On February 28, 2019 Puma Biotechnology, Inc. (NASDAQ: PBYI), a biopharmaceutical company, reported financial results for the fourth quarter and year ended December 31, 2018 (Press release, Puma Biotechnology, FEB 28, 2019, View Source [SID1234533837]). Unless otherwise stated, all comparisons are for the fourth quarter and full year 2018, compared to the fourth quarter and full year 2017 .
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Product revenue, net consists entirely of sales revenue from NERLYNX, Puma’s first commercial product. Net NERLYNX revenue in the fourth quarter of 2018 was $61.1 million, compared to net NERLYNX revenue of $20.1 million in the fourth quarter of 2017. Net NERLYNX revenue for the full year 2018 was $200.5 million, compared to net NERLYNX revenue of $26.2 million in 2017. Puma received approval from the U.S. Food and Drug Administration (FDA) for NERLYNX (neratinib) for the treatment of early stage HER2-positive breast cancer following adjuvant trastuzumab-based therapy on July 17, 2017, and the Company began shipment to wholesalers at the end of July 2017.
Based on accounting principles generally accepted in the United States (GAAP), Puma reported a net loss of $30.7 million, or $0.80 per share, for the fourth quarter of 2018, compared to a net loss of $64.1 million, or $1.71 per share, for the fourth quarter of 2017. Net loss for the full year 2018 was $113.6 million, or $2.99 per share, compared to $292.0 million, or $7.85 per share, for the full year 2017.
Non-GAAP adjusted net loss was $12.2 million, or $0.32 per share, for the fourth quarter of 2018, compared to non-GAAP adjusted net loss of $38.6 million, or $1.03 per share, for the fourth quarter of 2017. Non-GAAP adjusted net loss for the full year 2018 was $26.7 million, or $0.70 per share, compared to non-GAAP adjusted net loss of $183.3 million, or $4.93 per share, for the full year 2017. Non-GAAP adjusted net loss excludes stock-based compensation expense. For a reconciliation of GAAP net loss to non-GAAP adjusted net loss and GAAP net loss per share to non-GAAP adjusted net loss per share, please see the financial tables at the end of this news release.
Net cash provided by operating activities for the fourth quarter of 2018 was $7.1 million, compared to net cash used in operating activities of $35.6 million for the fourth quarter of 2017. Net cash used in operating activities for the full year 2018 was $24.1 million, compared to $172.5 million for the full year 2017. At December 31, 2018, Puma had cash and cash equivalents of $108.4 million and marketable securities of $57.0 million, compared to cash and cash equivalents of $81.7 million at December 31, 2017.
"2018 was a strong year for Puma as we continued to grow NERLYNX sales, expanded our global presence and made progress in expanding the potential indications for the drug," said Alan H. Auerbach, Chairman, Chief Executive Officer and President of Puma. "This was highlighted by the European Commission granting marketing authorization in Europe, additional licensing agreements designed to provide access to NERLYNX in China, Latin America, Israel and Canada, and announcing data from the Phase III NALA trial, Phase II CONTROL trial, and Phase II SUMMIT trials."
Mr. Auerbach added, "During 2019, we anticipate the following key milestones for Puma: (i) meeting with the FDA and the European Medicines Agency to discuss data from the Phase III trial in third-line metastatic breast cancer patients in the first half of 2019; (ii) meeting with the FDA to discuss the clinical development and regulatory strategy for the SUMMIT trial in the first half of 2019; (iii) announcing regulatory decisions on neratinib for the extended adjuvant HER2-positive early stage breast cancer indication in countries outside of the United States and Europe in the first half of 2019; (iv) presenting data from the Phase III trial in third-line HER2-positive metastatic breast cancer treatment (NALA) in the first half of 2019; (v) reporting additional data from the Phase II CONTROL trial in the first half of 2019; and (vi) reporting Phase II data from the SUMMIT basket trial of neratinib in patients with HER2 mutations in the first half of 2019."
Revenue
Total revenue consists of product revenue, net from sales of NERLYNX, Puma’s first commercial product, and license revenue. For the fourth quarter ended December 31, 2018, total revenue was $71.1 million, of which $61.1 million was net NERLYNX revenue and $10.0 million was license revenue. For the year ended December 31, 2018, total revenue was $251.0 million, of which $200.5 million was net NERLYNX revenue and $50.5 million was license revenue received from Puma’s sub-licensees. This compares to total revenue of $27.7 million in 2017, of which $26.2 million was net NERLYNX revenue and $1.5 million was license revenue.
Operating Costs and Expenses
Total operating costs and expenses were $89.7 million for the fourth quarter of 2018, compared to $85.2 million for the fourth quarter of 2017. Total operating costs and expenses were $345.7 million for the full year 2018 compared to $320.1 million for the full year 2017.
Cost of Sales:
Cost of sales was $10.3 million for the fourth quarter and $34.6 million for the full year 2018, compared to $4.1 million for the fourth quarter and $5.6 million for the full year 2017.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses were $41.0 million for the fourth quarter of 2018, compared to selling, general and administrative expenses of $30.9 million for the fourth quarter of 2017. Selling, general and administrative expenses for full year 2018 were $146.2 million, compared to $106.7 million for full year 2017, an increase of approximately $39.5 million. Increases in SG&A expenses for the full year 2018 primarily related to the hiring of a sales force and the commercial launch of NERLYNX, including approximately $18.9 million in payroll and related expenses, $8.2 million in travel and meetings, $6.0 million in professional fees, such as marketing, market access and analytics, $3.7 million in stock-based compensation and $2.6 million in other expenses, such as software and facilities, to support overall corporate growth.
Research and Development Expenses:
Research and development expenses were $38.4 million for the fourth quarter of 2018, compared to $50.2 million for the fourth quarter of 2017. Research and development expenses for the full year 2018 were $164.9 million, compared to $207.8 million for the full year 2017. The decrease of $42.9 million during the full year 2018 compared to the full year 2017 resulted primarily from decreases of approximately $25.5 million in stock-based compensation, $16.8 million in clinical trial expense, $2.6 million in consultant and contractor expense, partially offset by increases of approximately $2.0 million in R&D expenses primarily related to headcount additions in the medical affairs, quality assurance, regulatory affairs and pharmacovigilance.
Total Other Income (Expenses)
Total other expenses were $12.1 million for the fourth quarter of 2018, compared to total other expenses of $0.5 million for the fourth quarter of 2017. Total other expenses were $18.9 million for the year ended December 31, 2018, compared to total other income of $0.4 million for the year ended December 31, 2017. Other expense recorded in the fourth quarter of 2018 includes $9.0 million that represents an initial estimate of potential amounts that may be owed to class action participants as a result of the February 2019 jury verdict in a class action lawsuit, Hsu vs. Puma Biotechnology, Inc., et al.. The total amount of aggregate class-wide damages is uncertain and will be ascertained only after an extensive claims process and the exhaustion of any appeals. It is possible that the total damages will be higher than this estimate.
Conference Call
Puma will host a conference call to report its fourth quarter and full year 2018 financial results and provide an update on the Company’s business and outlook at 1:30 p.m. PST/4:30 p.m. EST on Thursday, February 28, 2019. The call may be accessed by dialing 1-877-709-8150 (domestic) or 1-201-689-8354 (international) at least 10 minutes prior to the start of the call and referencing the "Puma Biotechnology Conference Call." A live webcast of the conference call and presentation slides may be accessed on the Investors section of the Puma Biotechnology website at View Source A replay of the call will be available approximately one hour after completion of the call and will be archived on the Company’s website for 90 days.