Puma Biotechnology Inc

Good afternoon. My name is Paul, and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After the speaker's formal remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. If you require operator assistance during the conference, please press star 0. As a reminder, this call is being recorded. I would now like to turn the conference over to Marianne Mulhanneson, Senior Director of IR for PUMA Biotechnology. You may begin your conference.

Thank you, Paul. Good afternoon and welcome to PUMA's conference call to discuss our financial results for the third quarter of 2022. Joining me on the call today are Ellen Auerbach, Chief Executive Officer, President and Chairman of the Board of PUMA Biotechnology, Maximo Niguez, Chief Financial Officer, and Jeff Ledwick, Chief Commercial Officer. After market closed today, PUMA issued a news release detailing the third quarter 2022 financial results. That news release, the slides that Jeff will refer to, and a webcast of this call are accessible via the homepage and investor sections of our website at Pumabiotechnology.com. The webcast and presentation slides will be archived on our website and available for replay for the next 90 days. Today's conference call will include statements about the company's future expectations, plans, and prospects that constitute forward-looking statements for purposes of federal securities laws. Such statements are subject to risks and uncertainties, and actual events and results may differ from those expressed in these forward-looking statements. For a full discussion of these risks and uncertainties, please review our periodic and current reports filed with the SEC from time to time. including our annual report on Form 10-K for the year ended December 31, 2021, and our quarterly report on Form 10-Q for the period ended September 30, 2022. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this live conference call, November 3, 2022. The company undertakes no obligation to revise or update any forward-looking statements to reflect events and circumstances after the date of this conference call, except as required by law. During today's call, we may also refer to certain non-GAAP financial measures that involve adjustments to our GAAP figures. We believe these non-GAAP metrics may be useful terms as a supplement to, but not a substitute for our GAAP financial measures. Please refer to our third quarter 2022 news release for a reconciliation of our GAAP to non-GAAP results I will now turn the call over to Alan.

Thank you, Mary Ann, and thank you all for joining our call today. Today, PRUMA reported total revenue for the third quarter of 2022 of $57.1 million. Total revenue includes product revenue net, which consists entirely of Neuralink sales, as well as licensees and royalties from our sub-licensees. Product revenue net was 54.3 million in the third quarter of 2022, which represents an increase from the 51.3 million in product revenue net reported in the second quarter of 2022 and 43.4 million in product revenue reported in Q3 2021. Product revenue for the third quarter of 2022 included approximately 0.5 million of inventory bill that our specialty pharmacies and specialty distributors. Royalty revenue was 2.8 million in the second quarter of 2022, a decrease from 8.2 million in Q2 2022, and equal to the 2.8 million recorded in Q3 of 2021. We recorded no license revenue in the latest quarter. We reported 3,197 bottles of Neuralink sold in the third quarter, compared to 3,200 bottles sold in Q2 of 2022. We estimate that the Q3 inventory build amounted to approximately 31 bottles. In Q3 2022, new prescriptions, NRX, were up approximately 17% compared to Q2, and total prescriptions, TRX, were up about 5%. Jeff will provide further details in his comments and slides. I will now provide a clinical review of the quarter, and then Jeff Ludwig will address additional color on near-links commercial activities. Maxim Noguez will follow with highlights of the key components of our financial statements for the third quarter of 2022. As investors are aware, there is an ongoing clinical trial of neratinib that is being run by the Translational Breast Cancer Research Consortium, TBCRC, known as TBCRC22, that is testing neratinib in patients with HER2-positive metastatic breast cancer that are metastasized to the brain. The results from the prior cohort of the trial, which tested neratinib plus capecitabine in patients with brain metastasis, resulted in neratinib being listed in the NCCN guidelines for the treatment of breast cancer that has metastasized to the brain. The current cohort of the trial is testing the combination of neratinib plus Cadsila in patients with HER2-positive breast cancer that has metastasized to the brain. The results from two cohorts of this trial which tested the combination in patients who have not previously been treated with Capsyla and in patients who have previously been treated with Capsyla, will be presented at the San Antonio Breast Cancer Symposium in December. As investors are also aware, PUMA has an ongoing basket trial of neratinib and HER2-mutated cancers with HER2 as the summit trial. PUMA plans to meet with the FDA in the first half of 2023 to discuss the potential regulatory path for neratinib for two arms of this trial. patients with hormone receptor-positive HER2-negative breast cancer who have a HER2 mutation, and patients with metastatic non-small cell lung cancer with epidermal growth factor, or EGFR, exon 18 mutations who've previously been treated with an EGFR tyrosine kinase inhibitor. In September, PUMA was pleased to announce that we in-licensed the anti-cancer drug Alacerdib from Takeda. In clinical trials to date, Allocertib has shown single agent activity and activity in combination with other cancer drugs in the treatment of many different types of cancers, including whole-interceptor positive breast cancer, triple negative breast cancer, small cell lung cancer, and head and neck cancer. The drug has also shown activity in previous clinical trials in peripheral T-cell lymphoma and non-Hodgkin's lymphoma. Decatur's previous clinical development program with Allocertib was extensive, and due to this, There is a large, well-characterized clinical safety database with over 1,300 patients who are treated across 22 company-sponsored trials. PUMA is currently in the process of transitioning the Allocerta program from Takeda to PUMA. We anticipate that the majority of this will be completed by the end of the year. We continue to anticipate that there will be several clinical milestones for the Allocerta program in the coming months. This includes the publication of the biomarker studies from the randomized trial of alacertib plus fulvestrant versus alacertib alone in homoreceptor-positive HER2-negative breast cancer, which is expected in Q4 2022, biomarker data from the randomized trial of alacertib plus paclitaxel versus paclitaxel alone in homoreceptor-positive HER2-negative breast cancer, which is anticipated in the first half of 2023, and data from the ongoing investigator-sponsored Phase I-II trial of alacertib plus pembrolizumab for the treatment of patients with RB-deficient head and neck squamous cell cancer, which is also anticipated in 2023. As mentioned on prior earnings calls and in response to investor questions, PUMA continues to evaluate several drugs, potentially in license, that would allow the company to diversify itself and leverage PUMA's existing R&D regulatory and commercial infrastructure. The company will keep investors updated on this as it progresses. I will now turn the call over to Jeff Ludwig, Chief Commercial Officer, for a review of our commercial performance during the quarter.

Thanks, Alan. Appreciate it. And thanks to everyone for joining our third quarter earnings call. Before I move into the commercial review, just a reminder that I will be making forward-looking statements. The commercial team continues to focus on helping to support more patients battling breast cancer. Our goal is to increase the appropriate adoption of Neuralinks and ultimately generate consistent growth. Our strategy has not changed and remains focused around three areas. Number one, communicating the evolving positive clinical data for Neuralinks to HCPs. Number two, engaging and educating patients around the risk of reoccurrence as well as the risk benefit profile of Neuralinks. And finally, three, increasing our impact and share of voice through field force execution. I stated on the Q2 earnings call that I felt progress was made on all three fronts. I'm pleased to say that progress has continued in Q3 as well. Additional tools and resources were rolled out to further support our clinical story. HCP calls per day continued to increase, and our field teams further engaged with local and regional advocacy organizations. In addition, we saw continued growth in live versus virtual interactions. More specifically in Q3, approximately 77% of HCP calls were live versus virtual. Lastly, we saw underlinks added to more community oncology practice pathways in Q3, which we believe will further support our efforts at increasing adoption moving forward. With that high-level update, let me transition to some of the U.S. commercial slides. Once I have finished, I will turn the call over to Maximo for a more detailed review of our financial results. Starting with slide three, Our distribution model has not changed. We have two channels that provide Neuralinks to patients. We refer to these as our specialty pharmacy channel and our specialty distributor channel or in-office dispensing channel. Most of our business flows through the specialty pharmacy channel. In Q3, approximately 80% of our business went through this channel, with the remaining 20% of the business flowing through the specialty distributor channel. We do see slight quarterly fluctuations of this mix, but no significant changes have occurred this year. Moving to slide four. Slide four shows US quarterly net sales of Neuralink since FDA approval. As Alan noted, our net product sales were $54.3 million in the third quarter of 2022. This is a $3 million increase from the $51.3 million reported in Q2 of 2022. There was a small inventory increase in Q3, which we estimate contributed about $500,000 of this increase. On slide five, you see the bottles of Nerlinks sold by quarters since launch. Please note that this slide shows X factory bottles sold, so it represents sales into our specialty pharmacy and specialty distributor channel and not end user demand. We sold 3,197 bottles of Nerlinks in Q3 of 2022, which is almost identical to our Q2 22 bottle sales of 3,200. In Q3, we estimate that inventory increased by about 31 bottles. Please recall that we saw an inventory build in Q2 of approximately 175 bottles, which is impacting this quarter-over-quarter comparison. The commercial team has been focused on execution with the goal of driving both quarter-over-quarter growth and year-over-year growth. Q3 performance aligned with that aspiration in that we saw both quarter-over-quarter and year-over-year growth for enrollments, new prescriptions, or NRX, as well as total prescriptions, TRX. Now, let me provide some additional specifics around this performance. In Q3, we saw enrollments grow 7% quarter-over-quarter and 12% year-over-year. The year-over-year growth rates I am quoting are comparing Q3 of 22 to Q3 of 21. Moving on to new patient starts or NRX, we saw 17% quarter over quarter growth and 19% year over year growth. As we've discussed previously, NRX is an important leading indicator for us as new patient starts turn into refills which influence subsequent quarters as well. This positive trend continued when looking at total prescriptions or TRX. Total prescriptions grew about 5% quarter over quarter and about two and a half percent year over year. This is the first time since launch we have seen positive growth in enrollments, NRX and TRX for both quarter over quarter and year over year comparisons. Moving to slide six, we have continued to focus on the education and adoption of dose escalation and are pleased with the progress being made. Dose escalation can clearly benefit patients by significantly reducing the amount of grade three diarrhea, the median days of grade 3 diarrhea, and the overall discontinuation rate. We believe the adoption of dose escalation plays a very important role in reshaping the risk-benefit profile of NERLinks. As previously reported, dose escalation was added to the NERLinks label in late June of last year for both the extended adjuvant indication as well as the metastatic indication. In addition, NCCN updated their 2022 clinical practice guidelines to include to include dose escalation in early stage breast cancer. As you can see on slide six, we continue to see an increase in the adoption of dose escalation. In fact, in Q3, approximately 68% of patients who received commercial drug started Neuralynx on a lower daily dose. Slide seven highlights the strategic collaborations we have formed across the globe. We are pleased with our global partners and the progress being made. In Q3, Neuralinks received regulatory approval for metastatic breast cancer in both Ecuador and Singapore and was officially launched in Brazil and Spain. The launches in Brazil and Spain were both in the extended adjuvant setting. Our global partners are focused on driving increased adoption and preparing for future launches. I look forward to highlighting their continued progress with the goal of making Neuralinks available to more patients around the world. Puma was founded on a commitment to making a difference in the lives of patients and their families battling breast cancer. We are inspired by the courage and the strength exhibited by many of these patients and are committed to doing more to better support their journey. I want to take just a moment to thank my commercial colleagues and the entire cross-functional Puma organization. I am inspired by their passion and steadfast determination to make a difference and to do more. I will now turn the call over to Maximo for a review of our full financial results.

Thanks, Jeff. I will begin with a brief summary of our financial results for the third quarter of 2022. Please note that I will make comparisons to Q2 2022, which we believe is a better indication of our progress as a commercial company than year-over-year comparisons. For more information, I recommend that you refer to our Q3 2022 Thank You which will be filed today and includes our consolidated financial statements. For the third quarter of 2022, we reported a net loss based on GAAP of $0.4 million, or one cent per share. This compares to a Q2 2022 net income of $9.4 million, or 21 cents per share. On a non-GAAP basis, we just adjusted to remove the impact of stock-based compensation expense We reported net income of $2.5 million, or $0.05 per share, for the third quarter of 2022. Gross revenue from Nanlix sales was $63.4 million in Q3 2022, and $63.4 million in Q2 2022. As Alan mentioned, net product revenue from Nanlix sales was $54.3 million, compared to $51.3 million reported in the second quarter of 2022. We believe that Q3 net sales included approximately $0.5 million of inventory built from our distributors. Loyalty revenue totaled $2.8 million in the third quarter of 2022, a decrease from $8.2 million in Q2 2022. Our gross to net adjustment in Q3 2022 was about 14.3%. compared to the 19% gross net adjustment in Q2 2022. Continued lower Medicaid share, high inflation, and lower copay due to seasonality are the main drivers to the decline versus prior quarter. The cost of sales for Q3 2022 was $12.5 million, including $2 million for the amortization of intangible assets related to our neratinib license. Cost of sales for Q2 2022 was $14.9 million. Going forward, we will continue to recognize amortization of milestones to the licensed store, or about $2 million per quarter, as cost of sales. For fiscal year 2022, PUMA is increasing its previous guidance, now expecting that net Netlink's product revenue will be in the range of $194 to $196 million. We also anticipate that our gross to net adjustment for the full year 2022 will be between 18% and 19%, slightly better than our prior guidance. Furthermore, for the fiscal year 2022, we anticipate receiving royalties from our partners around the world in the range of $25 to $27 million, lower than our prior guidance due to the timing of our narrowing shipments to our partner in China and potential negative foreign exchange impact. We don't expect license revenue in 2022. In addition, we are narrowing our prior full-year net income guidance to a range of $7 to $9 million for the year. We recognize there continues to be a great deal of uncertainty regarding the impact of COVID-19, and this may continue to negatively impact our sales, royalties, and licensed revenue. We anticipate that for Q4 2022, NALEX net sales will be in the range of 48 to 50 million. This guidance assumes that inventory in Q4 will increase as we have seen in prior years. This guidance also assumes that we will see a sequential decline in new patient starts in Q4 around the holidays. As we have seen in prior years, due to the side effect profile of the drug. We tend to see that many patients delay starting Nerlix until after the holidays, which causes a seasonal decline in new patients starting Q4. We expect Q4 royalties revenue will be in the range of 9 to 11 million. This is an increase in royalty revenue compared to Q3. This increase is caused by the timing of shipments to our partner in China, as we explained during our prior call. We further estimate that the gross net adjustment in Q4 2022 will be approximately 18.5% to 19.5%, whom anticipates Q4 net income between $1 million and $3 million. SG&A expenses were $24 million in the third quarter of 2022, compared to $20.6 million for the second quarter. FG&A expenses included non-cash charges for stock-based compensation for $2 million for the third quarter of 2022 compared to $2.1 million for Q2 2022. Research and development expenses were $11.2 million in the third quarter of 2022 compared to $12 million for the second quarter. R&D expenses included non-cash charges for stock-based compensation of $0.9 million in the third quarter of 2022 compared to $1.1 million for the second quarter. In Q3 2022, we recorded $7 million as acquired in-process research and development expenses to reflect the $7 million upfront payment to Takeda. In the third quarter of 2022, PUMA reported cash earned of approximately $17.4 million compared to cash burned of approximately $14 million in Q2 2022. Our Q3 2022 cash earned does not include the $7 million payment to Takeda as it was executed in October. As a result of cost containment actions across the company implemented in the fourth quarter of 2021, UMA continues to expect lower operating expenses in 2022 compared to 2021. More specifically, we anticipate SG&A expenses to be down approximately 23% to 25% and R&D expenses to be down 25% to 27% year over year. At September 30, 2022, we had approximately $78 million in cash, cash equivalents, and marketable securities. Our accounts receivables balance was $28 million. Our accounts receivables terms range between 10 and 68 days, while our day sales outstanding are about 46 days. We estimate that as of September 30th, 2022, our distribution network will maintain approximately four weeks of inventory. Overall, we continue to deploy our financial resources to focus on the advancement of Neratinib through ongoing clinical trials and the commercialization of neurons.

Thanks, Maximo. During 2020 and 2021, COVID-19 pandemic presented significant commercial challenges to PUMA and presented significant barriers to commercial access for PUMA's commercial team. As these restrictions have lifted during 2022, we are seeing increased face-to-face interactions with HCPs and better access overall as well, as Jeff detailed earlier. We believe that this is contributing to the increased commercial results that we are seeing this year, and we are hopeful that this will continue to trend positively. Puma Senior Management, in cooperation with the Board of Directors, continues to remain focused on improving Neuralink sales in 2022 and beyond. Fourth quarter of 2021, we implemented a reduction in expenses with the goal of reducing expenses in order to maximize operating cash flows. We believe that the positive cash flow reported in the quarter was a direct result of these expense reductions. The company remains committed to continuing to achieve these operational cash flows and we'll continue to reduce expenses if needed to achieve this. We look forward to updating investors on this in the future. There continues to remain a significant unmet need for patients battling breast cancer, lung cancer, and other solid tumors. We at PUMA are committed and passionate about finding more effective ways at 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?

Thank you. We will now be conducting a question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. If you wish to withdraw your question, please press star 2. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you. Our first question is from Ed White with HC Wainwright. Please proceed with your question.

Hey, this is Steve on for Ed. First question. So it looks like the timing for the FDA meeting went from the second half of 22 to first half of 23. So can you explain what the change was there?

Yeah. Hi, Steve. Regarding the FDA meetings for the HER2-mutated and the EGFR-mutated, we ended up getting the packages to them later than we expected, so it's just the timing of when that's expected.

All right. And then, so that's good the live interaction went up. So do you think the live sales team is the right size?

Steve, I feel pretty good about the size of the field force right now, certainly as the oncology market is a very restrictive market, so we've seen that access slow down from, you know, several years ago. Right this moment, we feel like we've got the right size. We can cover all of our key targets across the country. With that said, if access continues to open up and improve, I will certainly work with Alan and we'll adjust the field force appropriately, but I believe right now we're roughly the right size and are doing a good job executing our strategy.

All right, great. Thanks for taking our questions.

Thank you. Our next question is from Jeff Meacham with Bank of America. Please proceed with your question.

Hey, good afternoon. This is Hao calling in for Jeff Meacham. Congrats on a good commercial quarter. So I think my first question is related to that. Could you maybe give us a little bit more color what sort of drives the good commercial quarter, is it maybe more of the live interactions with the physicians, or is it maybe COVID, you know, going back to normal, just any color you can provide?

Yeah, thanks for the question. I appreciate it. Just at a high level, what I'll tell you is that Neuralinks is promotionally sensitive, so being able to increase engagements and overall share of voice is very important, and it certainly has an impact. As we talked about, we've seen improved overall access which leads to increased productivity by a sales force. In addition, we've worked hard on improving our non-personal promotion as well and targeting those customers that we're not able to reach via, you know, search, digital, and social media. I would also say that our teams have done a good job of executing on our peer-to-peer strategy, and our teams have increased their engagement with local and regional advocacy organizations. And lastly, I'll throw out that NCCN changed their guidelines at the beginning of the year And although that's not going to drive adoption, it certainly supports the efforts that we're trying to accomplish. So it really helps give us some air cover as well.

Yeah, and if I can add to that, I would say, you know, if you look at all of the metrics like, you know, HCP interactions per rep, et cetera, they keep going up quarter over quarter, which is obviously positive. Jeff is exactly right that with, you know, COVID restrictions, you know, there were still some cancer centers that had COVID restrictions and those have been reduced. So that has no question helped us as well. And I think we do get a lot of feedback from the field force that the change to the NCCN guidelines, including Neuralinks, has been very helpful as well. So I would imagine that that's playing a role too.

Okay. And just a quick on the cost. So for the R&D, do you foresee you need more resources since now you have two molecules to develop? And then for the SG&A, for promotion, do you see the need because of live interaction, you need more resources?

um in 2023 to beta promote uh we have not changed our guidance from a spending perspective so i would say we would not see that that increase um and especially on the r d side you know remember that with neuratinib we're you know continuing to uh you know decrease our r d expenses because there's less patients on the summit studies and you know some of the other studies like you know our earlier studies like control etc we're still in the process of closing down So those costs are coming out. So you've kind of got the cost from the neuratinous studies going down while the ones from, you know, L-certed. I don't think we'll see a whole lot this year, a very small amount, more next year. But again, you know, with one going down and the other going up, it's going to kind of flatten, I would imagine.

Okay, that's helpful. Thank you.

Thank you. Our next question is from Gina Wang with Barclays. Please proceed with your question.

Hi, thanks for taking our question. This is Tom Regina. Maybe first, just wondering if there are any updates on the payer split between a commercial and Medicare, Medicaid? And secondly, still on the patient compliance, for new starters, how many percentage do you see could stay through the first two to three months where they get stabilized?

Sure, let me address both of those questions. First, from a general split of payer, again, this fluctuates quarter by quarter, but I would say for modeling, roughly 65% is commercial. About 25% would be government, Medicare, Medicaid, VA, DOD. And we also see about the remaining 10% is either unidentified or uninsured self-pay. So hopefully that answers that. In terms of length of therapy, and I think you're asking given the uptake of dose escalation, let me just give you a broader perspective there. First of all, through market research and customer engagement, we know that dose escalation is well received by the majority of physicians and their staff, and that physicians that do adopt dose escalation are more likely to start additional patients on their links going forward. We also know that persistence and compliance are impacted by other things other than just dosing and side effects. But to address your specific question, dose escalation, as you know, per our label, has patients increasing dose to full dose by week three. So thinking about that, we would expect to see the benefits of dose escalation in month two and month three. Our data does fluctuate, but we're currently seeing an absolute benefit of about 5% to 7% in decreased discontinuations or increased persistence by month two between the full dose and dose escalations. Dose escalation overall is really important to us strategically, and we are not only trying to improve persistence and compliance through additional adoption of dose escalation, but other ways to support patients throughout their journey. So hopefully that helps out.

Yep, very helpful. Maybe if I could have a follow-up regarding the FDA discussion in the next year. Just wondering if you're going to wait for the biomarker data update from the illustrative before you have the discussion with the FDA or you will just precede the FDA before that?

We're going to be proceeding with the FDA, you know, assuming we have the biomarker data. If we don't have it, we will probably still proceed with them because, yeah, a lot of the populations that we're going after, you know, for example, The CMIC amplified or the RB1 mutated in small cell lung cancer, we already have that data. So obviously that can be used for discussion in other tumors like breast. If we have it for the breast, we can obviously involve that as well, but it won't stop us from having the conversations with FDA on breast or on small cell lung.

Thank you.

This concludes our question and answer session. I would like to turn the conference back to Mary Ann for any closing remarks.

Thank you for joining us today. As a reminder, this call may be accessed via replay of the webcast at PumaBiotechnology.com beginning later today. Have a good evening.

Ladies and gentlemen, thank you for participating in today's conference call. This concludes our program. Everyone, have a great day. You may now disconnect.