On August 9, 2018 Puma Biotechnology, Inc. (NASDAQ: PBYI), a biopharmaceutical company, reported its financial results for the second quarter ended June 30, 2018 (Press release, Puma Biotechnology, AUG 9, 2018, View Source [SID1234528600]). Unless otherwise stated, all comparisons are for the second quarter 2018 compared to the second quarter 2017.

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On July 17, 2017, Puma Biotechnology 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, and the Company began shipment to wholesalers at the end of July 2017. Prior to the launch of NERLYNX the Company had no product revenue. Net product revenue from sales of NERLYNX in the second quarter of 2018 amounted to $50.8 million, compared to net product revenue of $36.0 million and $20.1 million in the first quarter of 2018 and fourth quarter of 2017, respectively.

Based on accounting principles generally accepted in the United States (GAAP), Puma reported a net loss applicable to common stock of $44.3 million, or $1.17 per share, for the second quarter of 2018, compared to a net loss applicable to common stock of $77.8 million, or $2.10 per share, for the second quarter of 2017. Net loss applicable to common stock for the first six months of 2018 was $68.7 million, or $1.82 per share, compared to $150.7 million, or $4.08 per share, for the first six months of 2017.

Non-GAAP adjusted net loss was $22.2 million, or $0.59 per share, for the second quarter of 2018, compared to non-GAAP adjusted net loss of $50.9 million, or $1.38 per share, for the second quarter of 2017. Non-GAAP adjusted net loss for the first six months of 2018 was $21.2 million, or $0.56 per share, compared to non-GAAP adjusted net loss of $94.0 million, or $2.54 per share, for the first six months of 2017. Non-GAAP adjusted net loss excludes stock-based compensation expense, which represents a significant portion of overall expense and has no impact on the cash position of the Company. 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 used in operating activities for the second quarter of 2018 was $17.6 million. Net cash used in operating activities for the first six months of 2018 was $23.9 million. At June 30, 2018, Puma had cash and cash equivalents of $95.9 million and marketable securities of $38.6 million, compared to cash and cash equivalents of $81.7 million at December 31, 2017.

"In the second quarter of 2018, we saw strong commercial progress for Puma," said Alan H. Auerbach, Chairman, Chief Executive Officer and President of Puma. "We continued to grow NERLYNX sales in the United States, with net sales of NERLYNX rising approximately 41% from the 2018 first quarter. We were also pleased that the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending marketing authorization for NERLYNX for the extended adjuvant treatment of adult patients with early stage hormone receptor positive HER2-overexpressed/amplified breast cancer and who are less than one year from the completion of prior adjuvant trastuzumab based therapy. The CHMP recommendation will now be reviewed by the European Commission (EC), which has the authority to approve medicines for the European Union (EU)."

Mr. Auerbach added, "We anticipate the following key milestones over the next 12 months: (i) in the third quarter of 2018, a decision by the European Commission (EC) regarding the Marketing Authorisation Application for neratinib; (ii) in the second half of 2018 or first half of 2019, reporting data from the Phase III NALA trial in third-line metastatic breast cancer patients; (iii) in the second half of 2018 and first half of 2019, submitting for regulatory approval of NERLYNX for the extended adjuvant HER2-positive early stage breast cancer indication in additional countries; (iv) in the fourth quarter of 2018, reporting additional data from the Phase II CONTROL trial; and (v) in the fourth quarter of 2018 and first half of 2019, reporting additional data from the Phase II SUMMIT trial."

Revenue

Total revenue consists of net product revenue from sales of NERLYNX, Puma’s first and only commercial product to date, and license revenue. The FDA approved NERLYNX for commercial sale in the United States in July 2017 and Puma commenced shipment to wholesalers in late July. For the second quarter of 2018, total revenue was $50.8 million, all of which was net product revenue. For the first six months of 2018, total revenue was $117.3 million, of which $86.8 million was net product revenue and $30.5 million was license revenue received from Puma’s sub-licensees.

Operating Costs and Expenses

Operating costs and expenses were $92.2 million for the second quarter of 2018, compared to $78.2 million for the second quarter of 2017. Operating costs and expenses for the first six months of 2018 were $182.1 million, compared to $151.4 million for the first six months of 2017.

Cost of Sales:

Cost of sales was $8.8 million for the second quarter of 2018 and $15.2 million for the first six months of 2018. The Company had no product sales prior to the third quarter of 2017.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were $40.1 million for the second quarter of 2018, compared to $24.9 million for the second quarter of 2017. SG&A expenses for the first six months of 2018 were $76.7 million, compared to $43.3 million for the first six months of 2017. This approximately $33.4 million increase was attributable to an increase of approximately $8.5 million in external expenses, such as marketing, commercialization support and commercial strategy. Additionally, internal expenses increased approximately $22.0 million, primarily due to the hiring of a salesforce for the commercialization of NERLYNX in the United States. Finally, employee stock-based compensation increased approximately $2.9 million due to the hiring of the salesforce in conjunction with the NERLYNX commercial launch. Puma expects SG&A expenses in 2018 and into 2019 to remain higher than in 2017 as it launches NERLYNX commercially in the United States and other territories.

Research and Development Expenses:

Research and development (R&D) expenses were $43.3 million for the second quarter of 2018, compared to $53.3 million for the second quarter of 2017. R&D expenses for the first six months of 2018 were $90.2 million, compared to $108.1 million for the first six months of 2017. The $17.9 million year-to-date decrease resulted primarily from a decrease of approximately $12.1 million for stock-based compensation and a decrease of approximately $9.0 million for clinical trial expenses. This was partially offset by an increase of approximately $3.2 million in other expenses, such as additional personnel needed to support medical affairs and quality assurance. We expect R&D expenses in 2018 to continue to decline slightly when compared with R&D expenses in 2017 based on a decline in clinical trial activities as existing trials continue to wind down.