Puma Biotechnology Q4 2023 Earnings Call Transcript

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February 29, 2024

There are 7 speakers on the call.

Operator

Good afternoon. My name is Alicia, and I'll be your conference call operator today. At this time, all participants are in a listen only mode. After the speakers' formal remarks, there will be a question and answer session. As a reminder, this call is being recorded.

Operator

I would now like to turn the conference call over to Mary Anne Ohanesen, Senior Director of IR for Puma Biotechnology. You may begin your conference.

Speaker 1

Thank you, Alicia. Good afternoon, and welcome to Puma's conference call to discuss our financial results for the Q4 of 2023. Joining me on the call today are Alan Auerbach, Chief Executive Officer, President and Chairman of the Board of Puma Biotechnology Maximo Nougues, Chief Financial Officer and Jeff Ludwig, Chief Commercial Officer. After market close today, Puma issued a news release detailing Q4 and full year 2023 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 sessions of our website at pumabiotechnology.com.

Speaker 1

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 ks for the year ended December 31, 2023. 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, February 29, 2024.

Speaker 1

The 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 our GAAP figures. We believe these non GAAP metrics may be useful to investors as a supplement to, but not as substitute for, our GAAP financial measures. Please refer to our Q4 2023 news release for a reconciliation of our GAAP to non GAAP results. I will now turn the call over to Alan.

Speaker 2

Thank you, Mary Anne, and thank you all for joining our call today. Today, Puma reported total revenue for the Q4 of 72,200,000 dollars Total revenue includes product revenue, net, which consists entirely of NERLYNX sales, as well as royalties from our sublicensees. Product revenue net was $53,200,000 in the Q4 of 2023, which was an increase from the Q3 2023 and slightly below $53,700,000 reported in Q4 2022. Product revenue for the Q4 of 2023 was impacted by approximately $2,100,000 of inventory increase at pharmacies and specialty distributors. Royalty revenue was $19,000,000 in the Q4 of 2023 compared to $4,500,000 in Q3 of 2023 $12,000,000 in Q4 of 2022.

Speaker 2

We reported 2,881 bottles of NERLYNX sold in the Q4 of 2023, essentially unchanged from the 2,874 bottles sold in Q3 of 2023. In Q4 of 2023, we estimate that inventory increased by about 127 bottles. In Q4 2023, new prescriptions or NRx were down approximately 9% compared to Q3 2023 and total prescriptions TRx were down approximately 7% compared to Q3 2023. Jeff will provide further details in his comments and slides. Narrowing sales were negatively impacted by the decline in enrollments that we mentioned in our Q3 earnings call, a lower than anticipated rate of conversion from enrollment to commercial new patient starts and a higher than expected gross to net.

Speaker 2

Jeff and Maximo will discuss these two topics further in their comments. We have continued to reduce our internal expenses to account for these factors as we recognize our fiscal responsibility to the shareholders and continue to be net income positive in 2024. I will now provide a clinical review of the quarter, then Jeff Ludwig will add additional color on NERLYNX commercial activities and Maximo and Guez will follow with highlights of the key components of our financial statements for the Q4 of 2023. In February, we are pleased to announce that we initiated the alacertin in cancer or ALISCA LUNG-one trial, a Phase 2 clinical trial of alacertib monotherapy for the treatment of patients with extensive stage small cell lung cancer. This trial was previously referred to as study PUMA ALI-four thousand two hundred and one.

Speaker 2

The trial will enroll up to 60 patients with extensive stage small cell lung cancer, who have progressed after first line platinum based chemotherapy and immunotherapy. Patients must provide tissue based biopsies so that biomarkers can be analyzed. Alosertib will be dosed at 50 milligrams BID on days 1 to 7 of every 21 day cycles. Puma plans to perform an initial interim analysis for the evaluation of the biomarkers as well as an evaluation of efficacy. As we discussed in our last earnings call, the goal of this Phase 2 study will be to confirm the efficacy of allocertib monotherapy in patients with small cell lung cancer with biomarkers where the Aurora Kinase pathway plays a role.

Speaker 2

The goal would be to correlate the efficacy of these biomarker subgroups in the Elisko LUNG-one study to the efficacy that was previously seen in the biomarker subgroups from the randomized trial of paclitaxel plus alicertib versus paclitaxel plus placebo that was previously published in the Journal of Thoracic Oncology in 2020. If the efficacy and biomarker data are comparable from the 2 studies, the company believes it would represent a potential accelerated approval strategy and would engage FDA to discuss this further. We currently have 4 sites open for enrollment and expect to have 10 to 15 sites open within the next 30 to 60 days. We anticipate that we will be able to share interim data from this trial with investors in the second half of twenty twenty four. We also anticipate the initiation of ALISCA BRES1, a Phase 2 trial of alosertib in combination with endocrine treatment in patients with chemotherapy naive HER2 negative hormone receptor positive breast cancer in Q4 of 2024.

Speaker 2

We additionally anticipate 2 clinical data presentations on alicertib in the first half of twenty twenty four. Investors will remember that the Phase 2 trial referred to as TBCRC-forty one, which was a Phase 2 trial of alacertib monotherapy versus alacertib plus endocrine therapy in patients with HER2 negative hormone receptor positive metastatic breast cancer was published in JAMA Oncology in 2023. As part of this trial, an analysis of biomarkers was performed in order to determine if the efficacy of alacertib in patients with HER2 negative hormone receptor positive metastatic breast cancer correlates with any biomarkers. We anticipate that the biomarker data from this trial will be presented in the first half of twenty twenty four. In addition, there is an ongoing investigator sponsored trial of alacertib given in combination with osimertinib in patients with metastatic EGFR mutant non small cell lung cancer.

Speaker 2

More specifically, patients with metastatic EGFR mutant non small cell lung cancer are treated with osimertinib and then at the time of progression, alicertib is added to osimertinib in order to see if alicertib can overcome osimertinib resistance. Interim data on this trial was previously presented at ASCO prior to Puma licensing the drug. We anticipate that updated data from this trial will be presented in the first half of twenty twenty four. Most notably, a recent biomarker analysis from this trial has demonstrated a subgroup of patients with a biomarker with a Aurora Kinase pathway plays a role where alicertib appears to have much greater efficacy when added to osimertinib at the time of progression on osimertinib. This biomarker occurs in about half of the patients in the trial, which is consistent with the published literature on this biomarker in this patient population.

Speaker 2

Based on this biomarker data, the trial is being amended to limit enrollment in the trial to only continue enrolling patients who have this biomarker. We believe that this might represent another indication for alacertib and we look forward to discussing this data with investors once it has been presented publicly. As mentioned on previous earnings calls and in response to investor questions, Puma continues to evaluate several drugs to potentially in license that would allow the company to diversify itself and leverage Puma's existing R and 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, Puma's Chief Commercial Officer for a review of our commercial performance during the quarter.

Speaker 3

Thanks, Alan. Appreciate it and thanks to everyone for joining our 4th quarter earnings call. Before I move into the commercial review, just a reminder that I will be making forward looking statements. Let me again start with a high level overview of our commercial strategy and then I will go into more details as we discuss specific slides. From a commercial strategy perspective, we believe that NERLYNX can benefit patients in the metastatic setting, but we remain heavily focused on early stage breast cancer.

Speaker 3

We do not have direct competition in the extended adjuvant setting and believe that there remains significant unmet need, especially for patients who are deemed to be at higher risk recurrence. We want to see NERLYNX play a larger role in helping patients reduce the risk of recurrence and avoid metastatic disease. We believe NERLYNX continues to be promotionally sensitive. Our sales and marketing teams are working hard to expand their reach and frequency both with personal and non personal promotion. HCP calls in the 4th quarter increased about 12% year over year with about 80% of those calls being live interactions.

Speaker 3

In addition to pure call activity, we are using internal and external data to try and improve our abilities to engage with clinicians at the right time given the various treatment decisions and duration of therapies. Finally, as a commercial organization, we remain committed to being more efficient and effective with our resources. We will continue to adapt to the changes in the business and the needs of the broader Puma organization. Let me now transition to some of the commercial slides where I will provide some additional specifics around performance. Once I have finished, I will turn the call over to Maximo for a more detailed review of our financial results.

Speaker 3

Turning to Slide 3. Slide 3 provides an overview of our distribution model. Now this model has not changed and remains separated into 2 distinct channels, the specialty pharmacy channel and specialty distributor channel. We do see quarterly fluctuations, but the majority of our business continues to flow through the specialty pharmacy channel. In Q4, about 74% of our business went through the specialty pharmacy channel and remaining 26% went through the specialty distributor channel.

Speaker 3

As a comparison, this compares to the 80% specialty pharmacy channel and 20% specialty distributor channel that we reported in Q3 of 2023. Turning to Slide 4, NERLYNX net revenue in Q4 2023 was $53,200,000 which is a $1,600,000 increase from the $51,600,000 we reported in Q3 of 2023 and about a $500,000 reduction from the $53,700,000 we reported in Q4 of 2022. Inventory changes will impact these comparisons, so let me provide some additional information here. In Q4 of 2023, we estimated that inventory increased by about $2,100,000 As a comparison, we estimate that inventory increased by about 600,000 in Q3 of 'twenty three and increased by about $2,600,000 in Q4 of 2022. Turning to Slide 5.

Speaker 3

Slide 5 shows Q4 2023 ex factory bottle sales and also provides both a year over year and a quarter over quarter comparison. In Q4 of 2023, NERLYNX X factory bottle sales were 2,000 881, which represents a slight increase of about 0.2% quarter over quarter and a 13% decline year over year. Let me again provide more specifics around the inventory impact, which is also included at the bottom of this slide. We estimate that inventory increased by about 127 bottles in the Q4 of 2023. As a comparison, we estimate that inventory increased by about 164 bottles in Q4 of 2022 and increased by about 32 bottles in Q3 of 2023.

Speaker 3

Now let me share some additional metrics and insights into our 4th quarter performance. In Q4, we saw new patient starts for NRx decline about 9% quarter over quarter and about 25% year over year. In terms of total prescriptions or TRx, we saw about a 7% quarter over quarter decline and about a 17% decline year over year. Our SD business did grow 10% quarter over quarter and about 4% year over year. As a reminder, we do not pick up NRx or TRx data in the SD channel.

Speaker 3

Overall demand decreased 3.1% quarter over quarter and about 12.8% year over year. As Alan mentioned, Q4 performance was negatively impacted by several factors. First, let me talk about enrollments. Enrollments are a very important leading indicator as they convert into new patient starts. New patient starts turn it into refills, which influence performance in subsequent quarters.

Speaker 3

Q4 performance was negatively impacted by the decline in enrollments we saw in Q3 and discussed during the Q3 earnings call. Soft Q3 enrollments had a negative impact on 4th quarter new patient starts, TRx and overall demand. As I mentioned during the Q3 earnings call, we did see the enrollment trend improve as the 3rd quarter progressed. Early in the Q4, we increased the amount of HCP non personal promotion. As we have discussed with investors in prior earnings calls, we typically see a decline in enrollments in the Q4 as patients delay starting therapy until after the holidays.

Speaker 3

In Q4, we were pleased to see enrollments continue to improve from Q3 and we saw Q4 enrollments grow 12% sequentially. This is the first time we have seen this growth Q4 over Q3. We are hopeful that this increase in non personal promotion was a contributor to this enrollment growth. However, we are waiting on additional data before making that conclusion. The second factor that negatively impacted our Q4 performance was the conversion rate from enrollments to commercial new patient starts.

Speaker 3

In Q4, we saw a decrease in a percent of patients converting from enrollments to new patient starts with the majority of that being driven by an increase in PAP or free goods. We do see quarterly fluctuations in these conversion rates, but in Q4, we had this metric move in a negative direction. Turning to Slide 6, excuse me. Slide 6 highlights the adoption of dose escalation since launch. We continue to believe that monitoring the adoption of dose escalation is an important metric for NERLYNX.

Speaker 3

Patients that started a reduced dose will experience significantly lower Grade 3 diarrhea and are likely to have a lower rate of discontinuation. In Q4, approximately 76% of patients who received commercial drug started NERLYNX on a lower daily dose. We have seen a fairly steady increase in the adoption of dose escalation over the last several years and I am pleased with the feedback that we receive from customers. Slide 7 highlights the collaborations we have formed across the globe. I have highlighted in red a number of updates since our Q3 earnings call.

Speaker 3

We are pleased to announce that in late Q3, NERLYNX received regulatory approval in Mexico in the metastatic setting and also received regulatory approval in the United Arab Emirates in the extended adjuvant setting. In addition, in Q1, NERLYNX recently received regulatory approval in Syria in the extended adjuvant setting and was officially launched in Morocco also in the extended adjuvant setting. We truly appreciate all the efforts put forth by our partners to make NERLYNX available to more patients around the world. I'd like to wrap up by thanking my colleagues at Puma for their passion and dedication to making an impact on the lives of patients and their families battling cancer. This team is committed to finding ways to be more efficient and effective and adapting to the changing needs of the business.

Speaker 3

I will now turn the call over to Maximo for a review of our full financial results. Maximo?

Speaker 4

Thanks, Jeff. I will begin with a brief summary of our financial results for the Q4 of 2023. Please note that I will make a comparison to Q3 2023, 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 2023 10 ks, which will be filed today and includes our consolidated financial statements. For the Q4 of 2023, we reported net income based on GAAP of $12,300,000 or $0.26 per share.

Speaker 4

This compares to net income in Q3 2023 of $5,800,000 or $0.12 per share. On a non GAAP basis, which is adjusted to remove the impact of stock based compensation expense, we reported net income of 14,800,000 or $0.31 per share for the Q4 of 2023. Gross revenue from NERLYNX sales was $64,900,000 in Q4 2023 $60,400,000 in Q3 2023. As Alan mentioned it, net product revenue from Nellings sales was $53,200,000 an increase from the fifty $1,600,000 reported in Q3 2023. Q4 net sales were impacted by lower enrollments in Q3 as well as a higher gross to net in Q4.

Speaker 4

Inventory buildup by $600,000 of buildup in Q3 2023. Royalty revenue totaled $19,000,000 in the Q4 of 2023 compared to $4,500,000 in Q3 2023. The higher royalties Q3 reflect the timing of shipments to our partner in China, as we noted last quarter. Our gross to net adjustment in Q4 2023 was about 18.1% compared to the 14.6% gross to net adjustment reported in Q3 2023. Higher Medicaid share, particularly from patients in Puerto Rico and higher government charge backs, were the main drivers of the increase versus Q3 2023.

Speaker 4

Cost of sales for Q4 2023 was $24,300,000 including $2,400,000 for amortization of intangible assets related to our neratinib license. Cost of sales for Q3 2023 was $13,300,000 Going forward, we will continue to recognize amortization of milestones to the licensor of about $2,400,000 per quarter as cost of sales. For fiscal year 2024, Puma anticipates that net NERLYNX product revenue will be in the range of $183,000,000 to $190,000,000 We also anticipate that our gross to net adjustment for the full year 2024 will be between 21.5% 22.5%, driven by the Inflation Reduction Act and higher expected Medicaid rebates. In addition, for fiscal year 2024, we anticipate receiving royalties from our partners around the world in the range of $30,000,000 to $33,000,000 We expect license revenue in 2024 in the range of $1,000,000 to $2,000,000 We also expect that net income for the full year will be in the range of $12,000,000 to $15,000,000 We anticipate that for Q1 2024, NANLEX product revenue, net, will be in the range of $38,000,000 to $40,000,000 Also, we expect Q1 royalty revenues will be in the range of $2,500,000 to $3,000,000 and no license revenue. We further estimate that the gross to net adjustment in Q1 2024 will be approximately 23% to 24%.

Speaker 4

Puma anticipates a Q1 net loss of between $10,000,000 $12,000,000 Sorry, let me repeat that. Puma anticipates a Q1 net loss between $10,000,000 $12,000,000 dollars As investors are aware, Q1 usually represents the lowest net product revenue of the 4th quarter due to the burn off from inventory build from Q4. Also due to our litigation expense and a onetime administrative expense, we expect higher expenses in Q1 than other quarters in 2024. Due to those items, we are forecasting a net loss in Q1, but anticipate that we will be net income positive for the remainder of 2024 as well as for the full year. SG and A expenses were $20,200,000 in the Q4 of 2023 compared to $22,800,000 for the Q3.

Speaker 4

SG and A expenses included noncash charges for stock based compensation of $1,800,000 for Q4 2023, unchanged from Q3 2023. Research and development expenses were $12,900,000 in the Q4 of 2023 compared to $11,400,000 for the Q3. R and D expenses included noncash charges for stock based compensation of $800,000 in the Q4 of 2023, unchanged from the Q3. On the expense side, Puma anticipates flat total operating expenses in 2024 compared to 2023. More specifically, we anticipate SG and A expenses to decrease by 8% to 12% and R and D expenses to increase 17% to 20% year over year.

Speaker 4

Due to our litigation expenses, we expect G and A expenses in Q1 and Q2 to be significantly higher than Q3 and Q4. In the Q4 of 2023, Ooma reported cash earn of approximately $10,400,000 This compares to cash earn of approximately $10,600,000 in Q3 2023. For the full year, Puma reported cash earn of approximately $14,400,000 In 2023, we made a $12,500,000 payment for a sales milestone to Pfizer and an $8,000,000 settlement payment as well. At December 31, 2023, we had approximately $1,000,000 in cash, cash equivalents and marketable securities versus $81,000,000 a year earlier. Our accounts receivables balance was $47,800,000 Our accounts receivables terms range between 10 60 days, while our days sales outstanding is about 46 days.

Speaker 4

We estimate that as of December 31, 2023, our distribution network maintained approximately 3 weeks of inventory. Overall, we continue to deploy our financial resources to focus on the commercialization of NERLYNX, the development of alisertib and controlling our expenses.

Speaker 2

Thanks, Maximo. We are pleased to report positive net income for the Q4 of 2023 and for full year 2023. Puma senior management in cooperation with the Board of Directors continues to remain focused on near linked sales trends in 2024 and beyond and recognizes its fiscal responsibility to shareholders to continue to maintain positive net income. In the Q4 of 2021, we implemented a reduction in expenses with the goal of reducing expenses in order to maximize operational cash flows. We believe that the positive net income reported in the Q4 and for the full year 2023 reflects these expense reductions.

Speaker 2

The expense reductions that we have previously performed and continue to perform are also a major contributor to the positive net income that the company is guiding to for full year 2024. The company remains committed to continuing to achieve this positive net income and will 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.

Speaker 2

This concludes today's presentation. We will now turn the call back to the operator for Q and A. Operator?

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Divya Rao with TD Cowen. Please proceed with your question.

Speaker 5

Hi, guys. Congrats on the quarter. This is Divya on for Mark. So I had a few questions on the Phase 2 trial in small cell lung cancer. One would be, I guess in terms of the second half data disclosure, should we expect it to be at a medical meeting or do you think it could be a press release?

Speaker 5

And then my second question is, I know you mentioned that the biomarker data was going to be one of the metrics that you use from the interim analysis to determine whether you move forward with talking with the FDA. Is the alosertib combo trial with paclitaxel also the best bar to look at when you're looking at efficacy? And do you feel like you want to see both the biomarker and the efficacy data kind of line up with that trial before moving forward with the FDA on future discussions? Thanks.

Speaker 2

Yes. So, Divya, thank you for your question. In terms of the disclosure, I would imagine there would be something more direct to investors, not at a medical meeting because just present a medical meeting, you have to submit an abstract and there's a lead time there and I'm not sure how much data we would have to submit to a medical meeting. So, a medical meeting presentation, I would guess probably is more of a 2025 event. But presenting that in some way, shape or form to investors that would be the way we would do this.

Speaker 2

And obviously, as much detail as we can, as we mentioned, we're going to be greatly increasing the number of sites this month. And so we're anticipating we're going to have a good number of patients to talk about. In terms of your second question, so obviously in small cell lung cancer you have both the chemotherapy sensitive group and the chemotherapy refractory group or the resistant group. So you get kind of 2 different it's not totally homogeneous. I don't know that like cross trial comparison is going to be like compared to this trial or that because it gets a little tricky in terms of prior treatments and things like that.

Speaker 2

I think the clear signal we're looking for is both response rate and PFS, but to see something that's better in the group that has the biomarker than doesn't, from the early data. Because again, the thesis we have is that alacertib is an Aurora Kinase inhibitor. So the biomarkers that are involved in the Aurora Kinase pathway is where we should see the best efficacy. That's really the signal we want to confirm. Because of different numbers and things like that, I'm not quite sure if we're going to want to do cross trial comparisons quite yet.

Speaker 2

But in terms of the early data, that's really what we're going to be looking for is to see, is there a biomarker subgroup that selects for the patients who are most likely to benefit from the drug.

Speaker 5

Got it. That's helpful. Thank you.

Operator

Thank you. Our next question comes from the line of Gena Wang. Please proceed with your question.

Speaker 6

Hi, good afternoon. Thanks for taking our questions. This is Harshita on for Gena. I had a couple on Allovertis. And Alan, you touched on this a little bit in the previous question, but I kind of wanted to get some more color on what the efficacy bar would be for alicertib in the small cell trial and I understand you disclosed that you don't want to make cross trial comparisons, but any color you can shed on how you're thinking about ulcerative, especially in light of the DLL3 targeting agents that are in development, including Amgen's tarlitumab that has a producer later this year and Harpoon's TriTAC that got taken over by Merck, they had shown some early results in Phase 1.

Speaker 6

So just keeping this in the background, was curious if you could shed some color on how you're thinking about ulcerative?

Speaker 2

Yes. So with reference to the DLL3 drugs, tarlatanab was a 3rd line drug. So challenging from that perspective to try to compare a second line and third line. Also I would say that while I recognize response rate is the typical thing people like to do cross trial comparisons on, As you're aware, you can't just get approval on response rate. You need to actually show a magnitude of that benefit.

Speaker 2

So APFS or survival benefit. So I think all of those are going to be important for us to look at. There is data on alicertib as a monotherapy that was published in Lancet Oncology previously. And I'm off the top of my head remembering it was like a 20 ish percent response rate and somewhere around 3 month PFS in a non selected group. So that would kind of be the most the only data we have for alacertib as a single agent, if you will.

Speaker 2

But trying to compare it to other agents, especially just looking at response rates, In small cell lung cancer, unfortunately, you've seen lots of drugs that have got really high response rate, but they can't confirm their clinical benefits, because of no increase in PFS or OS. So I think again, it's going to be really a totality of data where we want to see a response rate improvement, a PFS improvement. And the PFS and the OS, obviously, are going to be the ones that are going to be more important to us.

Speaker 6

Got it. Thank you, Alan. That's helpful. And then just a quick question again on ulcerative. Have you disclosed what the exact royalty percentages you owe to Takeda if the product is approved, commercialized?

Speaker 2

I do not have that in front of me in terms of our public disclosure. My recollection is we said something in the single digit range, if I remember correctly.

Speaker 6

Got it. Helpful. Thank you so much.

Operator

Thank you. There are no further questions at this time. I would like to turn the conference back over to Mary Anne for closing comments.

Speaker 1

Thank you all 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.

Operator

Ladies and gentlemen, thank you for participating in today's conference call. This concludes our program.

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Puma Biotechnology Q4 2023
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