Good afternoon. My name is Chantelle, 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 call over to Mariann Ohanesian, Senior Director of IR for Puma Biotechnology. You may begin your conference.

Thank you, Chantelle. Good afternoon, and welcome to Puma's Conference Call to Discuss Financial Results for the Second Quarter of 2019. Joining me on the call today are Alan Auerbach, Chief Executive Officer, President and Chairman of the Board of Puma Biotechnology; Steve Lo, Chief Commercial Officer; and Maximo Nougues, Chief Financial Officer. After market closed today, Puma issued a news release detailing second quarter financial results. That news release, the slides that Steve will refer to, and a webcast of this call are accessible via the homepage and the investor sections of our Web site at pumabiotechnology.com. The webcast and presentation slides will be archived on our Web site 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, August 8, 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 second quarter 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 second quarter of 2019 of 53.9 million. Total revenue consisted of product revenue for sales of NERLYNX and royalty revenue. Net sales of NERLYNX were 53.8 million in the second quarter of 2019, an increase of 8.2 million or 18% from the 45.6 million in net sales reported in the first quarter of 2019. Our second quarter results also included royalty revenue of 55,000 from two of 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 commercial activities and progress in the U.S. In April 2019, we announced that we entered in a licensing 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 provide some additional detail on this shortly. In July we announced that our licensing partner in Canada, Knight Therapeutics, received a marketing authorization from Health Canada for NERLYNX for the extended adjuvant treatment of adult patients with hormone receptor positive, HER2-positive early stage breast cancer following the completion of adjuvant trastuzumab-based therapy. In collaboration with our licensing partners, we also anticipate announcing additional regulatory decisions on neratinib for the extended adjuvant HER2-positive early stage breast cancer indications in additional countries outside of the United States and Europe throughout 2019. We also look forward to additional clinical…

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 six 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 second quarter, sales in this channel continued to grow and represented as much as approximately 32% of total bottles sold in certain weeks during the second quarter. 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 $53.8 million in the second quarter, an 18% increase from the prior quarter. The revenue increase was driven by the higher bottle volumes shown in the next slide. We experienced an increase in volume in the second…

Thanks, Steve. Let me start with a quick summary of our financial results for the second quarter of 2019. Please note that I will make comparisons to Q1 2019 and Q4 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 second quarter of 2019, we reported a net loss based on GAAP of $37.4 million, or $0.97 per share. Our GAAP net losses for Q1 2019 and Q4 2018 were $10.1 million and $30.7 million, respectively. In Q1 2019, we booked a $16.4 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. On a non-GAAP basis, which is adjusted to remove the impact of stock-based compensation, we reported a net loss of $22 million, or $0.57 per share for the second quarter of 2019. Gross revenue for NERLYNX sales was $60.3 million in Q2 versus $55.7 million in Q1 2019. As Alan and Steve mentioned, net revenue from NERLYNX sales was $53.8 million, an increase of 18% from net sales of $45.6 million for the first quarter of 2019. Our gross to net adjustment in Q2 was about 11%, a significant improvement from 18% net adjustment in Q1. As we noted in our last call, the main drivers of Q1 adjustments 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 co-pay assistance expenses during Q1 2019. We expect the…

Thanks, Maximo and Steve. We are pleased to see the sequential improvement in NERLYNX revenues during the second quarter. Puma’s senior management, in cooperation with the Commercial Committee of the Board of Directors, continues to remain focused on NERLYNX revenues and sales growth in 2019 and beyond. This concludes today’s presentation. We will now turn the floor back to the operator for a Q&A. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Your first question comes from Alethia Young, Cantor Fitzgerald. Go ahead please.

Hi, guys. Thanks for taking my question and congrats on the solid quarter this quarter. Maybe just two, if I may. I just want you to talk a little bit about potential for any kind of seasonality as we think about kind of heading into the third quarter. I don’t know if we’ve seen it before but I just want you to kind of opine on that? And then second, as we think about EU launch, can you just talk about maybe some of the potential country dynamics? Will it be kind of similar as the United States or do you think kind of the issues they are seeing with like discontinuations related to the side effects will be the same, just if you can kind of help us think about that? Thank you.

Hi, Alethia. So in terms of your first question on seasonality, I’m not aware of us seeing any seasonality third quarter or fourth. I don’t remember us seeing anything in – again, we’ve only been on the market for two years. But I don’t remember us seeing any seasonal dynamics in Q3 '18 or Q4 of '18. For the second one on EU launch, Steve, would you like to take that?

Sure, Alan. Yes, your question around are there different dynamics in Europe versus the United States and specifically for Germany, I think the important takeaway is number one, it’s a single payer healthcare system. And secondly, most patients are going to be seen in more of a hospital-type setting which in our opinion is helpful because there’s a lot of oversight of the patient in terms of discontinuations. The good news is our partner is acutely aware of this and we have been working very closely with them in terms of best practices in the United States.

And Alethia, I’d also add to that. Our partner Pierre Fabre, they marketed and have marketed Navelbine which is vinorelbine for a long time. So I think they probably have a nice amount of experience because it’s chemotherapy. We’re educating doctors on side effects and how to manage them. So I think we have a good deal of take from that.

Just one quick follow up. Have you guys secured reimbursement with NICE in the United Kingdom yet?

So I believe yesterday NICE actually came out with their preliminary recommendation and I believe they put out a press release on it. It’s not final yet but that was their draft. So I believe, as Steve said in his comments, Pierre Fabre has communicated to us they’re planning to launch in Germany, Austria and the UK in 2019 and as I said NICE just came out with the recommendation I believe it was yesterday.

Great. Thank you.

Thank you. Your next question comes from Yigal Nochomovitz from Citi. Go ahead, please.

Okay. Hi. Thanks for taking the questions, Alan. Just want to clarify. So you saw an 8% bottle increase but then 18% revenue increase. So could you just explain – I’m assuming that’s because of an inventory build given there was no price increase? Could you just clarify that first? Thanks.

Yes. Hi, Yigal. The gross to net – there was no inventory build. We stayed at three weeks of inventory in the channel; it was three weeks in Q1, three weeks in Q2. The other delta there is the gross to net. So the gross to net went from 18% in Q1 to 11% to Q2.

Okay, got it. And then on NALA, given the presentation at ASCO where you used the restricted means analysis, I just want to get a better understanding of what the regulatory precedent is for this type of analysis when the trial doesn’t obey the proportional hazards and how do you think the FDA will view that type of analysis once they review it? Thanks.

Hi, Yigal. So there is regulatory precedence for the restricted means analysis to be put in a label of a drug – this is off the top of my head. I can get back to you with the specifics. I’m almost sure it was Vectibix that used it and there was at least one or two other drugs, but I know it’s been used before. Let me get back to you on that. I know it has been used before and it has been used in the label of drugs before.

Okay, got it. That would be interesting. And then the last question I had is I just wondered if you could, maybe Steve could comment, what you’ve seen in the market post-ASCO with respect to the diarrhea control strategy whether given that publication or poster at ASCO whether you’ve seen a shift in the market towards more budesonide/loperamide and/or more dose titration relative to just loperamide? Thanks.

Anecdotally we have definitely heard from physicians that they like the dose escalation strategy and this includes a lot of the physicians who are currently using other techniques and also other ones where perhaps they weren’t using anything or they were just using loperamide alone and having some challenges with it. So we have definitely heard – and the optimism has come from a couple of places. One is that it reduces the pill burden on the patients because they’re not having to take loperamide so frequently and obviously only having to take NERLYNX and not two other drugs makes it a lot easier. The second being it doesn’t require another prescription to be filled, right, which is just a challenge for the patients. And the third is, remember that these are not metastatic patients who are kind of sitting at home. These are early-stage patients who are healthy. At this point in their treatment journey they’ve had their reconstructive surgeries, they’re done with chemotherapy, their hair is growing back, they’re getting back to work and they’re getting back to their normal day-to-day lives. So the dose escalation is a lot better on their quality of life because they’re not having to and especially if they have an occupation where they’re busy, they’re not having to take all these drugs so frequently because as you know with loperamide I think it’s like every four hours or something they have to take it and with the colestipol it’s twice a day. So it’s easier for the patients to manage just having to take the NERLYNX first thing in the morning and then they’re done.

I’ll add one more thing on top of Alan’s comments. A lot of the community physicians have been very positive about this because it’s intuitive to them. They said to us, I already do this with other drugs such as afatinib and this seems very intuitive.

Okay. Thank you very much.

Thank you. Your next question comes from Paul Choi, Goldman Sachs. Go ahead, please.

Good afternoon, everyone, and thanks for taking our questions. Maybe just a follow up on your comments with regard to patients making it through their first month of therapy and sticking with it afterwards. A couple of calls ago you pointed out an observation that some patients are extending their therapy beyond the initial 12 months. Is that still a trend that you’re observing in the market? Has that increased or decreased or has that remained stable? And then could you maybe just comment with regard to patient adherence what percentage of initial prescribed patients are making it through their full 12 months of therapy currently?

Okay. So for your first question in terms of patients who are continuing on therapy beyond 12 months, we are still seeing it and hearing about it. We’re not currently tracking it, so I don’t have any number I can give you on that. And then in terms of how many patients are making it past one month, et cetera, we don’t track that number and one of the challenges to doing that is that, as Steve mentioned, we’re seeing really dynamic growth in in-office dispensing channel. And oftentimes we find that the insurance companies will allow the patients to do the first two of their fills, so month one and two, via the in-office dispensing and then they have them transferred to the pharmacies. And so we tend to see that that in-office channel, because of that, right, a higher percent of those patients are going to be new patients. So, therefore, to us and the pharmacy channel we may see them as month one. But if they have just transferred over from the in-office, it’s actually month three. So it kind of distorts that signal a little bit and it makes a little more challenging to try to look at durations.

Okay. Thank you for that. And maybe just as a follow up, with regard to NALA now that you’ve done the presentation here, can you may be give us a sense of what feedback you have received from the clinical community in regards to how they’re thinking about their treatment options now that the data is out there? Any initial sense of what receptivity is and how that might look for early adoption upon approval and label expansion? Thanks for taking our questions.

So we have had a lot of feedback on the NALA data from the clinical community. And I would say that by far the data point that we hear the most positive feedback on is the prevention of the brain mets. And now remember this is now the third time we’ve seen a signal with neratinib in preventing or reducing the incidents of CNS mets. This was seen in the ExteNET trial both in the intend-to-treat population but a more dramatic effect in the HR-positive population. We also saw this in a study which was called [indiscernible] which was our frontline metastatic study which was [indiscernible] where we reduced the incidence with the brain mets and now we saw it in the NALA trial as well. And the specific feedback we have gotten is that because of the fact that when you get out to the third line or fourth, et cetera, setting, you become more and more worried about the brain mets, because obviously they are used to seeing them kind of in the first or second line. So because of that physicians have said to us, there’s no question when you get a third or fourth line patient, it’s always on your mind and unfortunately there’s no diagnostic test that can tell you who’s at a higher risk of developing them and who isn’t. So the fact that we’ve shown that, we hear very positive feedback on.

Great. Thanks for taking our questions.

Thank you. Your next question comes from Cory Kasimov of JPMorgan. Go ahead, please.

Hi. This is [indiscernible] on for Cory. Thanks for taking my questions. The first question we have is just about SG&A for the quarter. So it looks like sequentially versus Q1 it was down about 30% but at the same time you filled all the open positions. So can you just talk a little bit about what drove the difference in SG&A? And then I have a follow up.

To talk about SG&A, in Q1 we had a significant legal expense, so it wasn’t related to anything that changed on commercial. It changed between Q2 and Q1. It was more related to legal expenses where you’re seeing that drop.

Okay, great. And then you said on I think it was the 4Q call that of the physicians that have you’ve detailed, about 60% of them have turned into prescribers. How has that number evolved over kind of Q1 and now Q2? Are you seeing a higher rate of conversion now as you’re reaching out to more prescribers? And if not, why not or why do you think that isn’t happening?

Your comment that on the prior call we said 60%, I don’t remember saying that. Where was that – when did we say that? I’m looking at our transcript from that, I’m not seeing that. Where was that --?

I think that was the 4Q call.

Okay. I don’t have that transcript in front of me. In terms of the – so as Steve mentioned, we’ve had 75% of the physicians have been detailed which means we’ve met with them at least one. But obviously it doesn’t mean they’ve all become prescribers. I don’t have the number in front of me in terms of what percent have become prescribers.

Yes, what I will say is just anecdotally this is promotionally sensitive. We have to cover a lot of items to include education on risk recurrence as well as side effect management. So clearly the more opportunities we have with these physicians in general, we do eventually convert them to a NERLYNX user.

And then just to add more, I would say we have seen a nice trend every quarter where the number of new prescribers continues to go up. So that’s been a pretty steady growth that we’ve seen.

Okay, great. Thanks.

Thank you. Your next question comes from Chris Shibutani, Cowen and Company. Go ahead, please.

Hi. Good evening. Thank you for taking the question. This is CJ on for Chris. You talked about you’re going to have potentially CONTROL label update for budesonide in fourth quarter and have publication planned for other arms in that trial. Do you have other plans aside from that publication to raise awareness of the other arms in that trial that seem to have even better tolerability than the budesonide arm and potentially adding those to the label as well?

So I think if I remember correctly in terms of the arms that used the loperamide combinations, the budesonide and the colestipol were pretty close in terms of tolerability where a percent of patients that made it through an entire year. So the reason that – when we first got approved, the FDA said the only arm of the trial that we had a full year data on was the loperamide arm, so that was the only one we put in. When we got the full year of data on the budesonide, we then filed on that one and obviously the colestipol, et cetera arms will follow. So, yes, we of course have plans to update it to colestipol as well as the dose escalation. In terms of the publication, there are a number of physicians who are kind of no-see physicians. They don’t allow a rep to come in and they do their own education work. And so the publication really helps that group and that trends to be a lot of the more higher volume centers to raise the awareness of and so we think that can help out no question. In addition to that, yes, we do do a lot to raise awareness among physicians. There’s online things we do like the OncLive videos and things like that which we hear get used quite a bit. And then we also tend to do a lot of peer-to-peer events which can be [indiscernible] where they share best practices and things like that and we continue to do those as well.

Great. So there’s obviously a lot of efforts ongoing in addition to things with nurse educators that you mentioned. In the future what metrics might you be able to share for the various efforts that could demonstrate progress on the discontinuation front?

I think revenue would probably be the best one that investors would like to see. So again, because of the fact that patients tend to discontinue early, right, and that would be in month one, we can keep them on – if you look at like any of the clinical trials of this drug, the discontinuations tend to be looked somewhat like a barbell in the sense meaning you get a lot of them upfront in the first month or two and then it’s a small number going from months 3 to 11 and then a big jump at month 12 when you get the patients completing therapy. So I think the best metric of our ability to educate the physicians on discontinuations and intolerability and improving the tolerability is going to be revenue. But as you can imagine selling a patient 11 or 12 bottles is going to have a much greater impact on revenue than selling them one or two.

Great. Thank you very much.

Thank you. Your next question comes from Michael Schmidt, Guggenheim Securities. Go ahead, please.

Hi, guys. This is Kelsey on for Michael. To kind of help us gauge I guess the potential opportunity in terms of maybe scripts up for grabs, if you will, kind of per patient, do you have any idea of kind of – or could you provide some color on maybe the proportion of doctors that are actually prescribing anti-diarrheals versus the percentage of patients that are prescribed here but don’t actually go and fill it? I guess where are we seeing kind of the biggest loss or is it comparable across both of those leakage points I guess? Thank you.

Unfortunately, we don’t get prescriptions on which physicians are using which regimens and things like that. As you can imagine, prescriptions for loperamide or budesonide or colestipol include lots of other indications, so we don’t get that transparency. I would say – I don’t have the numbers in front of me, but if I was initially kind of on the top of my head trying to estimate what kind of discontinuation rates we were seeing in that first month or two, I would say it’s probably somewhere in the range of what we see in the clinical trials, so I think somewhere in the ranges that I mentioned. So it’s a pretty meaningful proportion there that as you said we could recapture, if you will.

Okay. Thank you.

Thank you. Your next question comes from Kennen MacKay, RBC Capital Markets. Go ahead, please.

Hi. Thanks for taking the question. Maybe just going back to the prior commentary justifying the product sales growth versus the volume growth. It seems like even after I back out the gross to net difference, it seems like maybe there’s sort of 5 million in gross sales that unaccounted for. Is that probably into sales outstanding or can you maybe help us understand sort of where that is going? Maybe the increase is moving through the specialty distributors and on the shelf there. And then secondly just going to the figure on the cumulative prescribers, wondering if you could sort of help us understand active prescribers and if that was really sort of in line with cumulative? Obviously it’s a different number but just wondering about the trend there. Thank you so much.

Kennen, on your first question in terms of the gain in sales, 4.6 million of the gain is from volume, 3.6 million is on the increased gross to net. There is no increase in inventory. Inventory build is not accounting for the gain. And then what was your second question?

Just going to the trend in the cumulative prescribers, just wondering if sort of the active prescribers was following that same trend if physicians have prescribed it previously after being detailed if they are sort of continuing to prescribe it, or you have to sort of re-detail, re-educate these physicians as well --?

Yes. So in terms of your second question, it terms of the ongoing number of prescribers, yes, we do tend to see physicians who have prescribed it continuing to. Now a lot of that depends on what volume of patients they see as well. As you can imagine, a high volume center has a constant flow of patients coming in, one that’s a lower volume center may not, so they may not have a patient every month or a patient every quarter who comes in that’s an early stage patient. So that tends to have a lot to do with the frequency.

Got you. Thanks, Alan. And maybe a final question, if I may, just going back to the commentary around filling the gaps in the sales force. Congrats on getting those filled. I’m wondering if there are any existing holes, maybe holes that sort of didn’t following the Q1 report of is there is now sort of full strength? Thanks so much for taking the questions.

Yes. So, Kennen, when we talk to our other colleagues in the sector, we tend to see that typical vacancy rates are usually between 10% and 15% at any given time. As of today, August 8 here, I think we have 3 out of 80 vacancies which is less than 5% vacancy rate. So I think we’re actually lower than the rest of the industry.

Got you. Thank you and congrats on that. That’s great.

Thank you. Your next question comes from Thomas Smith, SVB Leerink. Go ahead, please.

Hi, guys. Thanks for taking the questions. Just looking at the year-over-year bottle shipped, it looks like this remained relatively flat year-over-year. I was just wondering if you could talk about some of the underlying patient demand dynamics here relative to this time last year. How are the new patient starts and discontinuations relative to this time last year?

Yes, we don’t really get the characteristics of the patients in terms of like are they HR-positive or HR-negative or that – we don’t really have that information available. So I don’t know if there’s a whole lot we can give you on that.

Okay. And then just one follow up I guess regarding the upcoming meeting with FDA to discuss the regulatory strategy for tumor-agnostic label in HER2-mutants. Can you just give us a sense of what you intend to propose to the agency and how do you envision communicating the outcome of this meeting?

So in terms of our meeting with the FDA to discuss how we’re going to move forward in the HER2-mutation area, one opportunity would be to go for tumor-agnostic label. The second would be to propose something that’s a little more limited to some of the tumor types where we may have seen better activity. So if you look at the data we’ve presented to date, we’ve seen very strong activity in areas like breast cancer and cervical cancer and that data has been publicly presented. And then data in rare tumors like hepatocellular was kind of weaker. So we would also have the opportunity to talk to them just about something that’s more specific to the indications where we’ve seen better activity. Then there’s a good deal of regulatory precedence for doing something like that as well.

Right. Okay. Thanks for taking the questions.

Thank you. This concludes our question-and-answer session. I would now 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.