Puma Biotechnology, Inc. (NASDAQ:PBYI) Q4 2023 Earnings Call Transcript
Puma Biotechnology, Inc. (NASDAQ:PBYI) Q4 2023 Earnings Call Transcript February 29, 2024
Puma Biotechnology, Inc. misses on earnings expectations. Reported EPS is $0.26 EPS, expectations were $0.37. Puma Biotechnology, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
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. [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 Investor Relations for Puma Biotechnology. You may begin your conference.
Mariann Ohanesian: Thank you, Alicia. Good afternoon, and welcome to Puma's conference call to discuss our Financial Results for the Fourth Quarter 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 closed today, Puma issued a news release detailing fourth quarter and full year 2023 financial results. That news release with slides that Jeff will refer to and a webcast of this call are accessible via the homepage and Investors 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 SEC from time to time, including our annual report on Form 10-K 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. 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 a substitute for our GAAP financial measures. Please refer to our fourth quarter 2023 news release for a reconciliation of our GAAP to non-GAAP results. I will now turn the call over to Alan.
Alan Auerbach : Thank you, Mariann, and thank you all for joining our call today. Today, Puma reported total revenue for the fourth quarter of $72.2 million. Total revenue includes product revenue net, which consists entirely of NERLYNX sales as well as royalties from our sub-licensees. Product revenue net was $53.2 million in the fourth quarter of 2023, which was an increase from the Q3, 2023 and slightly below $53.7 million reported in Q4 2022. Product revenue for the fourth quarter of 2023 was impacted by approximately $2.1 million of inventory increase at all specialty pharmacies and specialty distributors. Royalty revenue was $19 million in the fourth quarter of 2023 was impacted by approximately $2.1 million of inventory increase at specialty pharmacies and specialty distributors.
Royalty revenue was $19 million in the fourth quarter of 2023 compared to $4.5 million in Q3 of 2023 and $12 million in Q4 of 2022. We reported 2,881 bottles of NERLYNX sold in the fourth quarter 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 of 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. NERLYNX sales were negatively impacted by the decline in enrollments that we mentioned in our third quarter earnings call, a lower than anticipated rate of conversion from enrollment to commercial new patient starts and a higher than expected gross to net.
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 Nougues will follow with highlights of the key components of our financial statements for the fourth quarter of 2023. In February, we were pleased to announce that we initiated the alisertib in cancer or ALISCA-Lung1 trial, a Phase 2 clinical trial of alisertib monotherapy for the treatment of patients with extensive stage small cell lung cancer.
This trial was previously referred to as study PUMA-ALI-4201. 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. alisertib 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 alisertib monotherapy in patients with small cell lung cancer with biomarkers where the aurora kinase pathway plays a role.
The goal would be to correlate the efficacy of these biomarkers subgroups in the ALISCA-Lung1 study to the efficacy that was previously seen in the biomarker subgroups from the randomized trial of paclitaxel plus alisertib 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 two studies, the company believes it would represent a potential accelerated approval strategy and would engage FDA to discuss this further. We currently have four 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 2024.
We also anticipate the initiation of ALISCA-Breast1, a Phase 2 trial of alisertib in combination with endocrine treatment in patients with chemotherapy-naïve, HER2-negative hormone receptor positive breast cancer in Q4 of 2024. We additionally anticipate two clinical data presentations on alisertib in the first half of 2024. Investors will remember that the Phase 2 trial referred to as TBCRC 41, which was a Phase 2 trial of alisertib monotherapy versus alisertib 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 and analysis of biomarkers was performed, in order to determine if the efficacy of alisertib in patients with HER2-negative hormone receptor-positive metastatic breast cancer correlates with any biomarker.
We anticipate that the biomarker data from this trial will be presented in the first half of 2024. In addition, there is an ongoing investigator-sponsored trial of alisertib given in combination with osimertinib in patients with metastatic EGFR-mutant non-small cell lung cancer. More specifically, patients with metastatic EGFR-mutant non-small cell lung cancer are treated with osimertinib and then at the time of progression, alisertib is added to osimertinib in order to see if alisertib 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 2024. Most notably, a recent biomarker analysis from this trial has demonstrated a subgroup of patients with a biomarker where the aurora kinase pathway plays a role, where alisertib 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. 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 potential indication for alisertib 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&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.
Jeff Ludwig: Thanks Alan. Appreciate it and thanks to everyone for joining our fourth 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. 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 reoccurrence. We want to see NERLYNX play a larger role in helping patients reduce derisk a reoccurrence 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. ACP calls in the fourth quarter increased about 12% year-over-year with about 80% of those calls being live interactions. 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. Turning to slide 3. Slide 3 provides an overview of our distribution model. Now this model has not changed and remains separated into two distinct channels, the specialty pharmacy channel and the 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 the remaining 26% went through the specialty distributor channel. 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's net revenue in Q4 2023 was $53.2 million, which is a $1.6 million increase from the $51.6 million we reported in Q3 of 2023, and about a $500,000 reduction from the $53.7 million, we reported in Q4 of 2022. Inventory changes will impact these comparisons, so let me provide some additional information here. In Q4 2023, we estimated that inventory increased by about $2.1 million. As a comparison, we estimate that inventory increased by about $600,000 in Q3 of 2023 and increased by about $2.6 million in Q4 of 2022. Turning to slide 5. 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 ex-factory bottle sales were 2,881, 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 fourth quarter 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. Now let me share some additional metrics and insights into our fourth quarter performance. In Q4, we saw new patient starts or NRx declined 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. 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. 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 fourth quarter new patient starts TRx and overall demand. As I mentioned during the third quarter earnings call, we did see the enrollment trend improve as the third quarter progressed.
Early in the fourth quarter, 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 fourth quarter as patients delay starting therapy until after the holidays. 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.
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 patients have 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. 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. I will now turn the call over to Maximo for a review of our full financial results. Maximo?
Maximo Nougues: Thanks, Jeff. I will begin with a brief summary of our financial results for the fourth quarter of 2023. Please note that I will make comparisons 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-K which will be filed today and includes our financial statements. For the fourth quarter of 2023, we reported net income based on GAAP of $12.3 million or $0.26 per share. This compares to net income in Q3 2023 of $5.8 million 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 $14.8 million or $0.31 per share for the fourth quarter of 2023.
Gross revenue from NERLYNX sales was $64.9 million in Q4 2023 and $60.4 million in Q3 2023. As Alan mentioned it, net product revenue from NERLYNX sales was $53.2 million, an increase from the $51.6 million reported in Q3 2023. Q4 net sales were impacted by lower enrollments in Q3 as well as a higher gross to net in Q4. Inventory buildup by our distributors, was approximately $2.1 million in Q4, which was lower than expected versus approximately $0.6 million of buildup in Q3 2023. Royalty revenue totaled $19 million in the fourth quarter of 2023 compared to $4.5 million in Q3 2020. Higher royalties versus 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 medicare share, particularly from patients in Puerto Rico, the higher government charge backs were the main drivers of the increase versus Q3 2023. Cost of sales for Q4 2023 was $24.3 million, including $2.4 million for the amortization of intangible assets related to our neratinib license. Cost of sales for Q3 2023 was $13.3 million. Going forward, we will continue to recognize amortization of milestones to the licensor of about $2.4 million per quarter as cost of sales. For fiscal year 2024, Puma anticipates that net NERLYNX product revenue will be in the range of $183 million to $190 million. We also anticipate that our gross to net adjustment for the full year will be between 21.5% and 22.5%, driven by the Inflation Reduction Act and higher expected Medicare rebates.
In addition, for fiscal year 2024, we anticipate receiving royalties from our partners around the world in the range of $30 million to $33 million. We expect license revenue in 2024 in the range of $1 million to $2 million. We also expect that net income for the full year will be in the range of $12 million to $15 million. We anticipate that for Q1 2024 NERLYNX product revenue net will be in the range of $38 million to $40 million. Also, we expect Q1 royalty revenues will be in the range of $2.5 million to $3 million and no license revenue. We further estimate that the gross to net adjustment in Q1 2024 will be approximately 23% to 24%. Puma anticipates a Q1 net loss of between $10 million and $12 million. Sorry, let me repeat that. Puma anticipates a Q1 net loss between $10 million and $12 million.
As investors are aware, Q1 usually represents the lowest net product revenue for the fourth quarter due to the burn-off from inventory build from Q4. Also due to our litigation expense and a one-time alliterative 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&A expenses were $20.2 million in the fourth quarter of 2023, compared to $22.8 million for the third quarter. SG&A expenses included non-cash charges for stock-based compensation of $1.8 million for Q4 2023 unchanged from Q3 2023. Research and development expenses were $12.9 million in the fourth quarter of 2023, compared to $11.4 million for the third quarter.
R&D expenses included non-cash charges for stock-based compensation of $0.8 million in the fourth quarter of 2023, unchanged from the third quarter. On the expense side, Puma anticipates flat total operating expenses in 2024 compared to 2023. More specifically, we anticipate SG&A expenses to decrease by 8% to 12%, and R&D expenses to increase 17% to 20% year-over-year. Due to our litigation expenses, we expect G&A expenses in Q1 and Q2 to be significantly higher than Q3 and Q4. In the fourth quarter of 2023, Puma reported cash earned of approximately $10.4 million. This compares to cash earned of approximately $10.6 million in Q3 2023. For the full year, Puma reported cash earned of approximately $14.4 million. 2023, we made a $12.5 million payment for a sales milestone to Pfizer and an $8 million settlement payment as well.
At December 31, 2023, we had approximately $96 million in cash, cash equivalents and marketable securities versus $81 million a year earlier. Our accounts receivables balance was $47.8 million. Our accounts receivable terms range between 10 days and 68 days, while our days sales outstandings are about 46 days. We estimate that as of December 31, 2023, our distribution network maintained approximately three 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.
Alan Auerbach : Thanks, Maximo. We are pleased to report positive net income for the fourth quarter of 2023 and for full year 2023. Puma senior management in cooperation with the Board of Directors continues to remain focused on NERLYNX sales trends in 2024 and beyond and recognizes the fiscal responsibility to shareholders to continue to maintain positive net income. In the fourth quarter 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 fourth quarter and for the full year 2023 reflects these expense reductions. 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 we'll continue to reduce expenses if needed to achieve this. We look forward to updating investors on this in the future. There continues to remain a significant unmet need for patients battling breast cancer, lung cancer and other solid tumors. We at Puma are committed and passionate about finding more effective ways at helping these patients during their journey, and we will continue to strive to achieve that goal. This concludes today's presentation. We will now turn the call back to the operator for Q&A. Operator?
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