Q3 2021 Puma Biotechnology Inc Earnings Call
Good afternoon, My name is Melinda and I'll be your conference operator today.
At this time all participants are in a listen only mode. After the speakers' formal remarks, there'll be a question and answer session. If you'd like to ask a question during that time simply press. The Star then the number one on your telephone keypad, if you'd like to withdraw your questions. Please press star two if.
You should require operator assistance during the conference. Please press Star Zero as a reminder, this call is being recorded I would now like to turn the conference call over to Maryann, Oh, Hannesson senior director of IR for Puma Biotechnology, you may begin your conference.
Thank you Bill and good afternoon, and welcome to Puma's conference call to discuss our financial results.
2021.
Any view on the call today are Alan Auerbach, Chief Executive Officer, President and Chairman of the board of Puma Biotechnology, Maximo Goya get Chief Financial Officer, and Jeff Ludwig Chief Commercial Officer.
After market close today, who issued a news release detailing third quarter 2021 financial results.
That news release the.
Why with Jeff will refer to and a webcast of this call are accessible via the home page and investors sections of our website at Puma Biotechnology got 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.
Purposes of Federal Securities laws.
Such statements are subject to risks and uncertainties and actual 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 Securities and Exchange Commission from time to time.
Including our annual report on Form 10-K for the year ended December 31 2020.
You are cautioned not to place undue reliance on these forward looking statements.
Only as of the date of this live conference call November 4th 2021.
Company undertakes no obligation to revise or update any forward looking statements to reflect events or 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 I guess.
We believe these non-GAAP metrics may be useful to investors as it is.
Supplement to but not as good.
Sure.
GAAP financial measures.
Please refer to our third quarter 2021 news release for a reconciliation.
And if our GAAP to non-GAAP results.
I'll now turn the call over to Alan.
Thank you Mary Anne and thank you all for joining our call today.
Today Puma reported total revenue for the third quarter.
21.
$46 $2 million total revenue includes product revenue net which consists entirely of U S. New airlink sales.
As well as license fees and royalties from our sub licensees.
Products revenue.
Yes.
It was $43 4 million in third quarter of 2021, representing declines from the $48 9 million in product revenue net reported in the second quarter of 2021, and $49 3 million in product revenue reported in Q3 of 2020.
Product revenue for the quarter was negatively impacted by approximately $3 $5 million due to inventory reduction at our specialty pharmacies and specialty distributors royalty revenue was $2 8 million in the third quarter of 2021 versus $4 3 million in Q2 of 2021 and $1 5 million in Q3.
2020.
During the third quarter of 2021, we continued to experience challenges brought on as a result of Covid.
19, pandemic and the Delta variant.
Jeff will show in his presentation, we reported 2947 bottles.
In the third quarter versus the 3354 bottles sold in Q2 of 2021.
Total sales in the quarter were negatively impacted by the inventory reduction at our specialty pharmacies and specialty distributors mentioned earlier.
Jeff will provide further details in his comments and thoughts.
Due to the access limitations presented by COVID-19 call activity. The physicians declined approximately 10, 5% in Q3 compared to Q2.
<unk> prescriptions were up two 9% in Q3 compared to Q2, while total prescriptions were down three 1%.
Bottle sold through our specialty distributor network, which we also referred to as our in office network.
11, 9% in Q3 compared to Q2.
I will now provide a clinical overview of the quarter and then Jeff Ludwig will add additional color on the near lace commercial activities Maximo <unk> will follow with highlights of the key components of our financial statements for the third quarter of 2021.
As we mentioned on our prior calls Puma has an ongoing basket trial of Niraparib and Hershey mutated cancers referred to as the summit trial.
Fourth quarter of 2019, Puma was met with the FDA to discuss the regulatory path for underwriting.
In patients with hormone receptor positive.
Her two negative breast cancer whoever hurts your invitation.
The purpose of the meeting in 2019 was to discuss the potential to file for accelerated approval on the data from the summit trial on the patients treated with the combination of Iraq and possible that stretch plus trastuzumab at that meeting the FDA suggested that tumor modified the summit trial in order to.
Better isolate the contribution of the retina to the efficacy seen in the summit trial for patients treated with the combination of the parcel of Austrian plus trastuzumab.
2020, the summit trial was amended such that ER positive <unk>.
Her two negative breast cancer patients, who have a hershey mutation will randomized to receive either full strength alone.
<unk>, plus trastuzumab or the combination of right, there plus sylvestris plus trastuzumab.
The randomized portion of the trial was designed using assignments two stage design each arm of the study initially enroll seven patients during stage one.
No patient in a given arm responds that all will be closed to further enrollment.
The first is in the first stage, one or more patients respond. The arm will then be expanded up to 18 patients if less than four patients in the extended arm respond that arm will be closed to further enrollment if for more patients respond the arm will be open to enroll additional patients as was discussed on our second quarter earnings conference call for the first time.
Patients who are treated in the photo strength alone arm of the trial no patients received the response.
And the seven patients who were treated in the whole restaurant plus trastuzumab arm in the trial no patients achieved a response.
Enrollment to the west with alone ample investment plus Trastuzumab arms of the trial, where therefore falls.
During the third quarter from a convened the study's independent data monitoring committee or at a M C.
The data from both the single and the doublet cohorts the audience. He recommended closing both the singles and the doublet cohorts.
In the first seven patients who were treated in the rat and the possible best friends at plus Trastuzumab arm of the trial, one or more responses were seen and therefore the criteria is met to expand to stage stage two of the Simon two stage design. This arm of the trial has been expanded to further enrollment currently patients on the ER positive patients.
With ER positive <unk> negative breast cancer, who have hurt your mutation are only being rolled into this triplet arm and summit, which treats patients with threatening plausible that strength plus trastuzumab, we anticipate that additional data on this will be presented at the San Antonio breast cancer Symposium in the fourth quarter of 2021.
<unk> believes that the data from the randomized portion of the trial has addressed the fda's request to isolate the contribution of Niraparib.
The efficacy seen in the summit trial in the patients treated with the combination of underwriting a possible investment plus trastuzumab.
Puma is therefore scheduled a meeting with the FDA this quarter to discuss the data from the randomized portion of the trial and to discuss the potential pathway to file for accelerated approval for the combination of the possible investment plus trastuzumab on the data in patients with ER positive her two negative breast cancer.
Who have her two mutation and had been treated in the summit trial.
The FDA meeting in 2019, the FDA agreed that patients treated with the triplet underwriting applicable investors plus trastuzumab, who enrolled both prior to the amendment in 2020 as well as those enrolled after the amendment.
Would be eligible for inclusion in the efficacy database used to support approval Kumar will continue to update investors on the status of this as it progresses.
As investors are also aware last November we announced interim data from another cohort and summit and more specifically the cohort with metastatic non small cell lung cancer with epidermal growth factor or Egfr.
Exon 18 mutations who have been previously treated with an egfr tyrosine kinase inhibitor. We are continuing to enroll this cohort of patients and anticipate we will have additional data from this cohort to report in the first half of 2022.
I'll now turn the call over to Jeff Ludwig who is chief commercial officer for a review of our commercial performance during the quarter.
Thanks, Alan I appreciate it and thanks to everyone for joining our third quarter earnings call.
Before I move into the commercial reviewed just a reminder, that I will be making forward looking statements.
In our second quarter earnings call, we announced a quarter over quarter increase in net sales and ex factory bottles.
Our goal was and still is to deliver consistent quarter over quarter growth, which we were not able to achieve in Q3.
Our ability to deliver consistent growth was largely based on two key assumptions.
Number one the positive evolving clinical profile profiled neuro links and to an improvement in call activity and access driven by an increase in vaccinations and a loosening of customer restrictions.
I reflect upon our Q3 performance I continue to feel very strongly about the evolving clinical data and its ability to shape and change the risk benefit perceptions of neuro links in this underpenetrated market.
The assumption that has caused us the biggest challenge because customer access and overall declining HCP call activity.
As Alan mentioned earlier, we saw about a 10% reduction in overall HCP calls in Q3 versus Q2 now.
Now HCP access and engagement is critical when you're trying to reposition the brand and share new evolving clinical data.
Given the importance of this leading indicator let me provide some additional insight.
If I compare our pre Covid HCP engagement with our current activity, we're still down overall about 40%.
We do expect that access caused by Covid restrictions will improve in the future.
But given the uncertainty of the pandemic, we are focused on increasing H C. P activity through both personal and non personal promotion.
With that high level update let me transition to some of the U S commercial slides and I will provide some additional insights along the way.
Once I finish my remarks, I will turn the call over to maximum who will review the full financial results.
Looking at slide three as you may recall, we have two channels that provide <unk> links 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 Q3, approximately 77% of our business went through this channel with the remaining 23% of the business flowing through the specialty distributor channel. This is in line with what we reported in the Q2 earnings call as well.
Moving to slide four slide four shows U S quarterly net sales of neuro links since FDA approval.
As Alan noted our net U S product sales were $43 $4 million in the third quarter of 2021.
This is a decrease from the $48 $9 million, we reported in Q2 of 2021.
Look we clearly do not want to see a decline in quarterly net sales, but I do want to provide a little more insight into this decline.
Approximately $3 5 billion or 60% of this decline was due to a reduction in distributor inventory.
Moving to slide five slide five shows the bottles of narrowing sold by quarter. Since launch. Please note that this slide shows ex factory bottles sold so it represents sales into our specialty pharmacy and specialty distribution channel and not end user demand.
We sold 2947 bottles of <unk> in Q3 of 2021, which is a decrease of 407 bottles from our Q2 2021 bottle sales of 3354.
Approximately 60% of this decline was from a reduction in distributor inventory.
As we look at our overall business, we pay very close attention to our leading indicators, we already talked about HCP call activity, but another key leading indicators interacts with new patient starts.
These new patients turned into continuing patients and tend to benefit the subsequent quarter in terms of overall results.
Looking back a few quarters, we saw an increase in new patient starts in Q1, which helped to drive positive growth in Q2.
We unfortunately did not sustain that same level of new patient starts in Q2, which impacted.
The Q3 results, which we are discussing now.
Focusing specifically on Q3, we did see an increase in new prescriptions of about 3% in Q3 and the commercial team is focused on improving that trend moving forward.
As previously reported we were excited to have dose escalation added to our label in late June for both our extended adjuvant indication as well as our metastatic indication.
As you can see we saw a significant increase in the adoption of dose escalation in the third quarter were approximately 57% of patients were started on neural links at a lower dose.
This is a large increase from the 38, 7% of patients we reported in Q2, which we believe is a result of the updated label.
We are pleased with the increasing adoption of dose escalation and believe that this increased adoption, we will improve the overall tolerability of narrowing <unk> increased the average length of therapy and ultimately allow more patients to receive the full benefit of neuro links.
This remains a key commercial priority and we're working to ensure dose escalation as highlighted on pathways formularies and dosing compendium.
Slide seven highlights the strategic collaborations we have formed across the globe with the goal of making <unk> available to more patients around the world.
We continue to be pleased with our global partners and the progress being made.
In terms of updates we recently received regulatory approval in South Korea, and the extended extended adjuvant setting.
Metastatic regulatory approval in Taiwan and are happy to report that <unk> was launched in Peru.
In addition, we are watching Mexico, and Brazil closely as we're expecting regulatory decisions in the very near future.
We are continuing to work very closely with our partners and look forward forward to future potential launches in additional countries in Europe, Latin America Asia, and the Middle East.
Before I turn the call over to Maximo I wanted to provide some additional updates that are important to our future success.
I mentioned earlier that I am happy with the evolving clinical profile up neuro links we have presented or published some important clinical updates over the last year that I have discussed on prior earnings calls.
I'm excited to say that we will also have a nice presence at this year San Antonio breast cancer Symposium, where we have nine abstracts that have been accepted.
Continuing to present and highlight the evolving clinical profile of <unk> as a cornerstone of our strategy.
We believe that these clinical updates coupled with the increasing adoption of dose escalation will collectively help us strengthen the risk benefit profile of neuro links and allow us to appropriately expand utilization.
Lastly, I want to let you know about some important commercial organizational changes that we're implementing.
It is clear that the oncology market continues to evolve and that Covid is likely caused additional access restrictions both from an acute and chronic perspective.
Given our inability to drive consistent growth it does not make sense to maintain the same size and structure.
I have taken actions to streamline our commercial organization not only to better align our financial resources.
As importantly to simplify our reporting structures reduce layers of management and improve ownership and execution at the customer level.
We have reduced the number of sales representatives and consequently, adjusted the size of our territories to ensure appropriate coverage and to better account for the new hybrid environment, which consists of both live and virtual interactions.
We have revised our targeting to help our teams better focus our efforts, where we will have the greatest potential impact on patients.
And we are building out a core strategic accounts team to better align with our largest customers.
Collectively these changes.
I expect to be able to reduce the overall commercial footprint by approximately 40%.
These changes will cause some disruption within the organization.
But we have work to appropriately manage vacancies over the last few months to reduce the impact on individuals'. These.
These changes are being put in place as we speak and I look forward to updating you all on future calls as to the impact we are seeing.
<unk> was founded on the commitment to making a difference in the lives of patients and their families battling best breast cancer.
I want to thank the commercial team for their passion and commitment to making a difference we know more must be done and we will not stop until we have achieved our goals.
I will now turn the call over to Maximo for a review of our financial results.
Thanks, Jeff.
I will begin with a brief summary of our financial results for the third quarter of 2021.
Please note that I will make comparisons to Q2 2021.
Which we believe is a better indication of our progress as a commercial company.
Year over year comparisons.
For more information I recommend that you refer to others. Thank you.
Will be filed today and includes our consolidated financial statements.
In the third quarter of 2021.
Reported a net loss based on GAAP $44 7 million.
One nine per share.
In Q2, 2021 we reported a net loss of $5 1 million.
On a non-GAAP basis would you say adjusted to remove the impact of stock based compensation, we reported a net loss of $40 4 million or <unk> 99 per cent for the third quarter of 2021.
Gross revenue from Nellix sales was $53 8 million in Q3 2021.
She was $59 3 million in Q2 2021.
As Alan mentioned it net product revenue from that in itself was $43 4 million.
Compared to the $48 9 million, we reported in the second quarter of 2021.
Royalty revenue totaled $2 8 million in the third quarter of 2021.
This is $4 3 million in Q2 anymore.
Our gross to net adjustment in Q3 that anyone was about 19, 4% an increase from the 17, 7% gross to net adjustment in Q2 2021.
The increase was driven by primarily by higher Medicaid rebates.
Cost of sales from the Q3, 2021 was $10 3 million, including $2 million for the amortization of intangible assets related to <unk> and that ought to make a license.
Cost of sales for Q2, 2021 was 12 million.
Going forward, we will continue to recognize amortization of milestones to the license or were about 2 million per quarter as cost of sales.
For fiscal year 2021.
<unk> anticipates that the net product revenue will be in the range of $180 million to $182 million.
Lower than our prior guidance.
The reduction to the guidance reflects our expectations for some lower than anticipated improvement in access to HCP.
We also anticipate that our gross to net adjustment in 2021 will be between 19% and 20%.
Furthermore for fiscal year 2021 we anticipate receiving royalties from our partners around the world in the range of $13 million to $14 million.
License revenue in the range of $50 million to $52 million.
We recognize there is a great great deal of uncertainty regarding the impact of COVID-19.
This may continue to negatively impact our sales and royalties and license revenue.
Okay.
We anticipate Q4 2021 not only mixed sales would be in the range of 42 million to $44 million.
Royalty revenues would be in the range of three five to $4 5 million.
Historically in Q4, and we have seen a decrease in new patient starts patients choose to delay starting <unk> until after the holidays.
We are incorporating these assumptions into our Q4 net sales guidance.
We anticipate that the gross to net adjustment in Q4, 2021 will be approximately 19, 5% to 25%.
SG&A expenses were $26 1 million in the third quarter of 2021.
Compared to $39 4 million for Q2 2021, respectively.
SG&A expenses included noncash charges for stock based compensation of $3 million for the third quarter of 2021.
Compared to $16 7 million for Q2, 2021.
Stock based compensation expenses in Q2, 2021 included approximately $13 6 million, resulting from a modification approved by stockholder.
Some of them until you want.
Research and development expenses were $18 8 million in the third quarter of 2021.
Compared to $18 6 million for Q2 2021.
R&D expenses included noncash charges for.
Stock based compensation of $1 3 million in the third quarter compared to $1 5 million for Q2 2021.
Other expenses include an increase for our legal accrual of $24 5 million most of it to reflect the settlement in principle arrive for the class action lawsuit in October with October.
All of approximately $54 2 million.
On an $8 4 million charge related to our debt refinancing in July 2021.
The third quarter of 2021, Puma reported cash burn of around $21 4 million.
Compared to cash burn of <unk> 1 million in Q2.
If we exclude one time cash flow event.
Impacted Q3, 2021 we would have seen positive cash flow of $2 1 million.
As a result of cost containment actions across the company.
Just the commercial restructuring that Jeff described.
Two months expecting lower operating expenses in Q4 on ongoing where SG&A as well as in research and development.
We ended the third quarter of 2021 with $87 5 million in cash cash equivalents and marketable securities.
Our accounts receivables balance at September 30.
$3 8 million.
Our accounts receivable terms range between 10 and 68 days.
Base sales outstanding are about 48 days.
We estimate that as of September 32021.
Our distribution there my opinion approximately three weeks of inventory.
Overall, we continue to deploy our financial resources to focus on debt bonds.
No.
Two ongoing clinical trials and the commercialization of Nellix.
Yeah.
Thanks Max.
The COVID-19 pandemic has continued to present commercial challenges diploma. However, we are hopeful that with the vaccinations that had been occurring in 2021 and will continue to occur throughout the year.
These barriers in the future.
Which should improve the ability of our commercial team to access and interact with health care providers to increase their awareness of the Netherlands data.
We also recognize the uncertainty as to when access to health care providers will improve.
We are remaining conservative in our outlook for improvement and access for the remainder of the year.
<unk> senior management in cooperation with the board of Directors continues to remain focused on nearly to revenue and sales growth in 2021 and beyond 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 have kumar committed and passionate about finding more effective ways that helping these patients during their journey and we will continue to strive to achieve that goal.
Sure.
And then the second question is on 2022 and sort of as the pandemic eases, how you're thinking about the revenue trajectory heading into next year. Thanks, So much.
Oh, Hi, currently, especially the questions Jessica.
Sure Let me, let me talk through the restructure the organization the commercial side, we've talked a lot about Cher voice and let me just talk about Cher voice in a broader sense, our our share of voices not been restricted because of the number of people we have in a field, but it's really been restricted because of the changes in access largely through the COVID-19. So on our previous structure, we essentially had access.
Capacity and regardless of how hard we tried to change and adjust when you're just not able to efficiently use that capacity or those resources.
Looking at a little more granular we definitely see accounts that have restricted access to the industry and in those cases as you can guess it typically does not make sense to deploy the resources. The same way, it's an inefficient utilization of edge out the.
The continuing trend in oncology has been toward more restrictions versus less restriction.
Revenue expectations, but obviously I'm, hoping that we can put we can leverage the new data that we have the evolving clinical data. We're hoping that this new organizational structure will play out to be more efficient and effective and obviously, we're working very hard to increase our call activity and engagement with customers.
The goal is to drive growth and that's what we're continuing to try to do in Cali in terms of potential new opportunities for revenue you know obviously the mutations would be one.
Interesting awareness and those.
And the other is we have an ongoing trial, which is the Tv's CRC twenty-two which is looking at the at the inpatient.
In patients with brain mess in combination that with cats Islay.
Looking for that data to be presented some time in the first half of 2022, my guests would be <unk> and certainly due to the huge unmet medical need.
In her two positive breast cancer patients with brain Mets and we're already in the <unk> guidelines for brain. That's there is the possibility you're going to see.
Uptake of neural links there.
Got it that's helpful. Thank you for taking my question.
Your next question comes from Mark Franz West Cowan. Please proceed with your question.
Alright, Thanks for taking my question each one clarification just on the headcount reductions on the sales force.
He said the footprint would be down 40 per cent is that just that head comes down 40% should we also expect expenses to be 40% or one to one relationship there.
Or is there a little bit of a disconnect and then I think also in your comments you mentioned the Opex will go down not just for SG&A, but also R&D.
Can you quantify that at all.
Yeah. So in terms of just comment on the 40% the head count would be commercial individuals, but he was talking about.
Being down 40%.
The expenses.
That won't be down 40%, an excellent you want to give some guidance, yes, our expectation is the quarter over quarter. So Q4 versus Q3 expenses will go down 10% operating expenses.
Total.
And Mark just so you know.
R&D expenses will go down.
Just because we don't have a lot of trials anything but also the way our reporting structure is oil record expenses, the medical Affairs Department, which is technically commercial.
They're expensive get reported through research and development. So although it's a commercial group just the way it is structured they're supposed to commit to research and development.
Okay, Great that's helpful and then.
Don't I know it was the seven patients from the triple at arm.
And you know.
The updated follow up on them.
I don't know if we like the patients enrolled pulse randomization.
I don't know if they'll be part of that it's a poster presentation.
That's public information that its poster presentation.
I don't know that.
I don't remember, if we're going to put in any of the ones from post renovation.
So I apologize I don't have that right now.
Okay, No worries would slide trumps keep track of thanks, very much for answering my questions.
Your next question comes from my I apologize it looks like we are Paul Choi with Goldman Sachs. Please proceed with your question.
Hi, This is Kate on for Paul. Thank you for taking my questions. We have two of them first for the Egfr lung study what additional data will the F. D. A required beyond the summit data to.
To support an accelerated approval and then second what sort of feedback have you gone from positions regarding the new dose escalation regimen. Thank you.
Okay. So let me take the first one in terms of the Egfr long we are specifically looking at patient with Exxon 18.
Mutated <unk> Egfr mutated lung cancer will already failed and Egfr T K I.
To answer your question what will the FTA require I don't think we know the answer to that right now because we've not had a discussion with them.
Post the data if you will to know what they would require I imagine I think we have in our milestones that we're going to plan a meeting with yesterday to discuss that my speculation would be that we have certainly seen for a lot of these rare mutations in lung that the FDA is required a single arm trial.
Eight I think if I remember correctly, it's usually around 50 or 100 patients or so.
I would assume the data from summit would suffice for that so we could just expand it to that that would be my assumption I don't have any concrete words from FDA on that the trial has been enrolling very well I think we're close to like 30 patients in that I'm already so well on our way.
You're wrong, we we just have not yet seen that at some juncture I think we will it's just very hard to predict when that will be it.
Gestural aunts, along the global partner.
Alex Obviously you were as we mentioned in the upfront comments were very pleased with the partnership our global partners, they're doing a nice job of moving NERLYNX two regulatory approval and launches. We were excited that NERLYNX was launched in Peru. Just recently, we expected to be launched a metastatic in Taiwan soon and as I stated where.
Excited to see what happens in Mexico and Brazil.
The initial launches from the customers on the ground has been positive there's there's unmet need across the globe and we think NERLYNX fills a nice niche in that unmet need. So we're seeing some nice slow steady uptake that is important to us and also I can add to that.
Been very lucky to have some really great partners.
Our largest which is you know.
<unk>.
It's been Ah doing a wonderful job of it and we've been very pleased with their their execution.
Great. Thank you so much.
Your next question comes from China, Wang with Barclays. Please proceed with your question.
Hi, This is gerald enough for Tina. Thanks for your question, maybe one the T V C. R C file a combo data so.
This is Ah and bring that patient population and what type of and point, we can prevent and.
Could you talk about the benchmark in record it passed and also your thoughts on the future of commercial landscaping indication given that's right now other drugs in the second and the third line also shows pretty strong activity in the C. N S.
Yeah, Let me take that question. So the cubic Trc 22 trial is a trial that originated with Pfizer when we license a drug we took it out and then we have expanded it.
The travelers random alone in patients with her deposit mesac breast cancer that had brain, let's we expanded it to look at the combination with Cape side of game, which is a lota and then we've said it again to look at a combination that with cats I Love. The reason we were looking at combination with cats Islay is that the preclinical data shows that neratinib being an ear.
<unk> hurt you inhibitor.