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Edited Transcript of PBYI earnings conference call or presentation 20-Feb-20 9:30pm GMT

Q4 2019 Puma Biotechnology Inc Earnings Call

Los Angeles Feb 21, 2020 (Thomson StreetEvents) -- Edited Transcript of Puma Biotechnology Inc earnings conference call or presentation Thursday, February 20, 2020 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alan H. Auerbach

Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary

* Mariann Ohanesian

Puma Biotechnology, Inc. - Senior Director of IR

* Maximo F. Nougues

Puma Biotechnology, Inc. - CFO & Principal Accounting Officer

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Conference Call Participants

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* Alethia Rene Young

Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research

* Chris Shibutani

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Edward Patrick White

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Kelsey Beatrice Goodwin

Guggenheim Securities, LLC, Research Division - Associate

* Kennen B. MacKay

RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research

* Paul Choi

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Samantha Lynn Semenkow

Citigroup Inc, Research Division - Senior Associate

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Presentation

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Operator [1]

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Good afternoon. My name is Brock, and I will be your conference call operator today. (Operator Instructions) As a reminder, this call is being recorded. I would now like to turn the conference call over to Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. You may begin your conference.

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Mariann Ohanesian, Puma Biotechnology, Inc. - Senior Director of IR [2]

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Thank you, Brock. Good afternoon, and welcome to Puma's conference call to discuss our financial results for the fourth quarter and full year 2019. Joining me on the call today are Alan Auerbach, Chief Executive Officer, President and Chairman of the Board of Puma; and Maximo Nougues, Chief Financial Officer. After market close today, Puma issued a news release detailing fourth quarter 2019 financial results. That news release, the slides that Alan 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 Securities and Exchange Commission from time to time, including once filed our annual report on Form 10-K for the year ended December 31, 2019, which will be filed next week. 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 20, 2020. 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 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 a substitute for our GAAP financial measures. Please refer to our fourth quarter 2019 news release for a reconciliation of our GAAP and non-GAAP results.

I will now turn the call over to Alan.

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [3]

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Thank you, Mariann, and thank you all for joining our call today. Today, Puma reported total revenue for the fourth quarter of 2019 of $62.9 million. Total product revenue consisted of license revenue of $4 million, royalty revenue of $0.2 million and net sales of NERLYNX of $58.7 million. Net sales of $58.7 million in the fourth quarter of 2019 represented a 9.7% increase from the $53.5 million in net sales reported in the third quarter of 2019.

I will begin with a review of some of the highlights of the quarter and then provide more details on NERLYNX' commercial activities in the U.S. Maximo Nougues will follow with highlights of the key components of our financial statements for the fourth quarter of 2019.

In September, we announced that our licensing partner in Latin America, Pint Pharma, received their first regulatory approval in Argentina for NERLYNX for the extended adjuvant treatment of adult patients with early-stage hormone receptor positive, HER2 over-expressed amplified breast cancer, and who completed adjuvant trastuzumab-based therapy less than 1 year ago.

In November, we announced that our licensing partner in Greater China, CANbridge Pharmaceuticals, received market approval in Hong Kong. According to the terms of the licensing agreements with both of those entities, Puma will be receiving royalties from the sales of NERLYNX in those territories once they are commercialized. In collaboration with our licensed partners, we also anticipate announcing additional regulatory decisions on neratinib in additional countries outside of the United States and Europe throughout 2020. As investors are aware, in the second quarter of 2019, we presented results from our Phase III trial of neratinib in third-line HER2-positive metastatic breast cancer, also known as the NALA trial, at the American Society of Clinical Oncology Annual Meeting in June.

A copy of the ASCO presentation is accessible on the events and webcast page of Puma's website. Based on the results of the NALA trial, Puma filed a supplemental new drug application, or sNDA, for neratinib for the treatment of third-line HER2-positive metastatic breast cancer in June of 2019. The sNDA was accepted by the FDA in September 2019 and our anticipated PDUFA date is April of 2020. We will continue to update investors on our regulatory progress with this as it progresses.

In addition, in September 2019, the FDA granted orphan drug designation to neratinib for the treatment of breast cancer patients with brain metastases. As investors are also aware, Puma has an ongoing basket trial of neratinib in HER2-mutated cancers referred to as the SUMMIT trial. On our third quarter earnings call, we announced that based on our recent meeting with the FDA, Puma is modifying the SUMMIT trial such that ER positive, HER2-negative breast cancer patients who have a HER2 mutation will be randomized to receive either fulvestrant alone, fulvestrant plus trastuzumab or the combination of neratinib plus fulvestrant plus trastuzumab. Each arm of the amended study will initially enroll 7 patients during stage 1, and if no patient in a given arm responds, that arm will be closed for further enrollment. If in the first stage, 1 or more patients respond, the cohort will then be expanded to up to 18 patients. If less than 4 patients in the expanded arm respond, that arm will be closed to further enrollment. If more than 4 patients respond, the arm will be expanded and further patients will be enrolled.

The amendment to the SUMMIT protocol has been submitted to the clinical sites that are participating in the study. We anticipate that the amendment will be approved at these sites and an enrollment to the 3 arms will begin next month. We continue to plan to schedule a pre-NDA meeting with the FDA after we receive the initial results from the Simon two-stage trial in order to discuss the potential for accelerated approval of neratinib in ER positive, HER2 negative breast cancer that has a HER2 mutation. Puma anticipates that this meeting will take place sometime between the fourth quarter of 2020 through the second quarter of 2021.

During our third quarter earnings call, we also discussed our current HER2 mutation screening trial, also known as HER-Seq. The HER-Seq trial was initiated with the goal of using a proprietary liquid biopsy test, developed by Puma, to screen patients with breast cancer and cervical cancer for HER2 mutations. This test is a low-cost validated NGS-based clinical trial assay run in a central lab and represents a efficient high throughput way to screen for patients with HER2 mutations, who can then be successfully enrolled in SUMMIT. The trial was initiated in December of 2018. In the trial, blood samples are taken from patients with metastatic breast cancer or cervical cancer and are streamed with a proprietary HER2 mutation liquid biopsy test developed by Puma. If the patient is found to have a HER2 mutation, the patient is referred to the SUMMIT trial to see if they are eligible to enroll. If the patient does not have a HER2 mutation, the patient is retested 3 to 6 months later and the same exercise is performed again. The HER-Seq trial is currently opened at approximately 18 sites and is in the process of being expanded to the other sites that are currently participating in SUMMIT. The goal of HER-Seq is to screen 2,500 breast cancer patients and 1,200 cervical cancer patients, which should identify more than enough patients for the SUMMIT trial to support the potential accelerated approval NDA filing. We look forward to continuing to update investors on the progress with SUMMIT and HER-Seq on future conference calls.

Also in January 2020, a notice of allowance was issued by the United States Patent and Trademark Office for pending application U.S. 11883474 regarding claims for methods of treatment of treating gefitinib and erlotinib-resistant non-small cell lung cancer. A notice of allowance was also issued in January 2020 for the related continuation application, U.S. 15207349 regarding its claim for methods of treating gefitinib and/or erlotinib-resistant non-small cell lung cancer having a T790M mutation in EGFR. The issue fees for both of these U.S. applications were paid in February 2020. We anticipate that these patents will issue in the coming months, and we look forward to updating investors on this as it progresses.

I will now review our U.S. commercialization progress for NERLYNX. First of all, just a reminder that I will be making forward-looking statements. As you may recall, we have 2 channels that provide NERLYNX to patients. We refer to these as our specialty pharmacy channel and our specialty distribution channel or our in-office distribution channel. In the fourth quarter, bottles sold in the specialty distribution channel represented approximately 22% of the bottles sold in the quarter. This is similar to the approximately 22% in the third quarter. During the fourth quarter, we also noted an increase in the number of new physicians in the specialty pharmacy network writing prescriptions for NERLYNX. The total number of NERLYNX prescribers increased approximately 6.7% in the fourth quarter of 2019 compared to the total number of NERLYNX prescribers in the third quarter of 2019.

Later in the call, Maximo will review the full financial results, but I will now provide you with the current sales results. On Slide 4, it shows the quarterly net sales of NERLYNX since FDA approval. As I previously stated, our net product sales revenue was $58.7 million in the fourth quarter, a 9.7% increase from the $53.5 million in net sales reported in the third quarter of 2019.

During 2019, at the American Society of Clinical Oncology Annual Meeting and at the San Antonio Breast Cancer Symposium, we presented data from our control trial shown that using a dose escalation during the first month of NERLYNX treatment reduces the grade 3 diarrhea associated with NERLYNX and improved tolerability. Since the data was presented, we have noticed that an increasing percentage of new physicians are starting using a lower dose of NERLYNX, which we believe is indicative of physicians using the dose escalation technique described in the data from the control trial. As you can see from the slide, the percent of new prescriptions that appear to be using this dose escalation technique increased from 18.8% in Q3 to 28.7% in Q4.

Slide 6 shows the bottles of neratinib sold by quarter. You will notice that the number of bottles sold in Q4 increased sequentially by approximately 5% from 4,696 in Q3 to 4,935 in Q4. We believe that during the fourth quarter, there was an approximate increase in inventory purchased by the specialty pharmacies, which was approximately 1 week of excess inventory. The specialty pharmacies have been drawing down this inventory in January and February, and we expect this to continue throughout the first quarter. NRX in the fourth quarter declined 16.5% from the third quarter of 2019, while TRX in the fourth quarter declined 3.3% from the third quarter of 2019. The decline in NRX mostly occurred during the months of November and December, and more specifically around the Thanksgiving, Christmas and New Year's holidays. We believe that this may have been due to patients starting NERLYNX -- patients delaying starting NERLYNX until after the holidays in order to avoid experiencing the GI side effects of NERLYNX, which tend to occur with the greatest frequency in the first month or so that the patient is taking the drug.

We did indeed see a large increase in the number of new patients signing up for the specialty pharmacy in January, which we believe may be due to these patients from the fourth quarter who may have delayed starting NERLYNX until after the holidays. The number of new patients signing up for the specialty pharmacy in January was a 30% increase from the average number of patients who signed up per month in the fourth quarter of 2019. We do not know if this increase will continue throughout Q1, but we are monitoring this closely.

As we have discussed with investors in prior earnings calls, when these new patients sign up for the specialty pharmacy, it takes approximately 2 weeks for the patient to actually receive their prescription and for Puma to see the NRX. Therefore, although there's been a sharp increase in the number of patients signing up for the specialty pharmacy in January, since it can take approximately 2 weeks for these patients to actually receive their prescription, NRX in early January started out lighter than expected, but did start trending up in late January and into early February, which we believe is due to this bolus of new patients signing up for the specialty pharmacy and getting their prescriptions filled.

In January, we also saw a slight increase in the number of patients that use the dose escalation technique mentioned in the previous slide as approximately 30% of the new patients starting NERLYNX in January have started at a lower dose. We believe that this may lead to an initial decline in bottles sold in Q1 due to the less expected refills for these patients in the quarter. However, although initially, the dose escalation leads to a decline in bottles sold, if indeed, it decreases the discontinuation rate, similar to what we've seen in the control study, we anticipate that this will lead to an overall increase in the potential revenue per patient that we are able to achieve. We recently performed an analysis of the percent of patients who were still taking NERLYNX after 6 months and the analysis did indeed show an increase in the percent of patients continuing to take the drug after 6 months for those patients who started NERLYNX at a lower dose compared to those who started taking NERLYNX at the standard dose. This data is early, but encouraging, and we will continue to monitor this trend in the future. We will continue to monitor all of these sales trends and look forward to reporting this to investors in future earnings calls. We are also committed to making NERLYNX available to patients across the world, and have formed partnerships throughout the world with companies who have commercial and regulatory expertise in that region.

During 2019, NERLYNX was approved in several countries outside the United States and Europe and -- as is seen on the slide. During 2020, we look forward to the potential for NERLYNX to be approved in additional countries this year, including China and several other countries in Latin America and South America, as is seen on the slide.

In Europe, our partner, Pierre Fabre, launched NERLYNX in Germany, the United Kingdom and Austria during the fourth quarter. We have been very pleased with their initial launch of the drug as it has been exceeding our initial projections, although we recognize it is still early in the launch. We anticipate that Pierre Fabre will launch NERLYNX in approximately 8 to 10 additional countries in Europe throughout 2020, and we look forward to updating investors on the European launch in the future.

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

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Maximo F. Nougues, Puma Biotechnology, Inc. - CFO & Principal Accounting Officer [4]

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Thanks, Alan. Let me start with a quick summary of our financial results for the fourth quarter of 2019. Please note I will make comparisons to Q3 and Q2 2019, which we believe are better indications of our progress as a commercial company than year-over-year comparisons. For more information, I recommend that you refer to our 10-K, which will be filed next week and will include our consolidated financial statements.

In the fourth quarter of 2019, we reported a net loss based on GAAP of $11.2 million or $0.29 per share. Our GAAP net losses for Q3 and Q2 2019 were $16.9 million and $37.4 million, respectively. On a non-GAAP basis, which is adjusted to remove the impact of stock-based compensation, we reported a net income of $0.3 million or $0.01 per share for the fourth quarter of 2019. Gross revenue from NERLYNX sales was $68.5 million in Q4 2019 versus $60.8 million in Q3 2019.

As Alan mentioned, net revenue from NERLYNX sales was $58.7 million, an increase from net sales of $53.5 million for the third quarter of 2019. Also, in Q4 2019, we received a $4 million license fee payment from Pierre Fabre related to an amendment to our license agreement that expanded their territory sales. Our gross to net adjustment in Q4 was about 14%, an increase from the 12% gross to net adjustment in Q3. The increase was driven mostly by higher Medicaid reimbursement. Net product sales for the full year 2019 were $211.6 million versus $200.5 million in 2018. And our gross to net for 2019 full year was about 13.7% compared to about 7% in 2018. Full year 2019 total revenue was $272.3 million compared to $251 million in 2018.

Cost of sales for the fourth quarter was $10.1 million, which included the amortization of milestone payments to the licensor of neratinib of approximately $1 million. Going forward, we will continue to recognize amortization of this -- of the milestone payments to the licensor or about $1 million per quarter as cost of sales.

For fiscal year 2020, Puma anticipates that NERLYNX net sales will be in the range of $215 million to $225 million. Please note, that this all includes revenue in our currently market indication and does not include any revenue from the potential expansion of the label for the third-line metastatic indication. We plan to update our revenue guidance when we receive the FDA decision on the sNDA. We also anticipate that our gross to net in 2020 will be between 16.5% and 17.5%. Furthermore, we anticipate receiving royalties from our partners around the world in the range of $5 million to $10 million and potential licensing fees in the range of $0 to $22 million.

We expect that our Q1 2020 net product sales will be significantly lower than Q4 2019 due to the impact from the previously mentioned seasonality, which resulted, which resulted in lower patient enrollments during the holidays and higher inventory levels at customers in Q4. We also expect to have a high gross to net adjustment in Q1 due to the impact of expected Medicare coverage gap and co-pay charges, which are usually higher at the beginning of the year. Therefore, our NERLYNX net revenue expectations for Q1 are in the range of $40 million to $42 million. We anticipate that the gross to net in Q1 will be approximately 19% to 20%.

SG&A expenses were $31.3 million in the fourth quarter of 2019 compared to $31.4 million and $33.5 million for Q3 and Q2 2019, respectively. SG&A expenses included noncash charge backs for stock-based compensation of $5 million for the fourth quarter of 2019 compared to $5.6 million and $7.4 million for Q3, Q2 2019, respectively.

Research and development expenses were $30.2 million in the fourth quarter compared to $30 million and $36.9 million for Q3 and Q2 2019, respectively. R&D expenses included noncash charges for stock-based compensation of $6.5 million in Q4 compared to $6.6 million and $8 million in Q3 and Q2 2019, respectively. In the fourth quarter of 2019, Puma reported cash burn of approximately $1.2 million compared to cash burn of approximately $7.3 million in Q3 2019 and $14.3 million without onetime events in Q2. We ended 2019 with $111.6 million in cash, cash equivalents and marketable securities. Our accounts receivables balance at December 31 was $28.9 million. Our accounts receivables tend to range between 10 and 65 days, while our days sales outstanding are about 43 days. Our distribution network maintains approximately 4 weeks of inventory, which is an increase of about 1 week from the prior quarter.

Overall, we continue to deploy our financial resources to focus on the advancement of neratinib through ongoing clinical trials and the commercialization of NERLYNX.

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [5]

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Thanks, Maximo. We continue to recognize that we need to improve NERLYNX sales growth. From the senior management in cooperation with Commercial Committee of the Board of Directors continues to remain focused on NERLYNX revenues and sales growth in 2020 and beyond. We have made a number of new hires in our commercial team and specifically within sales management, and we are hopeful that these new team members will make a positive contribution to NERLYNX sales growth, and we look forward to updating investors on this in the future.

This concludes today's presentation. We will now turn the floor back to the operator for Q&A. Brock, can you please open up the Q&A, please?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Ed White of H.C. Wainwright & Company.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [2]

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So Alan, just wanted to ask a question on the 474 and 349 patents. If they are allowed and issued, can you make any comments on what the next steps would be regarding TAGRISSO?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [3]

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Ed, thank you for the question. As I'm sure, you can imagine, the topic you're discussing is a very sensitive legal matter. And so therefore, we cannot comment much on it.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [4]

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Okay, understood. And then you just mentioned about new hires in the commercial. Can you just comment about the level of your sales force right now? Are you rightsized? Are you looking to make additional hires to fill any gaps that you have right now due to turnover?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [5]

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Yes. So I would say we have a team of 80 sales reps. We are performing an exercise to look at whether or not that needs to be expanded or not. We're still in the process of doing that. So I'm hopeful, we'll have that done in the next couple of months. During 2019, we added in a lot of senior management in our sales organization. We have a new VP of sales, new area sales directors, a lot of new regional managers. They've now been with us anywhere from 3 to 6 months or so. So I would imagine we will start to see the benefit of that team working together during 2020, probably more towards the back half of 2020. But I feel good about where that team is.

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Edward Patrick White, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [6]

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Okay. And just staying on the sales. In the past, you had commented that your prescriber reach is around -- for the current label, it's currently around 75%. Are you still around that level or making any more inroads?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [7]

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Yes. In terms of the reach, there's a lot of accounts, especially some of the more higher volume ones, that what we refer to as no-see accounts, meaning that they won't allow a sales rep to go in there and they end up doing their own education work, either by the published research, going to conferences, going to events and things like that. That probably makes up, I would guess, 15% to 20% of the prescriber base. So when you get up to that 75-ish range, which is probably around where we are, that's probably where you would top out. Now there's obviously a reach, but another topic is frequency, right, because the reach side that we used to show just basically showed if that physician had been contacted by Puma. Well, in 2.5 years, you can imagine if -- since we've launched this drug, if you've reached someone once, okay, that's good, but obviously, you'd like to have a more frequent interaction with them, so you can answer their questions, increase their awareness of data and things like that. That is something that we're certainly working to improve on, which is improving the frequency of our contact with physicians.

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Operator [8]

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The next question comes from Alethia Young of Cantor Fitzgerald.

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Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [9]

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Maybe 2 for me. One, I'm not sure if my memory serves me correctly, but I think it does. I just wondered or maybe I missed it on the 2020 guidance. I guess, I'm just trying to get a feel as to whether -- I know you talked about first quarter and some of the trends, but I didn't know if you could offer up any kind of opinion on how you think the rest of the year would shape out? And then maybe my second question, I guess, maybe digging a little bit more into this trend about kind of the population of kind of over the seasonality we saw like some shift. I mean, I feel like we've seen seasonality before, I guess. So I just wanted to see if there's anything particularly different that you're seeing about that particular type of seasonality that's like delayed in January or anything like that?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [10]

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Yes, Alethia. So first of all, in terms of Q1, the 3 impacts you're going to have is the inventory build in Q4, the seasonality, which obviously leads to kind of the delay in filling the gap. So I guess, you're like -- if you were charting NRX, you would see them kind of flat, dropping and then coming back. So it's kind of like a U, if you will, right? So when that's happening, when the incline is -- when you're starting from the trough and kind of coming back up to where you were before, and that's happening in January. Obviously, the month of January gets impacted, and so that's where the quarter gets impacted. So that would be the second one. The third, obviously, is the thing that we mentioned in terms of the lower doses. And then you obviously have, in Q1, the higher gross to net, which, as Maximo said, comes from a lot of the Medicare donut hole and things like that. So all of that together is going to impact Q1. In terms of having seen this in the past, I don't remember last year well enough to speak to it as accurately as I would like to, but I seem to recall that the inventory build this year was higher than last year. So that may have the impact, kind of the additional impact comparing 2020 Q1 to 2019 Q1.

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Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [11]

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And then on the guidance? Since 2020, like, is there a method or are you guys kind of leaving it open end until you figure out trends?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [12]

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No, I would say this. So first of all, in terms of the forecast for 2020, obviously, in Q2, you're not -- you'll have the impact of the inventory. We're assuming the inventory drawdown will be completed by the end of March, so that's obviously going to have a positive impact on the numbers going forward. And then obviously, on the gross to net line as well, that's going to be improved for the rest of the year as well. So you won't -- go ahead, sorry.

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Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [13]

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No. I just was curious if you're willing to quantify the inventory kind of stocking amount like how much of it was in revenue, like it was a couple of million or was it greater than that?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [14]

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Yes, I would say it was probably in the neighborhood of $5 million.

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Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [15]

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Okay, great.

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [16]

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So again, once that's worked down, it, obviously, will have a very positive impact on revenues.

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Operator [17]

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The next question comes from Chris Shibutani of Cowen.

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [18]

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Yes. Alan, you introduced a bit of a metric and observation about looking at the percentage of patients who are still taking the drug after 6 months, and how you seem to have a larger group who started at the lower dose versus the standard. Can you maybe give us a sense for what we're talking about in terms of all patients who are new starts? What portion of those are still taking at 6 months and maybe what those comparative numbers were?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [19]

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Yes, Chris, thanks for the question. Let me take a step back. If you look at our slide, in our presentation, that looks at the percent of patients taking the lower dose of NERLYNX, so I'm looking at it right now, and I believe this is Slide 5, okay? So it takes us up to 90 days from the end of a given month for the specialty pharmacy to be able to tell us if a patient is still taking NERLYNX, right? So there's kind of a lag from that in terms of discontinuations. So unfortunately, for the period kind of post ASCO when we really started to see a lot of the use of the drug -- of the dose escalation commercially, we don't have data yet to capture that. What we did do is we kind of looked back. So you'll notice on the slide, you always historically had some physicians who were doing this on their own, starting at a low dose and kind of titrating up, a lot of that comes from community physicians who treat a lot of different tumor types, so maybe they treat breast and lung and colon and other things, and they do this with other drugs. So there's a lot of oral cancer drugs, where a lot of physicians -- and a lot of those oral cancer drugs have tolerability issues. So a lot of physicians with other drugs will start at a lower dose and then kind of titrate up, and they were doing the same thing with NERLYNX. So what we did is we kind of analyzed those historical data, so kind of going back from Q1 of '19 back. And so again, it's a small sample size, it's not huge, but at least is something that's indicative.

The magnitude of the benefit we saw in terms of the absolute magnitude of increase of patients still taking the drug in the people who started at the lower dose compared to standard was around a double-digit number. I don't have it in front of me, so I can't exactly quote it. But it was an encouraging trend such that we were positively inclined by it.

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [20]

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Then to switch over to the metastatic opportunity, 2 questions there. I think in the past you've talked about how even prior to approval, there was something like 5% of patient use of neratinib was in the metastatic population. Can you update us on what that's been, particularly since the NALA trial data read out mid last year, that would be one? And then number two, is there anything that you can let us know in terms of any regulatory interactions, discussions that you've had that might suggest any reason to be concerned or put at risk the anticipated PDUFA in the second quarter, I believe, actually, the end of April?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [21]

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Okay. So in terms of the off-label use, it was somewhere in the range of 5% to 6% in Q4 of '19. Anecdotally, we hear from physicians, they use it in HER2-mutated breast cancer, they'll use it in patients with brain mets, or they'll use it in HER2 metastatic breast cancer, but I don't know that necessarily that's using the NALA regimen, right, in combination with capecitabine, sometimes it's just using it as a single agent as a salvage therapy or something like that. So that's kind of our current off-label use. Our guidance does not include anything for the third-line metastatic because there's a lot of factors that we need to get clarification on in order to be able to issue that guidance. As you can imagine, there's basically 4 outcomes that we can have in terms of the sNDA, right? The first one would be that the sNDA gets approved early; the second would be it gets approved on time; the third would be there's some delay in the PDUFA date, and it gets approved later; or the fourth would be they issue a CRL. Obviously, each one of those has a different impact on our revenues. And so we took a conservative view, which was to kind of wait to see, which one of those occurs and when it occurs before issuing our guidance. In terms of our interaction with the FDA, I'm not aware of any interaction that would tell me that any 1 of those 4 options has a higher probability or a lower probability.

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Operator [22]

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The next question comes from Yigal Nochomovitz of Citi.

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [23]

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This is Samantha, on for Yigal. I'm curious what percentage of physicians do you believe are actually using dose titration? Is it a core group of physicians? Are you seeing adoption of this across a wide number of doctors?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [24]

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Yes. I would say that in terms of the percent of physicians who are using it, it's probably somewhere in the ballpark of the number of patients we're seeing, so that 30-ish percent is probably a fair number.

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [25]

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Okay. And would you expect your -- the usage of this to continue to increase sort of linearly like we've seen over the last 3 quarters or should this eventually taper off?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [26]

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Our hope would be that it increases because we know that this leads to improved tolerability, right? So I would much rather have the kind of loss of the refill in that first quarter they're on to gain the more refills when they stay on for a longer period of time. And I think in past calls, we kind of went through that mathematical exercise, where it's a pretty big increase in the number of refills we would see if they stayed on for a longer period of time.

I would hope it continues to increase. We were at 28.7%, we're now at 30%. Does that mean it's starting to taper? It could. I think I just need more data to be able to answer that question accurately.

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [27]

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Got it. And then switching gears a bit to the European and the rest of the world territories that have launched so far. How should we think -- I know you gave us some guidance for revenues for those. But how should we think about the cadence of that and how that will go quarter-over-quarter? When NERLYNX is launched in a country, specifically for Europe, how long does it take before it gets in the physician's hands and they're able to prescribe the drug?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [28]

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In most of the European countries, you can't launch without reimbursement. So it would be -- you can't launch the drug unless you're reimbursed. So our assumption would be that when it's launched, it starts getting used. I would expect that as you go out quarter-over-quarter, specifically in Europe, you're going to see the continued growth of the countries that it launched in, but then obviously the uptake in the new countries as well.

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Operator [29]

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The next question is from Michael Schmidt of Guggenheim Securities.

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Kelsey Beatrice Goodwin, Guggenheim Securities, LLC, Research Division - Associate [30]

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This is Kelsey, on for Michael. I just had one quick one on the cervical cancer cohort. We're just wondering kind of given the lack of treatment options in relapsed cervical cancer and KEYTRUDA being a bit of kind of an odd benchmark. I guess, what kind of is the bar there for NERLYNX?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [31]

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Yes, thank you for the question. I would agree that KEYTRUDA could make a good benchmark. I would say that KEYTRUDA would be a good assumption to work with, that's certainly the one that we're kind of working with. I would say our current response rate is obviously higher than KEYTRUDA. I think kind of being in that range kind of bracketed by KEYTRUDA and where we are, I would say, from our view, that's kind of a good range to be in.

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Operator [32]

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The next question is from Kennen Mackay of RBC Capital Markets.

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Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [33]

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Alan, are there any plans to market NERLYNX tablets and doses other than 40 milligrams or to sell bottles with fewer pills at perhaps a slight premium per pill versus the month supply of 240 milligrams at 6 pills per day? It seems like they're obviously financial revenue recognition incentives here for the company, but also incentives for physicians and patients, given potential risk of new drug supply at the end of the month?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [34]

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Ken, thank you for the question. That is indeed something we're looking into. We hope to be able to update you on future calls with regard to that.

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Operator [35]

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The next question is from Paul Choi of Goldman Sachs.

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Paul Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [36]

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I just had a question with regard to the demand side. Alan, can you maybe just clarify a little bit more on your -- on the physician reach and your earlier comments with regard to new prescribers. I guess, how much of the growth is in terms of on the demand side is being driven by these new prescribers that you talked about earlier? And then I had a follow-up question.

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [37]

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That is a good question. I don't have the answer as to what percent of the RX in the quarter are driven by new versus existing. I apologize I don't have the numbers for that. I would say there is no question, a very large opportunity with new prescribers. We have certainly not topped out in terms of the -- where is our reach might be 75% of the physicians have been reached by the sales force. If I had to ballpark estimate, I would say, probably less than half of those have actually prescribed the drug. Again, that's just a ballpark off the top of my head. There is no question a lot of additional opportunity for us with physicians who have not written a prescription for NERLYNX yet and especially increasing education and increasing awareness.

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Paul Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [38]

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Okay, got it. And then, in prior calls, you've talked a little bit about duration in some instances of patients going beyond 12 months of therapy. Is that still the case? And with regard to the dose titration in patients who are doing that, is that increasing, having any effect on duration of treatment here?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [39]

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So in terms of patients going out beyond 1 year, I believe that is still occurring. I don't believe it's in a very large percent, it might be 10% or less. In terms of the dose titration, as we mentioned, our preliminary analysis is showing that patients are staying on for longer. But again, as I mentioned to the earlier question, it's kind of based on that historical group that was doing it. And so it's based on some low numbers. I'm hopeful in the next couple of quarters, we'll be able to update that number and get a much better feel for what it's doing.

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Paul Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [40]

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Okay, great. And then I know you obviously have some puts and takes with regard to the 2020 outlook, including the metastatic indication, and then the development of the patents. But I guess, are you in a comfortable enough position to sort of think about what might be the bookends for how to think about cash utilization or cash burn during this year or any sort of range that you might be able to put out to the Street here, how to think about the puts and takes there?

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [41]

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Maximo, would you like to answer that?

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Maximo F. Nougues, Puma Biotechnology, Inc. - CFO & Principal Accounting Officer [42]

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Yes, sure. Our goal for 2020 is to be cash flow neutral. Obviously, there are some assumptions based on that. But what the guidance we've put in, that's our goal for now.

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Alan H. Auerbach, Puma Biotechnology, Inc. - Founder, Chairman, President, CEO & Secretary [43]

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So at the current guidance, Paul, that would be cash flow neutral.

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Operator [44]

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This concludes our question-and-answer session. I would like to turn the conference back to Mariann for closing remarks.

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Mariann Ohanesian, Puma Biotechnology, Inc. - Senior Director of IR [45]

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

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Operator [46]

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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.