Good afternoon. My name is Brock, and I will 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 over to Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. You may begin your conference.

Thank you, Brock. Good afternoon, and welcome to Puma's conference call to discuss our financial results for the first quarter of 2019. Joining me on the call today are Alan Auerbach, Chief Executive Officer, President, and Chairman of the Board of Puma; Steve Lo, Chief Commercial Officer; and Maximo Nougues, Chief Financial Officer. After market closed today, Puma issued a news release detailing first quarter 2019 financial results. That news release, the slides that Steve will refer to, and a webcast of this call are accessible via the home page 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 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, May 9, 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 as substitute for our GAAP financial measures. Please refer to our first quarter 2019 news release for a reconciliation of our GAAP and non-GAAP results. I will now turn the call over to Alan.

Thank you, Mariann, and thank you all for joining our call today. Today, Puma reported total revenue for the first quarter of 2019 of $99.1 million. Total revenue consisted of product revenue for sales of NERLYNX and license revenue. Net sales of NERLYNX, also known as neratinib, were $45.6 million in the first quarter of 2019, a decrease from the $61.1 million in net sales reported in the fourth quarter of 2018. In addition, our first quarter results included license revenue of $53.5 million, which represented the revenue recognition of the $60 million upfront milestone payment we received from Pierre Fabre for our European licensing deal net of Puma's expected R&D expenses in Europe, as well as an additional milestone payment from one of our licensing partners. In a moment, I will turn the call over to Steve Lo, Puma's Chief Commercial Officer, who will provide an update on NERLYNX launch-related activities and detail our commercial progress in the United States to date. In April 2019, we announced that we entered into a license agreement with Pierre Fabre, under which Pierre Fabre will develop and commercialize NERLYNX within Europe and parts of Africa. Pierre Fabre has a well-established sales and marketing presence in Europe based on their experience in marketing navelbine, which is also referred to as Vinorelbine, which is one of the key chemotherapy drugs used in the treatment of breast cancer. We anticipate that Pierre Fabre will launch NERLYNX in Europe in 2019, and Steve will give some additional detail on this shortly. In March, we announced that our licensing partner in Australia, Specialized Therapeutics Asia, received marketing authorization from Australia's Therapeutics Goods Administration for NERLYNX and for the extended adjuvant treatment of adult patients with early-stage HER2 overexpressed amplified breast cancer following adjuvant trastuzumase-based therapy. In collaboration…

Thank you, Alan. NERLYNX has been in the U.S. market since our FDA approval in July of 2017. Since then, thousands of patients have been prescribed NERLYNX. We look forward to continuing to provide NERLYNX to more patients and reaching more physicians. A reminder that, during my presentation, I will be making forward-looking statements. As you may recall, our network of 6 specialty pharmacies provide NERLYNX directly to patients. The specialty pharmacies conduct benefit investigations, obtain a prior authorization approval from the insurance company, and then arrange with the patient to send NERLYNX to their home. We also have a separate specialty distribution in-office dispensing channel where the prescription does not need to be sent to the specialty pharmacy. This helps to facilitate the ability for certain patients to obtain NERLYNX directly from their physician's office, integrated health systems, and also the VA. To allow better access for patients, we expanded the distribution channel throughout 2018 and into 2019 by establishing partnerships with physician networks. As a result, we have continued to see an increase in patients being dispensed NERLYNX through hospitals and physician practices in this specialty distribution network. In the first quarter, sales in this channel continued to grow and represented as much as approximately 27% of total bottles sold in certain weeks. 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, you see quarterly net sales of NERLYNX since FDA approval. As Alan mentioned, our net product sales revenue was $45.6 million in the first quarter, a decrease from the prior quarter. The revenue decrease was due to lower volume and also an increase in the product gross-to-net, which will be discussed later in the call by Maximo. In terms of…

Thanks, Steve. Let me start with a quick summary of our financial results for the first quarter of 2019. Please note that I will be making comparisons to Q4 and Q3 2018, 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 includes our consolidated financial statements. For the first quarter of 2019, we reported a net loss based on GAAP, $10.1 million, or $0.26 per share. Our GAAP net losses for Q4 and Q3 2018 were $30.7 million and $14.2 million respectively. In Q1 2019, we booked at $16 million net expense as a result of our March 2019 jury verdict against Puma in a lawsuit. As you may recall, in Q4 2018, we recorded approximately $9 million of expense for estimated damages pursuant to a jury verdict in a separate lawsuit, while our results for the third quarter of 2018 included reimbursements from our insurance carriers of approximately $10 million for legal expenses, primarily in connection with this lawsuit. On a non-GAAP basis, which is adjusted to remove the impact of stock-based compensation, we reported a net income of $8.1 million, or $0.21 per basic share and $0.20 per diluted share for the first quarter of 2019. Gross revenue for NERLYNX sales was $55.7 million versus $63.5 million in Q4 2018. As Alan and Steve mentioned, net revenue from NERLYNX sales was $45.6 million versus $61.1 million for the fourth quarter of 2018. Our gross-to-net adjustment in Q1 was about 18%, significantly higher than Q4 and full-year 2018. The main drivers were a true-up of additional Medicaid charges from 2018 of about $2 million that we had previously not been billed for, higher Medicaid claims and higher coverage gap and…

Thanks, Maximo and Steve. We are not pleased with our first quarter NERLYNX revenues. Puma's senior management, in cooperation with the Commercial Committee of the Board of Directors, are putting processes in place to try to reduce the impact of some of the factors that led to our decline in revenues this quarter from negatively impacting our revenue growth, going forward. As Steve mentioned in his slides, we have seen an increase in bottles sold in April over what was sold in March. While it is too early to know for sure, this leaves us hopeful that these corrective measures that we are putting in place are starting to take hold. This concludes today's presentation. We will now turn the floor back to the operator for Q&A. Operator?

[Operator Instructions] Our first question today is from Yigal Nochomovitz of Citigroup.

Thank you for taking the question. If you look at the regions where you didn't lose salespeople, so not the 18 that lost the salespeople, on a same-store basis, could you talk about whether you're seeing any new start increases in those regions?

Thanks for the question. This is Steve. We did a comparison of open territories versus currently-filled territories. And overall, the general conclusion is that those territories that are filled, or we have people in them, grew at a better rate than the ones that are open. So from a same-store sales, yes, I think we continue to see growth there.

So in those, you're seeing that new starts are increasing?

Yes. We have new patient starts throughout the country. And I would say it's a better rate in the filled territories versus the unfilled territories.

And then, can you comment, in terms of the reasons for discontinuation, you gave a number of reasons. Are you seeing anything related to patients switching off neratinib and going onto Kadcyla?

We haven't heard anything in the field on anything like that. So as a reminder, the way our indication is in the extended adjuvant setting, patients would receive their first year of adjuvant treatment with Herceptin plus or minus Pertuzumab or TDM-1. And then, in their second year of treatment, they would receive neratinib. So we're certainly not aware, nor have we heard any physicians or key opinion leaders talk about switching from neratinib to Kadcyla in the extended adjuvant setting.

And then, regarding duration of treatment, what is the latest number on duration? And how is that being impacted by the benefits of prophylaxis?

Yes, so we don't disclose a duration number for one main reason. We have an increase in the channel mix with the specialty distribution network. I mentioned that it's as high as 27% in certain weeks. That's a part of the channel that we have no visibility in terms of prescribers, length of therapy, even patients, et cetera. So that's one reason why we don't have that number.

And then, with respect to the revenue impact in this quarter, can you provide some commentary on how that was impacted based on the gross-to-net increase relative to the impact from discontinuation? And then, just to clarify my prior question, can you specifically answer if, in the same-store sales region, you saw an increase in new starts? Thanks.

So yes, Yigal. I think in terms of the gross-to-net, the gross-to-net came in at 18% this quarter, [indiscernible]?

Yes.

All right. So from a, gross sales was 55.

Yes. So we more or less took about a $5 million hit on gross-to-net compared to what we are expecting the last year.

Yes. And then, I know you're asking a question again on the same-stores sales. We have 80 territories that we track, so I think there's variability there, so I wouldn't be able to just give you a general statement saying that there was growth in all of the territories.

The next question is from Alethia Young of Cantor Fitzgerald.

Thanks for taking questions. This is Varun for Alethia. I have couple of questions. First, on NERLYNX sales, if you can characterize a little more on discontinuations due to side effect versus coming off therapy, and how does discontinuations due to side effect compare to previous quarter?

Yes. The discontinuations to side effects is slightly up. Again, we have limited data, but at least in the fourth quarter cohort, we saw a slight uptick there. I think the most important piece, though, is that we have factors in place now. We've increased the number of nurse educators, and then we also have this concerted effort around keeping patients on drug with messaging around the drug tolerability with dose modifications.

That's very helpful. Then maybe the second one and the last, now we saw Kadcyla getting approved in adjuvant setting in certain sub-population. And you understand now how NERLYNX is being used and what is preferred target population for prescribers. Do you see any potential commercial headwind from Kadcyla? Any color there?

Yes, you're correct. Kadcyla was just recently approved, so Kadcyla would be used in the year before a patient would potentially get NERLYNX. So patients who are starting Kadcyla now would end that year of treatment sometime in the first or second quarter of 2020. So I think we really won't know the answer to that until we have seen patients go through that full year.

The next question is from Paul Choi of Goldman Sachs.

This is Corinne Jenkins on for Paul. We were just wondering if you could talk a little bit about your new sales reps and how long you think it'll take for them to get up to speed and performing kind of in line with your legacy sales force.

Yes. So every territory is different in terms of how the prior sales rep had worked the territory, so I would say that they're not all at the same starting point. We have had some great training classes in place, and as I mentioned earlier, there's three parts to what we have to do here. Number one is make sure that the physician understands reducing the rate of recurrence is important, the unmet medical need around that, the efficacy, and then, finally, side effect management. And so, in each of these territories, there are physicians who are already aware of that in their prescribing, and then there are other physicians that we may not have had enough interactions with. So it's difficult to estimate what that looks like, because each territory is different.

And then, if I can switch to maybe a clinical question, how are you thinking about the label claims for the metastatic indication?

So we would anticipate that the NDA would be filed based on the intent-to-treat population in the NALA study, which would be patients with HER2-positive metastatic breast cancer that have failed two or more prior lines of HER2-directed treatment.

The next question is from Cory Kasimov of JPMorgan.

Thanks for taking my questions, and this is Matthew on for Cory. So my first question is I'm curious on why there has been so much turnover in the sales force in Q1, whether you can quantify what this has looked like in prior quarters, and what you expect, going forward.

This is Steve. The turnover I would say you can attribute to 2 major reasons. One is it's getting extremely competitive in the marketplace for oncology field force talent. There are a lot of other companies that are launching and growing, so that's one. The second one is there are territories that historically have not done well, and so the turnover is actually oftentimes our choice in terms of making sure that we have potentially another person who may do a little better there. So it's twofold.

And then, do you expect this to continue, going forward, this level of turnover?

It's hard to estimate, but I will say that certainly the fact that we were able to fill the territories quickly in the first quarter and we're down to only 2 openings, I'm optimistic that we won't have that high of a turnover, moving forward.

And then, what's expectation for discontinuations in Q2 relative to Q1? And when do you expect the discontinuation dynamic to ultimately stabilize?

Yes. In terms of expectations for Q2 discontinuations, it's very difficult to estimate only because let's say if a patient started a month ago, right, they're just in their first month of therapy. And if they move to a different channel, such as the specialty distribution channel, it would be hard to estimate that. So I think the most important piece is, as we were referencing, we know this is an important driver for the success of NERLYNX. We have nurses in place. We've been increasing our messaging and our focus. And then, on top of that, I think we've been working very hard with the specialty pharmacies to make sure that they're reaching the patients and giving them the right education, as well. So it's been a lot of resources, but we know that this is the important part of how we will be successful, moving forward.

One more from me, and apology if I missed this, but can you quantify what happened to new patient starts in Q1, or what you saw there?

We didn't disclose the new patient start number. And the main reason, once again, is whenever the, we have a specialty distribution channel now that is reaching 27% during certain weeks. We don't get any new patient metrics on that, so there'll be times where it's hard to sort of give you an apples-to-apples comparison from prior quarters. The metric that we do provide, which you see on the slides, is on bottles sold. And certainly there was a decline there.

The next question is from Chris Shibutani of Cowen.

You had mentioned that some of the nurse clinician and peer-to-peer education involves helping manage the diarrhea adverse event, including halts or discontinuations, your dose reductions. Can you share with us what the actual kind of recipe or the narrative is that is being recommended? Obviously you're trying to counter that with trying to achieve efficacy as well. Can you just give us a sense for what might be the curtailed regimen?

Sure. I'll start, and then I think Alan will add a few things. As Alan mentioned earlier in the call, the control regimen has actually lots of arms. And so, from our standpoint, the most important piece is that patients receive some prophylaxis. We have been surprised in our market research when we talk to physicians that that's not top of mind for them. And frankly, if they have been using other medications in the adjuvant setting, they don't use prophylactic anti-diarrheal regimens. So number one is the education around control and the various choices there. Now, I'll turn over to Alan.

Yes. And Chris, you had mentioned you're trying to balance out efficacy. Recognize that in the ExteNET trial, which was our phase III, there was a considerable number of patients. Off the top of my head, I thought it was somewhere in, like, the 20%, 30% range where they did get a dose reduction, or they did have a dose delay, kind of like a stop and a start, if you will. And they continued to get efficacy in the trial. So we don't have any reason to believe that, if the patient doses down or does a dose delay, it's going to have any impact on the efficacy.

Got it. And apologize if you mentioned this earlier. As far as the metastatic indication and your interactions with the agency, I believe there was an anticipated meeting or discussion that was scheduled for the first half. Has that happened, or is that still yet to happen?

Yes, we mentioned that in the prepared comments, Chris. We stated that we had a meeting with the FDA in relation to the third-line metastatic indication, and that [indiscernible] as a patient is we'll be filing the supplemental NDA for the third-line indication, the NALA study data, in June or July of this year.

And then, any other locations or geographies that you're planning to file for metastatic? Thank you.

We, of course, would plan Europe and rest of the world, as well. We have not yet had the meeting with the European agency.

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

Thanks for taking the question. I guess, given the 20% quarter-over-quarter decline in bottles due to patients coming off drug, I'm wondering how you have comfort in your new lowered guidance of $220 million to $250 million, if I heard that right. By my math, that still implies quarter-over-quarter sequential growth of 12% to 20% throughout the rest of the year. So I'm just trying to understand I guess the math, or expectations behind that kind of turnaround.

This is Steve. So, first of all, I think we have demonstrated in the past that we can grow quarter-over-quarter. We have an increased focus on all the things that I mentioned earlier on the call on discontinuations, making sure that we have the right messaging, et cetera. And I think as we go further into this launch, physicians are getting more experience with the drug, and so we have seen that there are physicians who in the past may have only prescribed for a few patients, and they have expanded that. And I think it's a combination of all of the above, but specifically the comfort level around managing the side effects. And that, as I mentioned before, is a lot of work that we're spending on right now.

I guess on that topic, sort of total prescribing physicians and sort of new prescribing physicians was a metric that previously had been given the Street. And I know the messaging on the quarters has been simplified a little bit, but can you maybe just give us some sort of qualitative color on that? Really, are we seeing an increase in volume due to re-prescribing from these physicians who are experienced with the drug? Or is the growth still coming from new physicians that you're detailing to?

Yes, I think the optimistic part, which is, again, why I certainly thing that we can do our best to achieve the numbers, and Maximo's going to just clarify for you what the numbers are so that we're on the same page. But specifically, as it comes to prescribers, we haven't resolved them. I think I mentioned we have reached about 74% of them. And in all quarters, including this quarter and prior quarters, we have seen new patients from, number one, existing prescribers, so prescribers who have a few patients and continue to prescribe for more. And I think the good part is we also see new prescribers coming online. And we see a cadence of that weekly. So it's coming from both places. And then, I'll turn it over to Maximo to just clarify your numbers question to be on the same page.

Yes. So to reach the lower level of the guidance, we will need about 10% volume growth quarter-over-quarter. Now, also take into consideration that, in Q1, we had a very huge hit on terms of net sales for gross-to-net that we don't expect that to continue at that rate for the back half of the year. So absolutely we do need to grow, but again, that's what we gave our range. And I think that's the 20% quarter-over-quarter, I'm not sure it's correct.

I'm just wondering if you can help us understand, as it relates to the discontinuations, how many of those are coming from patients completing their one year of therapy? Maybe patients who started in Q4 '17 or Q1 '18 versus patients who are discontinuing from side effects or some other reason, like insurance dropping or something like that.

Yes. We don't have those specific numbers in front here, so we can certainly get back to you on that. And then, the final comment, just again on the optimism. As I mentioned, we had 18 open sales territories, right? They're all filled now. So certainly I think we'll have more opportunities to reach more physicians into this quarter.

The next question is from Michael Schmidt of Guggenheim.

Thanks for taking my questions. I just had a follow-up on the topic of those sales vacancies. I'm just not maybe quite understanding. So when I look at one of the graphs you showed that you actually did reach a higher number of prescribers in the first quarter compared to the fourth? I guess shouldn't that number go down if there would be an impact from less salespeople being available?

This is Steve. So I think the good news is the ones who were in territory worked extremely hard in the first quarter to help make up for that. And that's why I think certainly we had revenue and models in the first quarter. And I think there are still physicians who, whether it's an open territory or an existing territory, that from an access standpoint may not have reached in the past. So that's why I think the growth you see there in reach has gotten better.

And then, the other question I just had regarding the control study, I think you talked about potentially updating the label here with additional prophylaxis measures potentially being available. Could you just talk about that and what timing for that might be?

Yes. We did submit in fourth quarter, if I remember this correctly, to update the label for NERLYNX to include some data from the control trial. And I believe it was the budesonide arm that we had submitted. I would expect that to be updated sometime in the second half of this year.

The next question is from Thomas Smith of SVB Leerink.

Thanks for taking the questions. I understand that the NERLYNX volume through specialty distributors was as high as 27% of bottles in some weeks. But can you help us understand how much of the total volume during the quarter actually moved through the specialty distributor channel?

This is Steve. I think we're estimating that to be around 20%, 21% all in for the quarter.

And I understand that you have less visibility into the number of patients through that specialty distributor channel, but I was wondering if you could give us maybe more of an apples-to-apples comparison of some of the patient trends you're seeing through the specialty pharmacy channel, where it sounds like you have a little more visibility.

Yes. The reason why we're unable to give the apples-to-apples is, I'll just use a clear example of a patient starts in the specialty pharmacy channel, and they're on drug for 2 months, but then they transfer to the specialty distributor, that's shown as a discontinuation by the specialty pharmacy while that patient is still active on NERLYNX. And so this is why, longitudinally, we don't have those numbers, moving forward.

I was wondering if you could help us quantify the utilization of the anti-diarrheal prophylaxis co-pay assistance program during the quarter and maybe how this compares to the prior quarters.

Yes. We do see an increase in the number of redemptions of the voucher quarter-over-quarter. I don't have the percent increase in front of me, but I could certainly tell you that there has been an increase, and I think ultimately there's still an opportunity there because we haven't reached all the physicians or patients who are prescribed their products. So that's, again, an important focus effort that we have on addressing discontinuations. So thanks for bringing that up.

The next question is from Ying Huang of Bank of America.

Thanks for taking my questions. The first one on whether you can provide the detailed bottle number every month in the first quarter to give us a little bit clarity on the month-over-month trend? And then secondly, on the guidance here, can you talk a little bit more about the input into this new guidance? What are you assuming here? Thank you.

This is Steve. So I don't have the bottle numbers. Remember one thing: just with every month, the selling days vary because you have, like February's a shorter month, et cetera. So I think the best thing is just what I said before, which is certainly the month of March, we saw an increase from March to April. And then, I'll turn it over to Maximo on your second part of your question.

Yes. I think I mentioned some of that on my script. We anticipate, again, a quarter-over-quarter growth, although it's going to be lower than what previously had in terms of guidance. Also, we had a negative impact on the gross-to-net mostly due to Medicaid in the first quarter on an invoice that we received from prior quarters. So, I mean, when we looked at that, we're coming down to that guidance, because we cannot recover from the impact that we saw in Q1. I'm not sure if that is what you were referring to.

So do you expect, for example, every quarter for the next three quarters sequentially the revenue will go up?

Yes, I think so, but it's on a per-unit basis or a disposable unit like we have. It's very difficult to, you are very high one quarter, very low the other, other than some circumstances with a bolus of patients finish with their treatment.

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

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.

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.