Puma Biotechnology, Inc. (PBYI) Q2 2021 Earnings Report, Transcript and Summary

Good afternoon. My name is Kaley, and I will be your conference call operator today. [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, Kaley. Good afternoon, and welcome to Puma's conference call to discuss our financial results for the second quarter of 2021. Joining me on the call today are Alan Auerbach, Chief Executive Officer, President and Chairman of the Board of Puma Biotechnology; Maximo Nougues, Chief Financial Officer; and Jeff Ludwig, Chief Commercial Officer. After market closed today, Puma issued a news release detailing second quarter 2021 financial results. That news release, the slides that Jeff 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 results may differ from those expressed in these forward-looking statements. For a full discussion of these risks and uncertainties, please review our periodic and current reports filed with the Securities and Exchange Commission from time to time, including our annual report on Form 10-K for the year ended December 31, 2020. 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 5, 2021. 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 also 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 second quarter 2021 news release for a reconciliation of our GAAP to 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 2021 of $53.4 million. Total revenue includes U.S. net NERLYNX sales as well as license fees and royalties from our sublicensees. Net NERLYNX sales were $48.9 million in the second quarter of 2021, representing an increase from the $45.8 million in net sales reported in the first quarter of 2021 and $48.8 million reported in Q2 of 2020. Royalty revenue was $4.3 million in the second quarter of 2021 versus $2.4 million in Q1 of 2021 and $1.1 million in Q2 of 2020. During the second quarter of 2021, we continue to experience challenges brought on as a result of the COVID-19 pandemic, and more recently, the Delta variant. As Jeff will show in his presentation, we are therefore pleased to report that NERLYNX bottles sold in the second quarter increased to 3,354, which represented a 3.3% increase from the 3,247 bottles sold in Q1 of 2021. As Jeff will show in the slides, this represents the first sequential growth in NERLYNX bottles sold that Puma has seen since Q4 of 2019. I will begin with a review of some of the highlights of the quarter, then Jeff Ludwig will provide more details on NERLYNX' commercial activities. Maximo Nougues will then follow with highlights of the key components of our financial statements for the second quarter of 2021. As investors are aware, Puma has an ongoing basket trial of neratinib in HER2-mutated cancers referred to as the SUMMIT trial. In the fourth quarter of 2019, Puma met with the FDA to discuss the regulatory path for neratinib in patients with hormone receptor positive HER2-negative breast cancer who have a HER2 mutation. At that time, Puma had data on approximately 28 patients who had been treated with the combination of neratinib plus fulvestrant plus trastuzumab in the SUMMIT trial. The purpose of the FDA meeting in 2019 was to discuss the potential to file for accelerated approval on the data from the SUMMIT trial on the patients treated with the combination of neratinib plus fulvestrant plus trastuzumab. At that meeting, the FDA suggested that Puma modify the SUMMIT trial in order to better isolate the contribution of neratinib to the efficacy seen in the SUMMIT trial for the patients treated with the combination of neratinib plus fulvestrant plus trastuzumab. In early 2020, the SUMMIT trial was amended such that ER-positive HER2-negative breast cancer patients who have a HER2 mutation were randomized to receive either fulvestrant alone, fulvestrant plus trastuzumab, or the combination of neratinib plus fulvestrant plus trastuzumab. The purpose of this amendment was to isolate the contribution of neratinib to the efficacy that had previously been seen in the SUMMIT trial for the patients treated with the triplet of neratinib plus fulvestrant plus trastuzumab. The randomized portion of the trial was designed as a Simon 2-stage design. Each arm of the trial initially enrolled 7 patients during stage 1. If no patient in a given arm responds, that arm will be closed for further enrollment. If in the first stage 1 or more patients respond, the arm will then be expanded up to 18 patients. If less than 4 patients in the expanded arm respond, that arm will be closed to further enrollment. If 4 or more patients respond, the arm will be open to enroll additional patients. As was discussed on the first quarter earnings conference call, during the first quarter of 2021, enrollment of the initial 7 patients into each of the 3 randomized arms was completed. For the first 7 patients who were treated in the fulvestrant-alone arm of the trial, no patients achieved a response. In the 7 patients who were treated in the fulvestrant plus trastuzumab arm of the trial, no patients achieved a response. Enrollment to the fulvestrant alone and the fulvestrant plus trastuzumab arms of the trial have been paused. Puma is in the process of convening the study's independent data monitoring committee, or IDMC, to review the data from the singlet and the doublet cohorts with the anticipation that they will recommend closing both the singlet and the doublet cohorts. This meeting is expected to occur in the next month or so. In the first 7 patients who were treated in the neratinib plus fulvestrant plus trastuzumab arm of the trial, 1 or more responses were seen. And therefore, the criteria was met to expand to Stage 2 of the Simon 2-stage design. This arm of the trial has been expanded to further enrollments. Currently, patients with ER-positive HER2-negative breast cancer who have a HER2 mutation are only being enrolled into this triplet arm of SUMMIT. We anticipate that additional data on this will be presented in the fourth quarter of 2021. Puma believes that the data from the randomized portion of the trial has addressed the FDA's request to isolate the contribution of neratinib to the efficacy seen in the SUMMIT trial in the patients treated with the combination of neratinib plus fulvestrant plus trastuzumab. Puma has therefore scheduled a meeting with the FDA in the fourth quarter of 2021 to finalize the pathway, to file for accelerated approval for the combination of neratinib plus fulvestrant plus trastuzumab based on the data in patients with ER-positive HER2-negative breast cancer who have a HER2 mutation that have been treated in the SUMMIT trial. At the FDA meeting in 2019, the FDA agreed that patients with the triplet - or patients treated with the triplet of neratinib plus fulvestrant plus trastuzumab who enrolled both prior to the amendment in 2021 as well as those enrolled after the amendment in 2021 would be eligible for inclusion in the efficacy database used to support approval. Puma will continue to update investors on the status of this as it progresses. As investors are also aware, in November, we announced interim data from another cohort of the SUMMIT trial, and more specifically, the cohort of patients with metastatic non-small cell lung cancer with epidermal growth factor or EGFR exon 18 mutations who have been treated previously with an EGFR-targeted tyrosine kinase inhibitor. In late January 2021, we presented additional data from this cohort of patients in an oral discussion at the World Conference on Lung Cancer presented by the International Association for the Study of Lung Cancer. We are continuing to enroll this cohort of patients and anticipate that we will have additional data from this cohort to report in the first half of 2022. I will now turn the call over to Jeff Ludwig, Puma's Chief Commercial Officer, for a review of our commercial performance during the quarter.

Thanks, Alan. Appreciate it, and thanks to everyone for joining our second quarter earnings call. Before I move into the commercial review, just a reminder that I will be making forward-looking statements. The commercial organization remains focused on improving the position of NERLYNX in early-stage breast cancer with the goal of strengthening the risk-benefit perception with clinicians, developing and rolling out a new campaign to better educate and empower patients to ask for NERLYNX and ultimately drive a consistent increase in new patient starts in this underpenetrated market. As mentioned in previous calls, we believe that NERLYNX can play an important role in the treatment of metastatic breast cancer, but our focus is on extended adjuvant with the goal of preventing or delaying patients from becoming metastatic. We take this goal very seriously and know that more must be done to help patients who are at increased risk of reoccurrence in their battle with early-stage breast cancer. I am pleased with the previous work that has been completed and largely came to fruition a few months ago. We look forward to seeing the impact of this work, coupled with our ongoing and future efforts. The goal remains the same - to help more patients who are battling early-stage breast cancer. I do want to take a few minutes to talk about the previous clinical updates that have been published and communicated as well as highlight some recent clinical updates that we believe are important and can further strengthen the risk-benefit perceptions of NERLYNX in early-stage HER2-positive breast cancer. First, as a reminder of the previous clinical updates. The interim results of the CONTROL study were published in the September 2020 edition of Annals of Oncology and the final efficacy results from the ExteNET trial were published in the October 2020 edition of Clinical Breast Cancer. These data sets were also discussed and well represented at San Antonio Breast Conference Symposium and the Miami Breast Cancer Conference, which were held in December 2020 and March 2021, respectively. In regards to recent updates, 2 posters were presented at the ASCO annual meeting recently held in June that we believe further support the clinical benefits of NERLYNX in early-stage HER2-positive breast cancer. The first poster was entitled Dose Escalation for Mitigating Diarrhea. This was a ranked tolerability assessment of anti-diarrheal regimens in patients receiving neratinib for early-stage breast cancer. The conclusion of this poster suggested that dose escalation during the first 2 weeks of therapy improved tolerability versus other antidiarrheal strategies; it had the lowest rate of grade 3 diarrhea; improved overall compliance; and ultimately highlighted that dose escalation may allow patients to stay on neratinib for the recommended time period, providing patients the opportunity to receive the full benefit of treatment. The second poster was entitled Association Between Treatment Duration and Overall Survival in Early-Stage HER2-positive Breast Cancer Patients Receiving Extended Adjuvant Therapy with Neratinib in the ExteNET trial. This poster assessed clinical outcomes, including invasive disease-free survival and overall survival for patients who completed planned therapy in 3 groups from the ExteNET trial. The first group was the intent-to-treat population. The second group were patients with hormone receptive positive disease who initiated neratinib within 1 year after prior trastuzumab. This is a population that neratinib is approved for largely in the EU. And finally, HR-positive patients who initiated neratinib within 1 year after prior trastuzumab and had residual disease post neoadjuvant therapy. These descriptive findings suggest that patients with early-stage HER2-positive breast cancer who received the recommended 1-year duration of neratinib may have improved outcomes. More specifically, completion of planned neratinib was associated with improvements in IDFS and overall survival in all 3 of the groups evaluated. And finally, we are excited to announce that the U.S. Food and Drug Administration approved a labeling supplement to the U.S. prescribing information for NERLYNX that incorporated dose escalation into both our extended adjuvant indication as well as our metastatic indication. In addition, the FDA approved the new 133 bottle count SKU that provides a 4-week supply of NERLYNX aligned with the approved dose escalation regimen. I highlight these clinical updates because we feel that they collectively strengthen the risk-benefit profile of NERLYNX and are important to both health care providers and to patients. As Alan mentioned in his opening remarks, we continue to be impacted by the COVID-19 pandemic and the rising rates of the Delta variant, with the big impact coming from decreased access to customers and an overall reduction in our share of voice. As we previously communicated and based on increase - on the increase in vaccinations in 2021, we have been optimistic about seeing a reduction in commercial limitations that have hampered our efforts. We did see some loosening of restrictions in Q2 and an increased willingness by some clinicians to engage inside and outside the office. More specifically, we saw a slightly greater than 20% increase in call activity with HCPs in Q2 versus Q1. And equally as important, a much higher portion of these calls were in-person versus virtual. I am happy to see these changes, but they never happen as quickly as one would like. While we are seeing access to HCPs improve, it is hard to predict how the Delta variant will change these dynamics. In the most recent weeks, we have seen some customers begin to restrict access again or push back their planned opening dates to industry based on regional or local increases in the Delta variant. The commercial team continues to work very hard to adapt to these changes and remains focused on increasing our communications around our new clinical information. As you may recall, we have 2 channels that provide NERLYNX to patients. We refer to these as our specialty pharmacy channel and our specialty distributor channel or in-office dispensing channel. The majority of our business flows through the specialty pharmacy channel. More specifically in Q2, approximately 77% of our business went through this channel, with the remaining 23% flowing through the specialty distributor channel. This represents a slight change from the 76% SP and 24% SD business we reported during our Q1 earnings call. Now later in this call, Maximo will review the full financial results, but I will now provide you with the current U.S. sales results as well. Slide 4 shows U.S. quarterly net sales of NERLYNX since FDA approval. As Alan noted, our net U.S. product sales were $48.9 million in the second quarter of 2021. This is an increase from the $45.8 million we reported in Q1 of 2021. We have continued to see an increase in the number of patients qualifying for free drug through our patient assistance program. More specifically, we've seen a greater than 40% increase in patients qualifying for free drug comparing the first half of 2021 with the first half of 2020, that being January through June. We believe this increase was largely driven by very limited availability of Medicare Foundation support. Turning to Slide 5. Slide 5 shows the bottles of NERLYNX sold by quarter since launch. We sold 3,354 bottles of NERLYNX in Q2 of 2021, which is an increase from our Q1 2021 bottle sales of 3,247. We're excited to see this quarter-over-quarter growth, especially given the previously mentioned challenges with COVID and the increase in patients qualifying for free drug. With that said, the focus of the commercial organization is to grow NERLYNX quarter-over-quarter, with an emphasis on increasing share of voice and driving improved execution. We obviously also believe that the evolving clinical profile of NERLYNX will play a foundational role in our success here. We continue to be pleased with the increasing adoption of dose escalation in early-stage breast cancer. In Q2, we saw that approximately 39% of all new patient starts initiated therapy at a lower dose. This is a slight increase over what we reported in Q1 of 2021. Moving forward, we do expect to see this adoption increase driven by the FDA incorporating dose escalation into the dosing and administration section of our label as well as continued education and promotional emphasis. We clearly believe that increasing adoption of dose escalation will improve the overall tolerability of NERLYNX, increase the average length of therapy and ultimately allow more patients to receive the full benefit of NERLYNX. Slide 7 highlights the strategic collaborations we have formed across the globe with the goal of making NERLYNX available to more patients around the world. In terms of updates, we were excited to see the Q2 commercial launches of NERLYNX in Chile and Malaysia and to have received the metastatic approval of NERLYNX in Canada in late June. We are also anticipating commercial launches in Brunei and New Zealand in the second half of this year. We are continuing to work very closely with our partners and look forward to the potential for NERLYNX to be approved in additional countries in Europe, Latin America, Asia and the Middle East. In summary, I want to thank the commercial team for their passion and commitment to making a difference. I am proud of the work that has been done by the team and believe that we are well positioned to increase the impact that we are having on patients battling HER2-positive breast cancer. With that said, we know that more must be done, and we are committed to helping more patients and their families as they battle breast cancer. I will now turn the call over to Maximo for a review of our financial results.

Thanks, Jeff. I will begin with a brief summary of our financial results for the second quarter of 2021. Please note that I will make comparisons to Q1 2021 and Q4 2020, 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 today and includes our consolidated financial statements. For the second quarter of 2021, we reported a net loss based on GAAP of $5.1 million or $0.13 per share. In Q1 2021, we reported net income of $16.5 million. And in Q4 2020, our GAAP net loss was $15 million. On a non-GAAP basis, which is adjusted to remove the impact of stock-based compensation, we reported net income of $13.1 million or $0.32 per diluted share for the second quarter of 2021. Gross revenue from NERLYNX sales was $59.3 million in Q2 2021 versus $56.5 million in Q1 2021. As Alan mentioned, net revenue from NERLYNX sales was $48.9 million, an increase of 6.6% from the $45.8 million we reported in the first quarter of 2021. In Q1 2021, we also recognized $50 million in license revenue related to an upfront fee to include Greater China in our sublicense agreement with Pierre Fabre. Royalty revenue increased to $4.3 million in the second quarter of 2021 versus $2.4 million in Q1 2021. Our gross-to-net adjustment in Q2 2021 was about 17.7%, a decrease from the 18.9% gross-to-net adjustment in Q1 2021. The decrease was driven mostly by lower co-pay and coverage gap expenses, largely driven by seasonality. Cost of sales for Q2 2021 was $12 million, including $2 million for the amortization of intangible assets related to our neratinib license. Of those sales for Q1 2021 was $29.6 million and included a $20 million fee paid to Cambridge to terminate our sublicense agreement. Going forward, we will continue to recognize amortization of milestones to the licensor for about $2 million third quarter as cost of sales. For fiscal year 2021, Puma anticipates that NERLYNX net sales will be in the range of $200 million to $205 million, which is slightly lower than our prior guidance of $208 million to $213 million. The reduction to guidance reflects our expectation for a slower-than-anticipated improvement in access to HCPs. We also anticipate that our gross-to-net adjustment in 2021 will be between 19% and 20%, an increase versus prior guidance mostly driven by higher government pricing participation and Medicare rebates. Furthermore, for fiscal year 2021, we anticipate receiving royalties from our partners around the world in the range of $13 million to $15 million, equal to our prior guidance, and license revenue in the range of $50 million to $52 million. We recognize there is a great deal of uncertainty regarding the impact of COVID-19, and this may continue to negatively impact our sales, royalties and license revenue. We anticipate that Q3 2021 NERLYNX net sales will be in the range of $49 million to $50 million, and royalty revenues will be in the range of $3 million to $4 million. We anticipate that the gross-to-net adjustment in Q3 2021 will be approximately 19.5% to 20.5%. SG&A expenses were $39.4 million in the second quarter of 2021 compared to $28.2 million and $28.8 million for Q1 2021 and Q4 2020, respectively. SG&A expenses included noncash charges for stock-based compensation of $16.7 million for the second quarter of 2021 compared to $3.6 million for Q1 2021 and $4.3 million for Q4 2020. Stock-based compensation expense in Q2 2021 included approximately $13.6 million, resulting from a modification approved by stockholders to the term of an employee warrant. Research and development expenses were $18.6 million in the second quarter of 2021 compared to $20.2 million and $24.2 million for Q1 2021 and Q4 2020, respectively. R&D expenses included noncash charges with stock-based compensation of $3.8 million in the second quarter compared to $2.3 million and $5.2 million for Q1 2021 and Q4 2020, respectively. Other income and expense reflects a net credit for our legal accruals of $14.9 million. In the second quarter of 2021, Puma reported cash burn of $0.1 million compared to cash earned in Q1 2021 of $15.7 million, which included the $50 million license fee from Pierre Fabre and the $20 million termination fee paid to Cambridge. And cash burn of $15.6 million in Q4 2020, which included a $10.1 million milestone payment to Pfizer. We ended the second quarter with $109 million in cash, cash equivalents and marketable securities. Our accounts receivables balance at June 30 was $30.5 million. Our accounts receivables terms range between 10 and 68 days, while our days sales outstandings are about 48 days. We estimate that as of June 30, 2021, our distribution network maintain approximately 4 weeks of inventory. Subsequent to the close of the second quarter, Puma entered into a $125 million note purchase agreement with a fund managed by Athyrium Capital Management. Puma used the first tranche of the notes, $100 million and some cash on hand to retire its existing credit facility with Oxford Finance. The remaining $25 million might be drawn for future corporate purposes. This transaction provides Puma with increased cash flexibility, improved short-term cash flow and allow us to continue to support NERLYNX commercial activities and fund our ongoing clinical trials with neratinib. Overall, we continue to deploy our financial resources to focus on the advancements of neratinib through ongoing clinical trials and the commercialization of NERLYNX.

Thanks, Maximo. While the COVID-19 pandemic has presented commercial challenges to Puma, we are hopeful that the vaccinations that have been occurring in 2021 and will continue to occur throughout the year will reduce these barriers, which should improve the ability of our commercial team to access and interact with health care providers to increase their awareness of NERLYNX data. As we mentioned previously, in Q2, we did see improvements in our access to HCPs. However, this improvement is incurring - this improvement is occurring at a slower rate than we originally anticipated. We also recognize the more recent risks posed by the COVID-19 Delta variant, which may pose additional restrictions to access to HCPs, and we are remaining conservative in our outlook for improvements in access for the remainder of the year. Puma's senior management, in cooperation with the Board of Directors, continues to remain focused on NERLYNX' revenue and sales growth in 2021 and beyond. We look forward to updating investors on this in the future. There continues to remain a significant unmet need for our patients battling breast cancer, lung cancer and other solid tumors. We at Puma are committed and passionate about finding more effective ways at helping these patients during their journey, and we'll continue to strive to achieve that goal. This concludes today's presentation. We will now turn the floor back to the operator for questions and answers. Kaley?

[Operator Instructions]. Your first question comes from Yigal Nochomovitz with Citi.

This is Carly on for Yigal. First, can you comment on sort of what you're seeing with respect to utilization of the dose titration regimen following the label update last month? I guess, just given the data you've presented from CONTROL, it's interesting that still only about 39% of patients are starting at a reduced dose, so curious why you think some physicians have been slower to adopt the dose titration strategy versus others.

Jeff, do you want to handle that?

Yes, sure. Happy to chat about that. So one, just a confirmation. The dose escalation label was approved at the end of June, right at the end. So we're in the midst of updating all of our promotional materials and working with our SPs and SDs to communicate this out, and also obviously release the new materials to the sales force to enhance that message as well. We have seen, as you see from the slide, that we do see an increase in dose escalation going across the board. We've seen that essentially quarter-over-quarter with some slight variations. So we are happy that we're seeing that increase. Prior to it being officially in the FDA label, there's a lot of dosing compendia that refer to the FDA label. And also we are not able to fully engage our SP partners in helping us educate around dose escalation as well. So going forward, we do expect to see an acceleration with the new label approved by the FDA as well as the 133 bottle count. So I'd expect that you'll see this accelerate moving forward in the coming quarters.

And Carly, this is Alan. The other thing we do hear, and we hear this actually not infrequently, is that the physician will say, "I wrote the prescription for the dose escalation, but the pharmacy didn't put it on the bottle because it's not in the label." So as Jeff mentioned, look, it got approved late June, so I don't think we would have seen an impact in Q2, but we will certainly be looking for that Q3, Q4, et cetera. And our anticipation is we would like to see that increase.

Okay, great. That's helpful. And then just one quick clarifying question on the ER-positive HER2-negative breast cancer cohort first on it. When you report data in the fourth quarter of this year, will that also include data from the Stage 2 portion, the additional patients you're enrolling into the neratinib arm? Or will that just be the Stage 1 data?

Yes. So the presentation, if I'm remembering this correctly, the abstract that has been submitted for San Antonio for - so let me answer that in a more larger way here. The abstracts submitted for San Antonio was from the breast cancer cohort of SUMMIT. So these are patients with the HER2 mutation. There's ER-positive patients, and there's also triple-negative patients. So there's a separate cohort of triple-negative patients, who have triple-negative breast cancer treated with neratinib monotherapy. On the ER-positive, which is your question, which is the ER-positive of the HER2 mutation, we would probably be the Stage 1 and the Stage 2s as well. We have noticed that when we first went to enroll the trial, we had a lot of sites who were reticent to put patients on either the trastuzumab plus fulvestrant or fulvestrant alone arms because they were uncertain if there would be a benefit but they were eager to put it on the triplet, the neratinib plus trastuzumab plus fulvestrant arm, because they knew that, that had benefit. Since we've communicated to the sites that we've paused the enrollment of the doublet and singlet arms, so the fulvestrant alone and the trastuzumab fulvestrant, we have seen sites more eager to put patients on the trial because now they know that they're getting the triplet and there's 100% certainty they're getting it. So I would imagine it would be both the Stage 1, for the triplet arm, for the neratinib plus fulvestrant plus trastuzumab in the ER-positive. It should be the Stage 1s and the Stage 2s as well.

Our next question comes from Marc Frahm with Cowen and Co.

Just following up on that presentation. There's also the guidance for the regulatory update. Do you think you'll have that - those meetings in advance of San Antonio, so you can show us the data and have kind of what the regulatory approach is going to be? Or should - at the same time, or should we think of those as separate updates?

Well, the meeting will obviously be separate from San Antonio. I don't recall off the top of my head when the meeting is. So I would anticipate - look, when we present the data at San Antonio, we will present the data. I don't remember when the meeting is, if it's like a couple of days before or something, then it would make sense to combine both. I would anticipate that we would communicate both items as rapidly as we can.

Okay. Great. That's helpful. And then just on the gross and net trends, I mean, I guess, we typically see gross has come down a little bit after Q1 just because of all the kind of changeovers of plans, donut hole, all those types of things. Can you just give a little bit more detail on kind of what the dynamics are that are going on there driving the increase on a Q-over-Q basis?

Yes. So on the quarter-over-quarter basis, we have seen a decline on the gross to net impact. As just mentioned, in Q1 usually is higher. However, the decline was not as big as in prior years. Again, some of the dynamics, what I mentioned is we have seen an increase on Medicaid and also on government pricing.

And Marc, also to add, we're also seeing that we're - because the Medicare foundations don't have support, we're kind of getting an increase in free drug due to that.

Your next question comes from Geoff Meacham with Bank of America.

You have Alex Hammond on for Geoff Meacham. So for the SUMMIT basket trials for the EGFR exon 18 mutant non-small cell lung cancer indication, how many patients are currently undergoing treatment? And what data should we expect to be released in the first half of '22? And lastly, where do you see NERLYNX fitting into the current treatment paradigm?

Alex, thanks for the question. I'm searching for that information as we speak. My recollection is we're somewhere around 20 or 25 patients that we've treated so far. Ballpark, I think that number's correct. We have definitely been seeing an increase more recently. We would be looking to report the typical metrics, [indiscernible] response rate, PFS, et cetera. The cohort from a commercial perspective that we're really focusing on is the one that is - the ones who already received prior treatment with an EGFR tyrosine kinase inhibitor because the exon 18 EGFR mutation is sensitive to the first- and second-generation EGFR inhibitors. So this is gefitinib, erlotinib, osimertinib and afatinib. The only drug that actually has the exon 18 mutation in the label is afatinib, and in terms of patients who've already been treated with an EGFR tyrosine kinase inhibitor, the efficacy of afatinib is quite low. I believe the response rate is somewhere around 10%. So it's a pretty easy bar for us to be able to get over, given where we feel the data is. And I think that's really where we would see it fitting in.

Your next question comes from Gena Wang with Barclays.

This is Sheldon Fan for Gena. So first, I want to add my congrats on the encouraging initial data from the breast cancer cohort from SUMMIT. So I want to follow up the regulatory progress for non-small cell lung cancer cohort. So the cervical cancer, it seems like that was removed from the plan. Could you confirm that? Is that still in the potential agenda to discuss with the FDA in the pre-NDA meeting? And for non-small cell lung cancer, it seems like the - both that data presentation and the FDA meeting was somewhat pushed to 2022. Is that because of any COVID-19 impact on your clinical trial progress? Or do you think you need more mature data to meet with the FDA?

Yes. Thank you for the question. So you'll notice in the press release that we put out, we did mention both the cervical data and the exon 18 lung data. So both are still enrolling. The presentation of the cervical data is, because that's when the SGO meeting is, which in the first half of '22. So I presume that would be where we'd be submitting the data to. For the exon 18 mutated lung, we did certainly see interruptions due to COVID-19 in 2020, but we have definitely been seeing a much more rapid enrollment in 2021. So I think a lot of it was just getting more mature data. And because we were getting so many new patients coming in, that our feeling was just that was the time to wait, because our feeling was the more patients we had, the more fruitful discussions you can have with FDA. So that was kind of the basis, and the same with the cervical as well.

Your next question comes from Kennen MacKay with RBC Capital Markets.

It's Jackie [ph] for Kennen. Could you maybe elaborate a bit on the drivers of the return to bottle growth in the second quarter? Was this a gain in share or primarily a result of the easing up of the COVID-19 pandemic, and hence, the increased office basis?

Great. Thanks for the question. I appreciate it. I would say a couple of things that contribute to that growth. As we've mentioned prior that we see a phenomenon in Q4 where you do see some patients that push out therapy to the beginning of Q1 because of holidays, Thanksgiving, Christmas, New Year. So you see a slight dampening of that. With that said, we did see a nice increase in Q1, and we did see those bottle growth occur in Q2 as well. So the way I would attribute that growth would be a couple of things. One is the continued evolving clinical data that we feel is good as we continue to further embed dose escalation as well as highlight the benefits of neratinib in those patients that increase risk of recurrence. Also, I would tell you that the increased access to customers plays a very significant role in our success. This is a promotionally sensitive product, so as our sales team gets in front of customers and are able to have strong clinical discussions, we do see a correlation between those discussions and growth as well. So hopefully, that's helpful.

Yes. And if I can add to that, early-stage HER2-positive breast cancer tends to be a treatment that's entered the community setting. And a lot of times these are not physicians who just do breast. They do a lot of other tumors as well. And so as Jeff said, it's very promotionally sensitive. And so the opportunity to interact with those physicians and make them aware of the data, we know this can certainly be helpful. We did see in Q2 that month-over-month, there was an increase in visits - meetings with HCPs. And that was happening - every month was kind of higher than the previous. And a larger percentage of those meetings were in-person rather than virtual. And so I think that the combination of those 2 just made for a more effective sale, if you will. And that would be the driver we would hope to continue in the future quarters.

Your next question comes from Paul Choi with Goldman Sachs.

My first question is just with regard to utilization trends right now. And could you maybe just sort of comment on what you're seeing from the field with regard to the mix between the extended adjuvant and early metastatic use? And just with regard to the latter and promoting metastatic use, can you just - is that largely a function in your mind in the second half of this year of increased health care access or potential prescribers looking for additional information or other clarity on the indication?

Yes. So Paul, this is Alan. You had said used in extended adjuvant versus early metastatic. Just to be clear, our approval in the metastatic is in the third line and beyond, so it's a much later line of metastatic treatment. In terms of the utilization, we have seen in prior quarters and continue to see that roughly 95% of the use of the drug is in the early stage and about 5% is in the metastatic. We do not get a breakdown in metastatic, whether it's third line HER2 positive, whether it's patients with HER2 mutations, whether it's patients with HER2-positive brain mets because remember, we're in the NCCN guidelines. So it's difficult to say exactly where exactly that's being treated. We just know that it's in the metastatic setting.

Okay. Great. And just the second part of my question with regard to driving awareness and promotion here. And is that largely a function of increased access or just awareness of the - of NERLYNX as an option in the third line plus setting here?

So for the metastatic side, yes, a big function of this will be the continued promotion and communication of the data in the metastatic setting, and that is largely a function of access and access to HCPs as well as you can guess, we're looking for as many options as we can to enhance the nonpersonal promotion as well given some of the restrictions with COVID and the potential Delta variant rise.

Okay. Great. Then my second question is just with regard to the new bottle that are available in the SKU. I guess over time, how do you see that driving the mix? And would that SKU have any incremental revenue flow-through as you think about the number of bottles going out the door ex-factory?

No, Paul, I think the question is, one, we would expect to see an increase in the number of the 133 bottle count SKU going out. We are fully supportive, as earlier question came up, we really want to further embed dose escalation into new patient starts in both early-stage breast cancer as well as the metastatic setting. That by itself can be done with both the 180 bottle counts as well as the 133 bottle count, but the 133 bottle count has the added incentive of perfectly aligning for 4 weeks with that dose escalation. So we are trying to promote both of those as a convenient way of further embedding dose escalation into all new patient starts. In terms of revenue impact, what we really would like to see happen is, again, as patients start with dose escalation, all of the data suggests that they have an increased length of therapy, a longer duration. And ultimately, we expect to have better benefits to the patients. And that's where we hope to see the overall positive in embedding dose escalation.

Okay, great. And last one for us is just with regard to the ongoing combination trial with Kadcyla for patients with brain mets that you plan to report either later this year or early next year. Can you maybe just remind us, is there any potential regulatory discussions here that might follow from this trial and just sort of what the path and opportunity here might be for NERLYNX to differentiate?

Yes, sure. Happy to talk about the combination of NERLYNX with Kadcyla. So the genesis of the interest in this study was that there was preclinical data presented at the San Antonio Breast Cancer meeting last year that showed that NERLYNX neratinib was differentiated from the other EGFR TKIs in HER2-positive breast cancer because of the fact that neratinib is an irreversible inhibitor, and the other drug, the other approved HER2-positive breast TKIs are reversible inhibitors. The main difference between those is that neratinib being an irreversible inhibitor has the ability to internalize the HER2 receptor, whereas the ones that are reversible inhibitors do not. So by increasing the internalization of the HER2 receptor, you're essentially taking the receptor and bringing it inside the cell. Well, when you have an ADC, that's the mechanism of action, right? It attaches to the outside of the cell, it gets internalized and that's when it dumps out its payload, which is sometimes cytotoxic. So when you combine neratinib with an ADC, you end up increasing the intratumoral concentration of the ADCs. You're bringing more of the ADC into the cell. Now we had the FB-10 study, which was neratinib with Kadcyla. This was owned by the NSABP, in patients without brain mets. And we've certainly seen a much higher response rate than one would have expected, which is what made us interested in looking at neratinib in patients - with Kadcyla patients with brain mets. So the cohort of patients that has been enrolling the strongest in that trial is a cohort which is patients who've already had prior Kadcyla, and they're being given neratinib with Kadcyla in patients with HER2-positive breast cancer with brain mets. So this will obviously be a very interesting test of this internalization because, obviously, if neratinib can increase the intratumoral concentration of Kadcyla in patients with brain mets, who've already seen Kadcyla, that could certainly be of a pretty strong therapeutic advantage to the patients. So I don't think we can comment on any regulatory discussions until we get the data, but I will remind you that neratinib is in the NCCN guidelines for brain mets. So assuming the data is positive, we could certainly update the guidelines to include that data, which would increase awareness of it among physicians who would be interested in prescribing it.

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 disconnect.