


License revenue was approximately $50.3 million for the six months ended June
30, 2021, compared to approximately $22.7 million for the six months ended June
30, 2020. The increase in license revenue is due to a large, upfront payment in
connection with an amendment to a sub-license agreement entered into during the
six months ended June 30, 2021.

Royalty revenue:

Royalty revenue was approximately $6.6 million for the six months ended June 30, 2021, compared to $1.7 million for the six months ended June 30, 2020. The increase was due to increased product sales by our sub-licensees as they continue to commercialize NERLYNX in additional territories.

Cost of sales:


Cost of sales was approximately $41.5 million for the six months ended June 30,
2021, compared to $18.5 million for the six months ended June 30, 2020. The
increase in cost of sales was primarily attributable to a one-time license
termination fee, the increase in the amortization of the intangible asset under
our license agreement with Pfizer and increased royalty expense due to Pfizer.

Selling, general and administrative expenses:


For the six months ended June 30, 2021, SG&A Expenses were approximately $67.7
million, compared to approximately $60.3 million for the six months ended June
30, 2020. SG&A Expenses for the six months ended June 30, 2021 and 2020 were as
follows:



Selling, general, and
administrative expenses              For the Six Months Ended                    Change
(in thousands)                               June 30,                      $                %
                                      2021               2020          2021/2020        2021/2020
Payroll and related costs         $     20,599       $     21,384     $       (785 )           -3.7 %
Professional fees and expenses          20,416             20,981             (565 )           -2.7 %
Travel and meetings                      2,042              2,933             (891 )          -30.4 %
Facilities and equipment costs           2,795              2,864              (69 )           -2.4 %
Stock-based compensation                20,333              9,422           10,911            115.8 %
Other                                    1,563              2,700           (1,137 )          -42.1 %
                                  $     67,748       $     60,284     $      7,464             12.4 %




For the six months ended June 30, 2021, SG&A Expenses increased by approximately
$7.5 million compared to the same period in 2020, primarily attributable to the
following:

? an increase in stock-based compensation expense of approximately $10.9

million primarily due to the $13.6 million incremental expense resulting

from the modification to the term of Mr. Auerbach's warrant and an

increase of $2.6 million from new grants, partially offset by a decrease

of approximately $4.2 million for stock awards that have fully vested and

a decrease of approximately $1.1 million from stock awards forfeited.

This increase was partially offset by:

? a decrease in other expense of $1.1 million due to lower sponsorships,

         software, educational and training costs for the commercial team;




      ?  a decrease in travel and meetings of approximately $0.9 million related
         to travel restrictions due to the COVID-19 pandemic;



? a decrease in payroll and related costs of approximately $0.8 million; and




                                       34
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      ?  a decrease in professional fees and expenses of approximately $0.6

million, consisting primarily of decreases of approximately $1.8 million

for professional fees, primarily related to decreased consultancy efforts

related to marketing and commercialization support and lower audit and IT

         related expenses of $0.2 million, partially offset by an increase of
         approximately $0.1 million in insurance premiums and an increase of

approximately $1.1 million in legal fees in connection with various

         lawsuits.



Research and development expenses:


For the six months ended June 30, 2021, R&D expenses were approximately $38.9
million, compared to approximately $50.1 million for the six months ended June
30, 2020. R&D expenses for the six months ended June 30, 2021 and 2020 were as
follows:



Research and development expenses      For the Six Months Ended                    Change
(in thousands)                                 June 30,                      $                %
                                        2021               2020          2021/2020        2021/2020
Clinical trial expense              $     13,108       $     15,873     $     (2,765 )          -17.4 %
Internal R&D                              18,469             20,123           (1,654 )           -8.2 %
Consultant and contractors                 3,523              4,035             (512 )          -12.7 %
Stock-based compensation                   3,766             10,115           (6,349 )          -62.8 %
                                    $     38,866       $     50,146     $    (11,280 )          -22.5 %




For the six months ended June 30, 2021, R&D Expenses decreased by approximately
$11.3 million compared to the same period in 2020, primarily attributable to the
following:



      ?  a decrease in stock-based compensation expense of approximately $6.3
         million, primarily due to a decrease of approximately $6.3 million for
         stock awards that fully vested and a decrease of approximately $1.0

million from stock award forfeitures, partially offset by an increase of

         approximately $1.0 million from new grants and other immaterial
         fluctuations;



? a decrease in clinical trial expenses of approximately $2.8 million,

         primarily due to the close out of certain clinical trials, and a
         reduction in enrollments and patient on studies for open studies;




      ?  a decrease in internal R&D expense of approximately $1.7 million,

primarily due to a decrease in payroll and payroll-related expenses; and





      ?  a decrease in consultant and contractor expenses of approximately $0.5
         million, primarily due to the close out of certain clinical trials.




Other income (expenses):



Other income (expenses)              For the Six Months Ended                    Change
(in thousands)                               June 30,                      $                %
                                      2021               2020          2021/2020        2021/2020
Interest income                   $        134       $        452     $       (318 )          -70.4 %
Interest expense                        (6,968 )           (6,852 )           (116 )            1.7 %
Legal verdict (expense) credit          14,717               (186 )         14,903          -8012.4 %
Other income                               102                170              (68 )          -40.0 %
                                  $      7,985       $     (6,416 )   $     14,401           -224.5 %


Interest income:



For the six months ended June 30, 2021, interest income decreased by
approximately $0.3 million compared to the six months ended June 30, 2020. The
decrease in interest income reflects less cash invested in money market accounts
and high-yield savings accounts in 2021 compared to 2020.



Interest expense:



For the six months ended June 30, 2021, we recognized approximately $7.0 million
in interest expense, compared to $6.9 million of interest expense for the six
months ended June 30, 2020.



                                       35
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Legal verdict (expense) credit:




For the six months ended June 30, 2021, we reduced our legal expense accrual by
$20.0 million with respect to the Eshelman v. Puma Biotechnology, Inc., et
al. judgment, and we increased our legal expense accrual by $5.3 million with
respect to the Hsu v. Puma Biotechnology, Inc., et.al judgment, which resulted
in a $14.7 million net credit in legal verdict expense for the period.



Liquidity and Capital Resources


The following table summarizes our liquidity and capital resources as of June
30, 2021 and December 31, 2020, and for the six months ended June 30, 2021 and
2020, and is intended to supplement the more detailed discussion that follows:



                                                          As of                   As of
Liquidity and capital resources (in thousands)        June 30, 2021         December 31, 2020
Cash and cash equivalents                           $           89,848     $            85,293
Marketable securities                               $           19,127     $             8,096
Working capital                                     $           29,851     $            31,884
Stockholders' equity (deficit)                      $           29,469     $            (5,951 )

                                                     Six Months Ended       Six Months Ended
                                                      June 30, 2021           June 30, 2020
Cash provided by (used in):
Operating activities                                $           15,587     $             4,688
Investing activities                                           (11,032 )                25,158
Financing activities                                                 -                       2
Net increase in cash, cash equivalents and          $            4,555     $            29,848
restricted cash




Operating Activities:

For the six months ended June 30, 2021, we reported net income of approximately
$11.3 million, compared to a net loss of approximately $13.5 million for the
same period in 2020. Additionally, cash provided by operating activities for the
six months ended June 30, 2021 was approximately $15.6 million compared to
approximately $4.7 million of cash provided by operating activities for the same
period in 2020.

Cash provided by operating activities for the six months ended June 30, 2021
consisted of net income of approximately $11.3 million, an increase in accrued
expenses and other of approximately $18.5 million, an increase in inventory of
approximately $4.2 million, an increase in accounts receivable, net of
approximately $4.0 million, an increase of approximately $1.2 million in
accounts payable and in other immaterial fluctuations, and an increase of $1.0
million due to a recovery of credit loss expense; partially offset by a decrease
of approximately $30.0 million of non-cash items, such as stock-based
compensation and depreciation and amortization, and a decrease in other current
assets of approximately $3.2 million.

Cash provided by operating activities for the six months ended June 30, 2020
consisted of a net loss of approximately $13.5 million, offset by approximately
$23.7 million of non-cash items, such as stock-based compensation and
depreciation and amortization, a decrease in accounts receivable, net of
approximately $4.9 million, and other immaterial changes of $0.1 million;
partially offset by an increase in other current assets of approximately $3.1
million and a decrease in accounts payable of approximately $7.4 million.



Investing Activities:


During the six months ended June 30, 2021, cash used in investing activities was approximately $11.0 million, compared to net cash provided by investing activities of $25.2 million for the same period in 2020.

Cash used in investing activities during the six months ended June 30, 2021 consisted of approximately $19.1 million of available-for-sale securities, partially offset by maturities of approximately $8.1 million of available-for-sale securities.




Net cash provided by investing activities during the six months ended June 30,
2020 consisted of approximately $51.5 million of maturities of
available-for-sale securities, partially offset by the purchase of available for
sale securities of approximately $16.4 million and an increase in intangible
assets relating to the milestone achieved under the Company's license agreement
with Pfizer of $10.0 million.

                                       36
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Financing Activities:


During the six months ended June 30, 2021, and the same period in 2020, cash was
materially unchanged by financing activities. However, during April 2020, we
borrowed and fully repaid approximately $8.4 million with no penalty or interest
from Silicon Valley Bank, or SVB, under the Paycheck Protection Program, or PPP,
of the Coronavirus Aid, Relief, and Economic Security Act.

Loan and Security Agreement:


In October 2017, we entered into a loan and security agreement with SVB, as
administrative agent, and the lenders party thereto from time to time, or the
Original Lenders, including Oxford Finance, LLC, or Oxford, and SVB. Pursuant to
the terms of the credit facility provided for by the loan and security
agreement, or the Original Credit Facility, we borrowed $50.0 million. In May
2018, we entered into an amendment to the loan and security agreement, which
provided for an amended credit facility, or the Amended Credit Facility. Under
the Amended Credit Facility, the Original Lenders agreed to make term loans
available to us in an aggregate amount of $155.0 million, consisting of (i) an
aggregate amount of $125.0 million, the proceeds of which, in part, were used to
repay the $50.0 million we borrowed under the Original Credit Facility, and (ii)
an aggregate amount of $30.0 million that we drew in December 2018, which was
available under the Amended Credit Facility as a result of achieving a specified
minimum revenue milestone.

On June 28, 2019, or the Effective Date, we entered into an amendment and
restatement of the loan and security agreement, which provided for a new credit
facility, or the New Credit Facility, with Oxford, as collateral agent, and the
lenders party thereto from time to time, including Oxford, pursuant to which we
repaid the $155.0 million outstanding under the Amended Credit Facility, as well
as all applicable exit and prepayment fees, owed to the Original Lenders under
the Amended Credit Facility, using cash on hand and $100.0 million in new
borrowings from the New Credit Facility. Under the New Credit Facility, we
issued to Oxford new and/or replacement secured promissory notes in an aggregate
principal amount for all such promissory notes of $100.0 million evidencing the
New Credit Facility. No additional money remains available to us under the New
Credit Facility.

The New Credit Facility was secured by substantially all of our personal
property other than our intellectual property. We also pledged 65% of the issued
and outstanding capital stock of our subsidiaries, Puma Biotechnology Ltd. and
Puma Biotechnology B.V. The New Credit Facility limited our ability to grant any
interest in our intellectual property to certain permitted licenses and
permitted encumbrances set forth in the agreement.

The term loans under the New Credit Facility bore interest at an annual rate
equal to the greater of (i) 9.0% and (ii) the sum of (a) the "prime rate," as
reported in The Wall Street Journal on the last business day of the month that
immediately preceded the month in which the interest will accrue, plus (b) 3.5%.
We were required to make monthly interest-only payments on each term loan under
the New Credit Facility commencing on the first calendar day of the calendar
month following the funding date of such term loan, and continuing on the first
calendar day of each calendar month thereafter through August 1, 2021, or the
Amortization Date. Commencing on the Amortization Date, and continuing on the
first calendar day of each calendar month thereafter, we would have made
consecutive equal monthly payments of principal, together with applicable
interest, in arrears to each lender under the New Credit Facility, calculated
pursuant to the New Credit Facility. All unpaid principal and accrued and unpaid
interest with respect to each term loan under the New Credit Facility was due
and payable in full on June 1, 2024, or the Maturity Date. Upon repayment of
such term loans, we were also required to make a final payment to the lenders
equal to 7.5% of the aggregate principal amount of such term loans outstanding
as of the Effective Date. The effective interest rate as of June 30, 2021 was
12.75%.

At our option, we were able to prepay the outstanding principal balance of any
term loan in whole but not in part, subject to a prepayment fee of 3.0% of any
amount prepaid if the prepayment occurred through and including the first
anniversary of the funding date of such term loan, 2.0% of the amount prepaid if
the prepayment occurred after the first anniversary of the funding date of such
term loan through and including the second anniversary of the funding date of
such term loan, and 1.0% of the amount prepaid if the prepayment occurred after
the second anniversary of the funding date of such term loan and prior to the
Maturity Date.

The New Credit Facility included affirmative and negative covenants applicable
to us, our current subsidiaries and any subsidiaries we would have created in
the future. The affirmative covenants included, among others, covenants
requiring us to maintain our legal existence and governmental approvals, deliver
certain financial reports, maintain insurance coverage and satisfy certain
requirements regarding deposit accounts. We were also required to achieve
certain product revenue targets, measured as of the last day of each fiscal
quarter on a trailing year-to-date basis. New minimum revenue levels were to be
established for each subsequent fiscal year by mutual agreement of us, Oxford,
as collateral agent, and the lenders under the New Credit Facility. The negative
covenants included, among others, restrictions on our transferring collateral,
incurring additional indebtedness, engaging in mergers or acquisitions, paying
dividends or making other distributions, making investments, creating liens,
selling assets and suffering a change in control, in each case subject to
certain exceptions.

                                       37

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The New Credit Facility also included events of default, the occurrence and
continuation of which could have caused interest to be charged at the rate that
would otherwise have been applicable plus 5.0% and would have provided Oxford,
as collateral agent, with the right to exercise remedies against us and the
collateral securing the New Credit Facility, including foreclosure against the
property securing the New Credit Facility, including our cash. These events of
default included, among other things, our failure to pay principal or interest
due under the New Credit Facility, a breach of certain covenants under the New
Credit Facility, our insolvency, a material adverse change, the occurrence of
any default under certain other indebtedness in an amount greater than $500,000
and one or more judgments against us in an amount greater than $500,000
individually or in the aggregate that remained unsatisfied, unvacated, or
unstayed for a period of 10 days after its entry.

On February 27, 2020, we entered into an amendment of the New Credit Facility
with Oxford to establish our minimum revenue thresholds for the trailing year to
date periods ending March 31, June 30, September 30, and December 31, 2020 and
the fiscal year 2021. On August 5, 2020, we entered into an amendment of the New
Credit Facility with Oxford to amend the minimum revenue thresholds for the
trailing year to date periods ending September 30 and December 31, 2020. On
February 3, 2021, we entered into an amendment of the New Credit Facility with
Oxford to establish our minimum revenue thresholds for the trailing year to date
periods ending March 31, June 30, September 30 and December 31, 2021.



As of June 30, 2021, there were $100.0 million in term loans outstanding under
the New Credit Facility, representing all of our long-term debt outstanding as
of that date, and we were in compliance with all applicable covenants under the
New Credit Facility.

Note Purchase Agreement:

On July 23, 2021, or the NPA Effective Date, we repaid the $100.0 million in
term loans outstanding under the New Credit Facility, as well as all accrued
interest, applicable exit, prepayment and legal fees owed to the lenders under
the New Credit Facility in an amount of approximately $9.2 million, using cash
on hand and $100.0 million in new borrowings from the issuance of notes under
the note purchase agreement, or the Note Purchase Agreement, that we entered
into on the NPA Effective Date with Athyrium Opportunities IV Co-Invest 1 LP,
or, together with its affiliates, Athyrium, as administrative agent, and the
purchasers party thereto from time to time, or the Purchasers, including
Athyrium.

Pursuant to the Note Purchase Agreement, the Purchasers agreed to purchase from
us, and we agreed to issue to such Purchasers, notes payable by us. On the NPA
Effective Date, we issued to the Purchasers notes in an aggregate principal
amount for all such notes of $100.0 million. Subject to satisfaction of certain
conditions set forth in the Note Purchase Agreement, $25.0 million in additional
notes remains available to us under the Note Purchase Agreement.

The obligations of us under the Note Purchase Agreement are secured by
substantially all of our assets, including our intellectual property. We also
pledged 65% of the issued and outstanding capital stock of our subsidiaries,
Puma Biotechnology Ltd. and Puma Biotechnology B.V.



The notes issued under the Note Purchase Agreement bear interest at an annual
rate equal to the sum of (a) 8.0% and (b) Adjusted Three-Month LIBOR for such
Interest Period (as defined in the Note Purchase Agreement). We are required to
make quarterly interest payments on each note issued under the Note Purchase
Agreement commencing on the last business day of September 2021, and continuing
on the last business day of each March, June, September and December through
June 30, 2024, or the NPA Amortization Date. Commencing on the NPA Amortization
Date, and continuing on the last day of each March, June, September and December
thereafter, we will make consecutive equal quarterly payments of principal,
together with applicable interest, in arrears to each Purchaser, calculated
pursuant to the Note Purchase Agreement. All unpaid principal and accrued and
unpaid interest with respect to each note issued under the Note Purchase
Agreement is due and payable in full on July 23, 2026, or the NPA Maturity Date.
At our option, we may prepay the outstanding principal balance of all or any
portion of the principal amount of the notes, subject to a prepayment fee equal
to (i) a make-whole amount if the prepayment occurs on or prior to the second
anniversary of the NPA Effective Date and (ii) 2.0% of the amount prepaid if the
prepayment occurs after the second anniversary of the NPA Effective Date by on
or prior to the third anniversary of the NPA Effective Date. Upon prepayment or
repayment of all or any portion of the principal amount of the notes (whether on
the NPA Maturity Date or otherwise), we are also required to pay an exit fee to
the Purchasers equal to 2.00% of the aggregate principal amount of such notes
prepaid or repaid.



The Note Purchase Agreement includes affirmative and negative covenants
applicable to us, our current subsidiaries and any subsidiaries we create in the
future. The affirmative covenants include, among others, covenants requiring us
to maintain our legal existence and governmental approvals, deliver certain
financial reports, maintain insurance coverage and satisfy certain requirements
regarding deposit accounts. We must also (i) maintain a minimum amount of
unrestricted cash in deposit accounts subject to a control agreement in favor of
Athyrium at any time and (ii) achieve at least a specified minimum amount of
revenue (based on a combination of both sales of NERLYNX in the United States
and royalty revenues received by us for sales of NERLYNX outside the United
States), measured as of the last day of each four consecutive fiscal quarter
period. The negative covenants include, among others,

                                       38

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restrictions on our transferring collateral, incurring additional indebtedness,
engaging in mergers or acquisitions, paying dividends or making other
distributions, making investments, creating liens, selling assets and suffering
a change in control, in each case subject to certain exceptions.



The Note Purchase Agreement also includes events of default, the occurrence and
continuation of which could cause interest to be charged at the rate that is
otherwise applicable plus 2.0% and would provide Athyrium, as administrative
agent, with the right to exercise remedies against us and the collateral
securing the new credit facility, including foreclosure against the property
securing the obligations of us under the Note Purchase Agreement, including our
cash. These events of default include, among other things, our failure to pay
principal or interest due under the Note Purchase Agreement, a breach of certain
covenants under the Note Purchase Agreement, our insolvency, a material adverse
change, the occurrence of any default under certain other indebtedness in an
amount greater than $750,000 and one or more judgments against us in an amount
greater than $750,000 individually or in the aggregate that remains discharged
or otherwise satisfied, in each case, as further described in the Note Purchase
Agreement.



The foregoing description of the Note Purchase Agreement and the notes is only a
summary of the material terms thereof, and does not purport to be complete. The
description is qualified in its entirety by reference to the Note Purchase
Agreement and the form of note, which will be filed as exhibits to our Quarterly
Report on Form 10-Q for the quarter ending September 30, 2021.



Current and Future Financing Needs:




We did not receive or record any product revenues until the third quarter of
2017. We have spent, and expect to continue to spend, substantial amounts in
connection with implementing our business strategy, including our planned
product development efforts, our clinical trials, our research and development
efforts and our commercialization efforts.



We may choose to begin new research and development efforts or we may choose to
launch additional marketing efforts. These efforts may require funding in
addition to the cash and cash equivalents totaling approximately $89.8 million
and $19.1 million in marketable securities available at June 30, 2021. While our
consolidated financial statements have been prepared on a going concern basis,
we expect to continue incurring significant losses for the foreseeable future
and will need to generate significant revenue to sustain operations and
successfully commercialize neratinib. 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, including the global COVID-19 pandemic, our success
in commercializing neratinib, unfavorable decisions of regulatory authorities or
adverse clinical trial results. The outcome of these matters cannot be predicted
at this time.



In addition, we have based our estimate of capital needs on assumptions that may
prove to be wrong. Changes may occur that would consume our available capital
faster than anticipated, including the length and severity of the COVID-19
pandemic and measures taken to control the spread of COVID-19, as well as
changes in and progress of our development activities, the impact of
commercialization efforts, acquisitions of additional drug candidates and
changes in regulation. Potential sources of financing include strategic
relationships, public or private sales of equity or debt and other sources of
funds. We may seek to access the public or private equity markets when
conditions are favorable due to our long-term capital requirements. If we raise
funds by selling additional shares of common stock or other securities
convertible into common stock, the ownership interests of our existing
stockholders will be diluted. If we are not able to obtain financing when
needed, we may be unable to carry out our business plan. As a result, we may
have to significantly limit our operations, and our business, financial
condition and results of operations would be materially harmed. In such an
event, we will be required to undertake a thorough review of our programs, and
the opportunities presented by such programs, and allocate our resources in the
manner most prudent.


Non-GAAP Financial Measures


In addition to our operating results, as calculated in accordance with generally
accepted accounting principles, or GAAP, we use certain non-GAAP financial
measures when planning, monitoring, and evaluating our operational performance.
The following table presents our net loss and net loss 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, 2021, stock-based
compensation represented approximately 31.4% and 22.6% of our operating
expenses, respectively, compared to 19.7% and 17.7% for the same respective
period in 2020, 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.



                                       39
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Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Net Income and


   GAAP Net Income (Loss) Per Share to Non-GAAP Adjusted Net Income Per Share

                 (in thousands except share and per share data)



                                     For the Three Months Ended June 30,               For the Six Months Ended June 30,
                                         2021                   2020                     2021                     2020
GAAP net income (loss)               $      (5,106 )        $       3,395           $       11,322          $        (13,538 )
Adjustments:
Stock-based compensation -
Selling, general and
administrative (1)                          16,731                  4,730                   20,332                     9,422
Research and development (2)                 1,508                  5,900                    3,767                    10,115

Non-GAAP adjusted net income $ 13,133 $ 14,025

        $       35,421          $          5,999

GAAP net income (loss) per
share-basic                          $       (0.13 )        $        0.09  

$ 0.28 $ (0.34 ) Adjustment to net income (loss) (as detailed above)

                           0.45                   0.27                     0.60                      0.49
Non-GAAP adjusted basic net
income per share                     $        0.32      (3) $        0.36    (4)    $         0.88      (3) $           0.15   (4)

GAAP net income (loss) per
share-diluted                        $       (0.13 )        $        0.08   

$ 0.28 $ (0.34 ) Adjustment to net income (loss) (as detailed above)

                           0.45                   0.27                     0.59                      0.49
Non-GAAP adjusted diluted net
income per share                     $        0.32      (5) $        0.35    (6)    $         0.87      (5) $           0.15   (6)

(1) To reflect a non-cash charge to operating expense for selling, general, and administrative stock-based compensation.
(2) To reflect a non-cash charge to operating expense for research and development stock-based compensation.
(3) Non-GAAP adjusted basic net income per share was calculated based on 40,479,577 and 40,370,825 weighted-average shares
of common stock outstanding for the three and six months ended June 30, 2021, respectively.
(4) Non-GAAP adjusted basic net income per share was calculated based on 39,432,030 and 39,361,596 weighted-average shares
of common stock outstanding for the three and six months ended June 30, 2020, respectively.
(5) Non-GAAP adjusted diluted net income per share was calculated based on 40,986,716 and 40,939,688 weighted-average shares
of common stock outstanding for the three and six months ended June 30, 2021, respectively.
(6) Non-GAAP adjusted diluted net income per share was calculated based on 39,997,571 and 39,815,867 weighted-average shares
of common stock outstanding for the three and six months ended June 30, 2020, respectively.



Off-Balance Sheet Arrangements

We do not have any "off-balance sheet agreements," as defined by SEC regulations.

Contractual Obligations


In June 2020, we entered into a letter agreement, or the Letter Agreement, with
Pfizer relating to the method of payment associated with our achievement of a
milestone that triggered a $40.0 million payment under our license agreement
with Pfizer. The Letter Agreement permits us to make the milestone payment in
installments with the majority of the amount payable to Pfizer (including
interest) to be made in 2021 and the final payment occurring by September 30,
2021. Unpaid portions of the milestone payment will accrue interest at 6.25% per
annum until paid.

Other than as described in the preceding paragraph, there have been no material
changes outside the ordinary course of business to our contractual obligations
and commitments as described in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on Form 10-K
for the year ended December 31, 2020.

                                       40

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