Puma Biotechnology, Inc.
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Good afternoon. My name is Dona, and I’ll be your conference operator today. Welcome to the Puma Biotechnology conference call. At this time, all participants are in a listen-only mode. After the speakers’ formal remarks, there will be a question-and-answer session. And as a reminder, this conference is being recorded. I would now like to turn the conference over to Ms. Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. Thank you. Please go ahead.

[Mariann Ohanesian:]

[Alan Auerbach:]

Thank you, Mariann, and thank you all for joining our call today. Today, Puma reported total revenue for the fourth quarter of 2020 of $52.6 million. Total revenue includes net U.S. NERLYNX sales, as well as royalty fees from our sublicensees. Net NERLYNX sales were $50 million in the fourth quarter of 2020, representing a slight increase from the $49.3 million in net sales reported in the third quarter of 2020, and a decrease from the $58.7 million reported in Q4 of 2019. Our fourth quarter results also include royalty revenue of $2.6 million versus $200,000 in Q4 of 2019. During the fourth quarter of 2020, we continued to experience challenges brought on as a result of the COVID-19 pandemic.

[Jeff Ludwig:]

Thanks, Alan. Appreciate it, and thanks to everyone for joining our fourth quarter earnings call. The commercial organization continues to work very hard to reposition NERLYNX with the goal of strengthening the risk benefit perception, increasing our promotional interactions with customers and deploying resources in an innovative and efficient manner. We believe the NERLYNX can play an important role in the treatment of metastatic breast cancer, but our focus is on extended adjuvant with a goal of preventing patients from becoming metastatic. This market is significantly underpenetrated and more must be done to help patients and their families in this battle with early stage breast cancer. I am pleased with the foundational work that has been put in place, and we are increasing our emphasis around focus and execution moving forward. Before I move into the commercial review, just a reminder that I will be making forward-looking statements. As you may recall, we have two channels that provide NERLYNX to patients. We refer to these as our specialty pharmacy channel and our specialty distributor channel or in-office dispensing channel. The majority of our business flows through the specialty pharmacy channel. More specifically, in Q4, approximately 79% of our business went through this channel, with the remaining 21% flowing through the specialty distributor channel. This is in line with what we reported during our Q3 earnings call as well. Now later in this call, Maximo will review the full financial results, but I will now provide you with the current U.S. sales results. Slide 4 shows U.S. quarterly net sales of NERLYNX since FDA approval. As Alan noted, our net U.S. product sales were $50 million in the fourth quarter of 2020. This is a slight increase over the $49.3 million we reported in Q3 of 2020. As mentioned on prior Q4 earnings calls, we tend to see a decline in new patients starts in the fourth quarter each year as some patients decide not to initiate new therapies around the Thanksgiving, Christmas, and New Year’s holidays. In addition, these results continue to be impacted by the COVID-19 pandemic. As you are likely aware COVID-19 infection rates and that’s increased significantly in the fourth quarter to levels not seen previously and we have only recently begun to see these decline. These spikes have caused continued challenges with live face-to-face interactions with customers and virtual interactions remained the norm.

[Maximo Nougues:]

Thanks, Jeff. I will begin with a brief summary of our financial results for the fourth quarter of 2020. Please note that I will make comparisons to Q3 and Q2 2020, which we believe are better indications of our progress as a commercial company than year-over-year comparisons. The more information I recommend that you refer to our 10-K, which will be filed in early March and includes our consolidated financial statements. For the fourth quarter of 2020, we reported a net loss based on GAAP of $15 million or $0.38 per share. Our GAAP net loss for Q3 2020 was $31.5 million and our GAAP net income for Q2 2020 was $3.4 million. On a non-GAAP basis, which is adjusted to remove the impact of stock-based compensation, we reported a net loss of $5.5 million or $0.14 per share for the fourth quarter of 2020. Gross revenue from NERLYNX sales was $60.1 million in Q4 2020 versus $58.6 million in Q3. As Alan mentioned it, net revenue from NERLYNX sales was $50 million, a slight increase from net sales of $49.3 million in the third quarter of 2020. In Q4 2020, we also recognize $2.6 million in royalty revenue from our global partners versus $1.5 million in Q3. Our gross to net adjustment in Q4 was about 16.8%, an increase from the 15.8% gross-to-net adjustment in Q3. The increase was driven mostly by higher rebates, due to our price increase cost in August. Cost of sales for the fourth quarter was $10.9 million, which included the amortization of intangible assets related to our license of neratinib of approximately $2 million. Going forward, we will continue to recognize amortization of the milestone payments to the licensor of about $2 million per quarter as cost of sales. For fiscal year 2021, Puma anticipates that NERLYNX net sales will be in the range of $205 million to $210 million. We also anticipate that our gross to net adjustment in 2021 will be between 18.5% and 19.5%. Furthermore, for fiscal year 2021, we anticipate receiving royalties from our partners around the world in the range of $16 million to $17 million and potential license revenue in the range of $30 million to $32 million. We recognize there is a great deal of uncertainty regarding the impact of COVID-19. And this may continue to negatively impact ourselves royalties and license revenue. Historically, the first quarter represents the lowest net product sales quarter of a year, due to a number of factors, including the decline in new patients, starting NERLYNX during the holidays in the fourth quarter of the prior year, which carries over to in Q1. Also the recent weather conditions in certain parts of the U.S. created some disruptions to our segment and enrollment. We are tracking the recovery closely. We anticipate that Q1 2021 NERLYNX net sales will be in the range of $42 million to $43 million. Royalty revenues will be in the range of $2 million to $3 million. And license revenue will be $30 million. Also, we anticipate that the gross to net in Q1 2021 will be approximately 20% to 21%. SG&A expenses were $28.8 million in the fourth quarter of 2020 compared to $29.6 million and $29.4 million for Q3 and Q2 2020 respectively. SG&A expenses include a non-cash charges for stock-based compensation of $4.3 million for the fourth quarter of 2020, compared to $4.1 million for Q3 and $4.7 million for Q2. Research and development expenses were $24.2 million in the fourth quarter compared to $23.3 million and $24.7 million for Q3 and Q2 2020 respectively. R&D expenses, including non-cash charges for stock-based compensation of $5.3 million in Q4 compared to $3.5 million and $5.9 million for Q3 and Q2 2020 respectively. In the fourth quarter of 2020, Puma reported cash burn of $15.6 million, which included a $10.1 million milestone payment to Pfizer compared to cash earned of $1.8 million in Q3 and $6.2 million in Q2 2020. For the full fiscal year, our cash burn was $19.3 million, which included $20.6 million of payment to the licensor of neratinib. We ended the fourth quarter of 2020 with $93.4 million in cash, cash equivalent, and marketable securities. Our accounts receivables balance at December 31 was $25.5 million. Our accounts receivables terms range between 10 and 68 days, while our days sales outstanding are about 46 days. We estimate that as of year-end 2020, our distribution network maintained approximately three weeks of inventory. Overall, we continue to deploy our financial resources to focus on their balances of neratinib through ongoing clinical trials and the commercialization on NERLYNX.

[Alan Auerbach:]

Thanks, Maximo. We continue to recognize that we need to improve NERLYNX sales growth and that the COVID-19 pandemic is presenting challenges to us with respect to achieving that growth. Puma’s senior management in cooperation with the Board of Directors, continues to remain focused on NERLYNX revenue and sales growth in 2021 and beyond. We are continuing to adapt to the virtual environment that we have needed to pivot toward due to the COVID-19 pandemic, and we are hopeful that changes to our commercial infrastructure will make a positive contribution to NERLYNX sales growth. We look forward to updating investors on this in the future. There continues to be a significant unmet need for women battling breast cancer. We at Puma are committed and passionate about finding more effective ways of helping these patients during their journey, and we will continue to strive to achieve that goal. This concludes today’s presentation. We will now turn the floor back to the operator for Q&A. Operator?

[Operator:]

Ladies and gentlemen, the floor is now open for questions. Our first question today is coming from Kennen MacKay of RBC Capital Markets. Please go ahead.

[Kennen MacKay:]

Hi, thanks for taking the question. Maybe twofold question. I’m wondering first off, sort of next steps on the ongoing litigation on T790M on their IP in the EU, and then beyond that, as it relates to sales of NERLYNX. Just wondering in the metastatic setting, what the feedback has been from reps around competition with to tie then HER2-positive space again, metastatic setting. Thank you.

[Alan Auerbach:]

Thank you for the question, Kennen. So with regard to our T790M patent, I’m sure you can imagine that topic is one that’s a very sensitive legal matter. And so therefore there’s not much common that we can provide on it. And your second question with regard to the metastatic Jeff, if you’d like to take that.

[Jeff Ludwig:]

Sure. Happy to. So Kennen, as I mentioned in the opening remarks, we’re excited that NERLYNX was approved in the metastatic setting in February. As you mentioned to Kaiser was approved soon thereafter in April, and we feel very good. And quite honestly, another agent was approved in late December. So that’s very good for patients in the metastatic setting, where there’s many more options. We’re still watching to see how that sequencing plays out, but I can tell you that our focus is really in extended adjuvant trying to do everything we can to prevent patients from becoming metastatic. In the metastatic setting, we expect to see some sequencing of agents as unfortunately patients’ progress, but in the extended adjuvant setting, we do not seen the same type of competitive environment and we believe that market is significantly under-penetrated. So our focus is really in the earlier lines of therapy.

[Alan Auerbach:]

And Kennen, I can add to that. Look, in the metastatic setting, especially, kind of that third line and beyond, there’s been four drugs approved within 2020 timeframe. You had HER2 to Kaiser, NERLYNX and then Margenza. And as Jeff said, from a commercial standpoint, that’s an extremely competitive area. So it’s much wiser for us to maintain our focus on the extended adjuvant, where there is no competition for us where the only drug approved is that tends to be where we have the very large majority of our focus.

[Mariann Ohanesian:]

Does that answer your questions?

[Kennen MacKay:]

Yes. Thank you very much.

[Operator:]

Thank you. Our next question is coming from Kenneth Atkins of Cowen. Please go ahead.

[Kenneth Atkins:]

Hi, guys. Thanks for taking my question. As we look forward to the update in the second half, could you remind us what you think the bar for successes in EGFR exon 18 lung cancer? What profile do you think you need to achieve there to be successful?

[Alan Auerbach:]

Hi. Thanks for that question. That is a good question. I don’t know the answer to quote what the bar is to be successful if you will. We are focusing on patients who have an EGFR exon 18 mutation and specifically those who’ve already been treated with an EGFR TKI. The only data that’s out there in that space would be the data with afatinib, which showed a roughly 10%-ish response rates So using that as a bar – using that as kind of a comp, if you will, that’s where I think the bar is. Obviously, I can’t answer that from a regulatory standpoint until we’ve actually had a discussion with them. But from our perspective, our interim data showed a 40% response rate. We think that compares very, very favorably to the data with afatinib. I think the best comp I can give and the only one that’s out there for that niche if you will, is the afatinib data, that’s the best parameter I can give you.

[Kenneth Atkins:]

Got it. Okay. And then just one question on the guidance, what kind of assumptions that are built into the guidance for NERLYNX sales in 2021, in terms of what happens with the pandemic. And how should we think about trends through the year.

[Alan Auerbach:]

Jeff, you’d like take that.

[Jeff Ludwig:]

In terms of guidance for NERLYNX, especially, focused on the U.S., we are thinking about the COVID pandemic, obviously, you’re aware of what’s happening here. We believe a lot of folks are beginning to get vaccinated and ultimately we believe the second half of 2021 will be very different than the first half of 2021 from a commercial promotional perspective as we start to see, hopefully, knock on wood offices begin to open up, travel resume in a little bit more normal fashion. And ultimately, from NERLYNX commercial standpoint, this is a very promotionally sensitive product. And we obviously have some very good data that came out in the latter half of 2020. And so having those channels open up for more promotional activity should allow us to build growth quarter-over-quarter moving forward.

[Kenneth Atkins:]

Okay. Thank you. That’s helpful.

[Operator:]

Thank you. Our next question is coming from Cory Kasimov of J.P. Morgan. Please go ahead.

[Turner Kufe:]

Hey, this is Turner on for Cory. Thanks for taking my question. So it sounds like the pre-NDA meeting to discuss accelerated approval of the HER2-mutant hormone receptor positive breast cancer cohort of the SUMMIT trial with occur later this year. Can you just talked about the pushes and pulls of getting accelerated pure approval. And perhaps just what do you think you need to show in the data to achieve it?

[Alan Auerbach:]

Yes, just to clarify, you’re talking about the HER2-mutant breast, correct?

[Turner Kufe:]

Yes, correct? Yes.

[Alan Auerbach:]

Yes. Okay. So if you don’t mind, I’m going to kind of a long-winded explanation here. When we started the SUMMIT trial, we were first treating with neratinib as a single agent in that study. So these were patients who were HER2-negative ER-positive and had a HER2 mutation. We treated with neratinib, we were getting responses, but the duration of them was very short. And what we found was looking at pre and post-treatment biopsies, we were finding that when you gave neratinib to inhibit the mutation, the estrogen receptor transcription was upregulated quite high. So it was clear that what the mechanism of escape there was the estrogen receptor. So we then move forward with combining neratinib with fulvestrant, so that we’re hitting the HER2 mutation and hitting the estrogen receptor. We’re getting a higher response rate. We were getting a longer duration of response, but it wasn’t, kind of that, nine, 10 months types of directions we were looking for. We again did pre and post-treatment biopsies and we found was, although we were hitting the estrogen receptor and we were hitting mutation and the tumor was HER2 negative. The mechanism of escape with it was upregulating the HER2 receptor. So it’s flipping from being HER2-negative to HER2-positive. So we then gave neratinib to hit the mutation. We gave a fulvestrant to hit the estrogen receptor, and then we were getting Herceptin trastuzumab to prevent the tumor from trying to go to become HER2-positive. That’s when we started getting much higher response rates, longer durations. We went to the FDA and we had a meeting with them to discuss the path forward. And they acknowledged that the science was very well thought out, and they even acknowledged to us that they have had a lot of meetings with companies, where it was some involving kind of smaller targeted populations or you needed more than one drug to try to treat – effectively treat the tumor. What they asked us to do was to try to isolate the contribution of neratinib to that triplet – to the neratinib Herceptin fulvestrant triplets. And that’s where the assignment two-stage came in, which was the triplet in one arm Herceptin fulvestrant in the other, fulvestrant alone in the other. It’s going to really depend on what we see in that data. I mean if you see what you would hope to see, which is the clear advantage of the triplet over the others, I’m hopeful that will be what the FDA was looking for. Now we obviously have a very large body of data on the triplet on neratinib Herceptin fulvestrant, and that would obviously form a very significant basis of an accelerated approval filing. But we’re hopeful if you see that clean separation that’s exactly the question the FDA would like answered. So I can’t kind of give you any metrics or numbers. All I can say is that that appears to be what they’ve asked us to do, that’s what we are doing. And so we will know more after we’ve seen the data and had discussion with the FDA.

[Turner Kufe:]

Got it. That’s helpful. Thanks.

[Operator:]

Thank you. Our next question is coming from Jeff Meacham of Bank of America. Please go ahead.

[Alec Stranahan:]

Hey guys, this is Alec on for Jeff. Thanks for taking our questions. I think Jeff touched on this a little bit, but on your new partnership with Pierre Fabre in Asia, and how do you view the market for neratinib in these geographies versus what you’ve seen in the U.S. And I guess what is your sense as to Pierre Fabre’s commitment to pushing neratinib in these markets versus your prior partner. And secondly, I guess related to that what will be your go-to-market strategy in additional geographies, whether we could expect additional partnerships announced over the course of 2021. Thanks.

[Alan Auerbach:]

Okay. So talk about Pierre Fabre has been a great partner to us in Europe. We expanded the partnership wants to include some other countries in addition to Europe, and this is the second expansion of it. Their execution has been excellent in Europe. And they’ve been a wonderful partner to us. One of the things that’s very attractive about them is the fact that they have been selling the drug Navelbine, which is vinorelbine, which is one of the main chemotherapy drugs used in breast cancer. So there is an existing channel that’s in place to breast cancer physicians in their territories. In terms of in China, they’re trained – they’ve already been training their people and we’re scheduled to launch the drug in China in the second quarter, so in a few months. They have a very large commercial infrastructure there. It’s on par with the other companies in the area. So we have a very optimistic view of it. In terms of the actual dollar amounts, I would say that the U.S. is probably the biggest market for the drug. Europe is probably second. And I would say China is close behind in that second place. And it may actually be a tie between Europe and China. So I think it’s going to be a very significant opportunity for us. And we’re looking forward to their launch there. Now in terms of your question on other territories, as Jeff went over in his slide, we’ve got pretty much partnerships across the Board. I think there’s a few more countries out there, but the main ones, which is obviously now Europe, the Middle East, Northwest Africa, South Africa, Latin America, Canada, Israel, Australia with all we partnered those. So we’ve got, I think the main large country that we still haven’t partnered is Japan. And then I think there’s a few smaller ones as well.

[Alec Stranahan:]

All right, great. Thanks.

[Operator:]

Thank you. Our next question is coming from Paul Choi with Goldman Sachs. Please go ahead.

[Charles Ferranti:]

Hi everyone, thank you for the updates. This is Charlie on for Paul. So I’ve just got a quick question. It’s great to see the uptake of the dose titration increase with the Q4 patients that you showed there. I’m just wondering, or we’re just wondering what is being done in terms of expanding making sure that patients continue that uptake of this dose titration regimen from the control study, in addition to publication of the control study results what’s being done to promote this sort of regimen to increase NERLYNX uptake. Thank you so much.

[Jeff Ludwig:]

Yes, appreciate it. Very good question. We believe that is a very important foundational part of our strategy. As we believe the embedding or operationalizing of dose – a dose escalation can change the profile of risk benefit and tolerability. So clearly a significant message for the field force commercially both directly, as well as non-personal promotion is to highlight the benefits of the control study. We have also submitted the control study to the FDA for a label update, potential label update coming forward. And we are working with many of the pathways and guidelines committees as well to ensure that this becomes embedded as part of the standard of care for extended adjuvant patients there as well. One other piece that we’re moving forward with is we have actually received approval for a new bottle size. That is a 133 count bottle size that supports the adoption of dose escalation for the first month of therapy. That bottle size obviously supports the three pills per week, four pills per week, and then six pills for the remaining two weeks. So that it will also be launched in the foreseeable future as well to further embed dose escalation.

[Charles Ferranti:]

All right, great. That’s excellent color. Thank you so much.

[Operator:]

Thank you. Our next question is coming from Gena Wang of Barclays. Please go ahead.

[Unidentified Analyst:]

Hi, this is Sheldon on for Gena. Thanks for taking all the questions. The first – could you comment on your current revenue breakdown from the extended adjuvant setting versus metastatic and also your expectation about these breakdowns – the evolution of this breakdown going forward. Can we assume that vast majority will do come from extended adjuvant? And second is on the EGFR exon 18 mutated non-small cell lung cancer on, do you have any idea about the current penetration of genetic testing for these specific mutations? Is it bundled in the EGFR testing already?

[Alan Auerbach:]

Okay. On your first question Jeff, you’d like to handle that.

[Jeff Ludwig:]

Yes.

[Alan Auerbach:]

I believe you are asking is the breakdown of metastatic versus extended adjuvant.

[Jeff Ludwig:]

Yes, we estimate currently you’re saying the fourth quarter about 6% of our new patients starts are in the metastatic setting. And I would suggest that that expectation or a breakout will be consistent for at least the next several quarters. As I mentioned before, our focus is really heavily on the extended adjuvant in early stage breast cancer, where there’s an awful lot of patients that are not being treated there. And we think we can make a bigger impact on patient’s lives and with the goal of preventing them or hopefully helping them prevent a recurrence in the metastatic setting.

[Alan Auerbach:]

And then on your second question, which is on the EGFR exon 18, in lung cancer, they’re very good about doing mutation screening. I would venture to guess that it’s pretty much done for every patients and the EGFR exon 18 mutation is already on the lung cancer panel that everybody runs. So there’s no special test that anyone has to run. It’s being picked up on the existing panels.

[Unidentified Analyst:]

That’s very helpful. Thank you so much.

[Operator:]

Thank you. At this time, I’d like to turn the floor back over to Mariann for closing comments.

[Mariann Ohanesian:]

Thank you for your interest in Puma Biotechnology. As a reminder, this call may be active for a replay of the webcast at pumabiotechnology.com beginning later today. Have a good evening.

[Operator:]

Ladies and gentlemen, thank you for your participation and interest in Puma Biotechnology. You may disconnect your lines at this time and have a wonderful day.