Puma Biotechnology, Inc. (PBYI) CEO Alan Auerbach on Q3 2019 Results - Earnings Call Transcript

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Puma Biotechnology, Inc. (NASDAQ:PBYI) Q3 2019 Earnings Conference Call November 6, 2019 4:30 PM ET

Company Participants

Mariann Ohanesian - Senior Director of IR

Alan Auerbach - CEO, President and Chairman

Maximo Nougues - CFO

Conference Call Participants

Alethia Young - Cantor Fitzgerald

Yigal Nochomovitz - Citigroup

Michael Schmidt - Guggenheim

Kennen MacKay - RBC Capital Markets

Paul Choi - Goldman Sachs

Thomas Smith - SVB Leerink

Neena Bitritto-Garg - JPMorgan


Good afternoon. My name is Doug and I'll be your conference call operator today. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn a conference call over to Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. You may begin your conference.

Mariann Ohanesian

Thank you, Doug. Good afternoon and welcome to Puma’s conference call to discuss our financial results for the third quarter of 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 closed today, Puma issued a news release detailing third quarter financial results. That news release, the slides that Alan will refer to and a webcast of this call are accessible via the Home page 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 annual report on Form 10-K for the year ended December 31, 2018, and any subsequent documents we file with the U.S. Securities and Exchange Commission.

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, November 6, 2019. 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 third quarter 2019 news release for a reconciliation of our GAAP and 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 product revenue for the third quarter of 2019 of $53.5 million. Total product revenue consisted of product revenue for sales of NERLYNX. Net sales of NERLYNX were $53.5 million in the third quarter of 2019, a 0.6% decline from the $53.8 million in net sales reported in the second quarter of 2019.

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

In July, we announced that our licensing partner in Canada, Knight Therapeutics, received marketing authorization from Health Canada for NERLYNX for extended adjuvant treatment of adult patients with hormone receptor positive, HER2 positive early stage breast cancer following completion of adjuvant trastuzumab-based therapy.

In September, we announced that our licensing partner in Latin America, Pint Pharma, received their regulatory approval in Argentina for the same indication. Earlier this week, we announced that our licensing partner in Greater China, CANbridge, received marketing approval in Hong Kong. According to the terms of the licensing agreement with all three of those entities, Puma will be receiving royalties from the sales of NERLYNX in those territories once they are commercialized.

In collaboration with our licensing partners, we also anticipate announcing additional regulatory decisions on neratinib in additional countries outside of the United States and Europe in the remainder of 2019 and in 2020.

As investors are aware, in the second quarter of 2019, we presented the 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 for neratinib for the treatment of third-line HER2-positive metastatic breast cancer in June 2019.

The supplemental New Drug Application was accepted by the FDA in September and our anticipated PDUFA date is April of 2020. We will continue to keep up investors updated 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 metastasis.

As investors are aware, Puma has an ongoing basket trial of neratinib in HER2-mutated cancers referred to as the SUMMIT trial. We recently met with the FDA to discuss the regulatory path forward for this indication. And I will refer you to the slide deck on the webcast to discuss this further. As a reminder, I will be making forward-looking statements.

On this slide, the current SUMMIT basket trial is shown. The meeting with the FDA focused on the two baskets that are circled in blue, more specifically the HER2-mutated cervical cancer basket, and the hormone receptor positive HER2 mutated breast cancer basket.

First, I will discuss the hormone receptor positive HER2-mutated breast cancer basket. HER2-mutated in ER-positive breast cancer have been shown to occur in between 7% to 9% of ER positive breast cancer patients. They tend to occur in patients who have previously been treated with multiple lines of endocrine therapy and has been suggested that HER2 mutations may be a mechanism of resistance to endocrine therapy. They tend to be mutually exclusive with HER2 amplifications, so patients with ER-positive breast cancer who have a HER2 mutation tend to be HER20-negative.

Preclinical data has shown that an ER-positive tumors that have HER2 mutation, there is cross talk that occurs between the estrogen receptor and the HER2 mutation, such that if one of these is inhibited, the other one becomes more active. Due to this, we previously modified the SUMMIT trial to treat the ER-positive breast cancer patients with both fulvestrant which is also known as Faslodex, is an estrogen receptor degrader and neratinib to inhibit both the ER and the HER2 mutation.

The results which showed an increase in the response rate and duration of response in patients receiving this combination, were previously presented at the San Antonio Breast Cancer Meeting in 2018.

We performed paired biopsies on ER-positive patients with a HER2 mutation who were treated with sylvestris plus neratinib. The results of this showed that although the patients were HER2 non-amplified or HER2-negative when they started treatment, the tumor appeared to amplify the HER2 receptor as a way to get around of sylvestris and neratinib dual blockade. Therefore, the tumor was switching from being HER2-negative to being HER2-positive, and using the HER2 amplification as a mechanism of resistance to the neratinib plus sylvestris dual blockade.

Due to this, we modified the SUMMIT trial to treat the ER-positive patients with a combination of sylvestris plus neratinib plus trastuzumab which is also known as Herceptin, so that would be inhibited the estrogen receptor with sylvestris, the HER2 mutation with neratinib, and potentially inhibited the mechanism of resistance with trastuzumab.

On Slide 6, you can see the waterfall plots for the updated interim results of the SUMMIT trial where the patients are treated with neratinib monotherapy, neratinib plus sylvestris, and the combination of neratinib plus sylvestris plus trastuzumab. Please note that there is one patient in the neratinib monotherapy cohort and two patients in the neratinib plus sylvestris arm that are not shown because they did not have a post-baseline target lesion available.

This was the data that was discussed with the FDA during our meeting to discuss the regulatory path forward for neratinib in this indication. An update on this data including more patients in the neratinib plus sylvestris plus trastuzumab arm will be presented at the San Antonio Breast Cancer meeting in December.

On this slide you can see the updated progression-free survival curves for the SUMMIT trial for the patients treated with neratinib monotherapy, neratinib plus sylvestris, and the combination of neratinib plus, fulvestrant plus trastuzumab.

The results show that the median PFS for the patients treated with neratinib monotherapy was 3.6 months, the median PFS for the patients in the neratinib plus fulvestrant arm was 5.7 months, and the median PFS for the patients in the neratinib plus fulvestrant plus trastuzumab arm has not been reached.

This data was also discussed with the FDA during our meeting to discuss the regulatory path forward for neratinib in this indication. An update on this data will also be presented at the San Antonio Breast Cancer Meeting in December.

During the meeting with the FDA, the FDA suggested that Puma modify the existing SUMMIT trial to randomize patients to one of three arms, fulvestrant alone, fulvestrant plus trastuzumab plus - I’m sorry, fulvestrant alone, fulvestrant - neratinib plus fulvestrant or neratinib plus fulvestrant plus trastuzumab.

The FDA stated that the reason for requesting this was that the - there was very little published clinical data on the activity of fulvestrant alone or fulvestrant plus trastuzumab in ER-positive, HER2-mutated breast cancer. And that this data would help to isolate neratinib’s contribution to the efficacy of the triplets.

During the meeting, it was discussed that since these patients have received multiple prior endocrine treatments, it would not be expected that fulvestrant alone would have much activity on its own. In addition, since these tumors are HER2 negative, one would not anticipate the combination of trastuzumab plus fulvestrant to have much activity.

The FDA understood this concern and therefore recommended the modification be structured such that it uses Simon two-stage design with an early stopping rule, such that if, indeed, the fulvestrantalone arm or the fulvestrant plus trastuzumab arm did not show efficacy, enrollment to those arms could be stopped early.

Based on this meeting, 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 will initially enroll seven patients during Stage 1, and if no patient in a given arm responds, that arm will be closed to further enrollment. If the first stage - if in the first stage, one or more patients respond, the cohort will then be expanded up to 18 patients. If less than four patients in the expanded arm respond, that arm will be closed to further enrollments. If more than four patients respond, the arm will be expanded and further patients will be enrolled.

Based on the feedback from its meeting with FDA, Puma plans to schedule a pre-NDA meeting with the FDA after it receives the initial results from the Simon two-stage trial to discuss the potential for accelerated approval of neratinib in ER-positive, HER2-negative breast cancer that has a HER2 mutation. Puma anticipate that this meeting will take place sometime between the fourth quarter of 2020 and the second quarter of 2021, which is in approximately 12 to 18 months.

Based on the meeting with FDA, the FDA confirmed that Puma could pull the results from the ongoing SUMMIT trial of neratinib plus trastuzumab plus fulvestrant with the results from the neratinib plus trastuzumab plus fulvestrant arm of the newly amended randomized study for the Accelerated Approval NDA filing.

During the meeting with the FDA, Puma also discussed the data from Summit for the HER2 mutated cervical cancer cohorts. Approximately 5% of metastatic cervical cancer has a HER2 mutation. It tends to occur in adenocarcinomas and in HPV positive tumors.

Investors will remember that data from the summit trial for patients with HER2 mutated cervical cancer treated within neratinib monotherapy were presented at the SGO Annual Meeting earlier this year. This was the waterfall plot and swimmer plot that was presented during SGO. This data was also discussed with the FDA during our meeting to discuss the regulatory path forward for neratinib in this indication.

Slide 12 shows the PFS data that was presented at the SGO annual meeting. The median PFS for the patients taking a neratinib monotherapy was shown to be seven months. This data was also discussed with the FDA during our meeting to discuss the regulatory path forward for neratinib in this indication. Based on the meeting with the FDA, Puma plans to enroll additional patients with HER2 mutated cervical cancer on the neratinib monotherapy arm or SUMMIT.

We planned to use this monotherapy data to file for accelerated approval for this indication. Puma plans to schedule a pre-NDA meeting with the FDA to discuss filing for accelerated approval for neratinib monotherapy in HER2 mutated cervical cancer. We plan to have this meeting sometime between the fourth quarter of 2020 and the second quarter of 2021, which is in approximately 12 to 18 months.

In order to expedite enrollment in the summit study for both ER-positive HER2 negative, HER2 mutated breast cancer and HER2 mutated cervical cancer, Puma plans to expand its current HER2 mutation screening trial 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 the central lab and represents an efficient high throughput way to screen patients from mutations, HER2 virtually mutations who can subsequently be enrolled in the SUMMIT trial.

The trial was initiated in December of 2018 and the protocol is shown on the slide. Blood samples are taken from patients with metastatic breast cancer or cervical cancer and are screened with a proprietary HER2 mutation liquid biopsy test developed by Puma.

If the patient is found to have 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 three to six months later and the same exercise is performed again.

The HER-Seq trial is currently open at 15 sites and is in the process of being expanded to the approximately 50 sites that are currently participating in SUMMIT. The goal in 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 accelerated approval NDA filing.

To conclude based on our recent meeting with the FDA, Puma will be modifying the SUMMIT trial to expand the HER2 mutation breast cancer cohorts, we’ll then continue to enroll the HER2 mutated cervical cancer monotherapy cohorts and expand HER-Seq to expedite the enrollment in the SUMMIT with the goal of conducting a pre-NDA meeting with FDA for both the HER2 mutated breast cancer and HER2 mutated cervical cancer indications in approximately 12 to 18 months. We anticipate that investors may ask whether this expansion of HER-Seq and SUMMIT trial will have a negative impact on Puma's expenses going forward.

Puma anticipates that its research and development budget will be decreasing significantly going forward due to the expenses associated with the ExteNET trial, NALA trial, and CONTROL trials declining significantly going forward. These three trials make up approximately 23% to 25% of Puma’s current clinical research and development budget.

Puma expects that the decrease in these expenses should open up room in the research and development budget for the HER-Seq and SUMMIT expansions such that there should continue to be no increase in Puma’s R&D expenses and that Puma will continue to see an overall decline in R&D expenses going forward.

I will now review our US commercialization progress for NERLYNX. Just a reminder that I will be making forward-looking statements. On Slide 3, as you may recall, we have two channels that provide NERLYNX to patients. We refer to these as our specialty pharmacy channel and our specialty distribution channel or we also refer to this as our in-office dispensing channel.

In the third quarter, bottle sold into the specialty distribution channel represented approximately 21.5% of the total bottle sold in the quarter. This is similar to the approximately 21.8% in the second quarter. Later in the call, Maximo will review the full financial results but I will now provide you with the current sales numbers.

Slide 4 shows the quarterly net sales of NERLYNX since FDA approval. As I previously stated, our net product sales revenue was $53.5 million in the third quarter, a 0.6% decline from the $53.8 million in net sales reported in the second quarter of 2019. Although new prescriptions grew 4% sequentially in Q3 over Q2, we still saw a decline in product sales.

We experienced a decline in Q3 due to two key factors. First, we have mentioned in previous calls that in the commercial setting patient discontinuations have had an adverse impact in NERLYNX revenues as patients tend to discontinue neratinib early in the treatment course usually the first month which greatly reduces the potential revenue per patient that we are able to achieve. This continues to play a role in the third quarter.

As investors are also aware, the current label for NERLYNX only includes data from the loperamide-alone arm of control and therefore loperamide tends to be the most frequently used anti-diarrheal to prevent the neratinib-related diarrhea. In this arm of the control trial which is shown on the slide, discontinuation is due to diarrhea or other reasons were 44.5% in the poster presented at ASCO in 2009 as is highlighted in red on Slide 5. In 2018, Puma filed with the FDA to have the label expanded to initially include the data from the loperamide plus budesonide arm of the trial and this label expansion was approved last month.

In the data presented at ASCO, the data from this arm of the trial showed in improved tolerability profile as only 20.3% percent of the patients discontinued neratinib due to diarrhea or other reasons.

Puma believes that the inclusion of this data in the label will increase awareness of the loperamide plus budesonide combination which could help to reduce discontinuations. In addition, Puma expects that the interim results of the CONTROL trial, including data on the cohorts receiving loperamide alone, or in combination with budesonide or colestipol and also from the dose escalation cohorts will be published in a medical journal in the fourth quarter of 2019 as well, which Puma company believes will further improve the awareness of these techniques for reducing the neratinib-related diarrhea and improving the tolerability of the drug.

Investors will note that the dose escalation arm of the CONTROL trial which involves starting the neratinib at a lower dose and then increasing the dose of neratinib during the first month of treatment showed a low rate of patient discontinuations with 13.3% of the patients discontinuing neratinib as shown in the poster presented at ASCO. Since this data was presented at ASCO this year, we have noticed that an increasing percentage of new prescriptions are starting with a lower dose of NERLYNX which we believe is indicative of patients using this dose escalation technique.

As you can see from the slide the percentage of new prescriptions that appear to be using this dose escalation technique increased from 9% in Q2 to 18% in Q3 and has increased further 25% in the month of October.

Slide 7 shows the bottles of NERLYNX sold by quarter. You will notice that the number of bottles sold in Q3 declined sequentially by 2% from 4,791 in Q2 to 4,696 in Q3. We believe that this may have been impacted by discontinuations but may also have been impacted by new patients who started NERLYNX at a lower dose, and therefore it had less refills in the quarter.

The commercial bottle of NERLYNX contains 180 tablets, which are 40 milligrams each. When a patient is given a full dose of NERLYNX at 240 milligrams a day or 6 tablets a day, the prescription is refilled once a month. If the dose escalation technique used in control is used, then the patient initially starts NERLYNX at 120 milligrams per day, then is escalated to 200 milligrams per day. And then it escalated to 240 milligrams per day during the first month.

If the patient uses this dose escalation approach, then the first prescription will last longer than a month as the 180 tablets will last longer than 4 weeks. Once the patient dose escalates to 240 milligrams, the refill frequency will then be once per month. With the increase in the number of patients in the third quarter that use the dose escalation technique shown in the slide, we may have seen initial decline in bottles sold due to less refills in these patients.

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 CONTROL, it is anticipated that this will lead to an overall increase in the potential revenue per patient that we are able to achieve.

You will note on Slide 7 that the number of bottles sold in October was approximately 1,650, which represents a 5.4% increase over the average bottles sold per month in the third quarter. We speculate that this increase may result from patients’ dose escalating in Q3 to Q4 that they are refilling their prescriptions more frequently. And also due to a higher percentage of patients not discontinuing NERLYNX, which may also result in a higher number of bottles sold per patient. We will continue to monitor these trends and look forward to reporting this to investors in future earnings calls.

On Slide 8, we are committed to making NERLYNX available to patients across the world and have also formed great partnerships throughout the world with companies who have commercial and regulatory expertise in that region. We are pleased with the recent approvals in Argentina and Hong Kong and look forward to more this year as you can see in the Slide 8.

In Europe our partner Pierre Fabre is currently planning on launching NERLYNX in Germany, the United Kingdom, and Austria this quarter, and we look forward to updating investors on that launch in the future.

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

Maximo Nougues

Thanks Alan.

Let me start with a quick summary of our financial results for the third quarter of 2019. Please note that I will make comparisons to Q2 and Q1 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-Q which will be filed tomorrow and includes our consolidated financial statement.

For the third quarter of 2019 we reported a net loss based on GAAP of $16.9 million or $0.44 per share. Our GAAP net losses for Q2 and Q1 2019 were $37.4 million and $10.1 million respectively. As you may recall, in Q1 2019 we booked $53.5 million of license revenue received from our sub-licensees. That revenue was partially offset by $16.4 million of net expense as a result from March 2019 jury verdict against Puma.

On a non-GAAP basis which is adjusted to remove the impact of stock-based compensation, we reported a net loss of $4.7 million or $0.12 per share for the third quarter of 2019. Gross revenue from NERLYNX sales was $60.8 million in Q3 2019 versus $60.3 million in Q2 2019.

As I mentioned, net revenue from NERLYNX sales was $53.5 million, a slight decline from net sales of $53.8 million for the second quarter of 2019. Our gross to net adjustment in Q3 was about 12%, a slight increase from the 11% net adjustment in Q2. The increase was driven by higher Medicare reimbursements and GPO expenses. We expect gross to net to increase to approximately 13% for Q4 2019.

Cost of sales for the third quarter was $9.4 million, which included the amortization of milestone payments to the licensure of neratinib of approximately $1 million. Going forward, we will continue to recognize amortization of the milestone payments to the licensure or about $1 million per quarter as cost of sales.

For fiscal year 2019, Puma anticipates a NERLYNX net sales will be in the range of $205 million to $210 million. This represents a reduction versus our prior guidance. This reduction is due to an increase in the gross to net, which we now anticipate will be between 13% and 14% for the full-year 2019 as well as flat revenue in Q3.

We are also taking a conservative view to Q4 to account for a possible reduction in new patients starts due to the holidays as well as a short term impact of more patients starting in NERLYNX at a lower dose based on using the dose escalation technique.

We continue to anticipate that Puma will receive licensing and royalty revenues from its licensing partners in the range of $56 million to $60 million in 2019. SG&A expenses were $31.4 million in the third quarter of 2019 compared to $33.5 million and $45.5 million for Q2 and Q1 2019 respectively.

SG&A expenses included non-cash charges for stock based compensation of $5.6 million for the third quarter of 2019 compared to $7.4 million and $9.9 million for Q2 and Q1 2019 respectively. Research and development expenses were $30 million in the third quarter compared to $36.9 million and $35.7 million for Q2 and Q1 2019 respectively.

R&D expenses included noncash charges for stock based compensation of $6.6 million in Q3 compared to $8 million and $8.3 million for Q2 and Q1 2019 respectively. In the third quarter of 2019, Puma reported cash burn of approximately $7.3 million compared to cash burn approximately $14.3 million with our one-time event in Q2 and $15 million in Q1 2019. We ended the third quarter of 2019 with $110.4 million in cash, cash equivalent and marketable securities.

Our accounts receivables balance on September 30 was $27.2 million. Our cash receivable terms range between 10 and 68 days, while our days sales outstanding are about 42 days. Our distribution network maintains approximately three weeks of inventory. Overall, we continue to deploy our financial resources to focus on the advancements of neratinib through ongoing clinical trials on the commercialization of NERLYNX.

Alan Auerbach

Thanks Maximo.

We are not pleased with our third quarter revenues and recognize that we need to improve NERLYNX sales growth. Puma senior management in cooperation with the Commercialization Committee of the board of directors continues to remain focused on NERLYNX revenues in sales and sales growth in 2019 and beyond.

As was mentioned in the commercial presentation October's bottle sold showed an increase of the average monthly bottle sold in Q3, which we are hopeful is indicative of an improvement in NERLYNX sales and we will continue to monitor these trends and look forward to discussing them further with investors in future calls.

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

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Alethia Young with Cantor Fitzgerald. Please proceed with your question.

Alethia Young

I have a couple. The first one, could you potentially clarify the percentage of people that you kind of estimate might have gone to a titration regimen, so we can maybe perhaps put in context how to think about October? And then on the second question, looking at what the math says on your fourth quarter number, we need to be $53 million or about $58 million, if I think my math is right. So maybe talk about like under scenario, why you have confidence that you think you can maintain kind of flat revenues from where we are today and that one might be the titration, but I just wanted to talk about other puts and takes related to that as well? Thanks.

Alan Auerbach

Okay. Alethia, thank you for the question. Your first question was on what percent of the patients are using the dose titration, correct?

Alethia Young

Yes. With the ballpark, if possible.

Alan Auerbach

Yes. Well if you look on Slide 6 of our commercial presentation, we said that 18% of the patients in Q3 we believe used the dose titration and 20% - in Q4 for October, the month of October, it was up to 25%.

Alethia Young

Okay. And then can you just - so that - so when you - can you kind of walk us through the math to think about like how you could get kind of an acceleration as you were talking about it seems like the scenario is, is that people were - the titration disrupted the amount of bottles sold and then…

Alan Auerbach


Alethia Young

There's some possibility you get the math back on that in the fourth quarter and beyond. So maybe can you just flesh out a little bit more?

Alan Auerbach

Yes, sure. Okay. So let's look at it this way, right. So just using the loperamide alone regimen from control, the discontinuation rate was 45%, right. And we know that the discontinuations with neratinib tend to all be pretty much in month 1 or in month 12. So it's kind of a barbell, right, if they make it past the first month, they go all the way to month 12.

So using that assumption in a model, right, for every 100 patients, if you have 45% of them just get one bottle and stop and the other 55 get the full year, right. The average bottle sold to those 100 patients is somewhere on six or seven. If you use the budesonide arm, which is a lower discontinuation rate which is 20% and do the same math, right, assume 20% of them just get one bottle, the rest go the full year, that takes the average up to somewhere between 9 to 10 bottles per patient.

And on the dose escalation, using the 13% discontinuation rate from the data presented at ASCO, again assume that you get 13 patients who just get one bottle and stop, and then assume for the others they're just getting 11 bottles, right, because they're one short because the dose escalation. That again takes you up to an average bottles of between 9 and 10. So, using that math, I can see where we can get to an increase in the average bottles per patient.

Alethia Young

And then can you talk a little bit more about trend related to discontinuations perhaps in the fourth quarter? It seems like probably from kind of the middle of November to December might be a challenge, but just maybe can you talk about how you think those might play out for you as well just based on not discontinuations, but just people not going on therapy shall we say.

Alan Auerbach

Yes. So we don't notice, I'm not aware of any patients like taking a drug holiday like stopping during the holidays, and then restarting in January. So for continuing patients, I don't see any disruption. In terms of new patient starts in for Thanksgiving and Christmas, different regions and different sales reps you know give us different indications. Some say they don't feel there’ll be a slowdown. Some say there might be.

So I think we're kind of - we don't have any reason to absolutely believe that we're going to see that in this Thanksgiving and Christmas. We're just taking the conservative route, which is to assume that's correct. And we're just taking the conservative view on that


Our next question comes from the line of Yigal Nochomovitz with Citigroup. Please proceed with your question.

Yigal Nochomovitz

Alan, are you seeing any early trends in the fourth quarter with respect to the prophylactic budesonide and the uptake of that relative to loperamide?

Alan Auerbach

That is a difficult question, Yigal because of that label update was just done recently, I have not been able to - it was just done like in October. I have not gotten a chance to look at that data. I know last time I looked at the voucher analysis if I remember, and I'm grabbing to see if I have it here. And I thought I brought it with me - I did, yes. If you look at the vouchers because we have the antidiarrheal vouchers in Q3, other than the use of loperamide, budesonide was the most frequently used drug through the vouchers.

Yigal Nochomovitz

And then with respect to - I had a question on this new trial for the updated design for the SUMMIT trial.

Alan Auerbach


Yigal Nochomovitz

So I think you were saying that - the FDA was saying you wouldn't expect to see a response on fulvestrant since they had previously been exposed to that mechanism. And then you wouldn't expect to see a response on trastuzumab either because they were - they want HER2 amplified. So I guess the question is why - why does the FDA even insist on fulvestrant monotherapy, why not just do fulvestrant plus tras compared to the triple? Is there a reason they want fulvestrant by itself?

Alan Auerbach

That’s a good question. That was discussed. And in our meeting with them, I think it was - just to be able to separate the activity of all the components because clearly, if you look at the activity of the triple looks very good. And I think they just wanted to get a better feel for what role each of the components was playing.

And so, by - I completely understand your concern, which is you wouldn't really expect sylvestris alone to have much activity, and so, that was one of the reasons we perceived that they recommended this type of assignment to stage, so you're just exposing a small number of patients to it. And if indeed there's no signal, it drops off quick. And you limit the exposure of the patients to what is perceived to be an inferior regimen.

Yigal Nochomovitz

And then with respect to the finance side of the company and the R&D budgeting, you said your R&D budget will decrease significantly with the roll-off of alone arm of CONTROL. So, I'm just wondering, if the revenue sort of stay where they are at the current rate, do you think you can get to a cash flow breakeven just by tightening up on the OpEx line or is that not for a consideration?

Alan Auerbach

Well, look, obviously our goal is to grow NERLYNX revenue. You've certainly seen a pretty sharp drop in our R&D expenses from Q2 to Q3. And we're going to obviously continue to drop that again. I don't know the answer to that. We haven't really modeled the scenario of what happens if we just get to flat revenues. I don't think that's something we really want to - want as a goal. We're obviously looking to grow them. So, I don't know the answer to that question.

Yigal Nochomovitz

Okay. And then just one more, given the recent results with neratinib in the metastatic breast cancer setting, I was just curious to get your thoughts on how you see what the NALA trial has been providing a differentiated option for patients in metastatic breast cancer and where you would see neratinib in with the spec relative to the tucatinib in this whole line of patients?

Alan Auerbach

Yes. I think we aren't going to know the answer to that until we see the data and get a better understanding for both the safety as well as the efficacy from that trial. So I don't know that we can answer that until we see the data


Our next question comes from the line of Michael Schmidt with Guggenheim. Please proceed with your question.

Michael Schmidt

I had two. So, one question on regarding the cervical cancer cohort or study I guess what did the FDA communicated to you with respect to potential size, a number of patients required at a minimum for an IND filing or sNDA filing rather and then what sort of is the efficacy hurdle in that setting?

Alan Auerbach

So, in terms of the cervical cancer cohorts, I don't remember any specific number being discussed with the FDA. I think that it was somewhat in our judgment. I am comfortable especially with the screening from using HER-Seq, which obviously is going to find a lot of these patients to put into SUMMIT. That will have a comfortable number to be able to put in the sNDA in the timeline we're looking for.

In terms of the bar if you will, I don't know the answer to that. I seem to remember that KEYTRUDA got approved in a single arm study and I'm talking off the top my head here. But I’ve seemed to recall that response rate was somewhere around 15% to 20% or something like that. So, I think that was - that’s seem to be recollection of it.

Michael Schmidt

And then, I guess the other question I had just on the bottled volume that the chart that you show that month. I'm just curious and I know you did mention the slight increase in gross to net this year towards the end of the year, it sounds like more so. But I guess did you notice any impact on demand I suppose potentially driven by some of the price increases that have been taken?

Alan Auerbach

We have not noticed any change in demand due to the price increase.


Our next question comes from the line of Kennen MacKay from RBC Capital Markets. Please proceed with your question.

Kennen MacKay

Alan, just one housekeeping question as we think about the control trial. You've mentioned in the second expansion portion of that trial if more than four patients respond of the 18 in that setting, this could be expanded further. What would the third expansion be and potentially how many patients from your conversation with the FDA might be required for a registrational package in HER2 mutated. And apologies, that was SUMMIT not - so I think I missed both.

Alan Auerbach

Okay. Yes.

Kennen MacKay

And next on commercial, I just wanted to make sure I heard you correctly that prescriptions grew sequentially quarter over quarter. Was there a qualifier that that was around an Rx and not TRx? I'm just thinking about the reduced dosing dynamic and potential the monthly bottle to last beyond a month. Can you help us understand trends in new-to-brand prescriptions which might be indicative of new starts and whether there's new growth there? Thanks so much.

Alan Auerbach

So in terms of your first question on the SUMMIT study, so we'll be expanding it so that it's fulvestrant alone; trastuzumab, fulvestrant; neratinib plus fulvestrant plus trastuzumab. DNA 7 in the first, if they if one of seven doesn't respond, you shut it down. If it does, we expand it to 18 so it’s another 11 patients there.

In terms of what it expands to and what's needed for the approval for the FNDA, it's really going to depend on what we see and how much the operation is. I mean without seeing the data on the trastuzumab, fulvestrant and fulvestrant alone, it’s obviously challenging to see that.

I mean we can get a pretty good idea of what we think the triplet will show based on the data we have so far. It's just very challenging to say with the other two arms will show. So if they are indeed low in activity, I don't think we would need a lot of patients. If for some reason we see activity more than we expected, you may need more.

So I don't know the answer to that but I think we are comfortable based on our assumptions that the timeline we looked at which is kind of the Q4 2020 through Q2 of 2021, that timeframe would be enough data for us to have the Pre-NDA meeting with FDA.

Kennen MacKay

And just any commentary around the prescription or any clarification around prescription commentary or the brand?

Alan Auerbach

Yes. So there was NRF increase of 4% from Q2 to Q3. I don't have the TRx in front of me, so I can't answer that question. Yes, I don't have that data in front of me, so I don't remember it. So, I can't - I don't know the answer to that one.


Our next question comes from the line of Paul Choi with Goldman Sachs. Please proceed with your question.

Paul Choi

My first question is you presented the slide on control with regard to the results with the various anti-diarrheal strategies. And I guess Alan as your sales force has been in the field has there been any updated thoughts with - on views on non-loperamide utilization? And has any one of the other options there proven or proven to be or resonate more with clinicians in the field? Any color there you could provide would be great.

Alan Auerbach

Yes. So, I would say that based on the slide you saw in our commercial deck with regard to the adoption of the dose escalation that - the feedback we've been getting is it resonates very positively. I’d rather than say very positively because a lot of physicians already do this for a lot of oral cancer drugs where they started half a dose and kind of worked their way up for tolerability.

The second is it's very easy to implement, right? It doesn't require another prescription to be written. It's not an increase in the pill burden on the patients that they're taking lots of pills during multiple times a day. That has definitely resonated well. So, I would say I would not be surprised to see the people who were just using Imodium alone, right? To prophylax the patient switching to using the dose escalation. And remember when you do the dose escalation there's no prophylaxis use, there’s no anti-diarrheal prophylaxis used. You just use Imodium if you need it.

Paul Choi

And any utilization of any of the other agents either in combination with dose escalation or in combination at higher doses of NERLYNX?

Alan Auerbach

Yes. I don't know if once - with NERLYNX, the side effect profile is that you get a very high incidence of grade 3 diarrhea the first month. It's lower in the second month, and then by kind of month three, four, etcetera, it diminishes greatly. So it's really that first month or two you actually get past. I'm not aware of people using the dose escalation when they do get grade 3 diarrhea. Are they just using Imodium or a combination?

The feedback we've tended to be getting from the field is that when they're using the dose escalation, they're just not seeing grade 3 diarrhea, they might be seeing grade 1 or grade 2, but they’re not seeing the grade 3.

Paul Choi

And then just on the international side, you've had some approvals and other additional countries come online recently. I was just wondering, could you maybe lay out for us in the next year or so the - any other geographies that we should be mindful of where you could see incremental contributions from your partners in 2020? Thank you.

Alan Auerbach

Yes. So in terms of the - from a launch perspective, Pierre Fabre, our partner in Europe is going to first launch in the U.K., Germany and Austria, and then we'll roll out the other 25 to 30 countries during 2020. So, that obviously will have a revenue ad for us.

In terms of new approvals, China is probably the next big one for us. And I believe on the slide we gave, a timing for that. If I remember correctly, that was for some time in the first half of 2020, want to check that slide real quick. Yes, China in the first half of 2020, so that would probably be the next big one.


Our next question comes from the line of Thomas Smith from SVB Leerink. Please proceed with your question.

Thomas Smith

First just in terms of the prescriber base, Alan can you give us a sense for how many unique physicians prescribe NERLYNX in the quarter? And then I guess how this is change versus last quarter? Do you still feel like you're still growing the prescriber base here?

Alan Auerbach

Yes. So I don't have the number of new prescribers in the quarter in front of me but yes, we do monitor kind of new physicians, if you will, and every week, we continue to see new physicians prescribing the drug. So I don't think we've maxed out in terms of our total number of new physicians. I don't - like I said, I don't have the numbers in front of me so I can't really give any transparency into kind of how quick it's growing or anything like that but we - from a numerical standpoint, yes, it is increasing.

Thomas Smith

Okay. And then can you comment on sales force stability? I know this was an issue back in Q1, but I just wanted to get your sense for any changes in the makeup of the sales force and whether this could have had any impact on sales in the quarter?

Alan Auerbach

Yes. So we have 80 sales reps and usually the averages you'll have 10% to 15% of your territories open at any time point. Currently, we've got seven open positions. So we're kind of below that 10% threshold. So that continues to remain on the low side for us. And we're very pleased with that.

Thomas Smith

Right. Okay. And then, one last question around off-label use. I was wondering if you could just give us a sense for how much of NERLYNX sales are coming from either the metastatic setting or use in patients with brain mets? Just any kind of quantification around that would be really helpful.

Alan Auerbach

So we see less than 5% of our sales coming from the metastatic indication and that tends to be spread across metastatic use, not necessarily in the NALA regimen in combination with capecitabine, but they can give it like as a single agent and things like that.

We couldn't get - can’t get use in brain mets, and then we also get off-label use in the HER2 mutations. So because we don't market that, we only market the extended adjuvant, we don't get a lot of transparency and exactly what percent of that - less than 5% is coming from each one. But I can say anecdotally speaking to physicians, we do hear a lot of people using it for the HER2 mutations.


Our next question comes from the line of Cory Kasimov from JPMorgan. Please proceed with your question.

Neena Bitritto-Garg

This is Neena on for Cory. So just a follow-up on the prior question about the prescriber base, can you share what percentage of target prescribers you've been able to reach? This quarter, I think it was 75% last quarter and kind of to follow on that, can you also share what percentage you're seeing actually convert over to prescribers?

Alan Auerbach

Yes. So in terms of our prescriber reach, I don't think it increased much from last quarter. And again, reach is defined as just we met with them once. That’s not obviously means they're prescribers. I don't have the numbers in front of me of what percent of the prescribers we've reached. Have actually you know converted to prescribers. But as I said it's continuing to increase.

Neena Bitritto-Garg

And then what are you kind of seeing from you know talking about the sales force kind of turnover? Are you seeing kind of the new sales reps that you place earlier this year starting to get a little bit more productive? What are you just generally seeing there?

Alan Auerbach

Yes. That's a good question. I think that what we tend to see with the sales force is that you know obviously when they first come on line, you know just having someone there can help the productivity. But you know over time the more meetings they're doing with doctors and obviously you know the more, the more active they're getting. You know we do tend to see them getting more productive. So yes, I do think with the newer reps from earlier this year we are seeing good growth in them going forward.


This concludes our Q&A session. I'd like to turn the call back to Mariann for closing remarks.

Mariann Ohanesian

Thank you, Doug. Thank you for your time and attention today. As a reminder, this call may be accessed by a replay of the webcast of at pumabiotechnology.com beginning later today. Have a good evening.


Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.

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