EXPANDING
OUR HORIZONS
Puma Biotechnology, Inc. | 2023 Annual Report
Puma Biotechnology, Inc. | 2023 Annual Report
Puma is committed to improving the lives
of patients who continue to inspire and
motivate us in our mission.
PUMA BIOTECHNOLOGY, INC. is a biopharmaceutical company
PUMA BIOTECHNOLOGY, INC. is a biopharmaceutical company
with a focus on the development and commercialization of in-
with a focus on the development and commercialization of in-
novative products to enhance cancer care. Puma in-licensed
novative products to enhance cancer care. Puma in-licensed
the global development and commercialization rights to
the global development and commercialization rights to
PB272 (neratinib, oral) in 2011. In 2022, Puma in-licensed glob-
PB272 (neratinib, oral) in 2011. In 2022, Puma in-licensed glob-
al research and development and commercial rights to alisert-
al research and development and commercial rights to alisert-
ib, a selective, small molecule, orally administered inhibitor of
ib, a selective, small molecule, orally administered inhibitor of
aurora kinase A.
aurora kinase A.
Neratinib is a potent irreversible tyrosine kinase inhibitor
Neratinib is a potent irreversible tyrosine kinase inhibitor
that blocks signal transduction through the epidermal growth
that blocks signal transduction through the epidermal growth
factor receptors, HER1, HER2 and HER4. Puma has focused on
factor receptors, HER1, HER2 and HER4. Puma has focused on
developing the oral version of neratinib, and its primary drug
developing the oral version of neratinib, and its primary drug
candidate was directed at the treatment of HER2-positive
candidate was directed at the treatment of HER2-positive
breast cancer.
breast cancer.
Neratinib, oral was approved by the U.S. Food and Drug Ad-
Neratinib, oral was approved by the U.S. Food and Drug Ad-
ministration (FDA) in 2017 for the extended adjuvant treatment
ministration (FDA) in 2017 for the extended adjuvant treatment
of adult patients with early stage HER2-overexpressed/am-
of adult patients with early stage HER2-overexpressed/am-
plified breast cancer, following adjuvant trastuzumab-based
plified breast cancer, following adjuvant trastuzumab-based
therapy. Puma commenced commercial sales of the drug in
therapy. Puma commenced commercial sales of the drug in
2017 and it is marketed in the United States as NERLYNX®
2017 and it is marketed in the United States as NERLYNX®
tablets. In February 2020, NERLYNX was also approved by
tablets. In February 2020, NERLYNX was also approved by
the FDA in combination with capecitabine for the treatment
the FDA in combination with capecitabine for the treatment
of adult patients with advanced or metastatic HER2-positive
of adult patients with advanced or metastatic HER2-positive
breast cancer who have received two or more prior anti-HER2-
breast cancer who have received two or more prior anti-HER2-
based regimens in the metastatic setting. NERLYNX was grant-
based regimens in the metastatic setting. NERLYNX was grant-
ed marketing authorization by the European Commission in
ed marketing authorization by the European Commission in
2018 for the extended adjuvant treatment of adult patients with
2018 for the extended adjuvant treatment of adult patients with
early stage hormone receptor-positive HER2-overexpressed/
early stage hormone receptor-positive HER2-overexpressed/
amplified breast cancer and who are less than one year from
amplified breast cancer and who are less than one year from
completion of prior adjuvant trastuzumab-based therapy.
completion of prior adjuvant trastuzumab-based therapy.
Commercial sales commenced in the European Union in 2019.
Commercial sales commenced in the European Union in 2019.
Puma has entered into additional exclusive license agree-
Puma has entered into additional exclusive license agree-
ments with various parties to commercialize NERLYNX in
ments with various parties to commercialize NERLYNX in
regions outside the United States, including the European
regions outside the United States, including the European
Union, Canada, Latin America, Greater China, Israel, Southeast
Union, Canada, Latin America, Greater China, Israel, Southeast
Asia, Australia, New Zealand, South Korea, the Middle East,
Asia, Australia, New Zealand, South Korea, the Middle East,
and parts of Africa. Puma plans to continue to pursue the com-
and parts of Africa. Puma plans to continue to pursue the com-
mercialization of NERLYNX outside the United States.
mercialization of NERLYNX outside the United States.
NERLYNX® is a registered trademark of Puma Biotechnology, Inc.
NERLYNX® is a registered trademark of Puma Biotechnology, Inc.
Alisertib is an adenosine triphosphate–competitive and re-
Alisertib is an adenosine triphosphate–competitive and re-
versible inhibitor of aurora kinase A and results in disruption of
versible inhibitor of aurora kinase A and results in disruption of
mitosis leading to apoptosis of rapidly proliferating tumor cells
mitosis leading to apoptosis of rapidly proliferating tumor cells
that are dependent on aurora kinase A. Alisertib has been test-
that are dependent on aurora kinase A. Alisertib has been test-
ed in clinical trials in patients with metastatic cancers including
ed in clinical trials in patients with metastatic cancers including
breast cancer, small cell lung cancer, head and neck cancer,
breast cancer, small cell lung cancer, head and neck cancer,
ovarian cancer, peripheral T cell lymphoma and acute myeloid
ovarian cancer, peripheral T cell lymphoma and acute myeloid
leukemia. Puma initially intends to focus the development of al-
leukemia. Puma initially intends to focus the development of al-
isertib on the treatment of patients with small cell lung cancer,
isertib on the treatment of patients with small cell lung cancer,
metastatic estrogen receptor-positive (ER-positive) HER2-neg-
metastatic estrogen receptor-positive (ER-positive) HER2-neg-
ative breast cancer and triple-negative breast cancer.
ative breast cancer and triple-negative breast cancer.
Small cell lung cancer is an aggressive form of lung can-
Small cell lung cancer is an aggressive form of lung can-
cer with a poor prognosis, and with limited treatment op-
cer with a poor prognosis, and with limited treatment op-
tions for patients whose cancer has progressed on or after
tions for patients whose cancer has progressed on or after
platinum-based chemotherapy. In September 2023, the FDA
platinum-based chemotherapy. In September 2023, the FDA
granted Orphan Drug Designation to alisertib, a selective,
granted Orphan Drug Designation to alisertib, a selective,
small-molecule, orally administered inhibitor of aurora kinase
small-molecule, orally administered inhibitor of aurora kinase
A, for the treatment of patients with small cell lung cancer. In
A, for the treatment of patients with small cell lung cancer. In
February 2024, Puma initiated ALISCA-Lung1, a Phase II clin-
February 2024, Puma initiated ALISCA-Lung1, a Phase II clin-
ical trial of alisertib monotherapy for the treatment of patients
ical trial of alisertib monotherapy for the treatment of patients
with extensive-stage small cell lung cancer.
with extensive-stage small cell lung cancer.
Product Pipeline
Product Pipeline
PHASE I
PHASE I
PHASE II
PHASE II
PHASE III
PHASE III
REGISTRATION
REGISTRATION
APPROVAL
APPROVAL
NERATINIB: Tyrosine kinase inhibitor
NERATINIB: Tyrosine kinase inhibitor
HER2+ Breast Cancer
HER2+ Breast Cancer
Extended adjuvant
Extended adjuvant
Neratinib monotherapy
Neratinib monotherapy
Metastatic
Metastatic
Monotherapy or combination therapy
Monotherapy or combination therapy
Metastatic with brain mets
Metastatic with brain mets
Monotherapy or combination therapy
Monotherapy or combination therapy
ALISERTIB: Aurora kinase A inhibitor
ALISERTIB: Aurora kinase A inhibitor
ExteNET (Phase III HER2+ EBC*)
ExteNET (Phase III HER2+ EBC*)
CONTROL
CONTROL
NALA (Phase III 3rd Line HER2+ MBC**)
NALA (Phase III 3rd Line HER2+ MBC**)
TBCRC-022 (T-DM1 + neratinib)
TBCRC-022 (T-DM1 + neratinib)
TBCRC-041 (fulvestrant+alisertib)
TBCRC-041 (fulvestrant+alisertib)
HRc+*** HER2-negative MBC
HRc+*** HER2-negative MBC
ALISCA-Breast1 (alisertib+endocrine)
ALISCA-Breast1 (alisertib+endocrine)
Initiation in Q4 ‘24
Initiation in Q4 ‘24
Metastatic EGFR-mutant NSCLC****
Metastatic EGFR-mutant NSCLC****
NCT04085315 (alisertib+osimertinib)
NCT04085315 (alisertib+osimertinib)
Small cell lung cancer
Small cell lung cancer
NCT02038647 (paclitaxel+alisertib)
NCT02038647 (paclitaxel+alisertib)
ALISCA-Lung1 (PUMA-ALI-4201)
ALISCA-Lung1 (PUMA-ALI-4201)
Initiated in Q1 ’24
Initiated in Q1 ’24
* ECB: Early breast cancer ** MBC: Metastatic breast cancer *** HRc+: Hormone receptor positive **** NSCLC: Non-small cell lung cancer
* ECB: Early breast cancer ** MBC: Metastatic breast cancer *** HRc+: Hormone receptor positive **** NSCLC: Non-small cell lung cancer
To Our Stockholders
When Puma was founded approximately 14 years ago, the goal was quite simple and straightforward, to help cancer patients.
Today we continue to operate with a singular focus on helping to improve the lives of patients who inspire and motivate us
in our mission. In 2023, we made great strides with this mission as it was a year of moving forward on two fronts, both with
NERLYNX® as well as alisertib. I would like to provide a review of our many accomplishments in 2023, as well as share our
views of what is expected in 2024.
NERLYNX®
In February 2023, we were pleased to announce the addition of NERLYNX to the National Comprehensive Cancer Network®
(NCCN) Clinical Practice Guidelines in Oncology for Breast Cancer for patients with HER2 activating mutations. The update
was based on results from the Phase II SUMMIT trial, which enrolled a cohort of patients with locally assessed HR+/ HER2-
metastatic breast cancer with activating HER2 mutations who had received prior CDK4/6 inhibitor therapy, as well as being
based on results from the Phase II MutHer trial that evaluated NERLYNX in combination with fulvestrant in patients with
HER2-mutated, non-amplified metastatic breast cancer.
The updated guidelines include NERLYNX as category 2B potential targeted therapies for patients with ER+/ HER2- or ER-/
HER2- metastatic breast cancer and activating mutations in the HER2 genes. Additionally, the updated guidelines include
dose escalation in the NERLYNX dosing schedule for recurrent unresectable or metastatic breast cancer, aligning with the
labeling supplement to the U.S. Prescribing Information approved by the FDA.
These guidelines are used by physicians to determine the best course of treatment for patients, and the inclusion of NERLYNX
in these guidelines will increase awareness, allowing patients and their care teams to make more informed decisions about
their treatment plans while addressing this significant unmet need in advanced breast cancer.
As we move into 2024, we continue to utilize these updated guidelines to inform and educate doctors and other health care
practitioners about the expanded options for their patients. We also are working with patient advocacy groups to better in-
form patients and their families of the treatment options available to them, and we are supporting our global partners as they
expand access to NERLYNX in countries around the world.
Our international partners have leveraged their specific regulatory and commercial expertise to make NERLYNX available
to patients on six continents. We are grateful to our partners whose commercial infrastructure and resources allow patients
from all corners of the world to access NERLYNX. We would like to thank our cross-functional teams within Puma and our
partners who expertly managed the processes involved to get NERLYNX to markets across the globe. During 2023, our part-
ners launched NERLYNX into additional countries in Europe, Asia and Latin America, and we were very pleased to see the
continued growth in these countries. We anticipate that we will see continued growth in 2024 and beyond.
ALISERTIB
In 2023, we reported substantial progress in the development of alisertib for numerous tumor types. We were very pleased
with our interactions with the FDA for our first two planned indications, small cell lung cancer and HER2-negative, hormone
receptor-positive metastatic breast cancer. This resulted in the allowance of our Investigational New Drug (IND) application
for alisertib in small cell lung cancer during 2023 and our IND for HER2-negative, hormone receptor-positive metastatic
breast cancer in 2024.
Alan H. Auerbach
Alan H. Auerbach
Chairman, Chief Executive Officer, President and Founder
Chairman, Chief Executive Officer, President and Founder
Alisertib in Small Cell Lung Cancer
Alisertib in Small Cell Lung Cancer
We initiated the Phase II trial, ALISCA-Lung1, of alisertib monotherapy in small cell lung cancer in February 2024. The trial will
We initiated the Phase II trial, ALISCA-Lung1, of alisertib monotherapy in small cell lung cancer in February 2024. The trial will
enroll up to 60 patients with extensive stage small cell lung cancer who have progressed after first-line platinum-based che-
enroll up to 60 patients with extensive stage small cell lung cancer who have progressed after first-line platinum-based che-
motherapy and immunotherapy. Alisertib will be dosed at 50 mg BID on days 1-7 of every 21- day cycle. The primary endpoint
motherapy and immunotherapy. Alisertib will be dosed at 50 mg BID on days 1-7 of every 21- day cycle. The primary endpoint
of the trial will be objective response rate with secondary endpoints of duration of response, disease control rate, progres-
of the trial will be objective response rate with secondary endpoints of duration of response, disease control rate, progres-
sion-free survival (PFS) and overall survival. We will also be looking at each of these endpoints within selected pre-specified
sion-free survival (PFS) and overall survival. We will also be looking at each of these endpoints within selected pre-specified
biomarker subgroups as well as to assess whether any demonstrate enhanced efficacy. We anticipate that we will be able to
biomarker subgroups as well as to assess whether any demonstrate enhanced efficacy. We anticipate that we will be able to
share interim data from this trial with investors in the second half of 2024.
share interim data from this trial with investors in the second half of 2024.
In September 2023, the FDA granted to alisertib Orphan Drug Designation for the treatment of patients with small cell lung
In September 2023, the FDA granted to alisertib Orphan Drug Designation for the treatment of patients with small cell lung
cancer. The FDA grants Orphan Drug Designation to investigational therapies being developed to treat, diagnose, or prevent
cancer. The FDA grants Orphan Drug Designation to investigational therapies being developed to treat, diagnose, or prevent
a rare disease or condition affecting fewer than 200,000 people in the United States. Further, Orphan Drug Designation pro-
a rare disease or condition affecting fewer than 200,000 people in the United States. Further, Orphan Drug Designation pro-
vides benefits to drug developers, including assistance in the drug development process, tax credits for qualified trials, waiver
vides benefits to drug developers, including assistance in the drug development process, tax credits for qualified trials, waiver
of certain FDA fees, and the potential for seven years of post-approval marketing exclusivity.
of certain FDA fees, and the potential for seven years of post-approval marketing exclusivity.
Alisertib in Metastatic Breast Cancer
Alisertib in Metastatic Breast Cancer
In March 2023, we published results from the Phase II TBCRC 041 randomized clinical trial of alisertib alone or in combination
In March 2023, we published results from the Phase II TBCRC 041 randomized clinical trial of alisertib alone or in combination
with fulvestrant in postmenopausal patients with endocrine-resistant, HER2-negative advanced metastatic breast cancer
with fulvestrant in postmenopausal patients with endocrine-resistant, HER2-negative advanced metastatic breast cancer
who were previously treated with fulvestrant, in JAMA Oncology.
who were previously treated with fulvestrant, in JAMA Oncology.
For the 46 evaluable patients in the alisertib alone arm of the trial, nine partial responses were observed, resulting in an
For the 46 evaluable patients in the alisertib alone arm of the trial, nine partial responses were observed, resulting in an
overall response rate of 19.6%. For the 45 evaluable patients in the alisertib plus fulvestrant arm of the trial, nine patients
overall response rate of 19.6%. For the 45 evaluable patients in the alisertib plus fulvestrant arm of the trial, nine patients
experienced a response, resulting in an overall response rate of 20.0%. The median durations of response were 15.1 and 8.5
experienced a response, resulting in an overall response rate of 20.0%. The median durations of response were 15.1 and 8.5
months; the 24-week clinical benefit rates were 41.3% and 28.9%; and the estimated median progression-free survival were
months; the 24-week clinical benefit rates were 41.3% and 28.9%; and the estimated median progression-free survival were
estimated to be 5.6 and 5.4 months for the alisertib alone and alisertib plus fulvestrant arms, respectively. The most common
estimated to be 5.6 and 5.4 months for the alisertib alone and alisertib plus fulvestrant arms, respectively. The most common
grade 3 or higher adverse events for both arms were neutropenia, leukopenia, and anemia for both arms, with the added
grade 3 or higher adverse events for both arms were neutropenia, leukopenia, and anemia for both arms, with the added
observed adverse events of lymphopenia and fatigue for the alisertib plus fulvestrant arm only.
observed adverse events of lymphopenia and fatigue for the alisertib plus fulvestrant arm only.
In March 2024, we announced that we had been notified by the FDA that our IND submission has been reviewed, and that we
In March 2024, we announced that we had been notified by the FDA that our IND submission has been reviewed, and that we
can proceed with our Phase II ALISCA-Breast1 trial of alisertib for the treatment of HER2-negative, hormone receptor-positive
can proceed with our Phase II ALISCA-Breast1 trial of alisertib for the treatment of HER2-negative, hormone receptor-positive
metastatic breast cancer in 2024.
metastatic breast cancer in 2024.
This trial will investigate alisertib in combination with endocrine treatment (consisting of either anastrozole, exemestane,
This trial will investigate alisertib in combination with endocrine treatment (consisting of either anastrozole, exemestane,
letrozole, fulvestrant or tamoxifen) in chemotherapy-naïve patients with hormone receptor-positive, HER2-negative recurrent
letrozole, fulvestrant or tamoxifen) in chemotherapy-naïve patients with hormone receptor-positive, HER2-negative recurrent
or metastatic breast cancer. Patients must have been previously treated with CDK 4/6 inhibitors and received at least two
or metastatic breast cancer. Patients must have been previously treated with CDK 4/6 inhibitors and received at least two
prior lines of endocrine therapy in the recurrent or metastatic setting to be eligible for the trial. Puma plans to initiate this trial
prior lines of endocrine therapy in the recurrent or metastatic setting to be eligible for the trial. Puma plans to initiate this trial
in the second half of 2024.
in the second half of 2024.
Patients will be dosed with alisertib given at either 30 mg, 40 mg or 50 mg twice daily on days 1-3, 8-10 and 15-17 on a 28-day
Patients will be dosed with alisertib given at either 30 mg, 40 mg or 50 mg twice daily on days 1-3, 8-10 and 15-17 on a 28-day
cycle in combination with the endocrine therapy of the investigator’s choice. Patients must not have been previously treated
cycle in combination with the endocrine therapy of the investigator’s choice. Patients must not have been previously treated
with the endocrine treatment that will be given in combination with alisertib in the trial. Each dose level will enroll up to 50
with the endocrine treatment that will be given in combination with alisertib in the trial. Each dose level will enroll up to 50
patients. Patients must provide blood samples and tissue-based biopsies so that biomarkers can be evaluated. The primary
patients. Patients must provide blood samples and tissue-based biopsies so that biomarkers can be evaluated. The primary
efficacy end points will include objective response rate, duration of response, disease control rate and progression-free sur-
vival. As a secondary endpoint, we will be evaluating each of these efficacy endpoints within biomarker subgroups in order to
determine whether any biomarker subgroup correlates with response. The goal would be to enhance the efficacy in a biomark-
er subgroup to improve the efficacy of alisertib as previously seen in preclinical and clinical studies in other cancers, including
breast cancer and small cell lung cancer.
Once the optimal alisertib dose is identified, we plan to engage with global regulatory agencies regarding the design of a
pivotal (Phase III) trial, which it anticipates will be a randomized trial of alisertib plus investigators choice endocrine therapy
versus placebo plus investigator’s choice endocrine therapy in patients with chemotherapy-naïve HER2-negative, hormone
receptor-positive metastatic breast cancer.
Alisertib in EGFR-Mutant Non-Small Cell Lung Cancer
Alisertib is currently being studied in an ongoing investigator sponsored trial in which alisertib is administered in combination
with osimertinib in patients with metastatic EGFR-mutant non-small cell lung cancer. More specifically, patients with meta-
static EGFR-mutant non-small cell lung cancer are treated with osimertinib and then at the time of progression, alisertib is
added to osimertinib in order to see if alisertib can overcome osimertinib resistance. Interim data on this trial was previously
presented at ASCO prior to Puma licensing this drug. We anticipate that updated data from this trial will be presented in the
first half of 2024.
Most notably, a recent biomarker analysis from this trial has demonstrated a subgroup of patients with a biomarker where the
aurora kinase pathway plays a role where alisertib appears to have much greater efficacy when added to osimertinib at the
time of progression on osimertinib. This biomarker occurs in about half of the patients in the trial, which is consistent with the
published literature on this biomarker in this patient population. Based on this biomarker data, the trial is being amended to
limit enrollment in the trial to only continue enrolling patients who have this biomarker.
FINANCIALS
In 2023, we continued to be in a solid financial position as we continue to recognize our fiscal responsibility to shareholders
and continue to cut costs to protect our net income. In 2023, we reported NERLYNX product revenue, net of $203.1 million,
and royalty revenue from our licensing partners around the world of $32.5 million. We were also pleased to report positive net
income and earnings per share, as well as positive cash flow for full year 2023. We remain committed to continuing to achieve
this positive net income in 2024 and will continue to reduce expenses if needed to achieve this, while still continuing our in-
vestment into the alisertib programs and continuing with our mission to help cancer patients.
MOVING FORWARD IN 2024 AND BEYOND
Thousands of patients have been treated with NERLYNX, which has made a positive impact around the world. We are excited
to move forward with the clinical development of alisertib and look forward to results from our ongoing studies in breast can-
cer and lung cancer and the potential for alisertib to make a difference in the lives of these patients. Most importantly, we look
forward to advancing our mission throughout 2024 and beyond.
We could not achieve these goals without the continued support of our patients, physicians, employees and our stockholders.
On behalf of the Board of Directors, I would like to thank all stockholders for their continued encouragement and support in
our endeavor to continue to develop and commercialize new treatments to improve the quality of life for cancer patients and
their families.
Sincerely,
Alan H. Auerbach
Chairman, Chief Executive Officer, President and Founder
NERLYNX® has opened up new horizons for
NERLYNX® has opened up new horizons for
patients seeking to prevent recurrence.
patients seeking to prevent recurrence.
A LI S E RTI B
Small Cell Lung Cancer
▶ ALISCA-Lung1
A Phase II Study of Alisertib, an Investigational Drug, in Patients with Extensive- Stage
Small Cell Lung Cancer (SCLC).
▶ ABOUT THIS CLINICAL TRIAL
This Phase II study is investigating alisertib monotherapy in patients with extensive-stage
small cell lung cancer (ES-SCLC) to determine whether biomarkers correlate with ali-
sertib response. Findings from this study are anticipated to identify a biomarker-defined
patient population that derives the greatest clinical benefit from alisertib. Future clinical
development of alisertib in SCLC is anticipated to be focused on this biomarker-defined
population.
▶ WHO IS ELIGIBLE?
The ALISCA-Lung1 clinical trial is open to patients 18 years or older with pathological-
ly-confirmed ES-SCLC following progression on or after first-line treatment with plati-
num-based chemotherapy and immunotherapy.
▶ NOW ENROLLING
The study is being conducted at 15 sites within the United States, with 10 more sites
opening in 2024.
▶ FOR MORE INFORMATION ON THIS CLINICAL TRIAL, LOCATION OF TRIAL SITES, AND HOW
TO ENROLL,
Go to: www.clinicaltrials.gov ID NCT06095505 or
Email: clinicaltrials@pumabiotechnology.com
A LI S E RTI B
A LI S E RTI B
Metastatic Breast Cancer
Metastatic Breast Cancer
▶ ALISCA-Breast1
▶ ALISCA-Breast1
▶ ABOUT THIS CLINICAL TRIAL
▶ ABOUT THIS CLINICAL TRIAL
This is a global, randomized, dose optimization, multi-center Phase II study of alisert-
This is a global, randomized, dose optimization, multi-center Phase II study of alisert-
ib administered in combination with endocrine therapy in patients with HR-positive,
ib administered in combination with endocrine therapy in patients with HR-positive,
HER2-negative metastatic breast cancer (MBC). This dose-optimization trial will include
HER2-negative metastatic breast cancer (MBC). This dose-optimization trial will include
efficacy and safety in patients treated with alisertib, as well as the identification of possi-
efficacy and safety in patients treated with alisertib, as well as the identification of possi-
ble biomarkers.
ble biomarkers.
▶ WHO IS ELIGIBLE?
▶ WHO IS ELIGIBLE?
The ALISCA-Lung1 clinical trial is open to patients 18 years of age or older with patho-
The ALISCA-Lung1 clinical trial is open to patients 18 years of age or older with patho-
logically-confirmed HR+/HER2- MBC following progression on or after at least 2 prior
logically-confirmed HR+/HER2- MBC following progression on or after at least 2 prior
lines of endocrine therapy in the recurrent or metastatic setting.
lines of endocrine therapy in the recurrent or metastatic setting.
▶ OPENING IN 4Q-2024
▶ OPENING IN 4Q-2024
This study will be conducted at 50 sites within the United States, Spain and France.
This study will be conducted at 50 sites within the United States, Spain and France.
N E R LYNX®
(neratinib)
NERLYNX is a once-a-day oral treatment for adults with HER2-positive breast cancer, taken after trastuzumab-based therapy.
NERLYNX can help further reduce the risk of recurrence. It is also approved for patients with HER2-positive breast cancer in the
metastatic setting.
▶ In early stage HER2-positive breast cancer, the risk of recurrence can be as high as 25% within ten years.
▶ In a Phase III clinical study that included 2,840 patients who had early-stage HER2-positive breast cancer, NERLYNX
reduced the risk of recurrence by 34% at two years. This was the primary endpoint of the trial.
In absolute numbers, 94.2% of all patients studied who were HER2-positive and took NERLYNX had no return of cancer
after two years, compared to the 91.9% of patients on placebo: a difference of 2.3%.
•
In an exploratory subgroup analysis conducted after the clinical trial was completed, 75% of patients enrolled in
the clinical trial (2,117 out of 2,840) agreed to remain in the study beyond the initial two years. Of the HER2-positive
and HR-positive population, 95% were also treated with endocrine therapy, NERLYNX reduced the risk of recur-
rence by 42% at five years.
• An exploratory subgroup analysis was also conducted after the clinical trial was completed to evaluate the ef-
fect of NERLYNX on the CNS (central nervous system: brain and spinal cord) metastases in patients with early
stage HER2-positive, HR-positive breast cancer. NERLYNX reduced the risk of CNS recurrence or death by 59%.
In absolute numbers, 98.4% of patients given NERLYNX (n=670) did not experience a CNS recurrence, or death
from any cause, compared to 95.7% of those given placebo (n=664): an absolute benefit of 2.7%.
▶ NERLYNX was studied in a Phase III trial in combination with capecitabine versus lapatinib + capecitabine. The clinical
trial included 621 patients with metastatic HER2-positive breast cancer who had previously been treated with two or more
HER2-directed therapies.
NERLYNX + capecitabine reduced the risk of progression by 24% in those with metastatic HER2-positive breast cancer.
These are relative benefits. In absolute numbers, at 12 months, the progression-free survival rate was 29% in the NERLYNX
+ capecitabine group versus 15% in the lapatinib + capecitabine group.
NERLYNX® is available throughout the United States and it is approved in over 40 countries around the world.
“Despite advances in current adjuvant HER2-directed therapies, the risk of
recurrence, including CNS metastases, remains quite high. NERLYNX is the only
HER2-directed TKI approved in the curative setting, and dose escalation is an
important option to help improve diarrhea tolerability.”
— VK GADI, MD, PHD, UNIVERSITY OF ILLINOIS CANCER CENTER, CHICAGO, IL
© 2017 Puma Biotechnology, Inc.
INDICATIONS
INDICATIONS
• NERLYNX® (neratinib) tablets, for oral use, is a kinase inhibitor indicated:
• NERLYNX® (neratinib) tablets, for oral use, is a kinase inhibitor indicated:
• As a single agent, for the extended adjuvant treatment of adult patients with early stage HER2-positive breast cancer, to follow adjuvant tras-
• As a single agent, for the extended adjuvant treatment of adult patients with early stage HER2-positive breast cancer, to follow adjuvant tras-
tuzumab-based therapy.
tuzumab-based therapy.
• In combination with capecitabine, for the treatment of adult patients with advanced or metastatic HER2-positive breast cancer, who have re-
• In combination with capecitabine, for the treatment of adult patients with advanced or metastatic HER2-positive breast cancer, who have re-
ceived two or more prior anti-HER2 based regimens in the metastatic setting.
ceived two or more prior anti-HER2 based regimens in the metastatic setting.
Important Safety Information Regarding NERLYNX® (neratinib) U.S. Indication
Important Safety Information Regarding NERLYNX® (neratinib) U.S. Indication
CONTRAINDICATIONS: None
CONTRAINDICATIONS: None
WARNINGS AND PRECAUTIONS:
WARNINGS AND PRECAUTIONS:
• Diarrhea: Manage diarrhea through either NERLYNX dose escalation or loperamide prophylaxis. If diarrhea occurs despite recommended pro-
• Diarrhea: Manage diarrhea through either NERLYNX dose escalation or loperamide prophylaxis. If diarrhea occurs despite recommended pro-
phylaxis, treat with additional antidiarrheals, fluids, and electrolytes as clinically indicated. Withhold NERLYNX in patients experiencing severe
phylaxis, treat with additional antidiarrheals, fluids, and electrolytes as clinically indicated. Withhold NERLYNX in patients experiencing severe
and/or persistent diarrhea. Permanently discontinue NERLYNX in patients experiencing Grade 4 diarrhea or Grade ≥ 2 diarrhea that occurs
and/or persistent diarrhea. Permanently discontinue NERLYNX in patients experiencing Grade 4 diarrhea or Grade ≥ 2 diarrhea that occurs
after maximal dose reduction.
after maximal dose reduction.
• Hepatotoxicity: Monitor liver function tests monthly for the first 3 months of treatment, then every 3 months while on treatment and as clinically
• Hepatotoxicity: Monitor liver function tests monthly for the first 3 months of treatment, then every 3 months while on treatment and as clinically
indicated. Withhold NERLYNX in patients experiencing Grade 3 liver abnormalities and permanently discontinue NERLYNX in patients experi-
indicated. Withhold NERLYNX in patients experiencing Grade 3 liver abnormalities and permanently discontinue NERLYNX in patients experi-
encing Grade 4 liver abnormalities.
encing Grade 4 liver abnormalities.
• Embryo-Fetal Toxicity: NERLYNX can cause fetal harm. Advise patients of potential risk to a fetus and to use effective contraception.
• Embryo-Fetal Toxicity: NERLYNX can cause fetal harm. Advise patients of potential risk to a fetus and to use effective contraception.
ADVERSE REACTIONS: The most common adverse reactions (reported in ≥ 5% of patients) were as follows:
ADVERSE REACTIONS: The most common adverse reactions (reported in ≥ 5% of patients) were as follows:
• NERLYNX as a single agent: Diarrhea, nausea, abdominal pain, fatigue, vomiting, rash, stomatitis, decreased appetite, muscle spasms, dyspep-
• NERLYNX as a single agent: Diarrhea, nausea, abdominal pain, fatigue, vomiting, rash, stomatitis, decreased appetite, muscle spasms, dyspep-
sia, AST or ALT increased, nail disorder, dry skin, abdominal distention, epistaxis, weight decreased, and urinary tract infection.
sia, AST or ALT increased, nail disorder, dry skin, abdominal distention, epistaxis, weight decreased, and urinary tract infection.
• NERLYNX in combination with capecitabine: Diarrhea, nausea, vomiting, decreased appetite, constipation, fatigue/asthenia, weight decreased,
• NERLYNX in combination with capecitabine: Diarrhea, nausea, vomiting, decreased appetite, constipation, fatigue/asthenia, weight decreased,
dizziness, back pain, arthralgia, urinary tract infection, upper respiratory tract infection, abdominal distention, renal impairment, and muscle
dizziness, back pain, arthralgia, urinary tract infection, upper respiratory tract infection, abdominal distention, renal impairment, and muscle
spasms.
spasms.
To report SUSPECTED ADVERSE REACTIONS, contact Puma Biotechnology, Inc. at 1-844-NERLYNX (1-844-637-5969) or FDA at 1-800-
To report SUSPECTED ADVERSE REACTIONS, contact Puma Biotechnology, Inc. at 1-844-NERLYNX (1-844-637-5969) or FDA at 1-800-
FDA-1088 or www.fda.gov/medwatch.
FDA-1088 or www.fda.gov/medwatch.
DRUG INTERACTIONS:
DRUG INTERACTIONS:
• Gastric acid reducing agents: Avoid concomitant use with proton pump inhibitors. Separate NERLYNX by at least 2 hours before or 10 hours
• Gastric acid reducing agents: Avoid concomitant use with proton pump inhibitors. Separate NERLYNX by at least 2 hours before or 10 hours
after H2-receptor antagonists. Or separate NERLYNX by at least 3 hours with antacids.
after H2-receptor antagonists. Or separate NERLYNX by at least 3 hours with antacids.
• Strong CYP3A4 inhibitors: Avoid concomitant use.
• Strong CYP3A4 inhibitors: Avoid concomitant use.
• P-gp and moderate CYP3A4 dual inhibitors: Avoid concomitant use.
• P-gp and moderate CYP3A4 dual inhibitors: Avoid concomitant use.
• Strong or moderate CYP3A4 inducers: Avoid concomitant use.
• Strong or moderate CYP3A4 inducers: Avoid concomitant use.
• Certain P-gp substrates: Monitor for adverse reactions of P-gp substrates for which minimal concentration change may lead to serious adverse
• Certain P-gp substrates: Monitor for adverse reactions of P-gp substrates for which minimal concentration change may lead to serious adverse
reactions when used concomitantly with NERLYNX.
reactions when used concomitantly with NERLYNX.
USE IN SPECIFIC POPULATIONS:
USE IN SPECIFIC POPULATIONS:
• Lactation: Advise women not to breastfeed.
• Lactation: Advise women not to breastfeed.
Please see Full Prescribing Information for additional safety information.
Please see Full Prescribing Information for additional safety information.
Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-35703
PUMA BIOTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
77-0683487
(I.R.S. Employer Identification No.)
10880 Wilshire Boulevard, Suite 2150
Los Angeles, CA 90024
(424) 248-6500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Title of each class
Common Stock, par value $0.0001 per share
Securities registered pursuant to Section 12(b) of the Act:
Trading symbol
PBYI
Name of each exchange on which registered
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☒
☒
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $141.4 million as of June 30, 2023, based
upon the closing price of $3.53 per share of the registrant’s common stock on the NASDAQ Global Select Market on Thursday, June 30, 2023, the last
business day of the registrant’s most recently completed second fiscal quarter. Shares of common stock held by each executive officer, director and holder
of 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes. As of February 26, 2024, there were 48,207,162 shares of the registrant’s common
stock outstanding.
Documents Incorporated by Reference:
Portions of the Proxy Statement for the registrant’s 2024 Annual Meeting of Stockholders (the “2024 Proxy Statement”), are incorporated by
reference into Part III of the Form 10-K to the extent stated herein.
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TABLE OF CONTENTS
Page
Part I
Item 1.
Business .........................................................................................................................................................
Item 1A. Risk Factors ...................................................................................................................................................
Item 1B. Unresolved Staff Comments ..........................................................................................................................
Item 1C. Cybersecurity .................................................................................................................................................
Properties .......................................................................................................................................................
Item 2.
Legal Proceedings .........................................................................................................................................
Item 3.
Mine Safety Disclosure .................................................................................................................................
Item 4.
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ....................................................................................................................................................
[Reserved]......................................................................................................................................................
Item 6.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ........................
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .......................................................................
Financial Statements and Supplementary Data ..............................................................................................
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........................
Item 9.
Item 9A. Controls and Procedures ................................................................................................................................
Item 9B. Other Information ..........................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ...........................................................
4
42
78
79
80
80
82
83
84
85
98
98
98
98
99
99
Part III
Item 10. Directors, Executive Officers and Corporate Governance ............................................................................. 100
Item 11. Executive Compensation ............................................................................................................................... 100
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...... 100
Item 13. Certain Relationships and Related Transactions, and Director Independence ............................................... 100
Item 14. Principal Accounting Fees and Services ........................................................................................................ 100
Part IV
Item 15. Exhibits, Financial Statement Schedules ....................................................................................................... 101
Item 16. Form 10-K Summary ..................................................................................................................................... 101
Exhibit Index ................................................................................................................................................................... 102
Signatures ........................................................................................................................................................................ 108
Index to Consolidated Financial Statements ................................................................................................................... F-1
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (“Exchange Act”). Any statements about our expectations, beliefs, plans, objectives,
assumptions, future events or performance are not historical facts and may be forward looking. These forward-looking
statements include, but are not limited to, statements about:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the commercialization of NERLYNX® (neratinib) tablets ( “NERLYNX”);
the development of our drug candidates, including when we expect to undertake, initiate and complete clinical
trials of our drug candidates;
the anticipated timing of regulatory filings;
the regulatory approval of our drug candidates;
our use of clinical research organizations (“CRO”) and other contractors;
our ability to find collaborative partners for research, development and commercialization of potential
products;
efforts of our sub-licensees to obtain regulatory approval and commercialize NERLYNX in areas outside the
United States;
our ability to market any of our products;
our expectations regarding our costs and expenses;
our anticipated capital requirements and estimates regarding our needs for additional financing;
our ability to compete against other companies and research institutions;
our ability to secure adequate protection for our intellectual property;
our intention and ability to vigorously defend against any litigation to which we are or may become party;
our ability to in-license additional drugs;
our ability to attract and retain key personnel; and
our ability to obtain adequate financing on favorable terms or at all.
These statements are often, but not always, made through the use of words or phrases such as “anticipate,”
“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend” and similar words or phrases.
Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ
materially from those expressed in them. Discussions containing these forward-looking statements may be found
throughout this Annual Report, including the sections entitled “Item 1. Business” in Part I and “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Annual Report. These forward-
looking statements involve risks and uncertainties, including the risks discussed in the section entitled “Item 1A. Risk
Factors” in Part I of this Annual Report that could cause our actual results to differ materially from those in the forward-
looking statements. We undertake no obligation to update the forward-looking statements or to reflect events or
circumstances after the date of this document, except as required by law. The risks discussed in this Annual Report should
be considered in evaluating our prospects and future financial performance.
1
SUMMARY OF RISK FACTORS
Our business is subject to a number of risks of which you should be aware before making a decision to invest in our
common stock, including those described in the section entitled “Item 1A. Risk Factors” in Part I of this Annual Report.
These risks include, among others, the following:
• While we have reported net income in the years ended December 31, 2023 and 2022, we cannot assure that
we will continue to do so and may not be able to maintain profitability.
• We are currently a single product company with limited commercial sales experience.
• We may not be able to successfully commercialize NERLYNX in the future.
• We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital
needs and our failure to obtain additional financing when needed on acceptable terms, or at all, could force us
to delay, limit, reduce or terminate our product development or commercialization efforts or other operations.
• The terms of our Note Purchase Agreement place restrictions on our ability to operate our business and on our
financial flexibility, and we may be unable to achieve the revenue necessary for us to incur additional
borrowings under the Note Purchase Agreement or to satisfy the minimum revenue and cash balance
covenants.
• We have in-licensed alisertib, a drug candidate for which we have assumed all responsibility for global
development and commercialization. Our development of alisertib will be expensive, lengthy and
unpredictable, and any failure to successfully develop alisertib will have a material adverse effect on our
business and financial position.
•
Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time
may change as more patient data become available and are subject to audit and verification procedures that
could result in material changes in the final data.
• NERLYNX, alisertib or other drug candidates may cause undesirable side effects or have other properties
when used alone or in combination with other approved products or investigational new drugs that could
delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in
significant negative consequences following marketing approval, if any, as applicable.
• We are in the early stages of development of alisertib, and we cannot be certain that we will be successful if
we seek regulatory approvals for our drug candidates.
• We have limited experience as a company in marketing or distributing pharmaceutical products. If we are
unable to expand our marketing and sales capabilities in the commercialization of NERLYNX, our business,
results of operations and financial condition may be materially adversely affected.
• We are exposed to the risks associated with reliance on a direct sales force to commercialize NERLYNX in
the United States.
• Our NERLYNX commercialization efforts may fail to achieve the degree of market acceptance by patients
and physicians necessary for commercial success.
• We depend on a limited number of customers for a significant amount of our total revenue, and if we lose any
of our significant customers, our business could be harmed.
• Even though the United States Food and Drug Administration (“FDA”) and the European Commission
(“EC”) have granted approval of NERLYNX for the extended adjuvant treatment of certain patients with
early stage, HER2-positive breast cancer and the FDA has granted approval for NERLYNX for the treatment
of certain patients with metastatic HER2-positive breast cancer, the terms of the approvals may limit its
commercial potential.
2
• We are dependent on international third-party sub-licensees for the development and commercialization of
NERLYNX in several countries outside the United States. The failure of these sub-licensees to meet their
contractual, regulatory or other obligations could adversely affect our business.
• We have no experience in drug formulation or manufacturing and rely exclusively on third parties to
formulate and manufacture NERLYNX, alisertib and our other drug candidates, and any disruption or loss of
these relationships could delay our development and commercialization efforts.
• Our business, financial condition, results of operations and ongoing clinical trials have been, and could
continue to be, harmed by the effects of public health emergencies or outbreaks of epidemics, pandemics or
contagious diseases.
• We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of
that technology, including any cybersecurity incidents, could harm us.
• We depend significantly on in-licensed intellectual property, and the termination of these licenses would
significantly harm our business and future prospects.
• Our proprietary rights may not adequately protect our intellectual property and potential products, and if we
cannot obtain adequate protection of our intellectual property and potential products, we may not be able to
successfully market our potential products.
3
PART I
ITEM 1. BUSINESS
Company Overview
Unless otherwise provided in this Annual Report, references to the “Company,” “we,” “us,” and “our” refer to Puma
Biotechnology, Inc. and our wholly owned subsidiaries.
We are a biopharmaceutical company that develops and commercializes innovative products to enhance cancer care
and improve treatment outcomes for patients. We are currently commercializing NERLYNX, an oral version of neratinib,
for the treatment of HER2-positive breast cancer. Additionally, we have in-licensed, and are responsible for global
development and commercialization of, alisertib. Alisertib is a selective, small-molecule inhibitor of aurora kinase A that is
designed to disrupt mitosis leading to apoptosis of rapidly proliferating tumor cells that are dependent on aurora kinase A.
Prior to our licensing alisertib from Takeda, alisertib was tested in over 1,300 patients who were treated across 22
company-sponsored trials resulting in a large, well-characterized clinical safety database. Based on information in this
database, we believe alisertib has potential application in the treatment of range of different cancer types, including
hormone receptor positive breast cancer, triple negative breast cancer, small cell lung cancer and head and neck cancer. We
intend to pursue development of alisertib initially in small cell lung cancer and hormone receptor positive breast cancer.
The following figure provides an overview of our commercial product and drug candidates.
EBC: Early breast cancer
MBC: Metastatic breast cancer
*
**
*** HRc+: Hormone receptor positive
**** NSCLC: Non small cell lung cancer
Neratinib
Breast cancer is the leading cause of cancer death among women worldwide, with approximately one million new
cases reported each year and more than 400,000 deaths per year. Up to 20% of breast cancer tumors show over-expression
of the HER2 protein. Women with breast cancer that over-expresses HER2, referred to as HER2-positive breast cancer, are
at greater risk for disease progression and death than women whose tumors do not over-express HER2. Therapeutic
strategies have been developed to block HER2 in order to improve the treatment of this type of breast cancer. Trastuzumab,
pertuzumab, lapatinib, T-DM1, fam‐trastuzumab deruxtecan and tucatinib are all drugs are used as single agents, in
combination with other drugs and in combination with chemotherapy to treat patients with HER2-positive breast cancer at
various stages.
4
Neratinib is a potent irreversible TKI that blocks signal transduction through the epidermal growth factor receptors,
HER1, HER2 and HER4. Based on pre-clinical studies and clinical trials to date, we believe that neratinib may offer an
advantage over existing treatments that are used in the treatment of patients with HER2-positive breast cancer. We believe
that by more potently inhibiting HER2 at a different site and acting via a mechanism different from other agents, neratinib
may have therapeutic benefits in breast cancer patients who have been previously treated with these existing treatments,
most notably due to its irreversible inhibition of the HER2 target enzyme.
NERLYNX, the commercial name for neratinib, is currently approved in the United States for two indications: the
extended adjuvant treatment of adult patients with early stage HER2-overexpressed/amplified breast cancer following
adjuvant trastuzumab-based therapy and for use in combination with capecitabine for the treatment of adult patients with
advanced or metastatic HER2-positive breast cancer who have received two or more prior anti-HER2-based regimens in
metastatic setting. We also believe neratinib has potential clinical application in the treatment of several other cancers as
well, including other tumor types that over-express or have a mutation in HER2 or epidermal growth factor receptor
(“EGFR”), such as cervical cancer, lung cancer or other solid tumors.
We currently market NERLYNX in the United States using our direct specialty sales force consisting of
approximately 38 sales specialists as of December 31, 2023. Our sales specialists are supported by an experienced sales
leadership team consisting of regional managers and directors, as well as a commercial team of experienced professionals
in marketing, access and reimbursement, managed markets, marketing research, commercial operations and sales force
planning and management. Outside the United States, we have entered into exclusive sub-license agreements with third
parties to pursue regulatory approval, if necessary, and commercialize NERLYNX, if approved. As of December 31, 2023,
NERLYNX has received approval for the treatment of certain patients with extended adjuvant or metastatic HER2-
positive breast cancer in more than 20 countries outside the United States, including the European Union (“EU”), China,
Latin America, Australia, Canada, and Hong Kong. We are currently a party to several sub-licenses in various regions
outside the United States, including Europe (excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia,
Israel, South Korea, and various countries and territories in Central America, South America and Africa.
We have also implemented a managed access program for NERLYNX. Managed access programs provide
physicians and patients access to medicines when there are limited or no other therapeutic options available. Our managed
access program for NERLYNX enables participation from countries outside the United States where permitted by
applicable rules, procedures and regulatory authorities. The program provides access to NERLYNX for the treatment of
early stage HER2-positive breast cancer (extended adjuvant setting), HER2-positive metastatic breast cancer and HER2-
mutated solid tumors. In order for patients to qualify for our managed access program they must be unable to participate in
any ongoing NERLYNX clinical trial.
Alisertib
In September 2022, we entered into an exclusive license agreement with a subsidiary of Takeda Pharmaceutical
Company Limited (“Takeda”) to license the worldwide research and development and commercial rights to alisertib.
Alisertib is an investigational, reversible, ATP-competitive inhibitor that is designed to be highly selective for Aurora
Kinase A. Inhibition of Aurora Kinase A leads to disruption of mitotic spindle apparatus assembly, disruption of
chromosome segregation, and inhibition of cell proliferation. In clinical trials to date, alisertib had shown single agent
activity and activity in combination with other cancer drugs in the treatment of many different types of cancers, including
hormone receptor positive breast cancer, triple negative breast cancer, small cell lung cancer and head and neck cancer.
Alisertib has also shown activity in previous clinical trials in peripheral T cell lymphoma and non-Hodgkin's lymphoma.
Prior to our licensing alisertib from Takeda, the drug was tested in over 1,300 patients who were treated across 22
company-sponsored trials resulting in a large well-characterized clinical safety database.
Strategy
Our goal is to become a leading provider of advanced therapies for the treatment of various forms of cancer. The
following elements comprise our strategy to achieve this objective:
•
Successfully execute our NERLYNX commercial plan. An important near-term objective is to continue to
execute our NERLYNX commercial plan by driving market penetration and duration of therapy consistent
with the current NERLYNX label. We continue to focus our efforts on commercializing NERLYNX in the
United States. In addition, we have entered into exclusive sub-license agreements with various parties to
pursue regulatory approval, if necessary, and commercialize NERLYNX, if approved, in additional countries
worldwide.
5
• Advance the development of alisertib. We intend to pursue the development of alisertib in hormone receptor
positive breast cancer as well as small cell lung cancer based on the prior clinical data that has been
generated. We also plan to evaluate alisertib in biomarker focused populations where it has shown a higher
degree of activity, such as patients with c-myc amplification and RB1 loss/RB1 mutations, as we believe that
this may provide a point of differentiation from the other drugs being developed in the treatment of these
diseases. In the first half of 2024, we plan to initiate our ALI-4201 clinical trial, a Phase II clinical trial in up
to 60 patients designed to evaluate the safety and efficacy of alisertib in extensive small cell lung cancer.
• Maximize the value of our programs by maintaining the flexibility to commercialize our drug candidates
independently or through collaborative relationships with third parties. We are currently commercializing
NERLYNX using a direct sales force in the United States and using sub-licensees in certain countries outside
the United States. As we move additional drug candidates through development toward regulatory approval,
we plan to evaluate several options for each drug candidate’s commercialization strategy. These options
include building upon or leveraging our own internal sales force; entering into a joint marketing partnership
with another pharmaceutical or biotechnology company, whereby we jointly sell and market the product; and
out-licensing our product, whereby another pharmaceutical or biotechnology company sells and markets our
product and pays us a royalty on sales. Our decision may be different for each product that reaches
commercialization and will be based on a number of factors including capital necessary to execute on each
option, size of the market to be addressed and terms of potential offers from other pharmaceutical and
biotechnology companies.
•
In-license or acquire additional commercial drugs and/or drug candidates and technologies in order to build a
sustainable product pipeline by employing multiple therapeutic approaches and disciplined decision criteria
based on clearly defined proof of principal goals. We seek to build a sustainable portfolio including
commercial drugs where we can successfully leverage our existing commercial infrastructure and a product
pipeline by employing multiple therapeutic approaches and by acquiring drug candidates belonging to known
drug classes. In addition, we employ disciplined decision criteria to assess drug candidates. A decision by us
to license a drug candidate will depend on a variety of factors, including the scientific merits of the
technology; the costs of the transaction and other economic terms of the proposed license; the amount of
capital required to develop the technology; and the economic potential of the drug candidate, should it be
commercialized. We believe this strategy minimizes our clinical development risk and allows us to accelerate
the development and potential commercialization of current and future drug candidates.
Neratinib
HER2-Positive Breast Cancer Overview
Breast cancer is the leading cause of cancer death among women worldwide, with approximately 1 million new
cases reported each year and more than 400,000 deaths per year. Up to 20% of breast cancer tumors show over-expression
of the HER2 protein. Women with breast cancer that over-expresses HER2 are at greater risk for disease recurrence,
progression and death than women whose tumors do not over-express HER2. Therapeutic strategies have been developed to
block HER2 in order to improve the treatment of this type of breast cancer.
Trastuzumab, pertuzumab, lapatinib, T-DM1, fam‐trastuzumab deruxtecan and tucatinib are all drugs that are used
as single agents, in combination with other drugs and in combination with chemotherapy to treat patients with HER2-
positive breast cancer at various stages.
Currently, the only treatment approved by the FDA for the treatment of neoadjuvant (newly diagnosed) HER2-
positive breast cancer is the combination of pertuzumab plus trastuzumab and taxane chemotherapy. The FDA-approved
treatments for the adjuvant treatment of HER2-positive early stage breast cancer are the combination of trastuzumab and
chemotherapy, the combination of pertuzumab plus trastuzumab and chemotherapy, or Kadcyla, which is approved
specifically in patients with HER2-positive early stage breast cancer with residual disease after neoadjuvant treatment. In
addition, we are aware of numerous additional ongoing clinical trials involving other drug candidates used alone or in
combination with existing drugs to treat patients with breast cancer. In addition, we are also aware of a Phase III trial in
patients with high risk HER2-positive early stage breast cancer with residual disease after neoadjuvant treatment that is
testing the combination of Kadcyla plus tucatinib versus Kadcyla alone (the CompassHER2 RD Trial) as well as a Phase III
trial in patients with high risk HER2-positive early stage breast cancer with residual disease after neoadjuvant treatment that
is testing fam-trastuzumab deruxtecan versus Kadcyla alone (the DESTINY-Breast05 Trial).
6
We believe that there are approximately 30,000 patients in the United States and 37,000 patients in the EU with
early stage HER2-positive breast cancer that get treated with adjuvant treatment. We also believe that there are
approximately 6,400 patients in the United States with third-line and 4,700 patients in the United States with fourth-line
HER2-positive metastatic breast cancer. The number of patients with third-line or later HER2-positive metastatic breast
cancer may decrease in future years as the introduction of new neoadjuvant, adjuvant and extended adjuvant treatments
may reduce the number of patients with recurrence of HER2-positive breast cancer and therefore reduce the number of
patients with HER2-positive metastatic breast cancer.
Background on Neratinib
Neratinib is a potent irreversible TKI that blocks signal transduction through the epidermal growth factor receptors,
HER1, HER2 and HER4. Based on pre-clinical studies and clinical trials to date, we believe that neratinib may offer an
advantage over existing treatments that are used in the treatment of patients with HER2-positive breast cancer. We believe
that by more potently inhibiting HER2 at a different site and acting via a mechanism different from other agents, neratinib
may have therapeutic benefits in patients who have been previously treated with these existing treatments, most notably due
to its irreversible inhibition of the HER2 target enzyme.
In addition, we believe neratinib has clinical application in the treatment of several other cancers as well, including
other tumor types that over-express or have a mutation in HER2 or EGFR, such as breast cancer, cervical cancer, lung
cancer or other solid tumors.
Neratinib—Early Stage Breast Cancer
Extended Adjuvant Breast Cancer
In 2017, the FDA approved NERLYNX (neratinib) for the extended adjuvant treatment of adult patients with early
stage HER2-overexpressed/amplified breast cancer following adjuvant trastuzumab-based therapy. In 2018, the EC granted
marketing authorization for NERLYNX in the EU for the extended adjuvant treatment of adult patients with early stage
hormone receptor positive HER2-overexpressed/amplified breast cancer and who are less than one year from the
completion of prior adjuvant trastuzumab-based therapy. These approvals were obtained based on the two-year data
obtained in our ExteNET trial.
Two-Year ExteNET Data. In July 2014, we announced top line results from our ExteNET trial, a Phase III clinical
trial of neratinib for the extended adjuvant treatment of early stage HER2-positive breast cancer. The data from this trial
were presented in an oral presentation at the American Society of Clinical Oncology (“ASCO”) Annual Meeting in June
2015 and were published online in The Lancet Oncology in February 2016. The ExteNET trial was a double-blind, placebo-
controlled, Phase III trial of neratinib versus placebo after adjuvant treatment with Herceptin in women with early stage
HER2-positive breast cancer. More specifically, the ExteNET trial enrolled 2,840 patients in 41 countries with early stage
HER2-positive breast cancer who had undergone surgery and adjuvant treatment with trastuzumab. After completion of
adjuvant treatment with trastuzumab, patients were randomized to receive extended adjuvant treatment with either neratinib
or placebo for a period of one year. Patients were then followed for recurrent disease, ductal carcinoma in situ (“DCIS”), or
death for a period of two years after randomization in the trial.
The safety results of the study showed that the most frequently observed adverse event for the neratinib-treated
patients was diarrhea, with approximately 39.9% of the neratinib-treated patients experiencing grade 3 or higher diarrhea
(one patient, 0.1%, had grade 4 diarrhea). Patients who received neratinib in this trial did not receive any prophylaxis with
antidiarrheal agents to prevent the neratinib-related diarrhea.
The primary endpoint of the ExteNET trial was invasive disease-free survival (“DFS”). The results of the trial
demonstrated that treatment with neratinib resulted in a 33% reduction of risk of invasive disease recurrence or death versus
placebo (hazard ratio = 0.67, p = 0.009). The two-year DFS rate for the neratinib arm was 93.9% and the two-year DFS rate
for the placebo arm was 91.6%. The secondary endpoint of the trial was disease-free survival including ductal carcinoma in
situ (“DFS-DCIS”). The results of the trial demonstrated that treatment with neratinib resulted in a 37% reduction of risk of
disease recurrence including DCIS or death versus placebo (hazard ratio = 0.63, p = 0.002). The two-year DFS-DCIS rate
for the neratinib arm was 93.9% and the two-year DFS-DCIS rate for the placebo arm was 91.0%.
7
As an inclusion criteria for the ExteNET trial, patients needed to have tumors that were HER2-positive using local
assessment. In addition, as a pre-defined subgroup in the trial, patients had centralized HER2 testing performed on their
tumor as well. At the time the two-year data was compiled, centralized HER2 testing had been performed on 1,704 (60%)
of the patients in the ExteNET trial and further central testing on available samples was ongoing. For the 1,463 patients
whose tumors were HER2-positive by central confirmation, the results of the trial demonstrated that treatment with
neratinib resulted in a 49% reduction of risk of invasive disease recurrence or death versus placebo (hazard ratio = 0.51, p =
0.002). The two-year DFS rate for the centrally confirmed patients in the neratinib arm was 94.7% and the 2-year DFS rate
for the centrally confirmed patients in the placebo arm was 90.6%. For the patients in the trial whose tumors were HER2-
positive by central confirmation, the results of the trial demonstrated that treatment with neratinib resulted in a 51%
reduction of risk of disease recurrence including DCIS or death versus placebo (hazard ratio = 0.49, p < 0.001). The two-
year DFS-DCIS rate for the centrally confirmed patients in the neratinib arm was 94.7% and the two-year DFS rate for
centrally confirmed patients in the placebo arm was 90.2%.
For the pre-defined subgroup of patients with hormone receptor positive disease, the results of the trial demonstrated
that treatment with neratinib resulted in a 49% reduction of risk of invasive disease recurrence or death versus placebo
(hazard ratio = 0.51, p = 0.001). The two-year DFS rate for the neratinib arm was 95.4% and the two-year DFS rate for the
placebo arm was 91.2%. For the patients in the trial whose tumors were HER2-positive by central confirmation, the results
of the trial demonstrated that treatment with neratinib resulted in a 75% reduction of risk of invasive disease recurrence or
death (hazard ratio = 0.25, p < 0.001). The two-year DFS rate for the centrally confirmed patients in the neratinib arm was
97.0% and the two-year DFS rate for centrally confirmed patients in the placebo arm was 88.4%.
Five-Year ExteNET Data. In September 2017, we presented updated data from the ExteNET trial at the European
Society of Medical Oncology (“ESMO”) 2017 Congress in Madrid, Spain. The data represented a predefined five-year
invasive disease-free survival (“iDFS”), analysis as a follow-up to the primary two-year iDFS analysis of the Phase III
ExteNet trial. The results of the trial demonstrated that after a median follow up of 5.2 years, treatment with neratinib
resulted in a 27% reduction of risk of invasive disease recurrence or death versus placebo (hazard ratio = 0.73, p = 0.008).
The five-year iDFS rate for the neratinib arm was 90.2% and the 5-year iDFS rate for the placebo arm was 87.7%. The
secondary endpoint of the trial was invasive disease-free survival including ductal carcinoma in situ (“iDFS-DCIS”). The
results of the trial demonstrated that treatment with neratinib resulted in a 29% reduction of risk of disease recurrence,
including DCIS or death versus placebo (hazard ratio = 0.71, p = 0.004). The five-year iDFS-DCIS rate for the neratinib
arm was 89.7% and the five-year iDFS-DCIS rate for the placebo arm was 86.8%.
For the pre-defined subgroup of patients with hormone receptor positive disease, the results of the trial demonstrated
that treatment with neratinib resulted in a 40% reduction of risk of invasive disease recurrence or death versus placebo
(hazard ratio = 0.60, p = 0.002). The five-year iDFS rate for the neratinib arm was 91.2% and the five-year iDFS rate for
the placebo arm was 86.8%. For the pre-defined subgroup of patients with hormone receptor negative disease, the results of
the trial demonstrated that treatment with neratinib resulted in a hazard ratio of 0.95 (p = 0.762).
The results of the ExteNET trial showed that after two years of follow-up, for patients with hormone receptor
positive, HER2-positive early stage breast cancer patients who were treated within one year after the completion of
trastuzumab based adjuvant therapy, iDFS was 95.3% in the patients treated with neratinib compared with 90.8% in those
receiving placebo (hazard ratio = 0.49; 95% CI: (0.30, 0.78); p=0.002).
The safety results were unchanged from the primary two-year iDFS analysis of the study that showed the most
frequently observed adverse event for the neratinib-treated patients was diarrhea, with approximately 39.9% of the
neratinib-treated patients experiencing grade 3 or higher diarrhea (one patient, or 0.1%, had grade 4 diarrhea). Patients who
received neratinib in this trial did not receive any prophylaxis with antidiarrheal agents to prevent the neratinib-related
diarrhea.
In October 2020, we announced that efficacy results of neratinib in HER2-positive, hormone receptor-positive, or
HR+, early stage breast cancer, (“eBC”) from the Phase III ExteNET trial were published in Clinical Breast Cancer. The
manuscript presented data focusing on HR+ patients who initiated treatment within a year of completing an adjuvant
trastuzumab containing treatment (HR+ /< 1 yr) and subgroups of clinical interest including patients who did not achieve a
pathological complete response (no pCR) after neoadjuvant treatment and therefore were at a high risk of disease
recurrence (HR+/ <1 yr, no pCR). In the HR+ /< 1 yr patient population, the absolute 5-year invasive disease-free survival
benefit versus placebo was 5.1% (HR=0.58, 95% CI 0.41–0.82) and absolute 8-year overall survival benefit was 2.1%.
(HR=0.79, 95% CI 0.55–1.13). The 5-year cumulative incidence of central nervous system (“CNS”) metastases was 0.7%
in the neratinib arm and 2.1% in the placebo arm.
8
In the HR+/ <1 yr, no pCR subgroup of patients that were at a high risk of disease recurrence the absolute 5-year
iDFS benefit in the neratinib arm versus placebo was 7.4% (HR=0.60; 95% CI 0.33–1.07) and the 8- year overall survival
benefit was 9.1% (HR=0.47; 95% CI 0.23– 0.92).
NERLYNX is included in the body of the National Comprehensive Cancer Network (“NCCN”) Practice Guidelines
for Breast Cancer for the treatment of adjuvant HER2-positive Breast Cancer (BINV-16 & BINV-L) under the heading
Useful in Certain Circumstances, with a recommendation for considering extended adjuvant neratinib for patients with HR-
positive, HER2-positive disease with a perceived high risk of recurrence. Dose escalation of neratinib is included as an
approach to improve the tolerability of neratinib in the treatment of adjuvant HER2-positive breast cancer.
CONTROL. In February 2015, we initiated the CONTROL trial, which is an international, open-label, Phase II study
investigating the use of antidiarrheal prophylaxis or dose escalation in the prevention and reduction of neratinib-associated
diarrhea and, more specifically, grade 3 diarrhea. In the CONTROL trial, patients with HER2-positive early stage breast
cancer who had completed trastuzumab-based adjuvant therapy received neratinib daily for a period of one year.
In December 2021, final results from the CONTROL trial were presented at the CTRC-AACR San Antonio Breast
Cancer Symposium.
Final results showed the incidence of grade 3 diarrhea for the 137 patients who received the loperamide prophylaxis
was 31%, the incidence of grade 3 diarrhea for the 64 patients who received the combination of loperamide plus budesonide
was 28%, the incidence of grade 3 diarrhea for the 136 patients who received the combination of loperamide plus colestipol
was 21%, the incidence of grade 3 diarrhea for the 104 patients who received colestipol alone with loperamide as needed
was 33%, the incidence of grade 3 diarrhea for the 60 patients who used the dose escalation 1 regimen (DE 1) was 13%,
and the incidence of grade 3 diarrhea for the 62 patients who used dose escalation regimen 2 (DE 2) was 27%. Further
information is provided in Table 1 below:
Table 1: Incidence of Treatment-Emergent Diarrhea
Escalation Escalation
Loperamide Budesonide Colestipol Loperamide PRN Scheme 1 Scheme 2
Colestipol +
Loperamide
Neratinib
Dose
Neratinib
Dose
(N=137)
(N=64)
(N=136)
(N=104)
(N=60)
(N=62)
Patient incidence of diarrhea by
worst grade - n (%)
Any grade ....................................... 109 (80)
33 (24)
Grade 1 ...........................................
34 (25)
Grade 2 ...........................................
42 (31)
Grade 3 ...........................................
0
Grade 4 ...........................................
55 (86)
15 (23)
22 (34)
18 (28)
113 (83)
38 (28)
47 (35)
28 (21)
0
0
99 (95)
34 (33)
31 (30)
34 (33)
0
59 (98)
24 (40)
27 (45)
8 (13)
61 (98)
23 (37)
21 (34)
17 (27)
0
0
Diarrhea leading to discontinuation ...
28 (20)
7 (11)
5 (4)
8 (8)
2 (3)
4 (6)
Hospitalization (due to diarrhea) ........
2 (1)
0
0
0
0
0
Adoption of neratinib dose escalation at the initiation of treatment, particularly the 2-week DE schedule (“DE1”),
most markedly reduced the incidence, severity, and duration of neratinib-associated grade 3 diarrhea in CONTROL
compared to other treatment cohorts. Both DE strategies showed a lower incidence of grade 3 diarrhea (DE1 13%; DE2
27%) compared with that observed in the ExteNET trial (historical control: 39.8%). No grade 4 diarrhea was reported in
any cohort. The median cumulative duration of grade 3 diarrhea ranged from 2 – 2.5 days across the CONTROL DE study
cohorts for the entire 12-month treatment period (compared with 5.0 days for ExteNET). The proportion of patients
discontinuing neratinib because of diarrhea was decreased both DE cohorts (DE1 3%; DE2 6%) compared with ExteNET
(17%). The adoption of neratinib DE + loperamide PRN during the first 2 weeks of treatment (DE1 cohort) was associated
with the lowest rate of grade 3 diarrhea during the trial compared with all other anti-diarrheal strategies investigated in
CONTROL. These final findings from the CONTROL study showed improved tolerability of neratinib with all diarrhea
prophylaxis strategies and suggest that neratinib DE1 with loperamide PRN may allow patients to stay on treatment longer
9
and receive the full benefit of neratinib therapy. This study is complete, and the results have been submitted to multiple
global Health Authorities to support the addition of a dose escalation regimen to approved package inserts.
Dose escalation as an approach to improve the tolerability of neratinib in the treatment of adjuvant HER2-positive
Breast Cancer (BINV-L) is included in the NCCN treatment guidelines. This inclusion aligns with the labeling supplement
to the U.S. Prescribing Information approved by the FDA in June 2021, which incorporated the use of NERLYNX dose
escalation as evaluated in the Phase II CONTROL study.
Neratinib—Metastatic Breast Cancer
In February 2020, the FDA approved our supplemental New Drug Application (“NDA”) for the use of neratinib in
combination with capecitabine for the treatment of adult patients with advanced or metastatic HER2-positive breast cancer
who have received two or more prior anti-HER2-based regimens in the metastatic setting. This approval was based on the
results from our NALA trial.
Trials of Neratinib as a Single Agent. In 2009, Pfizer Inc. (“Pfizer”) presented data at the CTRC-AACR San Antonio
Breast Cancer Symposium from a Phase II trial of neratinib administered as a single agent to patients with HER2-positive
metastatic breast cancer. Final results from this trial were published in the Journal of Clinical Oncology in March 2010.
The trial involved a total of 136 patients, 66 of whom had received prior treatment with trastuzumab and 70 of
whom had not received prior treatment with trastuzumab. The results of the study showed that neratinib was reasonably
well-tolerated among both the pretreated patients and the patients who had not received prior treatment with trastuzumab.
Diarrhea was the most common side effect but was manageable with antidiarrheal agents and dose modification. Efficacy
results from the trial showed that the objective response rate was 24% for patients who had received prior trastuzumab
treatment and 56% for patients with no prior trastuzumab treatment. Furthermore, the median progression free survival
(“PFS”) was 22.3 weeks for the patients who had received prior trastuzumab and 39.6 weeks for the patients who had not
received prior trastuzumab.
Data from a second Phase II study, in which patients with confirmed HER2-positive metastatic breast cancer who
had failed treatment with trastuzumab and taxane chemotherapy were given neratinib in combination with capecitabine,
was presented at the 2011 CTRC-AACR San Antonio Breast Cancer Symposium. The results of the study showed that the
combination of neratinib and capecitabine had acceptable tolerability. The efficacy results from the trial showed that for the
61 patients in the trial who had not been previously treated with the HER2 targeted anti-cancer drug lapatinib, there was an
overall response rate of 64% and a clinical benefit rate of 72%. In addition, for the seven patients in the trial who had
previously been treated with lapatinib, there was an overall response rate of 57% and a clinical benefit rate of 71%. The
median PFS for patients who had not received prior treatment with lapatinib was 40.3 weeks and the median PFS for the
patients who had received prior lapatinib treatment was 35.9 weeks.
NALA. In February 2013, we reached agreement with the FDA under a Special Protocol Assessment (“SPA”) for our
Phase III clinical trial (PUMA-NER-1301 or the NALA trial) of neratinib in patients with HER2-positive metastatic breast
cancer who have failed two or more prior treatments (third-line disease). An SPA is a written agreement between the trial’s
sponsor and the FDA regarding the design, endpoints, and planned statistical analysis of the Phase III trial with respect to
the effectiveness of neratinib for the indication to be studied to support a NDA. The European Medicines Agency
(“EMA”) also provided follow-on Scientific Advice (“SA”) consistent with that of the FDA regarding our Phase III trial
design and endpoints used for such design to support the submission of an marketing authorization application (“MAA”) in
the EU.
Pursuant to the SPA and SA, the Phase III NALA trial was designed as a randomized controlled trial of neratinib
plus capecitabine versus Tykerb® (lapatinib) plus capecitabine in patients with third-line HER2-positive metastatic breast
cancer. The trial enrolled 621 patients who were randomized (1:1) to receive either neratinib plus capecitabine or lapatinib
plus capecitabine. The trial was conducted globally at sites in North America, Europe, Asia-Pacific and South America. The
co-primary endpoints of the trial were centrally confirmed PFS and overall survival (“OS”). An alpha level of 1% was
allocated to the PFS and 4% allocated to OS.
In June 2019, we announced that results from the Phase III NALA trial were presented at the ASCO 2019 Annual
Meeting in Chicago. For the primary analysis of centrally confirmed PFS, treatment with neratinib plus capecitabine
resulted in a statistically significant improvement in centrally confirmed PFS (hazard ratio=0.76, p=0.0059) compared to
treatment with lapatinib plus capecitabine. Because the hazard ratio was found to not be constant over time (i.e., the
proportional hazard assumption did not hold), the statistical analysis plan for the NALA trial prespecified that a restricted
means survival analysis at 24 months would be performed. In this prespecified analysis the mean PFS for the patients
10
treated with neratinib plus capecitabine was 8.8 months and the mean PFS for the patients treated with lapatinib plus
capecitabine was 6.6 months.
For the primary analyses of OS, neratinib plus capecitabine resulted in an improvement in OS that, although not
statistically significant, trended numerically in favor of the neratinib plus capecitabine arm of the study (hazard ratio = 0.88,
p=0.21). The median OS for the patients treated with neratinib plus capecitabine was 21.0 months and the median OS for
the patients treated with lapatinib plus capecitabine was 18.7 months. In the prespecified restricted means analysis the mean
OS at 48 months for the patients treated with neratinib plus capecitabine was 24.0 months and the mean OS for the patients
treated with lapatinib plus capecitabine was 22.2 months.
For the secondary endpoint of time to intervention for symptomatic central nervous system disease (also referred to
as brain metastases), the results of the trial showed that treatment with neratinib plus capecitabine led to an improvement
over the combination of lapatinib plus capecitabine. The overall cumulative incidence of CNS metastases was 22.8% for the
neratinib plus capecitabine arm and 29.2% for the lapatinib plus capecitabine arm (p=0.043). For the secondary endpoint of
duration of response, neratinib plus capecitabine treatment resulted in a longer duration of response compared to lapatinib
and capecitabine treatment, with a median response of 8.54 months compared to a median response of 5.55 months (HR =
0.495, p = 0.0004).
Treatment-emergent adverse events (“TEAEs”) were similar between arms: TEAEs leading to neratinib/lapatinib
discontinuation were lower with neratinib (10.9%) than with lapatinib (14.5%). There was a higher rate of grade 3 diarrhea
with neratinib plus capecitabine compared to lapatinib plus capecitabine (24.4% vs 12.5%); however, the discontinuations
due to diarrhea (neratinib plus capecitabine: 2.6%, lapatinib plus capecitabine: 2.3%) were similar in both arms.
NERLYNX plus capecitabine is included in the body of the NCCN Practice Guidelines for Breast Cancer for the
treatment of recurrent unresectable (local or regional) or stage IV (M1) HER2-positive Breast Cancer (BINV-Q), with a
recommendation for Fourth Line and Beyond (optimal sequence is not known). Dose escalation of neratinib is included as
an approach to improve the tolerability of neratinib in the treatment of metastatic HER2-positive breast cancer.
Metastatic Breast Cancer with Brain Metastases
Approximately one-half of the patients with HER2-positive metastatic breast cancer develop metastases that spread
to their brain. The current antibody-based treatments, including trastuzumab and pertuzumab, do not enter the brain and
therefore are not believed to be effective in treating these patients.
Neratinib is currently being tested in a clinical trial in collaboration with Translational Breast Cancer Research
Consortium referred to as TBCRC 022. The purpose of this study is to determine how well neratinib works in treating
breast cancer that has spread to the brain. In this research study, the investigators are looking to see how well neratinib
works to decrease the size of or stabilize breast cancer that has metastasized to the brain.
In June 2017, we presented interim data from the TBCRC 022 at the ASCO 2017 Annual Meeting. The multicenter
Phase II clinical trial enrolled patients with HER2-positive metastatic breast cancer who have brain metastases. The trial
enrolled three cohorts of patients. Patients in the second cohort (n=5) represent patients who had brain metastases which
were amenable to surgery and who were administered neratinib monotherapy prior to and after surgical resection. The third
cohort (target enrollment=60) enrolled two sub-groups of patients (prior lapatinib-treated and no prior lapatinib) with
progressive brain metastases who were administered neratinib in combination with the chemotherapy drug capecitabine.
The oral presentation reflected only the patients in the third cohort of patients without prior lapatinib exposure (cohort 3A,
n=37), who all had progressive brain metastases at the time of enrollment and who received the combination of
capecitabine plus neratinib.
In cohort 3A, 30% of the patients had received prior craniotomy, 65% of the patients had received prior whole brain
radiotherapy, and 35% had received prior stereotactic radiosurgery to the brain. No patients had received prior treatment
with lapatinib.
The primary endpoint of the trial was CNS Objective Response Rate according to a composite criteria that included
volumetric brain MRI measurements, steroid use, neurological signs and symptoms, and Response Evaluation Criteria in
Solid Tumors (“RECIST”) evaluation for non-CNS sites. The secondary endpoint of the trial was CNS response by
Response Assessment in Neuro-Oncology-Brain Metastases (“RANO-BM”), criteria. The efficacy results from the trial
showed that 49% of patients experienced a CNS Objective Response by the composite criteria. The results also showed that
the CNS response rate using the RANO-BM criteria was 24%. The median time to CNS progression was 5.5 months and
the median overall survival was 13.5 months, though 49% of patients remain alive and survival data are immature.
11
The results for cohort 3A showed that the most frequently observed severe adverse event for the 37 patients
evaluable for safety was diarrhea. Patients received antidiarrheal prophylaxis consisting of high dose loperamide, given
together with the combination of capecitabine plus neratinib for the first cycle of treatment in order to try to reduce the
neratinib-related diarrhea. Among the 37 patients evaluable for safety, 32% of the patients had grade 3 diarrhea and 41%
had grade 2 diarrhea.
Updated results from TBCRC-022 were presented in December 2022 at the 2022 San Antonio Breast Cancer
Symposium This presentation outlined updates from three cohorts: 4A – patients with previously untreated Breast Cancer
Brain Metastases (“BCBM”); 4B – patients with BCBM progressing after prior local CNS-directed therapy without prior T-
DM1 exposure; and 4C – patients with BCBM progressing after prior local CNS-directed therapy with previous T-DM1
exposure. Patients with measurable HER2-positive BCBM received neratinib 160 mg orally once daily plus T-DM1 3.6
mg/kg intravenously every 21 days in the three parallel-enrolling cohorts. Diarrhea prophylaxis with colestipol and
loperamide was required during cycle 1. All enrolled patients underwent a brain MRI plus CT scan of the
chest/abdomen/pelvis every six weeks for 18 weeks, followed by every nine weeks thereafter.
The primary endpoint, Response Assessment in Neuro-Oncology-Brain Metastases (“RANO-BM”), was evaluated
in each cohort separately. The efficacy results from the trial showed that CNS Objective Response Rate by RANO-BM was
33.3% of patients in cohort 4A, 29.4% in cohort 4B, and 28.6% in cohort 4C. Rates of response + stable disease greater
than or equal to 6 months were 50% in cohort 4A, 35.3% in cohort 4B, and 33.3% in cohort 4C.
Intracranial activity was observed for the combination of neratinib plus T-DM1 in all three cohorts, including in
patients with prior T-DM1 exposure, suggesting a reversal of resistance to T-DM1. Overall, the most frequently observed
adverse event was diarrhea, grade 2 (32%) and grade 3 (23%).
In April 2018, we announced that NERLYNX has been included as a recommended treatment option in the latest
NCCN, Clinical Practice Guidelines in Oncology Central Nervous System Cancers for Breast Cancer patients with brain
metastases. The NCCN designated NERLYNX in combination with capecitabine as a category 2B treatment option and
NERLYNX in combination with paclitaxel as a category 2B treatment option. Use, as designated for breast cancer patients
with brain metastases, is outside the FDA-approved indication for NERLYNX and considered investigational, and we do
not market or promote NERLYNX for these uses.
Neratinib—Other Potential Applications
While we believe neratinib has potential applications in other diseases, such as HER2 Mutation-Positive Solid
Tumors, HER2-Mutated, Non-Amplified Breast Cancer and EGFR Exon 18 Mutated Non Small Cell Lung Cancer, we are
not currently pursuing additional development in these indications at this time.
NERLYNX combinations are included in the body of the NCCN Practice Guidelines for Breast Cancer for patients
with HER2-negative metastatic (stage IV) breast cancer and activating mutations in the HER2 gene as detected by next
generation sequencing of tumor tissue or ctDNA under the heading Useful in Certain Circumstances (BINV-Q).
NERLYNX is included (i) with or without fulvestrant and (ii) with or without trastuzumab/fulvestrant. This inclusion is
described in a table entitled, “Emerging Biomarkers to Identify Novel Therapies for Patients with Stage IV (M1) Disease,”
within the NCCN Practice Guidelines for Breast Cancer. Dose escalation of neratinib is included as an approach to improve
the tolerability of neratinib in the treatment of metastatic HER2-positive breast cancer.
Alisertib
Alisertib is an investigational reversible, ATP-competitive inhibitor that is designed to be highly selective for Aurora
Kinase A. Inhibition of Aurora Kinase A leads to disruption of mitotic spindle apparatus assembly, disruption of
chromosome segregation, and inhibition of cell proliferation. In clinical trials to date, alisertib had shown single agent
activity and activity in combination with other cancer drugs in the treatment of many different types of cancers, including
hormone receptor positive breast cancer, triple negative breast cancer, small cell lung cancer and head and neck cancer. The
drug has also shown activity in previous clinical trials in peripheral T cell lymphoma and non-Hodgkin's lymphoma. Prior
to our licensing alisertib from Takeda the drug was tested in over 1,300 patients who were treated across 22 company
sponsored trials resulting in a large well characterized clinical safety database.
We intend to pursue the development of alisertib in hormone receptor positive. HER2-negative, breast cancer as well
as small cell lung cancer based on the prior clinical data that has been generated. We also plan to evaluate alisertib in
biomarker focused populations where it has shown a higher degree of activity, such as patients with c-myc amplification
and RB1 loss/RB1 mutations, as we believe that this may provide a point of differentiation from the other drugs being
12
developed in the treatment of these diseases. During 2023, we met with the FDA to discuss our alisertib clinical
development plan in both proposed indications and discussed potential dosing schedules for alisertib.
Alisertib in Small Cell Lung Cancer
In a Phase II trial that was published in Lancet Oncology in 2015, alisertib was tested as a single agent in several
cohorts of patients with solid tumors. These included small cell lung cancer as well as breast cancer. In small cell lung
cancer, the study design involved the administration of alisertib to patients with small cell lung cancer who had previously
received up to two prior cytotoxic regimens in the metastatic setting. Patients were administered alisertib monotherapy at a
dose of 50 mg twice a day (“BID”) for seven days followed by a 14-day break.
In patients with chemotherapy sensitive disease, alisertib resulted in a response rate of 19% and a duration of
response of 3.1 months. For the patients with chemotherapy refractory disease or chemotherapy resistant disease, alisertib
resulted in a response rate of 25% and a duration of response of 4.3 months. The main grade 3 or higher adverse events
(“AEs”) seen in the trial were neutropenia, anemia, leukopenia and thrombocytopenia.
Alisertib was also tested in a randomized Phase II trial of paclitaxel plus alisertib versus paclitaxel plus placebo in
patients with second line small cell lung cancer, the results of which were published in the Journal of Thoracic Oncology in
2020. In the trial, alisertib was dosed at 40 mg BID for 3 weeks on days 1–3, 8–10, and 15–17 plus paclitaxel (60 mg/m2
intravenously on days 1, 8, and 15) whereas the comparator arm received placebo plus paclitaxel (80 mg/m2 intravenously
on days 1, 8, and 15) in 28-day cycles.
Randomization was stratified by type of relapse after primary treatment, based on the common definition for each
type (with sensitive defined as relapsed greater than 90 but less than 180 days after primary treatment and resistant or
refractory defined as relapsed less than or equal to 90 days after primary treatment). The protocol was initially written by
the sponsor to record relapse type as the time from initial response. The protocol was corrected approximately midway
through the trial to correct the stratification definition of relapse type after primary treatment so that relapses were recorded
“from last administration of platinum-based chemotherapy,” which is in line with the NCCN treatment guidelines and
clinical treatment practice rather than “from initial response.” To maintain balance, the primary end point of PFS was
analyzed by using the original stratification definition of relapse type. However, a sensitivity analysis which used the
corrected stratification definition was also performed. The trial also incorporated an extensive biomarker analysis with a
prespecified analysis of c-Myc expression and an exploratory, retrospective analysis of genetic alterations in circulating
tumor DNA (“ctDNA”) with clinical outcome.
The primary endpoint in the trial was PFS. For the intent to treat (“ITT”) population the hazard ratio using the
original definition was 0.77 with a p value of 0.113. Using the corrected definition of relapse type, the hazard ratio was 0.71
with a p value of 0.038. For the patients with chemotherapy resistant or refractory relapse the hazard ratio was 0.66 with a p
value of 0.037. For the ITT population the OS data showed a hazard ratio of 0.87 with a p value of 0.714 and using the
corrected definition the hazard ratio was 0.79 with a p value of 0.209. Higher rates of grade 3 or higher AEs were seen in
the alisertib arm for neutropenia, anemia and decreased neutrophil count.
For the patients in the trial who were found to be positive for c-myc expression by immunohistochemistry the hazard
ratio in the trial was 0.29 with a median PFS for the paclitaxel plus alisertib arm of 4.64 months and a median PFS for the
placebo plus paclitaxel arm of 2.27 months. The trial also incorporated an analysis of patients with alterations in cell cycle
genes including cyclin-dependent kinase 6 gene (CDK6), retinoblastoma-like 1 gene (RBL1), retinoblastoma-like 2 gene
(RBL2), and retinoblastoma 1 gene (RB1). Of note RB1 mutations were the most frequently mutation with approximately
60% of the patients having RB1 mutations while CDK6, RBL1 and RBL2 mutations were found with very low frequency.
For patients with cell cycles mutations (RB1, CDK6, RBL1 and RBL2), the PFS in the paclitaxel plus alisertib arm was
3.68 months while the placebo plus paclitaxel arm was 1.8 months and the hazard ratio was 0.395 with a p value of 0.003.
The overall survival in this subgroup of patients was 7.2 months for the alisertib arm and 4.47 months for the placebo arm
with a hazard ratio of 0.427 and a p value of 0.00085.
Development plan. In the United States the incidence of small cell lung cancer is approximately 31,000 to 33,000
patients per year with approximately 17,000 to 18,000 deaths per year. There are two biomarkers of interest, c-myc
amplifications and RB1 mutations/deletions, that we intend to study with alisertib based on the previous clinical trial results
which may provide differentiation from the other drugs in development. According to the published biomarker data from
the alisertib clinical trial, approximately 72% of small cell lung cancer patient samples had c-myc amplifications and
approximately 60-80% of small cell lung cancer patient samples had RB1 mutations.
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In August 2023, we announced that we had been notified by the FDA that we can proceed under our Investigational
New Drug application (“IND”) with the clinical development of alisertib monotherapy for the treatment of patients with
extensive stage small cell lung cancer (“SCLC”). Our Phase II trial (ALISertib in CAncer (ALISCA-Lung1) Phase II trial
(PUMA-ALI-4201)) will enroll up to 60 patients with extensive stage small cell lung cancer who have progressed after
first-line platinum-based chemotherapy and immunotherapy. Patients must provide tissue-based biopsies so that biomarkers
can be analyzed. Alisertib will be dosed at 50 mg BID on days 1-7 of every 21-day cycle. In February 2024 we announced
that we initiated the Phase II ALISCA-Lung1 trial.
The primary endpoint of the trial will be objective response rate with secondary endpoints of duration of response,
disease control rate, progression free survival and overall survival. We will also be looking at each of these endpoints
within selected pre-specified biomarker subgroups as well as to assess whether there is enhanced efficacy in any biomarker
subgroup. We will be performing a biomarker analysis of the ALI-4201 trial in parallel with the execution of the clinical
trial. We plan to perform an initial interim analysis for the evaluation of the biomarkers as well as an evaluation of the
efficacy. Based upon the outcomes of the study, we anticipate meeting with the FDA to explore the potential for an
accelerated approval pathway for alisertib in small cell lung cancer.
Alisertib in Breast Cancer
In the same Phase II trial of alisertib monotherapy that was published in Lancet Oncology in 2015, alisertib was also
tested in patients with HER2-negative, hormone receptor positive breast cancer, HER2-positive breast cancer and triple
negative breast cancer. Patients were administered alisertib monotherapy at a dose of 50 mg BID for seven days followed
by a 14-day break. In the cohort of patients with HER2-negative, hormone receptor positive breast cancer, treatment with
alisertib resulted in a response rate of 23% with a PFS of 7.9 months. The main grade 3/4 AEs seen were neutropenia,
leukopenia, stomatitis and fatigue.
Alisertib was also tested in a randomized Phase II trial in hormone receptor positive, HER2-negative metastatic
breast cancer patients that was presented at the San Antonio Breast Cancer Symposium in 2020 and published in JAMA
Oncology in March 2023. In this trial alisertib was dosed at 50 mg BID on days 1-3, 8-10 and 15-17 on a 28 day cycle
while fulvestrant was dosed at its approved dose of 500 mg IM on days 1 and 15. The baseline characteristics from the trial
were well balanced although a higher percentage of patients with prior chemotherapy given in the metastatic setting were
present in the alisertib plus fulvestrant arm. Of note, patients were required to have been treated with prior fulvestrant as an
inclusion criteria for the trial.
The results from the trial showed a response rate of 19.6% in the alisertib alone arm and 20.0% in the alisertib plus
fulvestrant arm. The median duration of response was 15.1 months for the alisertib alone arm and 8.5 months for the
alisertib plus fulvestrant arm. The PFS was 5.6 months in the alisertib alone arm and 5.4 months in the alisertib plus
fulvestrant arm. The main AEs seen in the trial were similar to the prior monotherapy trial with incidences of neutropenia,
anemia, and decreases in white blood cells and lymphocytes seen.
Alisertib was also tested in a randomized Phase II trial in hormone receptor positive, HER2-negative metastatic
breast cancer and triple negative breast cancer patients, which was published in JAMA Network Open in 2021, in
which patients were randomized to receive either paclitaxel plus alisertib or paclitaxel alone. In this trial alisertib was dosed
at 40 mg BID on days 1-3, 8-10 and 15-17 on a 28-day cycle while paclitaxel was dosed at 60 mg/m2 on days 1, 8 and 15
of a 28-day cycle. In the control arm paclitaxel was dosed at 90 mg/m2 on days 1, 8 and 15 of a 28-day cycle.
The combination of paclitaxel plus alisertib resulted in a statistically significant improvement in PFS with a hazard
ratio of 0.56 and a p value of 0.005. The median PFS in the paclitaxel plus alisertib arm was 10.2 months and the median
PFS in the paclitaxel alone arm was 7.1 months. Treatment with paclitaxel plus alisertib resulted in a numerically higher
but not statistically significant improvement in overall survival with the median OS for the paclitaxel plus alisertib arm was
26.3 months versus 25.1 months for the single agent paclitaxel arm of the trial which resulted in a hazard ratio of 0.89 and a
p value of 0.61.
The standard of care for the first line treatment of hormone receptor positive, HER2-negative metastatic breast
cancer in the United States is treatment with Cyclin-dependent kinases (CDK) 4/6 inhibitors (CDK 4/6 inhibitors). In the
cohort of patients in the trial who were treated with CDK 4/6 inhibitors, the combination of paclitaxel plus alisertib resulted
in a median PFS of 13.9 months while paclitaxel alone resulted in a median PFS of 5.6 months. The hazard ratio was 0.59
with a p value of 0.19.
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In the cohort of patients with triple negative breast cancer, the combination of paclitaxel plus alisertib resulted in an
improvement in PFS with a hazard ratio of 0.35 and a p value of 0.022. The median PFS in the paclitaxel plus alisertib arm
was 9.6 months and the median PFS in the paclitaxel plus placebo arm was 5.7 months. Treatment with paclitaxel plus
alisertib resulted in a higher but not statistically significant improvement in overall survival with the median OS for the
paclitaxel plus alisertib arm was 16 months versus 12.7 months for the paclitaxel alone arm of the trial which resulted in a
hazard ratio of 0.51 and a p value of 0.09.
Higher rates of grade 3 or higher AEs were seen in the paclitaxel plus alisertib arm for neutropenia, leukopenia,
diarrhea, mucositis and stomatitis.
Archival tissue samples from patients enrolled in the clinical study were analyzed as part of a biomarker evaluation
strategy. Of the 140 patients enrolled in the trial, 45 from the alisertib plus paclitaxel arm and 51 from the paclitaxel arm
had sufficient tissue available for next generation sequencing, and 31 from the alisertib plus paclitaxel arm and 35 from the
paclitaxel arm had enough for RNA sequencing/gene set enrichment analysis. The most frequently mutated genes
were PIK3CA (45%) and TP53 (44%). No mutations were significantly associated with response or resistance to alisertib
plus paclitaxel, including those in PIK3CA, TP53, AKT1, HER2, and CDH1.
Increased MYC RNA expression was observed in tumors from patients who did not derive clinical benefit from
paclitaxel alone (defined as PFS less than 6 months) compared to those with benefit from paclitaxel alone (defined as PFS
greater than or equal to 6 months). Increased MYC RNA expression was not observed in patients who did not appear to
benefit from alisertib plus paclitaxel. Elevated expression of genes involved in MYC activation and in unfolded protein
response (a pro- survival mechanism) were enriched in alisertib plus paclitaxel responders compared to paclitaxel
responders and were associated with poor response to paclitaxel alone. In 12 patients with exceptional response to alisertib
plus paclitaxel (defined as PFS greater than or equal to 12 months), increased expression of genes involved in MYC
activation and in epithelial to mesenchymal transition (a hallmark of cancer progression and metastasis) was observed in
comparison to cancers from patients whose disease progressed within 6 months of initiating alisertib + paclitaxel (n=11) or
those with exceptional response to paclitaxel alone (n=4).
Development plan. In the United States the incidence of hormone receptor positive HER2-negative breast cancer is
40,000 patients per year with 29,700 deaths per year. There are two biomarkers of interest that we intend to study with
alisertib, c-myc amplifications and RB1 mutations/deletions. According to biomarker analyses from clinical trials,
approximately 50% of hormone receptor positive breast cancer tumors may have c-myc amplifications and approximately
2-9% of hormone receptor positive HER2-negative breast cancer samples have RB1 mutations detected at the time of
resistance to cdk4/6 inhibitors.
Based on the our interactions with the FDA in 2023, we plan to initiate a Phase II trial of alisertib in combination
with endocrine treatment (consisting of either anastrozole, exemestane, letrozole, fulvestrant or tamoxifen) in patients with
chemotherapy-naïve HER2-negative, hormone receptor-positive metastatic breast cancer (ALISCA-Breast1). Patients must
have been previously treated with CDK 4/6 inhibitors and received at least two prior lines of endocrine therapy in the
recurrent or metastatic setting to be eligible for the trial. We plan to initiate this trial in the second half of 2024.
The ALISCA-Breast1 trial is designed to dose patients with alisertib given at either 30 mg, 40 mg or 50 mg twice
daily (BID) on days 1-3, 8-10 and 15-17 on a 28-day cycle in combination with the endocrine therapy of the investigator’s
choice. Patients must not have been previously treated with the endocrine treatment that will be given in combination with
alisertib in the trial. Each dose level is expected to enroll up to 50 patients. Patients must provide blood samples and tissue-
based biopsies so that biomarkers can be evaluated. The primary efficacy end points will include objective response rate,
duration of response, disease control rate and PFS. As a secondary objective, the we plan to evaluate each of these efficacy
endpoints within biomarker subgroups in order to determine whether any biomarker subgroup correlates with more
favorable efficacy results, such as though observed in preclinical and clinical studies in other cancers including breast
cancer and small cell lung cancer. Pending the outcome of this planned study, we may then look to focus the future clinical
development of alisertib in combination with endocrine therapy for patients with HER2-negative hormone receptor-positive
breast cancer in patients with any potential biomarkers.
Based on our interactions with the FDA, we believe that this trial design could find the optimal dose of alisertib in
combination with endocrine therapy in patients with HER2-negative, hormone receptor-positive metastatic breast cancer,
and pending sufficiently positive results, allow us to move into a pivotal Phase III trial. Once the optimal alisertib dose is
identified, we plan to engage with global regulatory agencies regarding the design of a pivotal Phase III trial, which we
anticipate will be a randomized trial of alisertib plus investigator’s choice endocrine therapy versus placebo plus
investigator’s choice endocrine therapy in patients with chemotherapy naïve HER2-negative, hormone receptor-positive
metastatic breast cancer.
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Clinical Testing of Our Drug Candidates
Any drug candidates we seek to develop will require extensive pre-clinical and clinical testing to determine its safety
and efficacy in the potential applications prior to seeking and obtaining regulatory approval. This process is expensive and
time consuming. In completing these trials, we are dependent upon third-party consultants, consisting mainly of
investigators and collaborators, who will conduct such trials.
We and our third-party consultants conduct pre-clinical testing in accordance with Good Laboratory Practices
(“GLP”) and clinical testing in accordance with Good Clinical Practice standards (“GCP”) which are international ethical
and scientific quality standards utilized for pre-clinical and clinical testing, respectively. GCP is the standard for the design,
conduct, performance, monitoring, auditing, recording, analysis and reporting of clinical trials and the FDA requires
compliance with GCP regulations in the conduct of clinical trials. Additionally, our pre-clinical and clinical testing
completed in the EU is conducted in accordance with applicable EU standards, such as the EU Clinical Trials Regulation
(Regulation (EU) No 536/2014 of April 16, 2014), and applicable national laws of the 27 EU member states.
We have entered into, and may enter into in the future, master service agreements with CROs with respect to
initiating, managing and conducting the clinical trials of our products. These contracts contain standard terms for the type
of services provided that contain cancellation clauses requiring between 30 and 45 days written notice and that obligate us
to pay for any services previously rendered with prepaid, unused funds being returned to us.
Competition
The development and commercialization of new products to treat cancer is highly competitive. Significant financial
resources are invested in research, development and commercialization of new cancer products. We have faced and will
likely continue to face considerable competition from major pharmaceutical, biotechnology and specialty cancer
companies. Our competitors include, but are not limited to, Genentech, Novartis, Roche, Boehringer Ingelheim, Lilly,
Amgen, Daiichi Sankyo, Jazz and Seagen. Amgen, Daiichi Sankyo and Jazz are developing their drugs for the treatment of
small cell lung cancer. All of the other competitors are developing their drugs for the treatment of early stage and/or
metastatic HER2-positive breast cancer and/or for cancers that have a HER2 mutation. In addition, we are also competing
with academic institutions, governmental agencies and private organizations that are conducting research in the field of
cancer.
We are a small biotechnology company with a limited history of sales, marketing, operations and commercial
manufacturing. Many of the companies against which we are competing or against which we may compete in the future
have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. Mergers and
acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being
concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and
establishing clinical trial sites and enrolling subjects for our clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
We could see a reduction or elimination of our commercial opportunity if our competitors develop and
commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less
expensive than any products that we or our collaborators may develop. Our competitors also may obtain FDA or foreign
regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our
competitors establishing a strong market position before we or our collaborators are able to enter the market.
We anticipate that we will continue to face significant competition in the ongoing commercialization of NERLYNX
and the commercialization of any of our drug candidates that receive marketing approval. Our competition will be
determined by several factors including but not limited to the specific indications approved, the timing of any approvals as
well as competitive activity and entrants within this space. We expect that competition among products approved for sale
will be based on various factors, including safety, efficacy, pricing and contracting, patient support services, access and
reimbursement, formulary and pathway adoption as well as patent position.
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Sales and Marketing
United States
We currently have an oncology sales force in the United States comprised of approximately 38 sales specialists,
8 clinical nurse educators and four strategic account managers and one national account director who are focused on
promoting NERLYNX to oncologists and the oncology care team. This sales force is supported by an experienced
leadership team consisting of 6 regional business leaders and a VP of sales. In addition, the broader commercial team is
comprised of experienced professionals in marketing, training, sales operations, global product strategy as well as access
and reimbursement. In addition, our commercial infrastructure includes capabilities in manufacturing, regulatory, quality
control, and compliance. It is also supported from a clinical expertise and cancer landscape perspective by our medical
affairs group.
We launched NERLYNX in the United States in July 2017 with the goal of establishing NERLYNX as the standard
of care for the extended adjuvant treatment of adult patients with early stage HER2-positive breast cancer to follow
adjuvant trastuzumab-based therapy. In Feb 2020, NERLYNX was also approved in the United States in combination with
capecitabine for the treatment of adult patients with advanced or metastatic HER2-positive breast cancer who have received
two or more prior anti-HER2 based regimens in the metastatic setting.
We believe that the key commercial priorities to achieve for NERLYNX include:
•
•
Educating healthcare providers about the evolving clinical data for NERLYNX and its ability to reduce the
risk of recurrence in the extended adjuvant setting for woman battling HER2-positive breast cancer;
Educating HER2-positive breast cancer patients about the risks of recurrence and empowering them to ask
their MDs if NERLYNX is an appropriate option for them;
• Removing access barriers by ensuring broad insurance coverage; and
•
Providing patients with appropriate co-pay support as well as tools and resources to better maintain
persistency and compliance.
In the United States, we sell our products through a specialty pharmacy network and special distributor network. The
specialty pharmacy network sells directly to patients and consists of Acaria Health, Accredo, CVS, ONCO 360,
Optum/Diplomat and Biologics. Our specialty distributor network sells to hospitals, physician practices and other sites of
care and consists of McKesson, ASD/Oncology Supply, Cardinal Health and DMS Pharmaceutical Group.
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International
Outside the United States, we seek to enter into exclusive sub-license agreements with third parties to pursue
regulatory approval, if necessary, and commercialize NERLYNX, if approved. In 2018, the EC granted a marketing
authorization for NERLYNX in the EU for the extended adjuvant treatment of adult patients with early-stage hormone
receptor positive HER2-overexpressed/amplified breast cancer and who completed adjuvant trastuzumab-based therapy less
than one year ago. In December 2021, NERLYNX (neratinib) was included in the updated National Reimbursement Drug
List (“NRDL”) by the China National Healthcare Security Administration for patients with early stage hormone receptor
positive HER2-overexpressed/amplified breast cancer after adjuvant trastuzumab based therapy. The addition of
NERLYNX to the China NRDL now enables broad access to neratinib to more women throughout China. We continue to
pursue commercialization of NERLYNX in Europe and other countries outside the United States, where approved. The
following table shows the HER2-positive breast cancer approvals for NERLYNX by disease and country:
United States
Argentina
Peru
Chile
Canada
Taiwan
Israel
Ecuador
Singapore
Colombia
Malaysia
Metastatic
February 2020
January 2021
March 2021
May 2021
June 2021
October 2021
July 2022
August 2022
September 2022
March 2023
September 2023
United States
European Union
Australia
Canada
Argentina
Hong Kong
Singapore
Switzerland
Brunei
China
Chile
New Zealand
Taiwan
Ecuador
Malaysia
Peru
Macau
South Korea
Brazil
Mexico
Philippines
Israel
South Africa
Morocco
Extended adjuvant
July 2017
August 2018
March 2019
July 2019
August 2019
October 2019
November 2019
March 2020
April 2020
April 2020
April 2020
June 2020
June 2020
July 2020
July 2020
March 2021
August 2021
October 2021
December 2021
January 2022
June 2022
July 2022
January 2023
February 2023
We currently have sub-licenses in each of these regions with third parties that are commercializing NERLYNX in
their respective geography.
Intellectual Property and License Agreements
Neratinib Patent Portfolio
We hold a worldwide exclusive license under our license agreement with Pfizer, as amended (the “Pfizer
Agreement”) to 21 granted U.S. patents and four pending U.S. patent applications, as well as foreign counterparts thereof,
and other patent applications and patents claiming priority therefrom to develop and commercialize certain compounds,
including neratinib.
In the United States, we have a license to an issued patent, which is set to expire in 2030, for the composition of
matter of neratinib, our lead compound. We also have a license to an issued U.S. patent for the use of neratinib in the
treatment of breast cancer, which is currently set to expire in 2025, an issued patent for the use of neratinib in the extended
adjuvant treatment of early stage HER2-positive breast cancer that has previously been treated with a trastuzumab
containing regimen that expires in 2030, two issued patents for the use of neratinib in combination with capecitabine, the
latter of which is set to expire in 2031, and two issued patents for the formulation of NERLYNX® that are set to expire in
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2030, two issued patents for the polymorphic forms of neratinib which are set to expire in 2028, one issued patent for the
preparation of the polymorphic forms of neratinib which is set to expire in 2028, and three issued patents for the use of the
polymorphic forms of neratinib in the treatment of breast cancer which are set to expire in 2028. In jurisdictions which
permit such, we will seek patent term extensions where possible for certain of our patents (discussed further below,
including in “Government Regulation”). We plan to pursue additional patents in and outside the United States, based on our
existing neratinib patent portfolio, that covers neratinib composition, formulations, and combinations and uses thereof, and
additional therapeutic uses of neratinib. In addition, we will pursue patent protection for any new discoveries or inventions
made in the course of our development of neratinib.
In the United States, marketing approval for neratinib was obtained on July 17, 2017, which provided five years of
regulatory exclusivity. Marketing approval in the United States for neratinib in combination with capecitabine was obtained
on February 25, 2020, which provided three years of regulatory exclusivity. Requests for patent term extension under the
Hatch-Waxman Act have been filed for two patents in the United States: U.S. Patent No. 7,399,865 and U.S. Patent No.
9,211,291. We elected to apply patent term extension to U.S. Patent No. 7,399,865. The U.S. Patent and Trademark Office
(“USPTO”) has determined that U.S. Patent No. 7,399,865 is eligible for five years of patent term extension. U.S. Patent
No. 7,399,865 Patent Term Extension (PTE) Certificate issued on November 19, 2021. U.S. Patent No. 7,399,865 will
expire December 29, 2030. See “Government Regulation” below. If we obtain marketing approval in the United States for
new uses or combination therapies for neratinib, we may be eligible for additional periods of regulatory exclusivity, such as
three-year market exclusivity covering the new use. If we obtain market approval for neratinib or other drug candidates or
in certain jurisdictions outside the United States, we may be eligible for regulatory protection, such as eight to eleven years
of data and marketing exclusivity are potentially available for new drugs in the EU; up to five years of patent extension are
potentially available in Europe (Supplemental Protection Certificate), and eight years of data exclusivity are potentially
available in Japan. In Europe, marketing approval for neratinib was obtained on August 31, 2018, which provided 10 years
of regulatory exclusivity. Between 2019 and 2022, marketing approval for neratinib was obtained in Argentina, Brazil,
Brunei, Canada, Chile, China, Ecuador, Hong Kong, Israel, Malaysia, Mexico, Singapore and Taiwan. Where available and
eligible, regulatory or data exclusivity has been obtained, or is currently being pursued in these jurisdictions outside the
United States and Europe. Patent term extension or supplemental protection certificate are being, or will be, pursued in
jurisdictions where available and eligible, including Chile, Europe and Taiwan. We are pursuing patent term extension in
the form of patent term adjustment (PTA), in market approved jurisdictions where PTA is available. Where PTA requests
require proceedings in a court setting, there is no guarantee that such PTA requests will be granted. Current market
approved jurisdictions where patent term extensions or supplemental protection certificates are not available, not eligible, or
not pursued, include Argentina, Brunei, Canada, China, Ecuador, Hong Kong, Israel, Malaysia and Singapore. There can be
no assurance that we will qualify for any such regulatory exclusivity, or that any such exclusivity will prevent competitors
from seeking approval solely on the basis of their own studies. See “Government Regulation” below.
On November 28, 2011, a Boehringer Ingelheim entity filed an opposition to European Patent No. EP1848414,
which was licensed from Pfizer in 2011, and which included specific claims to a pharmaceutical composition for use in
treating cancer in a subject with a cancer having a mutation in epidermal growth factor receptor with a T790M
mutation. Oral proceedings were held before the Opposition Division of the European Patent Office in Munich, Germany
on February 4, 2014. The decision of the Opposition Division was to uphold the granted claims of the European patent that
relate to the T790M mutation without any modification. This included specific claims to a pharmaceutical composition
comprising an irreversible epidermal growth factor receptor inhibitor for use in treating cancer in a subject having a T790M
mutation and claims for the pharmaceutical composition for use in the treatment of numerous cancers, including lung
cancer and non-small cell lung cancer. Both parties appealed this decision. The opposition was rejected as inadmissible by
the Board of Appeal of the European Patent Office on December 1, 2020, and the EP1848414 patent was upheld as
originally granted. We have filed Supplemental Protection Certificate applications in the countries the EP1848414 patent
was validated. Of these Supplemental Protection Certificate applications, five have been granted, one is pending grant, four
have been abandoned and the remaining are in active prosecution.
An Opposition was filed by Hexal AG (“Hexal”) on August 3, 2016 against European Patent No. EP2416774 which
was licensed from Pfizer in 2011, and which claims neratinib for use in a method for treating HER-2/neu
overexpressed/amplified cancer and improving IDFS, wherein the method comprises delivering neratinib therapy to HER-
2/neu overexpressed/amplified cancer patients following the completion of at least one year of trastuzumab adjuvant
therapy, and wherein the neratinib therapy comprises treating the cancer patients with neratinib for at least twelve
months. An oral hearing was held December 8, 2017, wherein the patent was maintained as granted. Following an appeal
filed by Hexal, the Board of Appeal of the European Patent Office rejected the claims as granted and all pending auxiliary
requests during the oral hearing of September 2, 2021. Before issuance of a decision, we withdrew approval of the text in
which the patent was granted and all pending auxiliary requests, thereby revoking the patent and concluding the appeal.
One European divisional application, namely EP15188350.1, was granted with the European patent number EP3000467 on
March 1, 2023. Oppositions against EP3000467 were filed by Hexal AG (“Hexal”) on November 3, 2023, by Alfred E.
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Tiefenbacher (GmbH & Co. KG) on November 28, 2023 and by Generics [UK] Limited on December 1, 2023. EP3000467
is used as the basic patent for Supplementary Protection Certificate applications for the EMA-approved NERLYNX®
product. Responses to the notices of opposition need to be filed by April 15, 2024. One European divisional application is
pending in the same family, namely EP 23157078.8. Substantive examination thereof has not yet commenced.
On October 6, 2017, Hexal also filed an Opposition against European Patent No. EP2326329 which was licensed
from Pfizer in 2011, and which claims a combination of neratinib and pharmaceutically acceptable salts thereof with
capecitabine for use in a method of treating an Erb-2 positive metastatic breast cancer. An oral hearing was held on
February 13, 2019, wherein the patent was maintained as granted. Hexal then appealed, the Board of Appeal of the
European Patent Office rejected the claims as granted and the pending auxiliary request during the oral hearing of
November 16, 2022. Before issuance of a decision, we withdrew approval of the text in which the patent was granted and
the pending auxiliary request, thereby revoking the patent and concluding the appeal. A divisional application,
EP16203986.1 was granted with the patent number EP3175853 on November 1, 2023. A divisional application,
EP23206402.2, remains pending in this family. Claims for this pending divisional need to be filed by January 8, 2024.
Substantive examination thereof has not yet commenced.
On May 21, 2020, Dr. Richard Cooke at the firm Elkington and Fife LLP filed an Opposition against European
Patent No. EP2498756, which was licensed from Pfizer in 2011, and which claims, inter alia, tablet formulations of
neratinib maleate comprising intragranular and extragranular components. An oral hearing was held on April 6, 2022,
wherein the patent has been maintained in amended form. The Interlocutory Decision of the Opposition Division was
issued on July 25, 2022. Hexal, has not appealed the decision within the prescribed time and the Interlocutory Decision
became final. There are two pending divisional applications, namely EP19154710.8 and EP22169771.7, wherein the latter
received Third Party Observations on December 1, 2023.
An Opposition was filed by Generics (UK) Ltd. (“Generics”) on September 3, 2015 against European Patent No.
EP2656844, which was licensed from Pfizer in 2011, and which claims, inter alia, a pharmaceutical pack containing 50 to
300 mg of neratinib and pharmaceutically acceptable salts thereof and vinorelbine for use in a method of treating a
neoplasm. An oral hearing was held July 3, 2017, wherein the patent was maintained as granted. Generics then
appealed. The appeal was dismissed by the Board of Appeal of the European Patent Office on August 11, 2020, and the
EP2656844 patent was upheld as originally granted.
Unipharm filed a pre-grant opposition to Israeli Patent Application No. IL210616 on January 31, 2016. This
application was licensed from Pfizer in 2011. An oral hearing was held in Jerusalem before the Israeli Patent Office on
January 22, 2018. The patent was granted by the Israeli Patent Office upon filing of amendments to the claims. No
opposition to the patent has been filed within the allowed opposition period. The granted claims are directed to use of a
combination of neratinib and capecitabine in the manufacture of a medicament for treating a neoplasm.
Alisertib Patent Portfolio
We hold a worldwide exclusive license under our license agreement with Takeda (the “Takeda Agreement”), to
20 granted U.S. patents and 5 pending U.S. patent applications, as well as foreign counterparts thereof, and other patent
applications and patents claiming priority therefrom for a total of approximately 363 foreign patents and patent applications
to develop and commercialize alisertib.
We have a license to issued U.S. patents that include species claims and genus claims to the composition of matter of
alisertib which are set to expire in 2029 and 2027, respectively, not including any extension for Hatch-Waxman exclusivity.
We also have issued U.S. patents for the use of alisertib in combination with certain other agents in the treatment of certain
proliferative disorders, small-cell lung cancer and breast cancer, which are currently set to expire in 2032, 2033 and 2034,
respectively, not including any extension for Hatch-Waxman exclusivity.
We plan to pursue additional patents in and outside the United States, based on our existing alisertib patent portfolio,
that covers alisertib composition, formulations, combinations and uses thereof, and additional therapeutic uses of alisertib.
In addition, we will pursue patent protection for any new discoveries or inventions made in the course of our development
of alisertib.
Our goal is to obtain, maintain and enforce patent protection for our products, formulations, processes, methods and
other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other
parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the
broadest intellectual property protection possible for our current drug candidates and any future drug candidates,
proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in
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the United States and abroad. However, even patent protection may not always provide us with complete protection against
competitors who seek to circumvent our patents. See “Risk Factors—Risks Related to Our Intellectual Property—Our
proprietary rights may not adequately protect our intellectual property and potential products, and if we cannot obtain
adequate protection of our intellectual property and potential products, we may not be able to successfully market our
potential products.”
We depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our
advisors, consultants and other contractors, none of which is patentable. To help protect our proprietary know-how, which
is not patentable, and inventions for which patents may be difficult to obtain or enforce, we rely on trade secret protection
and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors
and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and,
where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important
to our business.
In-License Agreements
Pfizer License Agreement
We license the worldwide exclusive rights for the development, manufacture and commercialization of neratinib
(oral), neratinib (intravenous), PB357, and certain related compounds from Pfizer. Under the Pfizer Agreement, Pfizer was
obligated to transfer to us certain information, records, regulatory filings, materials and inventory controlled by Pfizer and
relating to or useful for developing these compounds and to continue to conduct certain ongoing clinical studies until a
certain time. After that time, we were obligated to continue such studies pursuant to an approved development plan,
including after the license agreement terminates for reasons unrelated to Pfizer’s breach of the license agreement, subject to
certain specified exceptions. We were also obligated to commence a new clinical trial for a product containing one of these
compounds within a specified period of time and use commercially reasonable efforts to complete such trial and achieve
certain milestones as provided in a development plan. If certain of our out-of-pocket costs in completing such studies
exceed a mutually agreed amount, Pfizer was obligated to pay for certain additional out-of-pocket costs to complete such
studies. We must use commercially reasonable efforts to develop and commercialize products containing these compounds
in specified major-market countries and other countries in which we believe it is commercially reasonable to develop and
commercialize such products. In July 2021, we entered into a confirmatory agreement with Pfizer and Wyeth LLC
(“Wyeth”), confirming that the rights granted to us by Pfizer under the Pfizer Agreement included Wyeth's rights in
neratinib (oral), neratinib (intravenous), PB357, and certain related compounds.
As consideration for the license, we are required to make payments totaling $187.5 million upon the achievements of
certain milestones if all such milestones are achieved. FDA approval of NERLYNX in July 2017 triggered a one-time
milestone payment. In June 2020, we entered into a letter agreement (the “Letter Agreement”) with Pfizer relating to the
method of payment associated with a one-time milestone payment under the Pfizer Agreement. The Letter Agreement
permits us to make the milestone payment in installments with portions of the amount payable to Pfizer (including interest)
made in June and November 2020 for approximately $20.6 million in the aggregate and the remaining portion to be made
in September 2021 for approximately $21.9 million. Unpaid portions of the milestone payment accrued interest at 6.25%
per annum until paid. The installment payments and accrued interest are included in accrued in-licensed rights on the
accompanying consolidated balance sheets.
The Pfizer Agreement originally stipulated that should we commercialize any of the compounds licensed from Pfizer
or any products containing any of these compounds, we will be obligated to pay to Pfizer incremental annual royalties
between approximately 10% and 20% of net sales of all such products, subject, in some circumstances, to certain
reductions.
In July 2014, we signed an amendment to the Pfizer Agreement that, among other things reduced the annual
royalties to be paid on net sales of licensed products from a tiered royalty rate structure ranging between 10% to 20% to a
fixed rate in the low to mid-teens.
Our royalty obligation continues, on a product-by-product and country-by-country basis, until the later of (i) the last
to expire valid claim of a licensed patent covering the applicable licensed product in such country, or (ii) the earlier of
generic competition for such licensed product reaching a certain level of sales in such country or expiration of a certain
time period after first commercial sale of such licensed product in such country. We can terminate the Pfizer Agreement at
will at any time or for safety concerns, in each case upon specified advance notice. Each party may terminate the
Pfizer Agreement if the other party fails to cure any breach of a material obligation by such other party within a specified
time period. Pfizer may terminate the Pfizer Agreement in the event of our bankruptcy, receivership, insolvency or similar
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proceeding. The Pfizer Agreement contains other customary clauses and terms as are common in similar agreements in the
industry.
Takeda License Agreement
In September 2022, we entered an exclusive license agreement with Takeda to license from Takeda the worldwide
right to research, develop, commercialize and otherwise exploit alisertib, also referred to as MLN-8237, a selective, small-
molecule, orally administered inhibitor of aurora kinase A. Under the terms of the Takeda Agreement, we assumed sole
responsibility for the global development and commercialization of alisertib. We paid Takeda an upfront license fee of $7
million in October 2022 and is eligible to receive potential future milestone payments of up to $287.3 million upon our
achievement of certain regulatory and commercial milestones during the term of the exclusive license agreement, as well as
tiered royalty payments for any net sales of alisertib.
Under the Takeda Agreement, we must use commercially reasonable efforts to develop and commercialize one
product containing alisertib in specified major-market countries. We may terminate the Takeda Agreement at will at any
time upon specified advance notice. Each party may terminate the Takeda Agreement if the other party fails to cure any
material breach of the Takeda Agreement by such other party within a specified time period. In addition, each party may
terminate the Takeda Agreement following the other party’s bankruptcy, insolvency, reorganization, receivership,
dissolution, liquidation or similar events. The Takeda Agreement contains other customary clauses and terms as are
common in similar agreements in the industry.
Sub-License Agreements
The following summary describes our material sub-license agreements. Because the following is only a summary, it
does not contain all of the information that may be important to you. For a complete description, you should refer to each of
these agreements, copies of which have been filed as exhibits to this Annual Report on Form 10-K.
Specialised Therapeutics Agreement
On November 20, 2017, we entered into a sub-license agreement (the “Specialised Therapeutics Agreement”), with
Specialised Therapeutics Asia Pte Ltd. (“STA”). Pursuant to the Specialised Therapeutics Agreement, we granted to STA,
under certain of our intellectual property rights relating to neratinib, an exclusive, sublicensable (under certain
circumstances) license to commercialize any pharmaceutical product containing neratinib in finished form for the extended
adjuvant treatment of patients with early stage HER2-positive breast cancer and HER2-positive metastatic breast cancer in
Australia, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, New Zealand, Papua New Guinea, Philippines,
Singapore, Thailand, Timor-Leste and Vietnam, or the STA Territory.
The Specialised Therapeutics Agreement sets forth the parties’ respective obligations with respect to the
development, commercialization, and supply of the licensed product. Within the STA Territory, STA will be generally
responsible for regulatory and commercialization activities, and we will be solely responsible for the manufacturing and
supply of the licensed product under a supply agreement entered into between the parties.
Pursuant to the Specialised Therapeutics Agreement, we received an upfront payment and will potentially receive
additional regulatory milestone payments. In addition, we will receive double-digit royalties on sales of licensed products,
calculated as a percentage of net sales of licensed products throughout the STA Territory.
The term of the Specialised Therapeutics Agreement continues, on a country-by-country basis, until the later of (i)
the expiration or abandonment of the last patent covering the licensed product or (ii) the earlier of (a) the date upon which
sales of generic versions of licensed product reach a specified level in such country, or (b) the tenth anniversary of the first
commercial sale of the licensed product in such country. The Specialised Therapeutics Agreement may be terminated by
either party if the other party commits a material breach, subject to a customary cure period, or if the other party is
insolvent. The Specialised Therapeutics Agreement will also terminate upon the termination of the supply agreement for
licensed products between the parties.
Medison Agreement
During the first quarter of 2018, we entered into a sub-license agreement (the “Medison Agreement”), with Medison
Pharma Ltd. (“Medison”). Pursuant to the Medison Agreement, we granted to Medison, under certain of our intellectual
property rights relating to neratinib, an exclusive license to commercialize neratinib and certain related compounds and
participate in the named patient supply in Israel (the “Medison Territory”), subject to the terms of the Medison Agreement
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and the related supply agreement. Pursuant to the Medison Agreement, we will potentially receive milestone payments due
to us upon successful completion of certain separate, distinct performance obligations. In addition, we are entitled to
receive double-digit royalties on sales of licensed products, calculated as a percentage of net sales of licensed products in
the Medison Territory.
Pint Agreement
On March 30, 2018, we entered into a sub-license agreement (the “Pint Agreement”), with Pint Pharma International
SA (“Pint”). Pursuant to the Pint Agreement, we granted to Pint, under certain of our intellectual property rights relating to
neratinib, an exclusive, sublicensable (under certain circumstances) license to develop and commercialize any product
containing neratinib and certain related compounds in Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua,
and Panama, Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and
Venezuela, French Guiana, the Falkland Islands, and Mexico (the “Pint Territory”).
The Pint Agreement sets forth the parties’ respective obligations with respect to the development,
commercialization, and supply of the licensed product. Pint will, at its expense, develop the licensed product for the
purpose of obtaining regulatory approval in the Pint Territory, subject to our consent to conduct such development activities
and approval of certain aspects of clinical studies conducted by Pint. Within the Pint Territory, Pint will also be responsible
for regulatory and commercialization activities. We will be solely responsible for the manufacturing and supply of the
licensed product under a supply agreement that will be entered into between the parties, subject to certain exceptions
therein.
Pursuant to the Pint Agreement, we received an upfront payment and will potentially receive additional regulatory
and sales-based milestone payments. In addition, we are entitled to receive double-digit royalties on sales of licensed
products, calculated as a percentage of net sales of licensed products throughout the Pint Territory.
The term of the Pint Agreement continues, on a country-by-country basis, until the later of (i) the expiration or
abandonment of the last licensed patent covering the licensed product in such country, or (ii) the earlier of (a) the date upon
which sales of generic versions of licensed product reach a specified level in such country, or (b) the tenth anniversary of
the first commercial sale of the licensed product in such country. The Pint Agreement may be terminated by either party if
the other party commits a material breach, subject to a customary cure period, or if the other party is insolvent. Pint may
also terminate the Pint Agreement at will, for certain safety concerns.
Knight Agreement
On January 9, 2019, we entered into a sub-license agreement (the “Knight Agreement”), with Knight Therapeutics,
Inc. (“Knight”). Pursuant to the Knight Agreement, we granted to Knight, under certain of the our intellectual property
rights relating to neratinib, an exclusive, sublicensable (under certain circumstances) license (i) to commercialize any
product containing neratinib and certain related compounds in Canada (the “Knight Territory”), (ii) to seek and maintain
regulatory approvals for the licensed products in the Knight Territory and (iii) to manufacture the licensed products
anywhere in the world solely for the development and commercialization of the licensed products in the Knight Territory
for human use, subject to the terms of the Knight Agreement and a supply agreement to be negotiated and executed by the
parties.
Under the terms of the Knight Agreement, we will be solely responsible for the manufacturing and supply of the
licensed products to Knight, but under limited circumstances Knight may obtain the right to manufacture the licensed
products under the supply agreement.
The Knight Agreement sets forth the parties’ respective obligations with respect to the commercialization of the
licensed products. Within the Knight Territory, we will be solely responsible for obtaining the regulatory approval for the
indication of extended adjuvant treatment of HER2-positive early stage breast cancer (the “Initial Indication”), and Knight
will use commercially reasonable efforts to prepare, file and manage regulatory filings for any other indications in the field
of human use. Promptly after obtaining the regulatory approval for the Initial Indication in the Knight Territory, we will
transfer such regulatory approval to Knight, and Knight will own and hold any regulatory approvals for the licensed
products in the Knight Territory in its name.
Pursuant to the Knight Agreement, we received an upfront payment and will potentially receive additional regulatory
and commercial milestone payments. In addition, we are entitled to receive double-digit royalties on sales of licensed
products, calculated as a percentage of net sales of licensed products in the Knight Territory.
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The term of the Knight Agreement continues, on a licensed product-by-licensed product basis, until the later of (i)
the expiration or abandonment of the last valid claim of the licensed patents that covers such licensed product in the
Territory, or (ii) the earlier of (a) the time when generic competitors to such licensed product have achieved a specified
level in such country, or (b) ten (10) years following the date of first commercial sale of such licensed product in the
Territory. The Knight Agreement may be terminated by either party if the other party commits a material breach, subject to
a customary cure period, or if the other party is insolvent.
Pierre Fabre Agreement
On March 29, 2019, we entered into a sub-license agreement (the “Pierre Fabre Agreement”), with Pierre Fabre
Medicament SAS (“Pierre Fabre”). Pursuant to the Pierre Fabre Agreement, we granted to Pierre Fabre under certain of our
intellectual property rights relating to neratinib an exclusive, sub-licensable (under certain circumstances) license to
develop, manufacture and commercialize any pharmaceutical product containing neratinib for therapeutic and prophylactic
indications for human or veterinary use in European countries excluding Russia and Ukraine, along with countries in North
Africa and francophone countries of West Africa (the “Pierre Fabre Territory”). On November 25, 2019, we entered into a
license amendment (the “First Pierre Fabre Amendment”), with Pierre Fabre to extend the Pierre Fabre Territory to the
Middle East, South Africa, Sudan and Turkey (as extended, the “First Pierre Fabre Territory”).
On February 24, 2021, we resolved a dispute with our former partner CANbridge Biomed Limited and terminated
our sub-license agreement. Simultaneous to the termination of this agreement, we entered into a third license amendment
(the “Third Pierre Fabre Amendment”) with Pierre Fabre to further extend Pierre Fabre’s licensed territory to Greater
China, (the “Third Pierre Fabre Territory”) which includes mainland China, Taiwan, Hong Kong and Macao (each a “China
Region”).
Pursuant to the Pierre Fabre Agreement, we received an upfront payment and will potentially receive additional
regulatory and sales-based milestone payments based on regulatory and sales activities in the Licensee Territory (as such
term is defined in the Third Pierre Fabre Amendment). Pursuant to the Third Pierre Fabre Amendment, we received an
upfront payment of $50.0 million and will potentially receive additional regulatory and sales-based milestone payments up
to $240.0 million based solely on regulatory and sales activities in the Third Pierre Fabre Territory. In addition, we will
receive double-digit royalties based on net sales of the licensed products in the Licensee Territory, on the one hand, and
double-digit royalties based on net sales of the licensed products in the Third Pierre Fabre Territory, on the other hand. For
the purposes of calculating royalties, sales of the licensed products in the Third Pierre Fabre Territory will be excluded
from the sales of licensed products made in the Licensee Territory.
Under the terms of the Pierre Fabre Agreement, as amended, we are obligated to supply Pierre Fabre with the
licensed products in accordance with the related supply agreement. Pierre Fabre will be responsible for conducting
additional clinical studies and leading regulatory activities in connection with the EMA, and Greater China.
The term of the Pierre Fabre Agreement, as amended, continues until, on a country-by-country basis, the later of (i)
the expiration or abandonment of the last licensed patent covering the licensed product in such country and (ii) the earlier of
(a) the date upon which sales of generic versions of the licensed product reach a specified level in such country, or (b) the
tenth anniversary of the first commercial sale of a licensed product in such country.
The Pierre Fabre Agreement, as amended, may be terminated by either party, in its entirety, if the other party
commits a material breach, subject to a cure period, or if the other party is insolvent, and Pierre Fabre may terminate the
Pierre Fabre Agreement, as amended, at its convenience or if there is evidence of safety issues with the licensed product.
Pierre Fabre may terminate the Pierre Fabre Agreement, as amended, on a territory-by-territory basis, by terminating only
the Licensee Territory or the Third Pierre Fabre Territory, for any of the foregoing reasons. We may terminate the Pierre
Fabre Agreement, as amended, on a China Region-by-China Region basis or, under certain circumstances, in the entire
Third Pierre Fabre Territory if Pierre Fabre is in material violation of certain anti-corruption laws.
Bixink Agreement
During the second quarter of 2020, we entered into a sub-license agreement (the “Bixink Agreement”), with Bixink
Therapeutics Co., Ltd. (“Bixink”). The Bixink Agreement granted intellectual property rights and set forth the respective
obligations with respect to development, commercialization and supply of NERLYNX in South Korea (the “Bixink
Territory”). The Bixink Agreement includes potential milestone payments due to us upon successful completion of certain
performance obligations, such as achieving regulatory approvals. In addition, we are entitled to receive double-digit
royalties on sales of licensed products, calculated as a percentage of net sales of licensed products throughout the Bixink
Territory.
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Manufacturing
We do not currently have our own manufacturing facilities. We intend to continue to use our financial resources to
support commercialization of NERLYNX and development of our drug candidates, including alisertib, rather than diverting
resources to establish our own manufacturing facilities. While our drug candidates were developed by Pfizer and Takeda,
both the drug substance and drug product are manufactured by third-party contractors. We are currently using third-party
contractors to manufacture, supply, store and distribute our neratinib products (including NERLYNX) in clinical trials and
commercial quantities as well as for alisertib in clinical trials.
Should alisertib or any of our other drug candidates obtain marketing approval, we anticipate establishing
relationships with third-party manufacturers and other service providers in connection with commercial production of our
products. We have some flexibility in securing other manufacturers to produce our drug candidates; however, our
alternatives may be limited due to proprietary technologies or methods used in the manufacture of some of our drug
candidates.
Government Regulation
United States—FDA Process
The research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing,
among other things, of drug products are extensively regulated by governmental authorities in the United States and other
countries. In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its
implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or
judicial sanctions, such as FDA refusal to approve pending NDAs, warning letters, fines, civil penalties, product recalls,
product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.
Drug Approval Process. None of our drug candidates may be marketed in the United States until the drug has
received FDA approval. The steps required before a drug may be marketed in the United States generally include the
following:
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•
•
•
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completion of extensive pre-clinical laboratory tests, animal studies, and formulation studies, certain of which
must be conducted in accordance with the FDA’s GLP requirements and other applicable regulations;
submission to the FDA of an IND for human clinical testing, which must become effective before human
clinical trials may begin;
approval by an independent institutional review board (“IRB”) or ethics committee at each clinical site before
each trial may be initiated;
performance of adequate and well-controlled human clinical trials in accordance with GCP requirements to
establish the safety and efficacy of the drug for each proposed indication;
submission to the FDA of an NDA after completion of all pivotal clinical trials;
satisfactory completion of an FDA advisory committee review, if applicable;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which
the active pharmaceutical ingredient (“API”) and finished drug product are produced and tested to assess
compliance with current Good Manufacturing Practices (“cGMPs”) and potential inspection of clinical trial
sites to assess compliance with GCP; and
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FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United
States.
Pre-clinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal
studies. The conduct of the pre-clinical tests and formulation of the compounds for testing must comply with federal
regulations and requirements. The results of the pre-clinical tests, together with manufacturing information and analytical
data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An
IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns
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or questions about the conduct of the trial, such as whether human research subjects will be exposed to an unreasonable
health risk. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Therefore, submission of an IND may not necessarily result in the FDA allowing clinical trials to
begin.
Clinical trials involve administration of the investigational drug to human subjects under the supervision of qualified
investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in
monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be provided to the FDA as part of a
separate submission to the IND. Further, an IRB for each medical center proposing to conduct the clinical trial must review
and approve the study protocol and informed consent information for study subjects for any clinical trial before it
commences at that center, and the IRB must monitor the study until it is completed. There are also requirements governing
reporting of ongoing clinical trials and clinical trial results to public registries. Study subjects must sign an informed
consent form before participating in a clinical trial.
Clinical trials necessary for product approval typically are conducted in three sequential phases, but the phases may
overlap. Phase I usually involves the initial introduction of the investigational drug into a limited population, typically
healthy humans, to evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics and pharmacologic
actions, and, if possible, to gain an early indication of its effectiveness. Phase II usually involves trials in a limited patient
population to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible adverse effects and safety risks;
and (iii) evaluate preliminarily the efficacy of the drug for specific targeted indications. Multiple Phase II clinical trials may
be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase III clinical trials.
Phase III trials are undertaken in an expanded patient population at multiple, geographically dispersed clinical trial centers
to further evaluate clinical efficacy and test further for safety by using the drug in its final form in order to establish the
risk/benefit profile of the drug and provide an adequate basis for product labeling. Post-approval trials, sometimes referred
to as Phase IV studies, may be conducted after initial marketing approval. These trials are used to gain additional
experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate
the performance of Phase IV clinical trials as a condition of approval of an NDA.
Furthermore, the sponsor, the FDA or an IRB may suspend clinical trials at any time on various grounds, including a
finding that the subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or
terminate approval of a clinical trial at its institution, such as in the circumstances where the clinical trial is not being
conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to
patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by the
sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine
whether a trial may move forward at designated check points based on access to certain data from the trial.
During the development of a new drug, sponsors are given an opportunity to meet with the FDA at certain points.
These points may be prior to submission of an IND, at the end of Phase II clinical testing, and before an NDA is submitted.
Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information
about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach consensus on the
next phase of development. Sponsors typically use the end of a Phase II meeting to discuss their Phase II clinical results and
present their plans for the pivotal Phase III clinical trial that they believe will support submission of an NDA.
A sponsor may request an SPA to reach an agreement with the FDA that the protocol design, clinical endpoints, and
statistical analyses are acceptable to support regulatory approval of the drug candidate with respect to effectiveness in the
indication studied. If such an agreement is reached, it will be documented and made part of the administrative record, and it
will be binding on the FDA except in limited circumstances, such as if the FDA identifies a substantial scientific issue
essential to determining the safety or effectiveness of the product after clinical studies begin, if the relevant data,
assumptions, or information provided by the sponsor in a request for SPA change are found to be false statements or
misstatements or omit relevant facts, or if the sponsor fails to follow the protocol that was agreed upon with the FDA. A
documented SPA may be modified, and such modification will be deemed binding on the FDA review division, except
under the circumstances described above, if FDA and the sponsor agree in writing to modify the protocol and such
modification is intended to improve the study. There is no guarantee that a study will ultimately be adequate to support an
approval, even if the study is subject to an SPA.
Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop
additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing
the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing
quality batches of the drug candidate and the manufacturer must develop methods for testing the quality, purity and potency
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of the final drugs. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted
to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
Assuming successful completion of the required clinical testing, the results of pre-clinical studies and of clinical
trials, together with other detailed information, including information on the manufacture and composition of the drug, are
submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. An
NDA must be accompanied by a significant user fee, which may be waived in circumstances, such as where the drug is
approved for an orphan-designated indications, or for the first NDA submitted by a qualifying small business.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting
them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request
additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional
information. The resubmitted application also is subject to a filing review before the FDA accepts it for filing and
substantive review. Once filed, the FDA reviews an NDA to determine, among other things, whether a product is safe and
effective for its intended use and whether its manufacturing is cGMP-compliant to assure and preserve the product’s
identity, strength, quality and purity. Under the Prescription Drug User Fee Act (“PDUFA”) guidelines that are currently in
effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA for a new molecular entity to review
and act on the submission. This review typically takes twelve months from the date the NDA is submitted to FDA because
the FDA has approximately two months to make a “filing” decision after the application is submitted.
The FDA also may refer an application for a novel drug to an advisory committee. An advisory committee is a panel
of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a
recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA inspects the facility or the facilities at which the drug and/or its API is
manufactured and will not approve the product unless the manufacturing is in compliance with cGMPs and adequate to
assure consistent production of the product within required specifications. Additionally, before approving an NDA, the
FDA will typically inspect one or more clinical sites to assure compliance with GCPs.
After the FDA evaluates an NDA, it will issue an approval letter or a Complete Response Letter. An approval letter
authorizes commercial marketing of the drug for specific indications. A Complete Response Letter indicates that the review
cycle of the application is complete, and the application will not be approved in its present form. A Complete Response
Letter usually describes the specific deficiencies in the NDA identified by the FDA and may require additional clinical data
and/or additional clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical
trials, pre-clinical studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately
decide that the NDA does not satisfy the criteria for approval.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail
limitations on the indicated uses for which such product may be marketed. For example, the FDA could approve the NDA
with a Risk Evaluation and Mitigation Strategy to mitigate risks of the drug, which could include medication guides,
physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries or
other risk minimization tools. Once the FDA approves a drug, the FDA may withdraw product approval if ongoing
regulatory requirements are not met or if safety problems occur after the product reaches the market. In addition, the FDA
may require testing, including Phase IV clinical trials, and surveillance programs to monitor the safety effects of approved
products that have been commercialized. The FDA has the power to prevent or limit further marketing of a product based
on the results of these post-marketing programs or other information. In addition, new government requirements, including
those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the
timeline for regulatory approval or otherwise impact ongoing development programs.
Orphan Drug Designation. Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended
to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United
States or, if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of
developing and making a drug product available in the United States for this type of disease or condition will be recovered
from sales of the product. Orphan designation must be requested before submitting an NDA. After the FDA grants orphan
designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan
designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
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If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for
which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not
approve any other applications to market the same drug for the same disease or condition for seven years, except in limited
circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or inability to manufacture
the product in sufficient quantities. The designation of such drug also entitles a party to financial incentives such as
opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. However, competitors, may
receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for
the same product but for a different indication for which the orphan product has exclusivity. Orphan exclusivity also could
block the approval of a competing product for seven years if a competitor obtains approval of the “same drug,” as defined
by the FDA, or if a drug candidate is determined to be contained within the competitor’s product for the same disease or
condition. In addition, if an orphan designated product receives marketing approval for an indication broader than what is
designated, it may not be entitled to orphan exclusivity.
Expedited Review and Approval Programs. The FDA has various programs, including fast track designation,
breakthrough therapy designation, priority review, and accelerated approval, which are intended to expedite or simplify the
process for reviewing certain drugs and in the case of accelerated approval, provide for approval on the basis of surrogate or
intermediate endpoints. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug
no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened.
Generally, drugs that may be eligible for these programs are those for serious or life-threatening diseases or conditions,
those with the potential to address unmet medical needs, and those that offer meaningful benefits over existing treatments.
Fast track designation, breakthrough therapy designation, priority review and accelerated approval do not change the
standards for approval but may expedite the development or approval process.
For example, fast track designation is designed to facilitate the development and expedite the review of drugs
designed to treat serious or life-threatening diseases or conditions and which demonstrate the potential to address an unmet
medical need for such diseases or conditions. Fast track designation applies to the combination of the drug candidate and
the specific indication for which it is being studied. The sponsor of a fast track drug candidate has opportunities for more
frequent interactions with the FDA review team during development. With regard to a fast track-designated drug candidate,
the FDA may also consider for review sections of the NDA on a rolling basis before the complete application is submitted,
if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the
NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the
first section of the NDA.
A drug candidate intended to treat a serious or life-threatening disease or condition may also be eligible for
breakthrough therapy designation to expedite its development and review. A drug candidate can receive breakthrough
therapy designation if preliminary clinical evidence indicates that the drug candidate, alone or in combination with one or
more other drugs or biologics, may demonstrate substantial improvement over existing therapies on one or more clinically
significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes
all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase
I and an organizational commitment to expedite the development and review of the drug candidate, including
involvement of senior managers.
Any drug candidate submitted to the FDA for approval, including a product with a fast track designation, may also
be eligible for other types of FDA programs intended to expedite development and review, such as priority review and
accelerated approval. An NDA is eligible for priority review if the drug candidate is designed to treat a serious condition,
and if approved, would provide a significant improvement in safety or effectiveness compared to available products. The
FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority
review in an effort to facilitate the review. The FDA endeavors to review applications with priority review
designations within six months of the filing date as compared to ten months for review of new molecular entity NDAs
under its current PDUFA review goals.
Drug products intended for serious or life threatening conditions may also be eligible for accelerated approval upon
a determination that the drug candidate has an effect on a surrogate endpoint, which is a laboratory measurement or
physical sign used as an indirect or substitute measurement representing a clinically meaningful outcome, or an effect on a
clinical endpoint that can be measured earlier than irreversible morbidity or mortality and that is reasonably likely to predict
an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or
prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA
generally requires that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled
confirmatory clinical trials to verify or characterize the anticipated effect on irreversible morbidity or mortality or other
clinical benefit and may require that such confirmatory trials be underway prior to granting any accelerated approval.
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Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct
the required clinical trials in a timely manner, or if such trials fail to verify the predicted clinical benefit. In addition, the
FDA currently requires pre-approval of promotional materials as a condition for accelerated approval.
Post-Approval Requirements. After a drug has been approved by the FDA for sale, the FDA may require that certain
post-approval requirements be satisfied, including the conduct of additional clinical studies. In addition, certain changes to
an approved product, such as adding new indications, making certain manufacturing changes, or making certain additional
labeling claims, are subject to further FDA review and approval. Before a company can market products for additional
indications, it must obtain additional approvals from the FDA. Obtaining approval for a new indication generally requires
that additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for
any drug candidate will be approved on a timely basis, or at all.
If post-approval conditions are not satisfied, the FDA may withdraw its approval of the drug. In addition, holders of
an approved NDA are required to (i) report certain adverse reactions to the FDA and maintain pharmacovigilance programs
to proactively look for these adverse events; (ii) comply with certain requirements concerning advertising and promotional
labeling for their products; and (iii) continue to have quality control and manufacturing procedures conform to cGMPs after
approval. The FDA periodically inspects the sponsor’s records related to safety reporting and/or manufacturing facilities;
this latter effort includes assessment of ongoing compliance with cGMPs. Accordingly, manufacturers and their
subcontractors must continue to expend time, money and effort in the area of production and quality control to maintain
cGMP compliance. In addition, discovery of problems with a product after approval may result in restrictions on a product,
manufacturer or holder of an approved NDA, including, among other things:
•
•
•
•
•
restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market or product recalls;
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or
revocation of existing product approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of drugs. A company can make only
those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the
approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-
label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters,
corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available products for
uses that are not described in the product’s labeling and that differ from those tested and approved by the FDA. Such off-
label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for
many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments.
The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products.
Data and market exclusivity provisions under the FDCA also can delay the submission or the approval of certain
applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first
applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not
previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the
action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug
application (“ANDA”), or an NDA submitted under section 505(b)(2) of the FDCA by another company for another
version of such drug where the applicant does not own or have a legal right of reference to all the data required for
approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-
infringement to one of the patents listed with the FDA by the holder of the NDA for the reference drug.
The FDCA also provides three years of non-patent exclusivity for an NDA, 505(b)(2) NDA or supplement to an
existing NDA if new clinical investigations, other than bioavailability studies, conducted or sponsored by the applicant are
deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths
of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations
and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the original active agent or
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from accepting and reviewing an application referencing the approved drug’s application. Five-year and three-year
exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be
required to conduct or obtain a right of reference to all of the pre-clinical studies and clinical trials necessary to demonstrate
safety and effectiveness.
Foreign Regulation
In addition to regulations in the United States, we are subject to a variety of foreign regulations governing, among
other things, clinical trials, marketing authorization, commercial sales and distribution of our products. The foreign
regulatory approval process includes all of the risks associated with FDA approval set forth above, as well as additional
country-specific regulation.
Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory
authorities of foreign countries before we can commence clinical trials and approval of regulatory authorities of foreign
countries before we may market products in those countries. Approval by one regulatory authority does not ensure approval
by regulatory authorities in other jurisdictions. The approval process varies from country to country, can involve additional
testing beyond that required by FDA, and may be longer or shorter than that required for FDA approval. The requirements
governing the conduct of clinical trials, product licensing, pricing and reimbursement also vary greatly from country to
country.
Non-clinical studies and clinical trials
As in the United States, the various phases of non-clinical and clinical research in the EU are subject to significant
regulatory controls.
Non-clinical studies are performed to demonstrate the health or environmental safety of new biological substances.
Non-clinical (pharmaco-toxicological) studies must be conducted in compliance with the principles of GLP as set forth in
EU Directive 2004/10/EC (unless otherwise justified for certain particular medicinal products, e.g., radio-pharmaceutical
precursors for radio-labeling purposes). In particular, non-clinical studies, both in vitro and in vivo, must be planned,
performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules
and criteria for a quality system for the organizational process and the conditions for non-clinical studies. These GLP
standards reflect the Organization for Economic Co-operation and Development requirements.
Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations
and the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use
(“ICH”) guidelines on GCP as well as the applicable regulatory requirements and the ethical principles that have their
origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint an
EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU
member states, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.
The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical
Trials Regulation (“CTR”) which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became
applicable on January 31, 2022. Unlike directives, the CTR is directly applicable in all EU member states without the need
for EU member states to further implement it into national law. The CTR notably harmonizes the assessment and
supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a
centralized EU portal and database.
While the EU Clinical Trials Directive required a separate clinical trial application (“CTA”) to be submitted in each
EU member state in which the clinical trial takes place, to both the competent national health authority and an independent
ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the
submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the
competent authority and an ethics committee in each member state, leading to a single decision per member state. The CTA
must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier
containing information about the manufacture and quality of the medicinal product under investigation. The assessment
procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a
separate assessment by each member state with respect to specific requirements related to its own territory, including ethics
rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is
approved, clinical study development may proceed.
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The CTR foresees a three-year transition period. The extent to which ongoing and new clinical trials will be
governed by the CTR varies. Clinical trials for which an application was submitted (i) prior to January 31, 2022 under the
EU Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted
for the application of the EU Clinical Trials Directive remain governed by said Directive until January 31, 2025. After this
date, all clinical trials (including those which are ongoing) will become subject to the provisions of the CTR.
Medicines used in clinical trials must be manufactured in accordance with GMP. Other national and EU-wide
regulatory requirements may also apply.
Marketing Authorization
In order to market our drug candidates in the EU and many other foreign jurisdictions, we must obtain separate
regulatory approvals. More concretely, in the EU, medicinal drug candidates can only be placed on the market after
obtaining a marketing authorization (“MA”). To obtain regulatory approval of a drug candidate under EU regulatory
systems, we must submit a MA application (“MAA”). The process for doing this depends, among other things, on the
nature of the medicinal product. There are two types of MAs:
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“Centralized MAs” – are issued by the European Commission (“EC”) through the centralized procedure,
based on the opinion of the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA, and
are valid throughout the EU. The centralized procedure is mandatory for certain types of products, such as (i)
medicinal products, derived from biotechnology processes, such as genetic engineering, (ii)
designated orphan medicinal products, (iii) advanced therapy medicinal products (“ATMPs”) such as gene
therapy, somatic cell therapy or tissue-engineered medicines, and (iv) medicinal products containing a new
active substance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative diseases, diabetes, auto-
immune and other immune dysfunctions and viral diseases. The centralized procedure is optional for products
containing a new active substance not yet authorized in the EU or for drug candidates which constitute a
significant therapeutic, scientific or technical innovation; or for which the granting of an MA would be in the
interest of public health in the EU.
“National MAs” – are issued by the competent authorities of the EU member states, and only cover their
respective territory and are available for drug candidates not falling within the mandatory scope of the
centralized procedure. Where a product has already been authorized for marketing in an EU member state,
this national MA can be recognized in another member state through the mutual recognition procedure. If the
product has not received a national MA in any member state at the time of application, it can be approved
simultaneously in various member states through the decentralized procedure. Under the decentralized
procedure, an identical dossier is submitted to the competent authorities of each of the member states in which
the MA is sought, one of which is selected by the applicant as the reference member state. The competent
authority of the reference member state prepares a draft assessment report, a draft summary of the product
characteristics (“SmPC”), and a draft of the labeling and package leaflet, which are sent to the other member
states (referred to as the member states concerned) for their approval. If the member states concerned raise no
objections, based on a potential serious risk to public health, to the assessment, SmPC, labeling or packaging
proposed by the reference member state, the product is subsequently granted a national MA in all the member
states, i.e., in the reference member state and the member states concerned.
Under the above described procedures, before granting the MA, the EMA or the competent authorities of the EU
member states assess the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety
and efficacy. MAs have an initial duration of five years. After these five years, the authorization may be renewed for an
unlimited period on the basis of a reevaluation of the risk-benefit balance.
Under the centralized procedure, the maximum timeframe for the evaluation of a MAA by the EMA is 210 days. In
exceptional cases, the CHMP might perform an accelerated review of a MAA in no more than 150 days (not including
clock stops). Innovative products that target an unmet medical need and are expected to be of major public health interest
may be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides
incentives similar to the breakthrough therapy designation in the United States. PRIME is a voluntary scheme aimed at
enhancing the EMA’s support for the development of medicines that target unmet medical needs. It is based on increased
interaction and early dialogue with companies developing promising medicines, to optimize their product
development plans and speed up their evaluation to help them reach patients earlier. Product developers that benefit from
PRIME designation can expect to be eligible for accelerated assessment, but this is not guaranteed. The benefits of a
PRIME designation include the appointment of a CHMP rapporteur before submission of a MAA, early dialogue and
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scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the
application process.
Data and Marketing Exclusivity
As in the United States, it may be possible in foreign countries to obtain a period of market and/or data exclusivity
that would have the effect of postponing the entry into the marketplace of a competitor’s generic or biosimilar product.
For example, in the EU, new products authorized for marketing (“reference products”) generally receive eight years
of data exclusivity and an additional two years of market exclusivity upon MA. If granted, the data exclusivity period
prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of
the reference product when applying for a generic or biosimilar MA in the EU during a period of 8 years from the date on
which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or
biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial MA of the
reference product in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from
commercializing its product in the EU until ten years have elapsed from the initial MA of the reference product in the EU.
The overall 10-year market exclusivity period can be extended to a maximum of 11 years if, during the first 8 years of those
10 years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the
scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing
therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new
chemical entity, and products may not qualify for data exclusivity.
In Japan, our products may be eligible for eight years of data exclusivity. There can be no assurance that we will
qualify for such regulatory exclusivity, or that such exclusivity will prevent competitors from seeking approval solely on
the basis of their own studies.
Orphan Medicinal Products
The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United
States. A medicinal product can be designated as an orphan if its sponsor can establish that: (1) the product is intended for
the diagnosis, prevention or treatment of a life threatening or chronically debilitating condition (2) either (a) such condition
affects not more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits
derived from the orphan status, would not generate sufficient return in the EU to justify the necessary investment; and (3)
there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been
authorized for marketing in the EU or, if such method exists, the product will be of significant benefit to those affected by
that condition.
Orphan designation must be requested before submitting an MAA. An EU orphan designation entitles a party to
incentives such as reduction of fees or fee waivers, protocol assistance, and access to the centralized procedure. Upon grant
of a MA, orphan medicinal products are entitled to ten years of market exclusivity for the approved indication, which
means that the competent authorities cannot accept another MAA, or grant a MA, or accept an application to extend a MA
for a similar medicinal product for the same indication for a period of ten years. The period of market exclusivity is
extended by two years for orphan medicinal products that have also complied with an agreed pediatric investigation plan
(“PIP”). No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan
indications. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and
approval process.
The orphan exclusivity period may be reduced to six years if, at the end of the fifth year, it is established that the
product no longer meets the criteria for which it received orphan destination, including where it is shown that the product is
sufficiently profitable not to justify maintenance of market exclusivity or where the prevalence of the condition has
increased above the threshold. Additionally, MA may be granted to a similar product for the same indication at any time if
(i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically
superior; (ii) the applicant consents to a second orphan medicinal product application; or (iii) the applicant cannot supply
enough orphan medicinal product.
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Post-Approval Requirements
Similar to the United States, both MA holders and manufacturers of medicinal products are subject to
comprehensive regulatory oversight by the EMA, the European Commission and/or the competent regulatory authorities of
the member states. The holder of a MA must establish and maintain a pharmacovigilance system and appoint an individual
qualified person for pharmacovigilance (“QPPV”) who is responsible for the establishment and maintenance of that system,
and oversees the safety profiles of medicinal products and any emerging safety concerns. Key obligations include expedited
reporting of suspected serious adverse reactions and submission of periodic safety update reports (“PSURs”).
All new MAA must include a risk management plan (“RMP”), describing the risk management system that the
company will put in place and documenting measures to prevent or minimize the risks associated with the product. The
regulatory authorities may also impose specific obligations as a condition of the MA. Such risk-minimization measures or
post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the
conduct of additional clinical trials or post-authorization safety studies.
The advertising and promotion of medicinal products is also subject to laws concerning promotion of medicinal
products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. All
advertising and promotional activities for the product must be consistent with the approved summary of product
characteristics, and therefore all off-label promotion is prohibited. Direct-to-consumer advertising of prescription medicines
is also prohibited in the EU. Although general requirements for advertising and promotion of medicinal products are
established under EU directives, the details are governed by regulations in each member state and can differ from one
country to another.
Failure to comply with the aforementioned EU and member state laws that apply to the conduct of clinical trials,
manufacturing approval, MA of medicinal products and marketing of such products, both before and after grant of the MA,
manufacturing of pharmaceutical products, statutory health insurance, bribery and anti-corruption or with other applicable
regulatory requirements may result in administrative, civil or criminal penalties. These penalties could include delays or
refusal to authorize the conduct of clinical trials, or to grant MA, product withdrawals and recalls, product seizures,
suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or
clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.
The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of
the 27 EU member states plus Norway, Liechtenstein and Iceland.
For other countries outside of the EU and the United States, the requirements governing product development, the
conduct of clinical trials, manufacturing, distribution, marketing approval, advertising and promotion, product licensing,
pricing and reimbursement vary from country to country. Additionally, clinical trials must be conducted in accordance with
GCP requirements and the applicable regulatory requirements and the ethical principles that have their origin in the
Declaration of Helsinki. Further, to the extent that any of our drug candidates, once approved, are sold in a foreign country,
we may be subject to applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and
implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare
professionals.
Brexit and the Regulatory Framework in the United Kingdom
Since the end of the Brexit transition period on January 1, 2021, Great Britain (England, Scotland and Wales) has
not been directly subject to EU laws, however under the terms of the Ireland/Northern Ireland Protocol, EU laws generally
apply to Northern Ireland. The EU laws that have been transposed into United Kingdom law through secondary legislation
remain applicable in Great Britain, however, new legislation such as the EU CTR is not applicable in Great Britain.
Under the Medicines and Medical Devices Act 2021, the Secretary of State or an ‘appropriate authority’ has
delegated powers to amend or supplement existing regulations in the area of medicinal products and medical devices. This
allows new rules to be introduced in the future by way of secondary legislation, which aims to allow flexibility in
addressing regulatory gaps and future changes in the fields of human medicines, clinical trials and medical devices.
Since January 1, 2021, the Medicines and Healthcare products Regulatory Agency (“MHRA”), has been the UK’s
standalone medicines and medical devices regulator. As a result of the Northern Ireland protocol, different rules will apply
in Northern Ireland than in England, Wales, and Scotland, together, Great Britain (“GB”); broadly, Northern Ireland will
continue to follow the EU regulatory regime, but its national competent authority will remain the MHRA. On February 27,
2023, the UK Government and the European Commission reached a political agreement on the “Windsor Framework”
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which will revise the Northern Ireland protocol in order to address some of the perceived shortcomings in its operation.
Under the changes, Northern Ireland will be reintegrated under the regulatory authority of the MHRA with respect to
medicinal products. The Windsor Framework was approved by the European Union-United Kingdom Joint Committee on
March 24, 2023, so the UK government and the EU will enact legislative measures to bring it into law. On June 9, 2023, the
MHRA announced that the medicines aspects of the Windsor Framework will apply from January 1, 2025.
The MHRA has introduced changes to national licensing procedures, including procedures to prioritize access to
new medicines that will benefit patients, including a 150-day assessment and a rolling review procedure. All existing EU
MAs for centrally authorized products were automatically converted or grandfathered into UK MAs, effective in GB (only),
free of charge on January 1, 2021, unless the MA holder opted-out. In order to use the centralized procedure to obtain a MA
that will be valid throughout the EEA, companies must be established in the EEA. Therefore, since Brexit, companies
established in the UK can no longer use the EU centralized procedure and instead an EEA entity must hold any centralized
MAs. In order to obtain a UK MA to commercialize products in the UK, an applicant must be established in the UK and
must follow one of the UK national authorization procedures or one of the remaining post-Brexit international cooperation
procedures to obtain an MA to commercialize products in the UK. A new international recognition framework has been in
place from January 1, 2024, whereby the MHRA will have regard to decisions on the approval of MAs made by the EMA
and certain other regulators when determining an application for a new GB MA.
The UK regulatory framework in relation to clinical trials is derived from existing EU legislation (as implemented
into UK law, through secondary legislation). On January 17, 2022, the MHRA launched an eight-week consultation on
reframing the UK legislation for clinical trials which aimed to streamline clinical trials approvals, enable innovation,
enhance clinical trials transparency, enable greater risk proportionality, and promote patient and public involvement in
clinical trials. The MHRA responded to the consultation on March 21, 2023 and confirmed that it would bring forward
changes to the legislation. The final legal texts introduced by the UK Government will ultimately determine the extent to
which the UK clinical trials framework aligns with or diverges from the (EU) CTR.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things,
fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and
criminal prosecution.
Coverage and Reimbursement
In the United States and internationally, sales of NERLYNX and any other product(s) that we market in the future,
and our ability to generate revenues on such sales, are dependent, in significant part, on the availability of adequate
coverage and reimbursement from third-party payors, such as state and federal governments, managed care providers and
private insurance plans. Private insurers, such as health maintenance organizations and managed care providers, have
implemented cost-cutting and reimbursement initiatives and likely will continue to do so in the future. These include
establishing formularies that govern the drugs and biologics that will be offered and the out-of-pocket obligations of
member patients for such products. We may need to conduct pharmacoeconomic studies to demonstrate the cost-
effectiveness of our products for formulary coverage and reimbursement. Even with such studies, our products may be
considered less safe, less effective or less cost-effective than existing or future products, and third-party payors may not
provide limits or deny coverage and reimbursement for our drug candidates, in whole or in part.
In many countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The
requirements governing drug pricing and reimbursement vary widely from country to country. In the EU, governments
influence the price of products through their pricing and reimbursement rules and control of national healthcare systems
that fund a large part of the cost of those products to consumers. Member states are free to restrict the range of
pharmaceutical products for which their national health insurance systems provide reimbursement, and to control the prices
and reimbursement levels of pharmaceutical products for human use. Some jurisdictions operate positive and negative list
systems under which products may only be marketed once a reimbursement price has been agreed to by the government.
Member states may approve a specific price or level of reimbursement for the pharmaceutical product, or alternatively
adopt a system of direct or indirect controls on the profitability of the company responsible for placing the pharmaceutical
product on the market, including volume-based arrangements, caps and reference pricing mechanisms. To obtain
reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the
cost effectiveness of a particular product to currently available therapies. Other member states allow companies to fix their
own prices for medicines but monitor and control company profits. There can be no assurance that any country that has
price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing
arrangements for any of our products. The downward pressure on healthcare costs in general, particularly prescription
products, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In
addition, in some countries, cross border imports from low-priced markets exert a commercial pressure on pricing within a
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country. Historically, products launched in the European Union do not follow price structures of the United States and
generally prices tend to be significantly lower.
In addition, particularly in the United States and increasingly in other countries, we are required to provide discounts
and pay rebates to state and federal governments and agencies in connection with purchases of our products that are
reimbursed by such entities. It is possible that future legislation in the United States and other jurisdictions could be enacted
to potentially impact reimbursement rates for the products we are developing and may develop in the future. This
legislation could increase the levels of discounts and rebates paid to federal and state government entities and significantly
impact our ability to generate revenues.
Political, economic and regulatory influences are subjecting the healthcare industry in the United States to
fundamental changes. There have been, and we expect there will continue to be, legislative and regulatory proposals to
change the healthcare system in ways that could significantly affect our future business. For example, the Patient Protection
and Affordable Care Act (the “ACA”), enacted in March 2010, substantially changed the way healthcare is financed by
both governmental and private insurers. Among the provisions of the ACA, of greatest importance to the pharmaceutical
industry are the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs
and biologic agents;
a new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to
have their drugs covered under Part D must offer discounts to eligible beneficiaries during their coverage gap
period, or the donut hole; and
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a new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the
ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by
several states without specifically ruling on the constitutionality of the ACA.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was
enacted. For example, the Budget Control Act of 2011, among other things, led to reductions of Medicare payments to
providers, which will remain in effect through 2032, unless additional Congressional action is taken. The American
Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several types of providers, including
hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government
to recover overpayments to providers from three to five years. More recently, on March 11, 2021, the American Rescue
Plan Act of 2021 was signed into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024.
The rebate was previously capped at 100% of a drug’s average manufacturer price.
Most significantly, in August 2022, the Inflation Reduction Act of 2022, or the IRA, was signed into law. This
statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption of the
ACA in 2010. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with
Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B
and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage
gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the
Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to
regulation, for the initial years. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to
price negotiations. HHS has issued and will continue to issue guidance implementing the IRA, although the Medicare drug
price negotiation program is currently subject to legal challenges. While the impact of the IRA on our business and the
pharmaceutical industry cannot yet be fully determined, it is likely to be significant.
The cost of prescription pharmaceuticals in the United States continues to be the subject of considerable discussion.
There have been several Congressional inquiries, as well as legislative and regulatory initiatives and executive orders
designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
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In the United States, individual states have also become increasingly active in passing legislation and implementing
regulations designed to control pharmaceutical product pricing. These actions include but are not limited to price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency
measures. In some cases, these actions have been designed to encourage importation from other countries and bulk
purchasing.
Similar political, economic and regulatory developments are occurring in the EU and may affect the ability of
pharmaceutical companies to profitably commercialize their products. In addition to continuing pressure on prices and cost
containment measures, legislative developments at the EU or member state level may result in significant additional
requirements or obstacles. The delivery of healthcare in the EU, including the establishment and operation of health
services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law
and policy. National governments and health service providers have different priorities and approaches to the delivery of
health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary
constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by
relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to
develop and market products, this could restrict or regulate post-approval activities and affect the ability of pharmaceutical
companies to commercialize their products. In international markets, reimbursement and healthcare payment systems vary
significantly by country, and many countries have instituted price ceilings on specific products and therapies.
In the EU, potential reductions in prices and changes in reimbursement levels could be the result of different factors,
including reference pricing systems, parallel distribution and parallel trade. It could also result from the application of
external reference pricing mechanisms, which consist of arbitrage between low-priced and high-priced countries.
Reductions in the pricing of our medicinal products in one EU member state could affect the price in other EU member
states and, thus, have a negative impact on our financial results.
Health Technology Assessment (“HTA”) of medicinal products in the EU is an essential element of the pricing and
reimbursement decision-making process in a number of EU member states. The outcome of HTA has a direct impact on the
pricing and reimbursement status granted to the medicinal product. A negative HTA by a leading and recognized HTA
body concerning a medicinal product could undermine the prospects to obtain reimbursement for such product not only in
the EU member state in which the negative assessment was issued, but also in other EU member states.
In 2011, Directive 2011/24/EU was adopted at the EU level. This Directive establishes a voluntary network of
national authorities or bodies responsible for HTA in the individual EU member states. The network facilitates and supports
the exchange of scientific information concerning HTAs. Further to this, in December 2021, Regulation No 2021/2282 on
HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only
begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim.
Once applicable, it will have a phased implementation depending on the concerned products. The Regulation intends to
boost cooperation among EU member states in assessing health technologies, including new medicinal products, and
provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member
states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas,
including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint
scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health
technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU
member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health
technology, and making decisions on pricing and reimbursement.
In the future, there may continue to be additional proposals relating to the reform of the U.S. and international
healthcare systems. Future legislation, or regulatory actions implementing recent or future legislation may have a
significant effect on our business. Our ability to successfully commercialize products depends in part on the extent to which
reimbursement for the costs of our products and related treatments will be available in the United States and worldwide
from government health administration authorities, private health insurers and other organizations. The adoption of certain
proposals could limit the prices we are able to charge for our products, the amounts of reimbursement available for our
products, and limit the acceptance and availability of our products. Therefore, substantial uncertainty exists as to the
reimbursement status of newly approved health care products by third-party payors.
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Government Price Reporting
Medicaid is a joint federal and state program for low-income and disabled beneficiaries. Medicare is a federal
program covering individuals age 65 and over as well as those with certain disabilities. As a condition of having federal
funds being made available for covered outpatient drugs under Medicaid and Medicare Part B, we have enrolled in the
Medicaid Drug Rebate Program (“MDRP”), which requires us to pay a rebate to state Medicaid programs for each unit of
our covered outpatient drugs dispensed to a Medicaid beneficiary and paid for by a state Medicaid program.
Medicaid rebates are based on pricing data that we must report on a monthly and quarterly basis to the U.S. Centers for
Medicare & Medicaid Services (“CMS”), the federal agency that administers the MDRP and Medicare programs. For the
MDRP, these data include the average manufacturer price (“AMP”) for each drug and, in the case of our innovator
products, the best price (“BP”). If we become aware that our MDRP price reporting submission for a prior period was
incorrect or has changed as a result of recalculation of the pricing data, we must resubmit the corrected data for up to three
years after those data originally were due. If we fail to provide information timely or are found to have knowingly
submitted false information to the government, we may be subject to civil monetary penalties and other sanctions, including
termination from the MDRP.
Federal law requires that a manufacturer that participates in the MDRP also participate in the Public Health
Service’s 340B drug pricing program (the “340B program”) in order for federal funds to be available for the manufacturer’s
drugs under Medicaid and Medicare Part B. We participate in the 340B program, which is administered by the Health
Resources and Services Administration (“HRSA”), and requires us to charge statutorily defined covered entities no more
than the 340B “ceiling price” for our covered outpatient drugs used in an outpatient setting. These 340B covered entities
include a variety of community health clinics and other entities that receive health services grants from the Public Health
Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated
using a statutory formula, which is based on the AMP and rebate amount for the covered outpatient drug as calculated
under the MDRP. In general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B
ceiling price calculation and discount requirement. We must report 340B ceiling prices to HRSA on a quarterly basis, and
HRSA publishes them to 340B covered entities. HRSA has finalized regulations regarding the calculation of the 340B
ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge
covered entities for 340B-eligible drugs. HRSA has also finalized an administrative dispute resolution process through
which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which
manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting
of 340B drugs.
In order to be eligible to have drug products paid for with federal funds under Medicaid and Medicare Part B and
purchased by certain federal agencies and grantees, we also must participate in the U.S. Department of Veterans Affairs
(“VA”) Federal Supply Schedule (“FSS”) pricing program. Under the VA/FSS program, we must report the Non-Federal
Average Manufacturer Price (“Non-FAMP”) for our covered drugs to the VA and charge certain federal agencies no more
than the Federal Ceiling Price, which is calculated based on Non-FAMP using a statutory formula. These four agencies are
the VA, the U.S. Department of Defense, the U.S. Coast Guard, and the U.S. Public Health Service (including the Indian
Health Service). We must also pay rebates on products purchased by military personnel and dependents through the
TRICARE retail pharmacy program. If we fail to provide timely information or are found to have knowingly submitted
false information, we may be subject to civil monetary penalties.
Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including
the cost of prescription drugs and combination products. A number of states have either implemented or are considering
implementation of drug price transparency legislation. Requirements under such laws include advance notice of planned
price increases, reporting price increase amounts and factors considered in taking such increases, wholesale acquisition cost
information disclosure to prescribers, purchasers, and state agencies, and new product notice and reporting. Such legislation
could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penalties
or pursue other enforcement mechanisms against manufacturers who fail to comply with drug price transparency
requirements, including the untimely, inaccurate, or incomplete reporting of drug pricing information.
37
Sales and Marketing
The FDA regulates all advertising and promotion activities for products under its jurisdiction prior to and after
approval, including standards and regulations for direct-to-consumer advertising, dissemination of off-label information,
industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be
marketed only for the approved indications and in accordance with the provisions of the approved label. Further, if there are
any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, we may
be required to submit and obtain FDA approval of a new or supplemental NDA, which may require us to collect additional
data or conduct additional pre-clinical studies and clinical trials. Failure to comply with applicable FDA requirements may
subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full
range of civil and criminal penalties available to the FDA.
Physicians may prescribe legally available drugs for uses that are not described in the drug’s labeling and that differ
from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties, and often
reflect a physician’s belief that the off-label use is the best treatment for the patient. The FDA does not regulate the
behavior of physicians in their choice to prescribe treatments, but FDA regulations do impose stringent restrictions on
manufacturers’ communications regarding off-label uses. Failure to comply with applicable FDA requirements may subject
a company to adverse publicity, enforcement action by the FDA and other regulatory agencies, corrective advertising,
consent decrees and the full range of civil and criminal penalties available to the FDA. In addition to the FDA, a company
can be subject to legal claims from other governmental agencies and private parties relating to marketing practices such as
the Federal Trade Commission (“FTC”), competitors, patients, and other third parties.
Outside the United States, our ability to market a product is contingent upon obtaining marketing authorization from
the appropriate regulatory authorities and similar requirements to the ones described above may apply in foreign
jurisdictions. The requirements governing, among other things, marketing authorization and pricing and reimbursement
vary widely from country to country.
Other Healthcare Laws
We are also subject to various federal, state and foreign laws pertaining to health care “fraud and abuse,” including
anti-kickback laws, false claims laws and transparency laws.
The federal Anti-Kickback Statute (“AKS”) prohibits, among other things, any person or entity from knowingly and
willfully soliciting, receiving, offering or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in
kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of an item or
service reimbursable, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs.
The term “remuneration” has been broadly interpreted to include anything of value. There are a number of statutory
exceptions and regulatory safe harbors protecting some common activities from prosecution; however, these are drawn
narrowly and require strict compliance in order to offer protection. Additionally, a person or entity does not need to have
actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Federal civil and criminal false claims laws, such as the federal False Claims Act (“FCA”) prohibit individuals or
entities from, among other things, knowingly presenting, or causing to be presented false, fictitious or fraudulent claims for
payment or approval by the federal government, including federal health care programs, such as Medicare and Medicaid,
and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent
claim, or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the
federal government. Private individuals can bring “qui tam” actions under the FCA, on behalf of the government and such
individuals, commonly known as “whistleblowers,” may share in amounts paid by the entity to the government in fines or
settlement. Moreover, a claim including items or services resulting from a violation of the AKS constitutes a false or
fraudulent claim for purposes of the FCA.
The federal Civil Monetary Penalties law prohibits, among other things, offering or transferring remuneration to a
federal healthcare beneficiary that a person knows or should know is likely to influence the beneficiary’s decision to order
or receive items or services reimbursable by the government from a particular provider or supplier.
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The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created federal criminal statutes
that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of
false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody
of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing
or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement
in connection with the delivery of or payment for healthcare benefits, items or services. Like the AKS, a person or entity
does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
The federal transparency requirements under the Physician Payments Sunshine Act, created under the ACA,
requires, among other things, certain manufacturers of drugs, devices, biologics and medical supplies reimbursed under
Medicare, Medicaid, or the Children’s Health Insurance Program to annually report to CMS information related to
payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors), certain non-physician practitioners (nurse practitioners, certified nurse anesthetists, physician assistants,
clinical nurse specialists, anesthesiology assistants and certified nurse midwives), and teaching hospitals and physician
ownership and investment interests, including such ownership and investment interests held by a physician’s immediate
family members.
Violations of these laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary
penalties, the possibility of exclusion from federal health care programs (including Medicare and Medicaid) and corporate
integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies.
Similar sanctions and penalties also may be imposed upon executive officers and employees, including criminal sanctions
against executive officers under the so-called “responsible corporate officer” doctrine, even in situations where the
executive officer did not intend to violate the law and was unaware of any wrongdoing. Given the penalties that may be
imposed on companies and individuals if convicted, allegations of such violations often result in settlements even if the
company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions,
including fines and civil monetary penalties, and corporate integrity agreements.
There are also state and foreign law and regulations equivalents of each of the above federal laws, such as state anti-
kickback and false claims laws, that may impose similar or more prohibitive restrictions, and may apply to items or services
reimbursed by any non-governmental third-party payors, including private insurers. These laws and regulations may differ
from one another in significant ways, thus further complicating compliance efforts. For instance, in the EU, many EU
member states have adopted specific anti-gift statutes that further limit commercial practices for medicinal products, in
particular vis-à-vis healthcare professionals and organizations. Additionally, there has been a recent trend of increased
regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member states
have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis),
similar to the requirements in the United States, on pharmaceutical companies. Certain countries also mandate
implementation of commercial compliance programs or require disclosure of marketing expenditures and pricing
information. Violation of any of such laws or any other governmental regulations that apply may result in penalties,
including, without limitation, significant administrative, civil and criminal penalties, damages, fines, disgorgement,
additional reporting obligations and oversight if a manufacturer becomes subject to a corporate integrity agreement or other
agreement to resolve allegations of non-compliance with these laws, the curtailment or restructuring of operations,
exclusion from participation in governmental healthcare programs and imprisonment.
Data Privacy and Security
Numerous state, federal and foreign laws, regulations, and standards govern the collection, use, access to,
confidentiality and security of health-related and other personal information and could apply now or in the future to our
operations or the operations of our partners. In the United States, numerous federal and state laws and regulations,
including data breach notification laws, health information privacy and security laws and consumer protection laws and
regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In
addition, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy and
security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate
compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal
penalties and restrictions on data processing.
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Other Laws and Regulatory Processes
We are subject to a variety of financial disclosure and securities trading regulations as a public company in the
United States with securities traded on the NASDAQ Global Select Market, including laws relating to the oversight
activities of the Securities and Exchange Commission (the “SEC”), and the rules and regulations of The NASDAQ Stock
Market LLC. In addition, the Financial Accounting Standards Board (“FASB”), the SEC, and other bodies that have
jurisdiction over the form and content of our accounts, our financial statements and other public disclosure are constantly
discussing and interpreting proposals and existing pronouncements designed to ensure that companies best display relevant
and transparent information relating to their respective businesses.
Our present and future business has been and will continue to be subject to various other laws and regulations.
Various laws, regulations and recommendations relating to safe working conditions, laboratory practices, experimental use
of animals, and the purchase, storage, movement, import and export, and use and disposal of hazardous or potentially
hazardous substances used in connection with our research work are or may be applicable to our activities. Certain
agreements entered into by us involving exclusive license rights or acquisitions may be subject to national or supranational
antitrust regulatory control, the effect of which cannot be predicted. The extent of government regulation that might result
from future legislation or administrative action cannot accurately be predicted.
Human Capital
Employees
As of December 31, 2023, our workforce consisted of 185 full-time employees. Throughout 2023, the size of our
employee population was fairly consistent, but ending with lower headcount at the end of the year due to reorganization
efforts and employee attrition. Our employee population consists of a field-based commercial team, working from a home
office and visiting customers across the country, employees reporting out of our two offices in the United States - Los
Angeles, CA and South San Francisco, CA – and employees working remotely from home on a consistent basis. For our
office-based employees, during the latter part of 2022, adopted a virtual work environment, allowing functional
management and employees to determine when working virtually is more efficient and productive, and when in-office
collaboration is beneficial. We are an equal opportunity employer and believe strongly in hiring and maintaining a diverse,
equitable, and inclusive workforce. This is reflected in our numbers with our total workforce being approximately 50%
women and 36% ethnically diverse. The following table summarizes our workforce by location for the years ended
December 31, 2023 and December 31, 2022:
Los Angeles ...................................................................................
South San Francisco .......................................................................
Field & Remote ..............................................................................
60
28
97
185
66
35
91
192
December 31, 2023
December 31, 2022
We believe that the safety and health of our employees and their families is essential to our business. Our culture is
driven by a desire to do what is right, and we strive to support the well-being of our employees. Our financial, medical, and
mental health benefits are designed to help employees through crisis, and we recently expanded our offerings to create
appropriate “work from home” conditions for those employees that are in field positions or choose not to work in the
office to include:
•
•
•
•
•
•
•
ergonomic webinars, 1x1 evaluations, and reimbursement for ergonomic equipment;
phone and internet subsidies;
purchasing additional IT equipment and office supplies;
increasing communications related to our free Employee Assistance Plans, work/life assistance programs, and
mental health benefits;
professional resiliency coaching;
subsidized subscriptions to ClassPass – access to fitness, wellness, and mindfulness classes; and
hosting a virtual fitness challenge to inspire employees to be more active.
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Compensation & Benefits
We know that developing and keeping great people is a vital part of our competitive edge and essential to providing
the best patient care. For this reason, we offer a robust total compensation package in an effort to attract and engage high
caliber employees.
Since 2019, we have offered personalized total compensation statements to all full-time employees. These
statements provide a transparent view of each employee’s monetary and non-monetary benefits. Employee’s total
compensation represents a broad spectrum of plans and programs designed to reward and motivate employees throughout
their careers.
Our total rewards package consists of competitive market-based salary and cash target bonus based on geography for
every employee. Bonus opportunity and equity compensation increase as a percentage of total compensation based on level
of responsibility with actual bonus payout based on performance.
In addition to competitive salaries and performance incentives, we offer employees 100% employer-paid
benefits that include medical, dental, vision, mental health services, life insurance, paid time off and family leave, 401(k)
match, fertility benefits, fitness/wellness benefits, volunteer days and more. Our benefit programs are constantly evolving
to meet our employees’ needs and renew our commitment to them as a vital resource to our continued success.
Culture and Communication
How we conduct our business is just as important as what we do. Our core values are the principles that guide our
company strategy and our individual actions. At all times we strive to distinguish ourselves as a respected
biopharmaceutical company that is differentiated by top talent and innovative products to enhance cancer care.
All employees are responsible for upholding our core values, including to be patient-centric, to communicate,
collaborate, innovate and be respectful, as well as for adhering to our Code of Ethics. These values nurture an inclusive
workforce striving for excellence that puts the well-being of our patients first. The majority of our employees have obtained
advanced degrees in their professions, and we support their continued development with individualized development plans
and objectives, mentoring, coaching, training and conference attendance.
Communication is critical in our ability to continuously enhance our company culture and create a more inclusive
environment. The implementation and distribution of quarterly company newsletters have allowed us to share what is
important and impactful to us as a business. It also allows for us to share stories and events that have affected our
employees and co-workers across the country on both a personal and professional level. We hold town halls with our
leaders to speak with employees about our vision and to receive feedback on matters important to them. Additionally, we
have dynamic information technology systems, which allow for a more synergistic atmosphere.
Corporate Information and History
Our principal executive offices are located at 10880 Wilshire Boulevard, Suite 2150, Los Angeles, California 90024
and our telephone number is (424) 248-6500. Our internet address is www.pumabiotechnology.com. Our annual, quarterly
and current reports, and any amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 may be accessed free of charge through our website after we have electronically filed or
furnished such material with the SEC. We also make available free of charge on or through our website our Code of
Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee Charter, Compensation Committee
Charter, Nominating and Corporate Governance Committee Charter and Research and Development Committee Charter.
We will disclose on a current report on Form 8-K or on our website any amendment or waiver of the Code of Business
Conduct and Ethics for our executive officers and directors. Any amendment or waiver disclosed on our website will
remain available on our website for at least 12 months after the initial disclosure.
The reference to www.pumabiotechnology.com (including any other reference to such address in this Annual
Report) is an inactive textual reference only, meaning that the information contained on or accessible from the website is
not part of this Annual Report on Form 10-K and is not incorporated in this report by reference.
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We were originally incorporated in the State of Delaware in April 2007 under the name Innovative Acquisitions
Corp. We were a “shell” company registered under the Exchange Act with no specific business plan or purpose until we
acquired Puma Biotechnology, Inc., a privately held Delaware corporation formed on September 15, 2010 (“Former
Puma”), in October 2011. As a result of this transaction, Former Puma became our wholly owned subsidiary and
subsequently merged with and into us, at which time we adopted Former Puma’s business plan and changed our name to
“Puma Biotechnology, Inc.”
ITEM 1A. RISK FACTORS
In addition to the other information contained in this Annual Report, the following risk factors should be considered
carefully in evaluating our company. Our business, financial condition, liquidity and results of operations could be
materially adversely affected by any of these risks. The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also
become important factors that affect us.
Risks Related to our Financial Condition and Capital Requirements
While we have reported net income in the years ended December 31, 2023 and 2022, we cannot assure that we will
continue to do so and may not be able to maintain profitability.
We have incurred significant operating losses since our inception. While we have reported net income in the years
ended December 31, 2023 and 2022, we cannot assure that we will continue to do so and will need to continue to generate
significant revenue to sustain operations and successfully commercialize neratinib and develop alisertib. As of December
31, 2023, we had an accumulated deficit of approximately $1,345.2 million, outstanding indebtedness of
approximately $99.7 million and cash and cash equivalents and marketable securities of approximately $95.9 million.
We expect to continue to incur significant expenses and may incur net losses in the future. Since inception, we have
devoted substantially all of our resources to identifying, acquiring and developing NERLYNX and to its commercialization
in the indications for which it has received regulatory approval. In September 2022, we in-licensed the development and
global commercialization rights to our drug candidate, alisertib. Biopharmaceutical development is a highly speculative
undertaking and involves a substantial degree of risk. While we experienced profitability in 2023 and 2022, we may
incur operating losses in the future as we continue our efforts to commercialize NERLYNX in existing indications and to
develop NERLYNX for additional indications, and as we commence development efforts for alisertib and any other drug
candidates we may acquire.
In 2017, the FDA approved NERLYNX for the extended adjuvant treatment of adult patients with early stage HER2-
overexpressed/amplified breast cancer following adjuvant trastuzumab-based therapy. In February 2020, NERLYNX was
also approved by the FDA in combination with capecitabine for the treatment of adult patients with advanced or metastatic
HER2-positive breast cancer who have received two or more prior anti-HER2-based regimens in the metastatic setting. In
2018, the EC granted a marketing authorization for NERLYNX in the EU for the extended adjuvant treatment of adult
patients with early stage hormone receptor positive HER2-overexpressed/amplified breast cancer and who completed
adjuvant trastuzumab-based therapy less than one year ago. Although we have begun to commercialize NERLYNX in the
United States and Europe in these indications, we continue to experience net losses. Moreover, we are in the early stages of
development for alisertib. The successful development and commercialization of any drug candidate will require us to
perform a variety of functions, including:
•
•
•
•
•
undertaking pre-clinical development and clinical trials;
participating in regulatory approval processes;
formulating and manufacturing products;
successfully conducting sales and marketing activities; and
implementing additional internal systems and infrastructure.
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We are only in the preliminary stages of most of these activities, particularly as they relate to alisertib. We will need
to generate significant revenue in order to offset our expenses and maintain profitability. We may not be able to generate
this revenue or maintain profitability in the future. As a result, we expect to incur losses for the foreseeable future.
Accordingly, we cannot assure you that we will be able to maintain or increase profitability. Our failure to maintain
profitability could negatively impact the value of our common stock.
We are currently a single product company with limited commercial sales experience.
We have invested a significant portion of our efforts and financial resources in the development and
commercialization of our lead product, NERLYNX. NERLYNX is the only product for which we currently receive product
revenue, and we expect NERLYNX to constitute the vast majority of our product revenue for the foreseeable future. By
virtue of being dependent on a single product, we do not have the ability to spread out risk or commercial fluctuations
across a portfolio of products. As a result, our success depends entirely on the commercial success of NERLYNX.
NERLYNX is the first product that we, as an organization, have launched and commercialized, and there is no guarantee
that we will be able to do so successfully. There are numerous examples of unsuccessful product launches and failures to
meet high expectations of market potential, including by pharmaceutical companies with more experience and resources
than we have.
We may not be able to successfully commercialize NERLYNX in the future.
The future commercial success of NERLYNX depends on the extent to which patients and physicians accept and
adopt NERLYNX. For example, if the expected patient population is smaller than we estimate or if physicians are
unwilling to prescribe or patients are unwilling to take or continue to take NERLYNX, due to any perceived efficacy
limitations or related side effects, including diarrhea, or otherwise, the commercial success of NERLYNX will be limited.
Thus, significant uncertainty remains regarding the future commercial potential of NERLYNX. We believe our ability to
effectively increase product revenue from NERLYNX depends on our ability to, among other things:
•
•
•
•
•
•
•
•
achieve and maintain compliance with regulatory requirements;
create and sustain market demand for NERLYNX through our marketing and sales activities and other
arrangements established for the promotion of NERLYNX;
compete with other breast cancer drugs, including clinical trials (either in the present or in the future);
educate physicians and patients about the benefits, administration and use of NERLYNX;
train, deploy and support a qualified sales force;
ensure and maintain appropriate placement on formularies and pathways;
ensure that our third-party manufacturers manufacture NERLYNX in sufficient quantities, in compliance with
requirements of the FDA and similar foreign regulatory agencies where NERLYNX is approved, and at
acceptable quality and pricing levels in order to meet commercial demand;
ensure that our third-party manufacturers develop, validate and maintain commercially viable manufacturing
processes that are compliant with current Good Manufacturing Practice (“cGMP”) or similar foreign
regulations;
• maintain agreements with wholesalers, distributors and group purchasing organizations on commercially
reasonable terms;
•
ensure that our entire supply chain efficiently and consistently delivers NERLYNX to our customers;
• maintain broad levels of coverage and reimbursement for NERLYNX from commercial health plans and
governmental health programs;
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continue to provide co-pay assistance to help qualified patients with out-of-pocket costs associated with their
NERLYNX prescription and/or other programs to ensure patient access to our products;
• maintain acceptance of NERLYNX as safe and effective by patients and the medical community;
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influence the nature and volume of publicity relative to our competitors’ products;
obtain regulatory approvals for additional indications for the use of NERLYNX; and
• maintain and defend our patent protection and regulatory exclusivity for NERLYNX and to comply with our
obligations under, and otherwise maintain, our intellectual property license with Pfizer and our license
agreements with third parties.
We cannot assure you that we will successfully address each of these uncertainties or any others we may face in the
ongoing commercialization of NERLYNX. In addition, we are dependent on international third-party sub-licensees for the
development and commercialization of NERLYNX in several countries outside the United States. The failure of these sub-
licensees to meet their contractual, regulatory or other obligations could adversely affect international sales of NERLYNX
and hinder our ability to generate revenue. These uncertainties make it difficult to predict our future commercial
opportunity and forecast our financial performance.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs and our
failure to obtain additional financing when needed on acceptable terms, or at all, could force us to delay, limit, reduce or
terminate our product development or commercialization efforts or other operations.
Our operations have consumed substantial amounts of cash since inception. As we continue to commercialize
NERLYNX and as we pursue development of alisertib, our costs and expenses may increase in the future due to, among
other things, the cost of a direct sales force and the cost of manufacturing. We will also continue to expend substantial
amounts on research and development of our other drug candidates, including conducting clinical trials. Our future capital
requirements will depend on many factors, including:
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the costs and expenses of our United States sales and marketing infrastructure, and of manufacturing;
the degree of success we experience in commercializing NERLYNX;
the revenue generated by the sale of NERLYNX and any other products that may be approved;
the costs, timing and outcomes of clinical trials and regulatory reviews associated with developing
NERLYNX for additional indications, alisertib and our other drug candidates;
the emergence of competing products;
the extent to which NERLYNX or any other drug candidates we develop are adopted by the physician
community and patients;
the number and types of future drug candidates we develop and commercialize;
the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending
intellectual property-related claims;
the costs of operating as a public company and compliance with existing and future regulations; and
the extent and scope of our general and administrative expenses.
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While our consolidated financial statements have been prepared on a going concern basis, we expect to incur
significant losses for the foreseeable future and will continue to remain dependent on our ability to obtain sufficient funding
to sustain operations and successfully commercialize NERLYNX and develop alisertib. While we have been successful in
raising financing in the past, there can be no assurance that we will be able to do so in the future. Additional financing may
not be available on a timely basis on terms acceptable to us, or at all. We may raise funds in equity or debt financings to
access funds for our capital needs. If we raise additional funds through further issuances of equity or convertible debt
securities, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any
new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Any debt financing obtained by us in the future would cause us to incur debt service expenses and could include restrictive
covenants relating to our capital raising activities and other financial and operational matters, which may make it more
difficult for us to obtain additional capital and pursue business opportunities. If we are unable to obtain adequate financing
or financing on terms satisfactory to us when we require it, we may terminate or delay the development of one or more of
our drug candidates, delay clinical trials necessary to market our products, or delay establishment of sales and marketing
capabilities or other activities necessary to commercialize our products. If this were to occur, our ability to continue to grow
and support our business and to respond to business challenges could be significantly limited. Furthermore, our ability to
obtain funding may be adversely impacted by uncertain market conditions, our success in commercializing NERLYNX,
unfavorable decisions of regulatory authorities or adverse clinical trial results. The outcome of these matters cannot be
predicted at this time.
The terms of our Note Purchase Agreement place restrictions on our ability to operate our business and on our financial
flexibility, and we may be unable to achieve the revenue necessary for us to incur additional borrowings under the Note
Purchase Agreement or to satisfy the minimum revenue and cash balance covenants.
We are party to a Note Purchase Agreement with Athyrium Opportunities IV Co-Invest 1 LP
(“Athyrium”), providing for potential issuance by us of notes of up to $125.0 million, which mature on July 23, 2026. The
terms of our Note Purchase Agreement place restrictions on our ability to operate our business and on our financial
flexibility. As of December 31, 2023, the aggregate principal amount outstanding under the notes sold pursuant to the Note
Purchase Agreement (collectively, the “Athyrium Notes”) was $100.0 million. The Athyrium Notes are secured by
collateral which consists of our equity interests in our domestic and foreign subsidiaries (including up to 100% of the issued
and outstanding equity interests in each of our domestic subsidiaries directly owned by us or the guarantors of the Athyrium
Notes) and substantially all of our property. In addition to voluntary prepayments, we may also be required to make
mandatory prepayments under the Athyrium Notes in varying amounts within three (3) business days of the occurrence of
certain events, including in the event that we receive proceeds from a voluntary or involuntary disposition and such
proceeds are not reinvested in eligible assets within 180 days of the date of such disposition, or in the event that we receive
extraordinary receipt cash proceeds and such proceeds are not reinvested in eligible assets within 180 days of the date of
such extraordinary receipt. The Note Purchase Agreement includes affirmative and negative covenants applicable to us and
our subsidiaries. The affirmative covenants include, but are not limited to, requirements to (i) maintain our legal existence
and take all reasonable actions to maintain our rights, privileges and authorizations (including renewal of permits or
licenses) necessary to conduct our business and maintain our intellectual property, (ii) deliver certain financial statements,
certificates and other information to Athyrium on a regular basis, (iii) maintain adequate insurance coverage with respect to
the properties and business and (iv) cause all of our deposit accounts (other than certain “excluded accounts”) to be subject
to Deposit Account Control Agreements. The negative covenants include, but are not limited to, restrictions on (i) creating
or incurring certain liens on our property, assets or revenues, (ii) making certain investments or incurring additional
indebtedness, (iii) engaging in certain business or strategic activities (including transactions with affiliates or insiders) and
(iv) paying certain dividends, distributions or other restricted payments. Additionally, pursuant to the Note Purchase
Agreement, we must maintain a minimum cash balance in our accounts subject to a deposit account control agreement and
must achieve certain levels of product revenue for any four (4) consecutive fiscal quarter periods. These affirmative and
negative covenants may make it difficult for us to operate our business. In addition, we cannot assure you that we will be
able to achieve the minimum product revenue requirements or minimum cash balance requirements under the Note
Purchase Agreement. Our failure to satisfy such requirements, or our direct or indirect breach of certain other covenants,
could result in an event of default under the Athyrium Notes. The occurrence and continuation of an event of default could
(i) cause interest to accrue at a rate per annum equal to the applicable interest rate under the Note Purchase
Agreement plus two percent (2.00%) and (ii) cause accrued and unpaid interest on past due amounts (including interest
thereon) to be due and payable in cash on demand. Additionally, upon the occurrence or continuation of an event of default,
Athyrium, in its capacity as administrative agent, would have the right to exercise remedies against us, including declaring
the unpaid principal amount under the Note (and interest thereon) immediately due and payable, and foreclosure against the
property securing the Athyrium Notes (including our cash). Other events of default under the Note Purchase Agreement
include, but are not limited to, (i) our failure to pay principal or interest due under the Note Purchase Agreement, (ii) our
insolvency or related actions (including an assignment for the benefit of creditors), (iii) the existence of material adverse
changes in our business or products, (iv) the occurrence of any default under certain other indebtedness in an amount
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greater than $750,000 or one or more judgments against us in an amount greater than $750,000 individually or in the
aggregate that remains unsatisfied, unvacated or unstayed for a period of thirty (30) days after its entry and (v) the delisting
of our shares of common stock from the Nasdaq Capital Market.
Risks Related to the Discovery and Development of our Products and Drug Candidates
We have in-licensed alisertib, a drug candidate for which we have assumed all responsibility for global development and
commercialization. Our development of alisertib will be expensive, lengthy and unpredictable, and any failure to
successfully develop alisertib will have a material adverse effect on our business and financial position.
In September 2022, we in-licensed alisertib from Takeda. Pursuant to our exclusive license agreement with Takeda,
we are responsible for global development and commercialization of alisertib. Clinical development of alisertib will be
expensive, lengthy and unpredictable. Failure or delay can occur at any time during the development process. There are
numerous risks associated with our planned development alisertib, including, among others:
• We have limited experience developing alisertib;
• The results of pre-clinical studies and early clinical studies of alisertib may not be predictive of later clinical
studies, and success in previous stages cannot ensure positive outcome of future stages of clinical studies;
• Alisertib may fail to show the desired pharmacological properties or safety and efficacy traits despite having
progressed through pre-clinical studies and early clinical studies;
• Even if we complete clinical development of alisertib, the results may not be sufficient to obtain regulatory
approval in the United States or other countries;
• Our license agreement with Takeda may be terminated by Takeda if we materially breach the agreement, in
which case we would lose all rights to develop and commercialize alisertib;
• We plan to rely on third party contractors to formulate and manufacture alisertib for clinical trials and these
third-party contractors may be unable to formulate and manufacture alisertib in the volume and quality we
require;
• We plan to rely on third-party contractors to conduct our clinical trials of alisertib and if those parties fail to
perform their services within expected timelines or fail to comply with regulatory requirements, our
development efforts could be delayed;
• Clinical trials are expensive, time-consuming and difficult to design and implement; and
• Development of alisertib could distract management’s attention from other important aspects of our business.
Even if we are successful in developing alisertib, we cannot assure you that we will be able to successfully
commercialize alisertib. Any delays or failure in our development of alisertib could have material adverse effects on our
business, operations and financial condition.
Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may
change as more patient data become available and are subject to audit and verification procedures that could result in
material changes in the final data.
From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical
trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions
are subject to change following a more comprehensive review of the data related to the particular study or trial. We also
make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received
or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report
may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once
additional data have been received and fully evaluated. Preliminary and topline data also remain subject to audit and
verification procedures that may result in the final data being materially different from the preliminary data we previously
published. Consequently, preliminary and topline data should be viewed with caution until the final data are available.
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From time to time, we may also disclose interim data from our clinical trial. Interim data from clinical trials that we
may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between preliminary or interim data and final data
could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result
in volatility in the price of our common stock.
In addition, others, including regulatory agencies, may not accept or agree with our assumptions, estimates,
calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the
value of the particular program, the approvability or commercialization of the particular drug candidate or product and our
company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial
is based on what is typically extensive information, and you or others may not agree with what we determine is material or
otherwise appropriate information to include in our disclosure.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory
authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our drug
candidates may be harmed, which could harm our business, operating results, prospects or financial condition.
NERLYNX, alisertib or other drug candidates may cause undesirable side effects or have other properties when used
alone or in combination with other approved products or investigational new drugs that could delay or prevent their
regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences
following marketing approval, if any, as applicable.
Undesirable side effects caused by NERLYNX, alisertib or other drug candidates could cause us or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of
regulatory approval by the FDA or other comparable foreign regulatory authorities. To date, subjects treated with
NERLYNX have experienced drug-related side effects such as diarrhea. Results of our trials could reveal a high and
unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or
terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or
deny approval of our drug candidates for any or all targeted indications. The drug-related side effects could affect patient
recruitment or the ability of enrolled patients to complete clinical trials or result in potential product liability claims. Any of
these occurrences may harm our business, financial condition and prospects significantly.
Additionally, if we or others later identify undesirable side effects caused by any approved product, including in
combination with other approved products or investigational new drugs, a number of potentially significant negative
consequences could result, including:
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regulatory authorities may withdraw approvals of such product;
regulatory authorities may require additional warnings on the label;
• we may be required to suspend marketing of a product, or we may decide to remove such product from the
marketplace;
• we may be required to create a medication guide outlining the risks of such side effects for distribution to
patients;
• we could be subject to fines, injunctions, or the imposition of criminal or civil penalties, or be sued and held
liable for harm caused to patients; and
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our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of NERLYNX or the
particular drug candidate, if approved, and could significantly harm our business, results of operations and prospects.
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We are in the early stages of development of alisertib, and we cannot be certain that we will be successful if we seek
regulatory approvals for our drug candidates.
We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to the
development of alisertib. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug
products are and will remain subject to extensive regulation by the FDA and other regulatory authorities in the United
States and other countries that each have differing regulations. We cannot predict with any certainty that any NDA or
supplemental NDA (or similar foreign applications) to market alisertib or our other drug candidates will be approved by the
FDA or foreign regulatory authorities. We are not permitted to market NERLYNX for other indications or alisertib or any
of our other drug candidates in the United States until we receive approval of an NDA from the FDA or until we receive a
MA from the EC in the EU, as applicable, for such indications, or, in any foreign countries, until requisite approval from
such countries.
Approval of NERLYNX by the FDA or the EC for any particular indication does not ensure that another foreign
jurisdiction will also approve NERLYNX for such indication, nor does it ensure that NERLYNX will be approved by the
FDA or the EC for any other indications. Similarly, approval of alisertib by the FDA or the EC would not ensure that
another jurisdiction will also approve alisertib. Obtaining approval of an NDA or foreign marketing application is an
extensive, lengthy, expensive and inherently uncertain process, and the FDA or a foreign regulator may delay, limit or deny
approval of a drug candidate for many reasons, including:
• we may not be able to demonstrate that NERLYNX, alisertib or any other drug candidate is safe and effective
as a treatment for our targeted indications to the satisfaction of the FDA or other foreign regulator;
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the results of our clinical trials may not meet the level of statistical or clinical significance required by the
FDA or other foreign regulator for marketing approval;
the FDA or other foreign regulators may disagree with the number, design, size, conduct or implementation of
our clinical trials;
the CRO that we retain to conduct clinical trials or any other third parties involved in the conduct of trials
may take actions outside of our control that materially adversely impact our clinical trials;
the FDA or other foreign regulators may not find the data from pre-clinical studies and clinical trials
sufficient to demonstrate that the clinical and other benefits of NERLYNX, alisertib or any other drug
candidate outweigh the safety risks;
the FDA or other foreign regulators may disagree with our interpretation of data from our pre-clinical studies
and clinical trials or may require that we conduct additional studies or trials;
the FDA or other foreign regulators may not accept data generated at our clinical trial sites;
the FDA or other foreign regulators may require development of a Risk Evaluation and Mitigation Strategy or
similar risk management measures as a condition of approval;
the FDA or other foreign regulators may identify deficiencies in the manufacturing processes or facilities of
our third-party manufacturers; or
the FDA or other foreign regulators may change their approval policies or adopt new regulations.
If we do not obtain regulatory approval of alisertib or our other drug candidates in a particular jurisdiction, we will
not be able to market such drug candidate in that jurisdiction. Therefore, failure to obtain regulatory approval of alisertib or
our other drug candidates will limit our commercial revenue.
In addition, FDA and foreign regulatory authorities may change their approval policies and new regulations may be
enacted. For instance, the EU pharmaceutical legislation is currently undergoing a complete review process, in the context
of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020. The
European Commission’s proposal for revision of several legislative instruments related to medicinal products (revising the
eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and
adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before
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adoption, which is not expected before early 2026. The revisions may however have a significant impact on the
biopharmaceutical industry in the long term.
We are subject to ongoing obligations and continued regulatory review with regard to NERLYNX, alisertib and any
other drug candidates that may receive FDA or foreign regulatory approval, which may result in significant expense.
Additionally, NERLYNX, alisertib and our other drug candidates, if approved, could be subject to labeling and other
restrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements
or experience unanticipated problems with our products.
The FDA’s approval for NERLYNX and any regulatory approvals that we receive for alisertib or our other drug
candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to
the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical
trials, and surveillance to monitor the safety and efficacy of the drug candidate. In addition, the manufacturing processes,
labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product
will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and
other post-marketing information and reports, registration, as well as continued compliance with cGMPs and similar
requirements and GCPs for any clinical trials that we conduct post-approval. Later discovery of previously unknown
problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party
manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other
things:
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restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or
voluntary or mandatory product recalls;
fines, warning letters or holds on clinical trials;
refusal by the FDA or foreign regulatory authorities to approve pending applications or supplements to
approved applications filed by us, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s and foreign regulatory authorities' policies may change, and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval of our drug candidates. We also cannot predict the likelihood,
nature or extent of government regulation that may arise from future legislation or administrative or executive action, either
in the United States or outside the United States. If we are slow or unable to adapt to changes in existing requirements or
the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to
enforcement action, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could
hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified
products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact
our business.
The ability of the FDA and foreign regulatory authorities to review and approve new products can be affected by a
variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s
and foreign regulatory authorities' ability to hire and retain key personnel and accept the payment of user fees, and other
events that may otherwise affect the FDA’s and foreign regulatory authorities' ability to perform routine functions. Average
review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition,
government funding of other government agencies that fund research and development activities is subject to the political
process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies, such as the European
Medicines Agency (“EMA”) following its relocation to Amsterdam and resulting staff changes, may also slow the time
necessary for new drugs or modifications to approved drugs to be reviewed and/or approved by necessary government
agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut
down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and
stop critical activities.
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Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign
manufacturing facilities at various points. Even though the FDA resumed standard inspection operations and any
resurgence of the virus or emergence of new variants may lead to further inspectional or administrative delays.
If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other
regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly
impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions,
which could have a material adverse effect on our business.
Clinical trials are very expensive, time-consuming and difficult to design and implement.
Although NERLYNX has been approved by the FDA for two limited indications, alisertib and our other drug
candidates are in development, as well, all of which will require extensive clinical testing before we can submit any NDA
or similar foreign entities for regulatory approval. We have no prior experience developing alisertib and may face
significant difficulties during our development of alisertib. Human clinical trials are very expensive and difficult to design
and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial process is also time
consuming. We estimate that clinical trials for any of our drug candidates will take at least several years to complete.
Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or
repeat clinical trials. The results of pre-clinical studies and early clinical trials of our drug candidates may not be predictive
of the results of later-stage clinical trials. Drug candidates in later stages of clinical trials may fail to show the desired safety
and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies
in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or
adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be
successful.
We do not know whether our future clinical trials will begin on time or enroll patients on time, or whether our
ongoing and/or future clinical trials will be completed on schedule or at all. Clinical trials can be delayed for a variety of
reasons, including delays related to:
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the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our
clinical studies;
obtaining regulatory authorizations to commence a trial or reaching a consensus with regulatory authorities on
trial design;
any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be
subject to extensive negotiation and may vary significantly among different CROs and trial sites;
obtaining approval or a positive opinion from one or more institutional review boards (“IRBs”) or ethics
committees;
IRBs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment
of additional subjects, or withdrawing their approval of the trial;
changes to clinical trial protocol;
clinical sites deviating from trial protocol or dropping out of a trial;
• manufacturing sufficient quantities of drug candidate or obtaining sufficient quantities of combination
therapies for use in clinical trials;
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subjects failing to enroll or remain in our trial at the rate we expect, or failing to return for post- treatment
follow-up;
subjects choosing an alternative treatment for the indication for which we are developing our drug candidates,
or participating in competing clinical trials;
lack of adequate funding to continue the clinical trial;
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subjects experiencing severe or unexpected drug-related adverse effects;
occurrence of serious adverse events in trials of the same class of agents conducted by other companies;
selection of clinical end points that require prolonged periods of clinical observation or analysis of the
resulting data;
a facility manufacturing our drug candidates or any of their components being ordered by the FDA or
comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of
current good manufacturing practice (“cGMP”), regulations or other applicable requirements, or infections or
cross-contaminations of drug candidates in the manufacturing process;
any changes to our manufacturing process that may be necessary or desired;
third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not
performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, good
clinical practices (“GCP”), or other regulatory requirements;
third-party contractors not performing data collection or analysis in a timely or accurate manner; or
third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other foreign
government or regulatory authorities for violations of regulatory requirements, in which case we may need to
find a substitute contractor, and we may not be able to use some or all of the data produced by such
contractors in support of our marketing applications.
Further, we, the FDA, foreign regulatory authorities, or an IRB may suspend our clinical trials at any time if it
appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, that we are
exposing participants to unacceptable health risks, or if the FDA or such other foreign regulator finds deficiencies in our
IND or comparable submissions supporting the conduct of these trials. Therefore, we cannot predict with any certainty the
schedule for commencement and completion of future clinical trials. If we experience delays in the commencement or
completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our drug
candidates could be harmed, and our ability to generate revenue from the drug candidates may be delayed. In addition, any
delays in our clinical trials could increase our costs, slow down the approval process and jeopardize our ability to
commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and
results of operations. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of
clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates.
In addition, the FDA’s and other foreign regulatory authorities’ policies with respect to clinical trials may change
and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the
EU recently evolved. The EU CTR which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became
applicable on January 31, 2022. While the EU Clinical Trials Directive required a separate CTA to be submitted in each
member state in which the clinical trial takes place, to both the competent national health authority and an independent
ethics committee, the CTR introduces a centralized process and only requires the submission of a single application for
multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics
committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has
been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each
member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s
decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study
development may proceed. The CTR foresees a three-year transition period. The extent to which ongoing and new clinical
trials will be governed by the CTR varies. Clinical trials for which an application was submitted (i) prior to January 31,
2022 under the EU Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the
sponsor has opted for the application of the EU Clinical Trials Directive remain governed by said Directive until January
31, 2025. After this date, all clinical trials (including those which are ongoing) will become subject to the provisions of the
CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our
developments plans.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies
governing clinical trials, our development plans may be impacted.
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Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made
more difficult or rendered impossible by multiple factors outside our control.
We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our
clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our
trials. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient
population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the
number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the
proximity of patients to clinical sites and the eligibility criteria for the study. Furthermore, any negative results we may
report in clinical trials of any of our drug candidates may make it difficult or impossible to recruit and retain patients in
other clinical studies of that same drug candidate. Delays or failures in planned patient enrollment and/or retention may
result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our drug
candidates or could render further development impossible. In addition, we expect to rely on CROs and clinical trial sites to
ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their
services, we will be limited in our ability to compel their actual performance.
The results of our clinical trials may not support our drug candidate claims.
Even if our clinical trials are completed as planned, we cannot be certain that their results will support the safety and
effectiveness of our drug candidates for our targeted indications. Success in pre-clinical testing and early clinical trials does
not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will
replicate the results of prior clinical trials and pre-clinical testing. A failure of a clinical trial to meet its predetermined
endpoints would likely cause us to abandon a drug candidate and may delay development of other drug candidates.
Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses and many
companies that believed their drug candidates performed satisfactorily in preclinical studies and clinical trials nonetheless
failed to obtain FDA or comparable foreign regulatory authority approval. We cannot guarantee that the FDA or foreign
regulatory authorities will interpret trial results as we do, and more trials could be required before we are able to submit
applications seeking approval of our drug candidates. To the extent that the results of the trials are not satisfactory to the
FDA or foreign regulatory authorities for support of a marketing application, we may be required to expend significant
resources, which may not be available to us, to conduct additional trials in support of potential approval of our drug
candidates. Even if regulatory approval is secured for any of our drug candidates, the terms of such approval may limit the
scope and use of our drug candidate, which may also limit its commercial potential. Furthermore, the approval policies or
regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our
clinical data insufficient for approval, which may lead to the FDA or comparable foreign regulatory authorities delaying,
limiting or denying approval of our drug candidates.
We may attempt to secure approval from the FDA through the use of the accelerated approval pathway. If we are unable
to obtain such approval, we may be required to conduct additional preclinical studies or clinical trials beyond those that
we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary regulatory approvals.
Even if we receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we
do not comply with rigorous post-marketing requirements, the FDA may seek to withdraw any accelerated approval we
have obtained.
We may in the future seek accelerated approval for our one or more of our drug candidates, including alisertib.
Under the accelerated approval program, the FDA may grant accelerated approval to a drug candidate designed to treat a
serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a
determination that the drug candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is
reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is
clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of
accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical
sign, or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. An
intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or
mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit.
The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy
may not be a direct therapeutic advantage but is a clinically important improvement from a patient and public health
perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent
manner, additional confirmatory studies to verity and describe the drug’s clinical benefit. If such post-approval studies fail
to confirm the drug’s clinical benefit or are not completed in a timely manner, the FDA may withdraw its approval of the
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drug on an expedited basis. In addition, in December 2022, President Biden signed an omnibus appropriations bill to fund
the U.S. government through fiscal year 2023. Included in the omnibus bill is the Food and Drug Omnibus Reform Act of
2022, which among other things, provided FDA new statutory authority to mitigate potential risks to patients from
continued marketing of ineffective drugs previously granted accelerated approval. Under these provisions, the FDA may
require a sponsor of a product seeking accelerated approval to have a confirmatory trial underway prior to such approval
being granted.
Prior to seeking accelerated approval for any of our drug candidates, we intend to seek feedback from the FDA and
will otherwise evaluate our ability to seek and receive accelerated approval. There can be no assurance that after our
evaluation of the feedback and other factors we will decide to pursue or submit an NDA for accelerated approval or any
other form of expedited development, review or approval. Furthermore, if we decide to submit an application for
accelerated approval for our drug candidates, there can be no assurance that such application will be accepted or that any
expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other comparable
foreign regulatory authorities could also require us to conduct further studies prior to considering our application or
granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review
or approval for our drug candidate would result in a longer time period to commercialization of such drug candidate, if any,
could increase the cost of development of such drug candidate and could harm our competitive position in the marketplace.
Risks Related to Commercialization of our Drug Candidates
We have limited experience as a company in marketing or distributing pharmaceutical products. If we are unable to
expand our marketing and sales capabilities in the commercialization of NERLYNX, our business, results of operations
and financial condition may be materially adversely affected.
In the United States, we rely on a direct sales force. NERLYNX is a marketed drug and none of the members of our
sales force had ever promoted NERLYNX prior to its commercial launch. There are risks with establishing, growing and
maintaining our own sales and marketing capabilities, including:
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the expense and time required to recruit and train a sales force;
our inability to recruit, retain or motivate adequate numbers of effective and qualified sales and marketing
personnel;
the inability to provide adequate training to sales and marketing personnel;
the need to train our sales force to ensure that a consistent and appropriate message about NERLYNX is being
delivered to our potential customers;
the inability of sales personnel to obtain access to physicians or convince adequate numbers of physicians to
prescribe any product;
our inability to equip the sales force with effective materials, including medical and sales literature, to help
them inform and educate physicians and patients about the benefits of NERLYNX and its proper
administration; and
unforeseen costs and expenses associated with maintaining an independent sales and marketing organization.
If we are unable to effectively address these risks, our efforts to commercialize NERLYNX successfully could be
harmed, which would negatively impact our ability to generate product revenue.
Additionally, we will need to maintain and further develop our sales force to achieve commercial success, and we
will be competing with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and
sales personnel. In the event we are unable to continue to develop and effectively maintain our commercial team, including
our U.S. sales force, our ability to successfully commercialize our products would be limited, and we would not be able to
generate product revenue successfully.
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Similarly, if we enter into arrangements with third parties to perform sales, marketing and distribution services, our
product revenue or the profitability associated with any product revenue may be lower than if we were to market and sell
any products that we develop ourselves. In addition, we may not be successful in entering into arrangements with third
parties to sell and market our products or may be unable to do so on terms that are favorable to us. We may have little
control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market
our products effectively. Moreover, we may be negatively impacted by other factors outside of our control relating to such
third parties, including, but not limited to, their inability to comply with regulatory requirements. If we do not
maintain sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties,
we will not be successful in commercializing our products.
We are exposed to the risks associated with reliance on a direct sales force to commercialize NERLYNX in the United
States.
In the United States, we rely on a direct sales force to market NERLYNX. Additionally, for any future products that
we successfully develop, we will need to establish or maintain effective sales and marketing capabilities or enter into
agreements with third parties to sell or market those products. There are risks with maintaining and growing our own sales
and marketing capabilities, including:
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the expense and time required to recruit and train a sales force;
our inability to recruit, retain or motivate adequate numbers of effective and qualified sales and marketing
personnel;
the inability to provide adequate training to sales and marketing personnel;
the need to train our sales force to ensure that a consistent and appropriate message about NERLYNX is being
delivered to our potential customers;
the inability of sales personnel to obtain access to physicians or convince adequate numbers of physicians to
prescribe any product;
our inability to equip the sales force with effective materials, including medical and sales literature, to help
them inform and educate physicians and patients about the benefits of NERLYNX and its proper
administration;
unforeseen costs and expenses associated with creating or maintaining an independent sales and marketing
organization; and
the premature or unnecessary incurrence of significant commercialization expenses if the commercial launch
of a product is delayed or does not occur for any reason.
If we are unable to effectively address these risks, our efforts to commercialize NERLYNX, or any additional drug
candidates that we develop, could be harmed, which would negatively impact our ability to generate product revenue.
Outside the United States we rely entirely on third-party sublicenses for the development and commercialization of
NERLYNX. For a description of the risks associated with those arrangements see, “—Risks Related to Third Parties—We
are dependent on international third-party sub-licensees for the development and commercialization of NERLYNX in
several countries outside the United States. The failure of these sub-licensees to meet their contractual, regulatory or other
obligations could adversely affect our business.”
Our NERLYNX commercialization efforts may fail to achieve the degree of market acceptance by patients and
physicians necessary for commercial success.
NERLYNX was approved by the FDA in 2017. We had total revenue for NERLYNX of $253.2 million, $228.0
million and $235.6 million for the years ended December 31, 2021, 2022 and 2023, respectively. We cannot assure you that
the sales of NERLYNX will continue at these levels or grow. We may encounter delays or hurdles related to our sales
efforts that affect amount of revenue generated and the timing of such revenue. There is no guarantee that the infrastructure,
systems, processes, policies, personnel, relationships and materials we have built to commercialize NERLYNX in the
United States will be sufficient for us to achieve success at the levels we expect.
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Our NERLYNX commercialization efforts may fail to gain sufficient market acceptance by physicians, patients,
third-party payors and others in the medical community. If NERLYNX does not achieve an adequate level of acceptance,
we may not generate significant product revenue and we may not maintain profitability. The degree of market acceptance of
NERLYNX and will depend on a number of factors, including:
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the timing of our receipt of any additional marketing approvals;
the terms of any approvals and the countries in which approvals are obtained;
the efficacy and safety and potential advantages and disadvantages compared to alternative treatments;
the prevalence and severity of any side effects associated with our products;
the additional indications for which our products are approved;
adverse publicity about our products or favorable publicity about competing products;
the approval of other products for the same indications as our products;
our ability to offer our products for sale at competitive prices;
the convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
the success of our physician education programs;
the strength of our marketing and distribution support;
the availability of third-party coverage and adequate reimbursement, including patient cost-sharing programs
such as copays and deductibles; and
any restrictions on the use of our products together with other medications.
If NERLYNX fails to achieve market acceptance, it could have a material and adverse effect on our business,
financial condition, results of operation and prospects.
We depend on a limited number of customers for a significant amount of our total revenue, and if we lose any of our
significant customers, our business could be harmed.
The majority of our revenue comes from a limited number of customers. In 2023, four customers individually
comprised approximately 31.4%, 17.2%, 15.2% and 11.9% respectively, of our total product revenue. We expect that
revenue from a limited number of customers will continue to account for a large portion of our revenue in the future. The
loss by us of any of these customers, or a material reduction in their purchases or their market pricing, could harm our
business, results of operations, financial condition and prospects. In addition, if any of these customers were to fail to pay
us in a timely manner, it could harm our cash flow.
Outside the United States we rely primarily on third-parties to pursue regulatory approval, if necessary, and to
commercialize NERLYNX and they may not commit sufficient time or resources to marketing NERLYNX.
Outside the United States, we seek to enter into exclusive sub-license agreements with third parties to pursue
regulatory approval, if necessary, and commercialize NERLYNX, if approved. As of December 31, 2023, NERLYNX has
received approval for the treatment of certain patients with extended adjuvant or metastatic HER2-positive breast cancer in
more than 20 countries outside the United States, including the EU, Australia, Canada, and Hong Kong. We are currently
party to several sub-licenses in various regions outside the United States, including Europe (excluding Russia and Ukraine),
Australia, Canada, China, Southeast Asia, Israel, South Korea, and various countries and territories in Central America,
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South America, the Middle East and Africa. We depend on these third parties for a significant portion of our total revenue.
Royalty revenue obtained pursuant to these sub-license agreements was 14% and 12% of total revenue for the years ended
December 31, 2023 and 2022, respectively. We have very little control over these third-parties and any of our existing or
future licensees may fail to devote the necessary resources and attention to obtain regulatory approval, where needed, and
to market and distribute NERLYNX effectively. If these licensees are unsuccessful in receiving regulatory approvals or in
commercializing NERLYNX, our business, results of operations and financial condition will be materially adversely
affected. Moreover, we intend to seek additional third parties to sub-license NERLYNX in additional geographies, and may
pursue a similar strategy for any future drug candidates that we develop. We cannot assure you that we will be able to enter
these agreements on commercial terms, or at all, and our failure to do so would have an adverse effect on our continued
commercialization efforts for NERLYNX or any future drug candidates.
Even though the FDA and EC have granted approval of NERLYNX for the extended adjuvant treatment of certain
patients with early stage, HER2-positive breast cancer and the FDA has granted approval for NERLYNX for the
treatment of certain patients with metastatic HER2-positive breast cancer, the terms of the approvals may limit its
commercial potential.
Even though the FDA and EC have granted approval of NERLYNX, the scope and terms of the approvals may limit
our ability to commercialize NERLYNX and, therefore, our ability to generate substantial sales revenue. The FDA and EC
have both approved NERLYNX for the extended adjuvant treatment of certain adult patients with early stage, HER2-
positive breast cancer in patients who are less than one year from the completion of prior adjuvant trastuzumab-based
therapy. In connection with the FDA and EC approvals, we have committed to conduct certain post-marketing studies. We
have completed the post-marketing commitments related to the FDA approval, and the post-marketing studies related to the
EC approval are ongoing. If we fail to comply with all of our post-marketing commitments, or if the results of the post-
marketing studies, or any other ongoing clinical studies of NERLYNX, are negative, the FDA or the EC could decide to
withdraw its respective approval, add warnings or narrow the approved indication in the product label.
Regulatory approval for any approved product is limited by the FDA and foreign regulatory authorities to those specific
indications and conditions for which clinical safety and efficacy have been demonstrated as set forth on the product
label. If we market our products for uses beyond such approved indications, we could be subject to enforcement action,
which could have a material adverse effect on our business.
The FDA and foreign regulatory authorities strictly regulate marketing, labeling, advertising and promotion of
prescription drugs. These regulations include standards and restrictions for direct-to-consumer advertising, industry-
sponsored scientific and educational activities, promotional activities involving the internet and off-label promotion. Any
regulatory approval that the FDA or foreign regulatory authorities grant is limited to those specific diseases and indications
for which a product is deemed to be safe and effective by the FDA and foreign regulatory authorities. For example, the
FDA-approved label for NERLYNX is limited to the extended adjuvant treatment of adult patients with early stage, HER2-
positive breast cancer following adjuvant trastuzumab-based therapy, and in combination with capecitabine, to the
treatment of adult patients with advanced or metastatic HER2-positive breast cancer who have received two or more prior
anti-HER2 based regimens in the metastatic setting. In addition to the FDA or foreign regulatory authorities approval
required for new formulations, any new indication for an approved product also requires FDA or foreign regulatory
authorities approval. If we are not able to obtain FDA approval for any desired future indications for our drugs and drug
candidates, our ability to effectively market and sell our products may be reduced and our business may be adversely
affected.
While physicians in the United States and outside the United States may choose, and are generally permitted, to
prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical
trials and approved by the regulatory authorities, our ability to promote the products is narrowly limited to those indications
that are specifically approved by the FDA or foreign regulatory authorities. These “off-label” uses are common across
medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. For example, in
April 2018, we announced that NERLYNX (neratinib) has been included as a recommended treatment option in the latest
NCCN Clinical Practice Guidelines in Oncology Central Nervous System Cancers for Breast Cancer patients with brain
metastases. The NCCN designated NERLYNX in combination with capecitabine as a category 2A treatment option and
NERLYNX in combination with paclitaxel as a category 2B treatment option. Use, as designated for breast cancer patients
with brain metastases, is outside the FDA approved indication for NERLYNX and considered investigational, and we do
not market or promote NERLYNX for these uses. Regulatory authorities in the United States and outside the United States
generally do not regulate the behavior of physicians in their choice of treatments. Regulatory authorities do, however,
restrict communications by pharmaceutical companies on the subject of off-label use. Although court decisions in the
United States have suggested that certain off-label promotional activities may be protected under the First Amendment, the
scope of any such protection is unclear. If our promotional activities fail to comply with the FDA’s or other regulatory
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authorities’ regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In
addition, our failure to follow FDA or other regulatory authorities rules and guidelines relating to promotion and
advertising may cause the FDA or other regulatory authorities to issue warning letters or untitled letters, bring an
enforcement action against us, suspend or withdraw an approved product from the market, require a recall or institute fines
or civil fines, or could result in disgorgement of money, operating restrictions, injunctions or criminal prosecution, any of
which could harm our reputation and our business.
We may fail to obtain orphan drug designations from the FDA for our drug candidates, and even if we obtain such
designations, we may be unable to maintain the benefits associated with orphan drug designation, including the
potential for market exclusivity.
Regulatory authorities in some jurisdictions, including the U.S., may designate drugs designed to address relatively
small patient populations as “orphan drugs.” Under the Orphan Drug Act, the FDA may grant orphan drug designation to a
drug intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than
200,000 in the United States, or a patient population greater than 200,000 in the United States, where there is no reasonable
expectation that the cost of developing the drug or biologic will be recovered from sales in the United States. In the U.S.,
orphan designation entitles a party to financial incentives such as opportunities for grant funding for clinical trial costs, tax
advantages and user-fee waivers. In addition, if a drug candidate that has orphan designation subsequently receives the first
FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug
exclusivity, which means that the FDA may not approve any other applications, including an NDA, to market the same
drug for the same disease or condition for seven years, except in limited circumstances, such as a showing of clinical
superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product
quantity.
We may decide to seek Orphan Drug Designations for alisertib. There can be no assurances that we will be able to
obtain such designations. Even if we, or any future collaborators, obtain orphan drug designation for a drug candidate, we,
or they, may not be able to obtain or maintain orphan drug exclusivity for that drug candidate. Further, even if we, or any
future collaborators, obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product
from competition because different drugs with different active ingredients may be approved for the same disease or
condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same disease or
condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or
makes a major contribution to patient care, or the manufacturer of the product with orphan exclusivity is unable to maintain
sufficient product quantity. Orphan drug designation neither shortens the development or regulatory review time of a drug
nor gives the drug any advantage in the regulatory review or approval process.
Health care reform measures may hinder or prevent our products’ and drug candidates’ commercial success.
The United States and some foreign jurisdictions have enacted or are considering enacting a number of legislative
and regulatory proposals to change the healthcare system in ways that could affect our ability to profitably sell our product
and drug candidates, if and when they are approved. Among policy makers and payors in the United States and elsewhere,
there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs,
improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of
these efforts and has been significantly affected by major legislative initiatives.
In March 2010, the ACA became law in the United States. The ACA substantially changed the way healthcare is
financed by both governmental and private insurers and significantly affects the pharmaceutical industry. Among the
provisions of the ACA, of greatest importance to the pharmaceutical industry are the following:
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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs
and biologic agents, apportioned among these entities according to their market share in certain government
healthcare programs;
an increase of the rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected and not generally distributed
through the retail channel;
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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-
sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage
gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;
extension of manufacturers’ Medicaid rebate liability to covered outpatient drugs dispensed to individuals
who are enrolled in Medicaid managed care organizations;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer
Medicaid coverage to additional individuals, which began in April 2010, and by adding new eligibility
categories for certain individuals with income at or below 133% of the Federal Poverty Level beginning in
2014, thereby potentially increasing manufacturers’ Medicaid rebate liability;
increase in the number of entities eligible for discounts under the 340B program;
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;
a licensure framework for follow-on biologic products; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct
comparative clinical effectiveness research, along with funding for such research.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the
ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by
several states without specifically ruling on the constitutionality of the ACA.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was
enacted. For example, the Budget Control Act of 2011, among other things, led to reductions to Medicare payments of
providers which, will remain in effect through 2032. On January 2, 2013, the American Taxpayer Relief Act of 2012,
among other things, also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer
treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years. More recently, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021
into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024. The rebate was previously
capped at 100% of a drug’s average manufacturer price,
Most significantly, in August 2022, President Biden signed the Inflation Reduction Act of 2022, or the IRA, into
law. This statute marks the most significant action by Congress with respect to the pharmaceutical industry since adoption
of the ACA in 2010. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations
with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part
B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D
coverage gap discount program with a new discounting program (beginning in 2025). The IRA permits the Secretary of the
Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to
regulation, for the initial years. On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to
price negotiations. HHS has issued and will continue to issue guidance implementing the IRA, although the Medicare drug
price negotiation program is currently subject to legal challenges. While the impact of the IRA on our business and the
pharmaceutical industry cannot yet be fully determined, it is likely to be significant.
The cost of prescription pharmaceuticals in the United States has also been the subject of considerable discussion.
There have been several Congressional inquiries, as well as legislative and regulatory initiatives and executive orders
designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drug products. We
cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could
impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products,
any of which could adversely affect our business, results of operations and financial condition.
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Individual states in the United States have also become increasingly active in passing legislation and implementing
regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and,
in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional healthcare
authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products
and which suppliers will be included in their prescription drug and other healthcare programs.
We anticipate that other healthcare reform measures that may be adopted in the future may result in additional
reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and
additional downward pressure on the price that we receive for any approved product, and could seriously harm our
business. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction
in payments from private payors. The implementation of cost containment measures or other healthcare reforms may
prevent us from being able to generate revenue, attain profitability or commercialize our product and drug candidates, if
approved.
In the EU, similar political, economic and regulatory developments may affect our ability to profitably
commercialize NERLYNX and our other drug candidates, if approved. In addition to continuing pressure on prices and cost
containment measures, legislative developments at the EU or member state level may result in significant additional
requirements or obstacles that may increase our operating costs. The delivery of healthcare in the EU, including the
establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a
matter for national, rather than EU, law and policy. National governments and health service providers have different
priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In
general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing
and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national
regulatory burdens on those wishing to develop and market products, this could restrict or regulate post-approval activities
and affect our ability to commercialize NERLYNX and our other drug candidates, if approved. In other international
markets outside the United States and the EU, reimbursement and healthcare payment systems vary significantly by
country, and many countries have instituted price ceilings on specific products and therapies.
On December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive
2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from
January 2025 onwards, with preparatory and implementation-related steps to take place in the interim. Once applicable, it
will have a phased implementation depending on the concerned products. This Regulation intends to boost cooperation
among EU member states in assessing health technologies, including new medicinal products, and provide the basis for
cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common
HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical
assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations
whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify
promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will
continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and
making decisions on pricing and reimbursement.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the United States or outside the United States. If we or our collaborators are slow or unable
to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators
are not able to maintain regulatory compliance, NERLYNX or any future approved product may lose any regulatory
approval that may have been obtained and we may not sustain profitability.
Failure to obtain or maintain adequate coverage and reimbursement for our products or drug candidates, if approved,
could limit our ability to market those products and decrease our ability to generate revenue.
Successful commercial sales of any approved products will depend on the availability of adequate coverage and
reimbursement from government health administration authorities, private health insurers and other third-party payors.
Each third-party payor separately decides which products it will cover and establishes the reimbursement level, and there is
no guarantee that any of our approved products or drug candidates that may be approved for marketing by regulatory
authorities will receive adequate coverage or reimbursement levels. Obtaining and maintaining coverage approval for a
product is time-consuming, costly and may be difficult. We may be required to conduct expensive pharmacoeconomic
studies to justify coverage and reimbursement or the level of coverage and reimbursement relative to other therapies. If
coverage and adequate reimbursement are not available or limited, we may not be able to successfully commercialize any
product or drug candidate for which we obtain marketing approval. Government authorities and third-party payors have
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attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly,
third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are
challenging the prices charged for drugs and biologics. Even if we obtain coverage for a given product, the resulting
reimbursement rates may be inadequate and may affect the demand for, or the price of, any drug candidate for which we
obtain marketing approval.
We expect to experience pricing pressures in connection with the sale of our current or future commercial products,
due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional
legislative proposals. There may be additional pressure by payors and healthcare providers to use generic drugs that contain
the active ingredients found in neratinib or any other drug candidates that we may develop. If we fail to successfully secure
and maintain adequate coverage and reimbursement for our products or are significantly delayed in doing so, we will have
difficulty achieving market acceptance of our products and expected revenue and profitability which would have a material
adverse effect on our business, results of operations and financial condition.
We are subject to federal, state and foreign healthcare fraud and abuse laws, false claims laws and physician payment
transparency laws. Failure to comply with these laws may subject us to substantial penalties.
We do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-
party payors. However, federal, state and foreign healthcare laws and regulations pertaining to fraud and abuse and
physician payment transparency laws and regulations apply to us depending on programs we operate and have been
asserted by the government and others to apply to companies like us, and our arrangements with healthcare providers,
customers and other entities, including our marketing practices, educational programs and pricing policies. These laws
include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly
and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or
to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or
service for which payment may be made under federal healthcare programs, such as the Medicare and
Medicaid programs. A person or entity does not need to have actual knowledge of the federal Anti-Kickback
Statute or specific intent to violate it to have committed a violation.;
federal false claims laws, including, without limitation, the False Claims Act, which prohibit, among other
things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from
Medicare, Medicaid or other federal third-party payors that are false or fraudulent, such as engaging in
improper promotion of products or submitting inaccurate price reports to the Medicaid Drug Rebate program.
In addition, the government may assert that a claim including items or services resulting from a violation of
the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
the federal Civil Monetary Penalties law, which prohibits, among other things, offering or transferring
remuneration to a federal healthcare beneficiary that a person knows or should know is likely to influence the
beneficiary’s decision to order or receive items or services reimbursable by the government from a particular
provider or supplier;
federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or
making false statements relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person
or entity does not need to have actual knowledge of the statute or specific intent to violate it to have
committed a violation;
the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and
medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health
Insurance Program (with certain exceptions) to report annually to Centers for Medicare & Medicaid Services
(“CMS”), information related to payments or other “transfers of value” made to physicians (defined to include
doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (nurse
practitioners, certified nurse anesthetists, physician assistants, clinical nurse specialists, anesthesiology
assistants and certified nurse midwives), and teaching hospitals, and requires applicable manufacturers and
group purchasing organizations to report annually to CMS ownership and investment interests held by the
physicians described above and their immediate family members and payments or other “transfers of
value” to such physician owners (manufacturers are required to submit reports to CMS by the 90th day of each
calendar year);
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analogous state equivalents of each of the above federal laws, such as anti-kickback and false claims laws
which may apply to sales or marketing arrangements and claims involving healthcare items or services
reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical
companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance
guidance promulgated by the federal government or otherwise restrict payments that may be made to
healthcare providers and other potential referral sources; and state laws that require drug manufacturers to
report information related to payments and other transfers of value to physicians and other healthcare
providers or marketing expenditures and pricing information; and
• European and other foreign law equivalents of each of these laws, including reporting requirements detailing
interactions with and payments to healthcare providers.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under
such laws, it is possible that some of our business activities, including our relationships with physicians and other
healthcare providers, some of whom recommend, purchase and/or prescribe our products, and the manner in which we
promote our products, could be subject to challenge under one or more of such laws.
We are also exposed to the risk that our employees, independent contractors, principal investigators, consultants,
vendors, distributors and agents may engage in fraudulent or other illegal activity. While we have policies and procedures
in place prohibiting such activity, misconduct by these parties could include, among other infractions or violations,
intentional, reckless and/or negligent conduct or unauthorized activity that violates FDA or foreign regulatory
authority requirements, including those laws that require the reporting of true, complete and accurate information to the
FDA or foreign regulatory authorities, manufacturing standards, federal and state healthcare fraud and abuse laws and
regulations, laws that require the true, complete and accurate reporting of financial information or data or other commercial
or regulatory laws or requirements. It is not always possible to identify and deter misconduct by our employees and other
third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or
unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from
a failure to be in compliance with such laws or regulations.
If our operations are found to violate any of the laws described above or any other laws and regulations that apply to
us, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, the curtailment or
restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment
of officers involved, any of which could adversely affect our ability to market our current and any future products, once
approved, and materially adversely affect our business, results of operations and financial condition. Any action against us
for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and
divert our management’s attention from the operation of our business.
If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other
governmental pricing programs in the United States, we could be subject to additional reimbursement requirements,
penalties, sanctions and fines, which could have a material adverse effect on our business, results of operations and
financial condition.
We participate in the Medicaid Drug Rebate Program (“MDRP”) and other federal and state government pricing
programs in the United States, and we may participate in additional government pricing programs in the future. These
programs generally require us to pay rebates or otherwise provide discounts to government payors in connection with
drugs, including NERLYNX, that are dispensed to beneficiaries of these programs. As a condition of having federal funds
being made available for our covered outpatient drugs under Medicaid and Medicare Part B, we have enrolled in the
MDRP, which requires us to pay a rebate to state Medicaid programs for each unit of our covered outpatient
drugs dispensed to a Medicaid beneficiary and paid for by a state Medicaid program. Medicaid drug rebates are based on
pricing data that we must report on a monthly and quarterly basis to the U.S. Centers for Medicare & Medicaid Services
(“CMS”), the federal agency that administers the MDRP and Medicare programs. For the MDRP, these data include the
average manufacturer price (“AMP”) for each drug and, in the case of our innovator products, the best price. If we become
aware that our MDRP price reporting submission for a prior period was incorrect or has changed as a result of recalculation
of the pricing data, we must resubmit the corrected data for up to three years after those data originally were due. In
addition, there is increased focus by the Office of Inspector General within the U.S. Department of Health and Human
Services on the methodologies used by manufacturers to calculate AMP, and BP, to assess manufacturer compliance
with MDRP reporting requirements. If we fail to provide information timely or are found to have knowingly submitted
false information to the government, we may be subject to civil monetary penalties and other sanctions, including
termination from the MDRP, which would result in payment not being available for our covered outpatient drugs under
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Medicaid or, if applicable, Medicare Part B. Failure to make necessary disclosures and/or to identify overpayments could
result in allegations against us under the Federal False Claims Act and other laws and regulations.
Federal law requires that a manufacturer that participates in the MDRP also participate in the Public Health
Service’s 340B drug pricing program (the “340B program”) in order for federal funds to be available for the manufacturer’s
drugs under Medicaid and Medicare Part B. We participate in the 340B program, which is administered by the Health
Resources and Services Administration (“HRSA”), and requires us to charge statutorily defined covered entities no more
than the 340B “ceiling price” for our covered outpatient drugs used in an outpatient setting. These 340B covered entities
include a variety of community health clinics and other entities that receive health services grants from the Public Health
Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated
using a statutory formula, which is based on the AMP and rebate amount for the covered outpatient drug as calculated
under the MDRP. In general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B
ceiling price calculation and discount requirement. We must report 340B ceiling prices to HRSA on a quarterly basis, and
HRSA publishes them to 340B covered entities. HRSA has finalized regulations regarding the calculation of the 340B
ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge
covered entities for 340B-eligible drugs. HRSA has also finalized an administrative dispute resolution process through
which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which
manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting
of 340B drugs.
In order to be eligible to have drug products paid for with federal funds under Medicaid and Medicare Part B and
purchased by certain federal agencies and grantees, we also must participate in the U.S. Department of Veterans Affairs
(“VA”) Federal Supply Schedule (“FSS”) pricing program. Under the VA/FSS program, we must report the Non-Federal
Average Manufacturer Price (“Non-FAMP”) for our covered drugs to the VA and charge certain federal agencies no more
than the Federal Ceiling Price, which is calculated based on Non-FAMP using a statutory formula. These four agencies are
the VA, the U.S. Department of Defense, the U.S. Coast Guard, and the U.S. Public Health Service (including the Indian
Health Service). We must also pay rebates on products purchased by military personnel and dependents through the
TRICARE retail pharmacy program. If we fail to provide timely information or are found to have knowingly submitted
false information, we may be subject to civil monetary penalties.
Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including
the cost of prescription drugs and combination products. A number of states have either implemented or are considering
implementation of drug price transparency legislation that may prevent or limit our ability to take price increases at certain
rates or frequencies. Requirements under such laws include advance notice of planned price increases, reporting price
increase amounts and factors considered in taking such increases, wholesale acquisition cost information disclosure to
prescribers, purchasers, and state agencies, and new product notice and reporting. Such legislation could limit the price or
payment for certain drugs, and a number of states are authorized to impose civil monetary penalties or pursue other
enforcement mechanisms against manufacturers who fail to comply with drug price transparency requirements, including
the untimely, inaccurate, or incomplete reporting of drug pricing information. If we are found to have violated state law
requirements, we may become subject to penalties or other enforcement mechanisms, which could have a material adverse
effect on our business.
Pricing and rebate calculations are complex, vary among products and programs, and are often subject to
interpretation by us, governmental or regulatory agencies, and the courts. The terms, scope and complexity of these
government pricing programs change frequently, as do interpretations of applicable requirements for pricing and rebate
calculations. Responding to current and future changes may increase our costs and the complexity of compliance will be
time consuming. Any required refunds to the U.S. government or responding to a government investigation or enforcement
action would be expensive and time consuming and could have a material adverse effect on our business, results of
operations and financial condition. Price recalculations under the MDRP also may affect the ceiling price at which we are
required to offer products under the 340B program. Pursuant to the IRA, the AMP figures we report to the MDRP will also
be used to compute rebates under Medicare Part D triggered by price increases that outpace inflation. Civil monetary
penalties can be applied if we are found to have knowingly submitted any false price or product information to
the government, if we fail to submit the required price data on a timely basis, or if we are found to have charged 340B
covered entities more than the statutorily mandated ceiling price. In the event that CMS were to terminate our Medicaid
rebate agreement, no federal payments would be available under Medicaid or Medicare for our covered outpatient drugs.
We cannot assure you that our submissions will not be found to be incomplete or incorrect.
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Risks Related to Third Parties
We are dependent on international third-party sub-licensees for the development and commercialization of NERLYNX
in several countries outside the United States. The failure of these sub-licensees to meet their contractual, regulatory or
other obligations could adversely affect our business.
We have entered into exclusive sub-license agreements with several third parties that provide these sub-licensees
exclusive rights to the development and commercialization of NERLYNX in Europe (excluding Russia and Ukraine),
Australia, Canada, China, Southeast Asia, Israel, South Korea, and various countries and territories in Central America,
South America, the Middle East and Africa. As a result, we are entirely dependent on these parties to achieve regulatory
approval of NERLYNX for marketing in these countries and for the commercialization of NERLYNX, if approved. For the
years ended December 31, 2023 and 2022, royalty revenue from these sub-licensees was $32.5 million and $28.0 million,
respectively, and represented 14% and 12% of total revenue, respectively. The timing and amount of any milestone and
royalty payments we may receive under these agreements, as well as the commercial success of NERLYNX in those
regions outside of the United States, will depend on, among other things, the efforts, allocation of resources and successful
commercialization of NERLYNX by the licensees. We also depend on these third parties to comply with all applicable laws
relative to the development and commercialization of our products in those countries. We do not control the individual
efforts of these licensees and have limited ability to terminate these agreements if the licensees do not perform as
anticipated. The failure of these licensees to devote sufficient time and effort to the development and commercialization of
NERLYNX; to meet their obligations to us, including for future royalty and milestone payments; to adequately deploy
business continuity plans in the event of a crisis; and/or to satisfactorily resolve significant disagreements with us or
address other factors could have an adverse impact on our financial results and operations. In addition, if these third parties
violate, or are alleged to have violated, any laws or regulations during the performance of their obligations for us, it is
possible that we could suffer financial and reputational harm or other negative outcomes, including possible legal
consequences.
Any termination, breach or expiration of any of these sub-license agreements could have a material adverse effect on
our financial position by reducing or eliminating the potential for us to receive license fees, milestones and royalties. In
such an event, we may be required to devote additional efforts and to incur additional costs associated with pursuing
regulatory approval and commercialization of the applicable products and drug candidates. Alternatively, we may attempt
to identify and transact with a new sub-licensee, but there can be no assurance that we would be able to identify a suitable
sub-licensee or transact on terms that are favorable to us.
We have no experience in drug formulation or manufacturing and rely exclusively on third parties to formulate and
manufacture NERLYNX, alisertib and our other drug candidates, and any disruption or loss of these relationships could
delay our development and commercialization efforts.
We have no experience in drug formulation or manufacturing and do not intend to establish our own manufacturing
facilities. We lack the resources and expertise to formulate or manufacture NERLYNX, alisertib and other potential drug
candidates. While our drug candidates were developed by Pfizer and Takeda, both the drug substance and drug product are
manufactured by third-party contractors. We are using the same third-party contractors to manufacture, supply, store and
distribute drug supplies for our clinical trials and the commercialization of NERLYNX and we plan to use third-party
contractors to manufacture, supply, store and distribute drug supplies for our clinical trials of alisertib. If we are unable to
continue our relationships with one or more of these third-party contractors, we could experience delays in our development
or commercialization efforts as we locate and qualify new manufacturers. We intend to rely on one or more third-party
contractors to manufacture the commercial supply of our drugs. Our anticipated future reliance on a limited number of
third-party manufacturers exposes us to the following risks:
• We may be unable to identify manufacturers on acceptable terms or at all because the number of potential
manufacturers is limited, and the FDA or foreign regulatory authorities must approve any replacement
manufacturer with respect to NERLYNX and any other approved products. This approval would require new
testing and compliance inspections. In addition, a new manufacturer would have to be educated in, or develop
substantially equivalent processes for, production of our products after receipt of FDA or comparable foreign
regulatory authority approval.
• Our third-party manufacturers might be unable to formulate and manufacture our products and drug
candidates in the volume and of the quality required to meet our clinical and/or commercial needs.
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• Our future contract manufacturers may not perform as agreed or may not remain in the contract
manufacturing business for the time required to supply our clinical trials or to successfully produce, store and
distribute our products for commercialization, as applicable.
• The facilities used by our contract manufacturers to manufacture NERLYNX, alisertib and our other drug
candidates must be approved for the manufacture of such products or candidates by the FDA or foreign
regulatory authorities pursuant to inspections that are conducted following submission of an NDA to the FDA
or pursuant to similar foreign applications to foreign regulatory authorities. We do not control the
manufacturing process of, and are completely dependent on, our contract manufacturing partners for
compliance with cGMP or similar foreign regulations for manufacture of both active drug substances and
finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms
to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to
secure and/or maintain regulatory approval for their manufacturing facilities. In addition, drug manufacturers
are subject to ongoing periodic unannounced inspection by the FDA and similar non-U.S. regulatory agencies
and corresponding state agencies to ensure strict compliance with cGMP regulations and other government
regulations and corresponding foreign standards. If the FDA or a comparable foreign regulatory authority
does not approve these facilities for the manufacture of our drug candidates or if it withdraws any such
approval in the future, we may need to find alternative manufacturing facilities, which would significantly
impact our ability to develop, obtain regulatory approval for alisertib and our other drug candidates, if
approved, or market NERLYNX.
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If any third-party manufacturer makes improvements in the manufacturing process for our products, we may
not own, or may have to share, the intellectual property rights to the innovation.
Each of these risks could delay our clinical trials, the approval, if any, of alisertib or our other drug candidates by the
FDA or comparable foreign regulatory authorities or the commercialization of NERLYNX, or result in higher costs or
deprive us of potential product revenue.
If our third-party manufacturers fail to manufacture NERLYNX in sufficient quantities and at acceptable quality and
pricing levels, or fail to fully comply with cGMP or similar foreign regulations, we may face delays in commercialization
or be unable to meet market demand, and may lose potential revenues.
The manufacture of NERLYNX requires significant expertise and capital investment, including the development of
advanced manufacturing techniques, process controls and the use of specialized processing equipment. Our third-party
manufacturers must comply with federal, state and foreign regulations, including the FDA’s regulations governing cGMP
and similar requirements outside the United States, enforced by the FDA through its facilities inspection program and by
similar foreign regulatory authorities in other jurisdictions where we do business. These requirements include, among other
things, quality control, quality assurance and the maintenance of records and documentation. The FDA or similar foreign
regulatory authorities at any time may implement new standards or change their interpretation and enforcement of existing
standards for manufacture, packaging or testing of our products. Any failure by us or our third-party manufacturers to
comply with applicable regulations may result in fines and civil penalties, suspension of production, product seizure or
recall, operating restrictions, imposition of a consent decree, modification or withdrawal of product approval or criminal
prosecution and would limit the availability of our product. Any manufacturing defect or error discovered after products
have been produced and distributed also could result in significant consequences, including costly recall procedures, re-
stocking costs, damage to our reputation and potential for product liability claims.
If our third-party manufacturers are unable to produce the required commercial quantities of NERLYNX to meet
market demand for NERLYNX on a timely basis or at all, or if they fail to comply with applicable laws for the
manufacturing of NERLYNX, we will suffer damage to our reputation and commercial prospects and we will lose potential
revenue.
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We rely on third parties to conduct our pre-clinical studies and clinical trials. If these third parties do not successfully
carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for our
drug candidates.
We depend upon independent investigators and collaborators, such as CROs, universities and medical institutions, to
conduct our pre-clinical studies and clinical trials, including those involving NERLYNX (for additional indications) and
alisertib, under agreements with us. These collaborators are not our employees, and we cannot control the amount or timing
of resources that they devote to our programs. Nevertheless, we are responsible for ensuring that each of our clinical trials
is conducted in accordance with regulatory requirements, including GCP requirements, and the applicable protocol. If we,
or any of our CROs or third party contractors, fail to comply with applicable GCPs, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to
perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection
by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP
regulations. In addition, our clinical trials must be conducted with product produced under current cGMP or similar foreign
regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would cause us to
incur additional costs and delay the regulatory approval process. Moreover, third party contractors and investigators may
not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such
programs ourselves. If outside collaborators fail to devote sufficient time and resources to our drug-development programs,
or if their performance is substandard or otherwise fails to satisfy applicable regulatory requirements, the approval of our
FDA or foreign applications, if any, and our introduction of new drugs, if any, will be delayed. These collaborators may
also have relationships with other commercial entities, some of whom may compete with us. If our collaborators assist our
competitors to our detriment, our competitive position would be harmed. If any of our relationships with these third-party
collaborators terminate, we may not be able to enter into arrangements with alternative third parties on commercially
reasonable terms, or at all. Switching or adding additional third parties to our clinical trial programs can involve substantial
costs and require extensive management time and focus.
Risks Related to our Business Operations
Our business, financial condition, results of operations and ongoing clinical trials have been, and could continue to be,
harmed by the effects of public health emergencies or outbreaks of epidemics, pandemics or contagious diseases.
We and our commercial partners are subject to various risks related to potential future public health emergencies or
outbreaks of epidemics, pandemics or contagious diseases, such as the COVID-19 pandemic. For example, many
geographic regions previously imposed, or in the future may impose, “shelter-in-place” orders, quarantines or similar orders
or restrictions, which may prevent cancer patients from traveling to see their doctors and result in a decline in new patient
enrollments/new patient starts and could adversely affect our business, financial condition and results of operations.
Additionally, certain of our personnel, such as our commercial, field medical and sales force teams, were restricted or
prevented from conducting routine business activities during the height of the COVID-19 pandemic, including traveling or
interacting in-person with physicians and customers, as a result of these employee health and safety concerns, “shelter-in-
place” orders, travel restrictions and other actions and restrictions that may be prudent or required by governmental
authorities. Timely enrollment in our clinical trials is dependent upon global clinical trial sites which have been in the past,
and may in the future be, adversely affected by the impacts of a potential resurgence of COVID-19 or other severe global
health crises, and disruptions in patient enrollments could have a material adverse impact on our clinical trial plans,
timelines, business, financial conditions and results of operations.
Additionally, we rely exclusively on third-party manufacturers to manufacture our products. We, our suppliers and
our manufacturers modified our business practices for the continued health and safety of our employees during the height of
the COVID-19 pandemic, including by operating with the majority of our respective workforces working from home. If a
resurgence of COVID-19 or other severe global health crisis were to occur, it could disrupt our respective standard
operations, including our procurement of suppliers for our operations. In addition, this may increase our cybersecurity risk,
create data accessibility concerns and make us more susceptible to communication disruptions, any of which could
adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics
committees, manufacturing sites, research or clinical trial sites, and other important agencies and contractors. Our business
interruption insurance, if available at all, may be insufficient to cover losses resulting from extended business interruptions
from public health emergencies or outbreaks of epidemics, pandemics or contagious diseases.
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Engaging in international business subjects us to additional business and regulatory risks, and there can be no
assurance that our products will be accepted in those markets.
We have entered into exclusive sub-license agreements providing for third parties to pursue regulatory approval and
commercialize NERLYNX, if approved, in various specified regions outside of the United States. We plan to continue to
pursue commercialization of NERLYNX in additional countries outside the United States where it has been approved.
Engaging in international business inherently involves a number of difficulties and risks, including:
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competition from established companies, many of which are well-positioned within their local markets with
longer operating histories, more recognizable names and better established distribution networks;
the availability and level of coverage and reimbursement within prevailing foreign healthcare payment
systems and the ability of patients to elect to privately pay for NERLYNX and, if approved, alisertib and our
other products;
difficulties in enforcing intellectual property rights;
pricing pressure;
required compliance with existing and changing foreign regulatory requirements and laws;
laws and business practices favoring local companies;
longer sales and payment cycles;
difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
political and economic instability;
foreign currency risks that could adversely affect our financial results;
potentially adverse tax consequences, tariffs and other trade barriers;
exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign
Corrupt Practices Act (“FCPA”), and similar laws and regulations in other jurisdictions;
international terrorism and anti-American sentiment;
difficulties and costs associated with staffing and managing foreign operations; and
export restrictions and controls relating to technology.
If we or our sub-licensees or third-party manufacturers are unable to address these international risks, we may fail to
establish and maintain an international presence, and our business, financial condition and results of operations would
suffer.
The failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws, including the FCPA and
similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse
consequences.
We are subject to the FCPA, regulations of the U.S. Office of Foreign Assets Control, the United Kingdom Bribery
Act of 2010 and other anti-corruption, anti-bribery and anti-money laundering laws around the world where we conduct
activities, including, if approved in such countries, the sale of our products. We face significant risks and liability if we fail
to comply with the FCPA and other anti-corruption and anti-bribery laws that prohibit companies and their employees and
third-party business partners, such as distributors or resellers, from authorizing, offering or providing, directly or indirectly,
improper payments or benefits to foreign government officials, political parties or candidates, employees of public
international organizations including healthcare professionals, or private-sector recipients for the corrupt purpose of
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obtaining or retaining business, directing business to any person, or securing any advantage. We currently rely on various
third parties for certain services outside the United States, including continued development of our drug candidates and, if
approved, its subsequent commercialization. We may be held liable for the corrupt or other illegal activities of these third
parties and intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly
authorize such activities.
Any violation of the FCPA, other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws
could result in whistleblower, adverse media coverage, investigations, loss of export privileges, severe criminal or civil
sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, which could have a
material and adverse effect on our reputation, business, operating results and prospects. In addition, responding to any
enforcement action or related investigation may result in a materially significant diversion of management’s attention and
resources and significant defense costs and other professional fees.
If we fail to comply with United States export control and economic sanctions or fail to expand and maintain an
effective sales force or successfully develop our international distribution network, our business, financial condition and
operating results may be adversely affected.
When selling any products outside of the United States, including NERLYNX, we are subject to United States
export control and economic sanctions laws, the violation of which could result in substantial penalties being imposed
against us. More broadly, if we fail to comply with export control laws, any sales could fail to grow or could decline, and
our ability to grow our business could be adversely affected.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that
technology, including any cybersecurity incidents, could harm us.
Our internal computer systems and those of third parties with which we contract may be vulnerable to damage from
cyberattacks, “phishing” attacks and other social engineering schemes, employee theft or misuse, human error, fraud, denial
or degradation of service attacks, computer viruses, malware (e.g. ransomware), sophisticated nation-state and nation-state-
supported actors, unauthorized access or use by persons inside our organization or persons with access to systems inside
our organization, hacking, natural disasters, terrorism, war and telecommunication and electrical failures despite the
implementation of security measures. Attacks upon information technology systems are increasing in their frequency, levels
of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals
with a wide range of motives and expertise. We may also face increased cybersecurity risks due to our reliance on internet
technology and the number of our employees who are working remotely, which may create additional opportunities for
cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to
sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to
anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that
may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate
incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to
avoid detection, and to remove or obfuscate forensic evidence. System failures, accidents or security breaches could cause
interruptions in our operations and could result in a material disruption of our clinical activities and business operations, in
addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in
delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent
that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate
disclosure of confidential or proprietary information, we could incur liability and our research and development programs,
and the development of our drug candidates could be delayed.
The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by
computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and
sophistication of attempted attacks and intrusions from around the world have increased and evolved. If we or our third-
party vendors were to experience a significant cybersecurity breach of our or their information systems or data, the costs
associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects
could be material. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage
the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer
significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing
inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information.
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We and certain of our service providers are from time to time subject to cyberattacks and security incidents. While
we do not believe that we have experienced any significant system failure, accident or security breach to date, if such an
event were to occur and cause interruptions in our operations, it could result in a material disruption of our development
programs and our business operations, whether due to a loss, corruption or unauthorized disclosure of our trade secrets,
personal information or other proprietary or sensitive information or other similar disruptions. It could also expose us to
risks, including an inability to provide our services and fulfill contractual demands, and could cause management
distraction and the obligation to devote significant financial and other resources to mitigate such problems, which would
increase our future information security costs, including through organizational changes, deploying additional personnel,
reinforcing administrative, physical and technical safeguards, further training of employees, changing third-party vendor
control practices and engaging third-party subject matter experts and consultants and reduce the demand for our technology
and services.
If a security breach or other incident were to result in the unauthorized access to or unauthorized use, disclosure,
release or other processing of personal information, it may be necessary to notify individuals, governmental authorities,
supervisory bodies, the media and other parties pursuant to privacy and security laws. Any security compromise affecting
us, our service providers, strategic partners, other contractors, consultants, or our industry, whether real or perceived, could
harm our reputation, erode confidence in the effectiveness of our security measures and lead to regulatory scrutiny. To the
extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate
disclosure of confidential or proprietary or personal information, we could incur liability, including litigation exposure,
penalties and fines, we could become the subject of regulatory action or investigation, our competitive position could be
harmed and the further development and commercialization of our products and services could be delayed. If such an event
were to occur and cause interruptions in our operations, it could result in a material disruption of our business. Furthermore,
federal, state and international laws and regulations can expose us to enforcement actions and investigations by regulatory
authorities, and potentially result in regulatory penalties, fines and significant legal liability, if our information technology
security efforts fail. We may also be exposed to a risk of loss or litigation and potential liability, which could materially and
adversely affect our business, results of operations or financial condition. We maintain cyber liability insurance; however,
this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an
interruption or breach of our systems.
Compliance with governmental regulation and other legal obligations related to privacy, data protection and
information security could result in additional costs and liabilities to us or inhibit our ability to collect and process data,
and the failure to comply with such requirements could have a material adverse effect on our business, financial
condition or results of operations.
Privacy and data security have become significant issues in the United States, Europe and in many other jurisdictions
where we may in the future conduct our operations. As we receive, collect, process, use and store personal and confidential
data, we are subject to diverse laws and regulations relating to data privacy and security. In the United States, numerous
federal and state laws and regulations could apply to our operations or the operations of our partners, including state data
breach notification laws, state health information privacy laws, and federal and state consumer protection laws and
regulations (e.g. Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure, and protection
of health-related and other personal information. In addition, we may obtain health information from third parties
(including research institutions from which we obtain clinical trial data) that are subject to privacy and security
requirements under HIPAA. Depending on the facts and circumstances, we could be subject to criminal penalties if we
knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a
manner that is not authorized or permitted by HIPAA.
Certain states have also enacted data privacy and security laws and regulations, which govern the privacy,
processing and protection of health-related and other personal information. Such laws and regulations will be subject to
interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for
us and our future customers and strategic partners. For example, the California Consumer Privacy Act of 2018
(“CCPA”) went into effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and
increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for
civil penalties for violations, as well as a private right of action for data breaches that has increased the likelihood of, and
risks associated with data breach litigation. Further, the California Privacy Rights Act (“CPRA”) generally went into effect
on January 1, 2023 and significantly amends the CCPA. It imposes additional data protection obligations on covered
businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk
data, and opt outs for certain uses of sensitive data. It also created a new California data protection agency authorized to
issue substantive regulations and could result in increased privacy and information security enforcement. Additional
compliance investment and potential business process changes may also be required. Similar laws have been passed in
other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy
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legislation in the United States. The enactment of such laws could have potentially conflicting requirements that would
make compliance challenging. Compliance with these privacy and data security requirements is rigorous and time-intensive
and may increase our cost of doing business; despite those efforts, there is a risk that we may be subject to fines and
penalties, litigation and reputational harm, which could materially and adversely affect our business, financial condition and
results of operations.
Furthermore, the FTC also has authority to initiate enforcement actions against entities that mislead customers about
HIPAA compliance, make deceptive statements about privacy and data sharing in privacy policies, fail to limit third-party
use of personal health information, fail to implement policies to protect personal health information or engage in other
unfair practices that harm customers or that may violate Section 5 of the FTC Act. Even when HIPAA does not apply,
failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or
affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data
security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds,
the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
Additionally, federal and state consumer protection laws are increasingly being applied by the FTC and states’ attorneys
general to regulate the collection, use, storage, and disclosure of personal or personally identifiable information, through
websites or otherwise, and to regulate the presentation of website content.
In addition, the regulatory framework for the receipt, collection, processing, use, safeguarding, sharing and transfer
of personal and confidential data is rapidly evolving and is likely to remain uncertain for the foreseeable future as new
global privacy rules are being enacted and existing ones are being updated and strengthened. For example, on May 25,
2018, the European Union General Data Protection Regulation (“GDPR”) took effect in Europe. The GDPR is directly
applicable in each European Union and EEA member state and applies to companies established in the European Union and
the EEA as well as companies that collect and use personal data to offer goods or services to, or monitor the behavior of,
individuals in the European Union and the EEA. GDPR imposes stringent data protection obligations for processors and
controllers of personal data, and penalties and fines for failure to comply with GDPR are significant, including fines of up
to €20 million or 4% of total worldwide annual turnover, whichever is greater. Among other requirements, the GDPR
regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate
protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms
between the EEA and the United States remains uncertain. Case law from the Court of Justice of the European Union
(“CJEU”) states that reliance on the standard contractual clauses – a standard form of contract approved by the European
Commission as an adequate personal data transfer mechanism alone may not necessarily be sufficient in all circumstances
and that transfers must be assessed on a case-by-case basis. On October 7, 2022, President Biden signed an Executive Order
on ‘Enhancing Safeguards for United States Intelligence Activities’ which introduced new redress mechanisms and binding
safeguards to address the concerns raised by the CJEU in relation to data transfers from the EEA to the United States and
which formed the basis of the new EU-US Data Privacy Framework (“DPF”), as released on December 13, 2022. The
European Commission adopted its Adequacy Decision in relation to the DPF on July 10, 2023, rendering the DPF effective
as a GDPR transfer mechanism to U.S. entities self-certified under the DPF. The DPF also introduced a new redress
mechanism for EU citizens which addresses a key concern in the previous CJEU judgments and may mean transfers under
standard contractual clauses are less likely to be challenged in future. We currently rely on the EU standard contractual
clauses to transfer personal data outside the EEA and the UK, including to the United States, with respect to both intragroup
and third-party transfers. We expect the existing legal complexity and uncertainty regarding international personal data
transfers to continue. In particular, we expect the DPF Adequacy Decision to be challenged and international transfers to
the United States and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators. As
a result, we may have to make certain operational changes and we will have to implement revised standard contractual
clauses and other relevant documentation for existing data transfers within required time frames.
Further, since January 1, 2021, companies have to comply with the GDPR and also the UK data protection regime,
which imposes separate but similar obligations to those under the GDPR. The UK GDPR mirrors the fines under the
GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover. On October 12, 2023, the UK
Extension to the DPF came into effect (as approved by the UK Government), as a UK GDPR data transfer mechanism to
U.S. entities self-certified under the UK Extension to the DPF. As we continue to expand into other foreign countries and
jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
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Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other
legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner
from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.
Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other
third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded,
could result in additional cost and liability to us, damage our reputation, and adversely affect our business and results of
operations.
If we cannot compete successfully for market share against other drug companies, we may not achieve sufficient
product revenue and our business will suffer.
The market for our drugs and drug candidates is characterized by intense competition and rapid technological
advances. NERLYNX competes, and alisertib and any of our other drug candidates that receives FDA or foreign regulatory
approval will compete, with a number of existing and future drugs and therapies developed, manufactured and marketed by
others. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a
specific indication than our products or may offer comparable performance at a lower cost. In addition, a large number of
companies are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are
targeting. If our products fail to capture and maintain market share, we may not achieve sufficient product revenue and our
business will suffer.
We compete against fully integrated pharmaceutical companies and smaller companies that are collaborating with
larger pharmaceutical companies, academic institutions, government agencies and other public and private research
organizations. Many of these competitors have oncology compounds that have already been approved or are in
development. In addition, many of these competitors, either alone or together with their collaborative partners, operate
larger research and development programs or have substantially greater financial resources than we do, as well as
significantly greater experience in the following:
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developing drugs;
undertaking pre-clinical testing and clinical trials;
obtaining FDA and other foreign regulatory approvals of drugs;
formulating and manufacturing drugs; and
launching, marketing and selling drugs.
We may be exposed to liability claims associated with the use of hazardous materials and chemicals.
Our research and development activities may involve the controlled use of hazardous materials and chemicals.
Although we believe that our safety procedures for using, storing, handling and disposing of these materials comply with
federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or contamination
from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability
could materially adversely affect our business, financial condition and results of operations. In addition, the federal, state
and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous or radioactive
materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our
business, financial condition and results of operations.
The loss of one or more key members of our management team could adversely affect our business.
Our success and future growth depend, to a significant degree, on the skills and continued services of our
management team, in particular Alan H. Auerbach, our Chief Executive Officer and President. If Mr. Auerbach resigns or
becomes unable to continue in his present role and is not adequately replaced, our business operations could be materially
adversely affected. We do not maintain “key man” life insurance for Mr. Auerbach.
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If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed.
As of December 31, 2023, we had 185 employees. Our future success depends on our ability to identify, attract, hire,
train, retain and motivate other highly skilled scientific, technical, marketing, managerial and financial personnel. Although
we will seek to hire and retain qualified personnel with experience and abilities commensurate with our needs, there is no
assurance that we will succeed despite their collective efforts. Competition for personnel is intense, and any failure to
attract and retain the necessary technical, marketing, managerial and financial personnel would have a material adverse
effect on our business, prospects, financial condition and results of operations.
We may not successfully manage our growth.
Our success will depend upon the expansion of our operations and our ability to successfully manage our growth.
Our future growth, if any, may place a significant strain on our management and on our administrative, operational and
financial resources. Our ability to manage our growth effectively will require us to implement and improve our operational,
financial and management systems and to expand, train, manage and motivate our employees. These demands may require
the hiring of additional management personnel and the development of additional expertise by management. Any increase
in resources devoted to research and product development without a corresponding increase in our operational, financial
and management systems could have a material adverse effect on our business, financial condition and results of operations.
We may be adversely affected by the current economic environment.
Our ability to attract and retain collaborators or customers, invest in and grow our business and meet our financial
obligations depends on our operating and financial performance, which, in turn, is subject to numerous factors, including
the prevailing economic conditions and financial, business and other factors beyond our control, such as the rate of
unemployment, the number of uninsured persons in the United States and inflationary pressures. We cannot anticipate all
the ways in which the current economic climate and financial market conditions could adversely impact our business.
We are exposed to risks associated with reduced profitability and the potential financial instability of our
collaborators or customers, many of which may be adversely affected by volatile conditions in the financial markets. For
example, unemployment and underemployment, and the resultant loss of insurance, may decrease the demand for
healthcare services and pharmaceuticals. If fewer patients are seeking medical care because they do not have insurance
coverage, our collaboration partners or customers may experience reductions in revenues, profitability and/or cash flow that
could lead them to modify, delay or cancel orders for our products once commercialized. If collaboration partners or
customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be
able to pay, or may delay payment of, accounts receivable that are owed to us. This, in turn, could adversely affect our
financial condition and liquidity. In addition, if economic challenges in the United States result in widespread and
prolonged unemployment, either regionally or on a national basis, a substantial number of people may become uninsured or
underinsured. To the extent economic challenges result in fewer individuals pursuing or being able to afford our products
once commercialized, our business, results of operations, financial condition and cash flows could be adversely affected.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to
product liability lawsuits and product recalls.
The testing and marketing of medical products entail an inherent risk of product liability. If we cannot successfully
defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit
commercialization of our products. If we are unable to obtain sufficient product liability insurance at an acceptable cost to
protect against potential product liability claims, the commercialization of pharmaceutical products we develop, alone or
with collaborators, could be prevented or inhibited.
Product recalls may be issued at our discretion, or at the discretion of government agencies and other entities that
have regulatory authority for pharmaceutical sales. Any recall of NERLYNX could materially adversely affect our business
by rendering us unable to sell NERLYNX for some time and by adversely affecting our reputation.
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We may in the future engage in strategic transactions that increase our capital requirements, dilute our stockholders,
cause us to incur debt or assume contingent liabilities and subject us to other risks.
We actively evaluate various strategic transactions on an ongoing basis, including licensing or otherwise acquiring
complementary products, technologies or businesses. Any potential future acquisitions or in-licensing transactions entail
numerous risks, including but not limited to:
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risks associated with satisfying the closing conditions relating to such transactions and realizing their
anticipated benefits;
increased operating expenses and cash requirements;
difficulty integrating acquired technologies, products, operations, and personnel with our existing business;
the potential disruption of our historical core business;
diversion of management’s attention in connection with both negotiating the acquisition or license and
integrating the business, technology or product;
retention of key employees;
difficulties in assimilating employees and corporate cultures of any acquired companies;
uncertainties in our ability to maintain key business relationships of any acquired companies;
strain on managerial and operational resources;
difficulty implementing and maintaining effective internal control over financial reporting at businesses that
we acquire, particularly if they are not located near our existing operations;
exposure to unanticipated liabilities of acquired companies or companies in which we invest;
the potential need to write down assets or recognize impairment charges; and
potential costly and time-consuming litigation, including stockholder lawsuits.
As a result of these or other problems and risks, businesses, technologies or products we acquire or invest in or
obtain licenses to may not produce the revenues, earnings or business synergies that we anticipated, acquired or licensed
drug candidates or technologies may not result in regulatory approvals, and acquired or licensed products may not perform
as expected. As a result, we may incur higher costs and realize lower revenues than we had anticipated. We cannot assure
you that any acquisitions or investments we have made or may make in the future will be completed or that, if completed,
the acquired business, licenses, investments, products, or technologies will generate sufficient revenue to offset the negative
costs or other negative effects on our business. Failure to effectively manage our growth through acquisition or in-licensing
transactions could adversely affect our growth prospects, business, results of operations, financial condition, and cash flow.
In addition, we may spend significant amounts, issue dilutive securities, assume or incur significant debt obligations,
incur large one-time expenses and acquire intangible assets or goodwill in connection with acquisitions and in-licensing
transactions that could result in significant future amortization expense and write-offs. Moreover, we may not be able to
locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or
products that may be important to the development of our business. Other pharmaceutical companies, many of which may
have substantially greater financial, marketing and sales resources, compete with us for these opportunities. Even if
appropriate opportunities are available, we may not be able to successfully identify them or we may not have the financial
resources necessary to pursue them, and if pursued, we may be unable to structure and execute transactions in the
anticipated timeframe, or at all.
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Risks Related to our Intellectual Property
We depend significantly on in-licensed intellectual property, and the termination of these licenses would significantly
harm our business and future prospects.
We depend significantly on our license agreements with Pfizer and Takeda, respectively. Each of these license
agreements may be terminated if we materially breach the agreement and fail to cure our breach during an applicable cure
period. Our failure to use commercially reasonable efforts to develop and commercialize licensed products in applicable
specified major market countries would constitute a material breach of the applicable license agreement. The applicable
license agreement may also be terminated if we become involved in bankruptcy, receivership, insolvency or similar
proceedings. In the event either license agreement is terminated, we will lose all of our rights to develop and commercialize
the drug candidates covered by such license, which would significantly harm our business and future prospects.
Our proprietary rights may not adequately protect our intellectual property and potential products, and if we cannot
obtain adequate protection of our intellectual property and potential products, we may not be able to successfully market
our potential products.
Our commercial success will depend in part on obtaining and maintaining intellectual property protection for our
products, formulations, processes, methods and other technologies. We will only be able to protect these technologies and
products from unauthorized use by third parties to the extent that valid and enforceable intellectual property rights,
including patents, cover them, or other market exclusionary rights and regulatory exclusivity periods apply. The patent
positions of pharmaceutical companies, like ours, can be highly uncertain and involve complex legal and factual questions
for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in
such companies’ patents has emerged to date in the United States. The general environment for pharmaceutical patents
outside the United States also involves significant uncertainty. Accordingly, we cannot predict the breadth of claims that
may be allowed (if any are allowed at all) or enforced, or that the scope of these patent rights could provide a sufficient
degree of future protection that could permit us to gain or keep our competitive advantage with respect to these products
and technology. For example, we cannot predict:
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the degree and range of protection any patents will afford us against competitors, including whether third
parties will find ways to make, use, sell, offer to sell or import competitive products without infringing our
patents;
if and when patents will issue;
• whether or not others will obtain patents claiming inventions similar to those covered by our patents and
patent applications; or
• whether we will need to initiate litigation or administrative proceedings in connection with patent rights,
which may be costly whether we win or lose, and the outcome of which is unpredictable.
The patents we have licensed may be challenged by third parties and could be invalidated or rendered unenforceable.
There is no guarantee that a court would agree that any of the patents we have licensed, and which are currently in force,
are valid or enforceable. Challenges to the breadth or strength of protection provided by any patents we have licensed, or
patent applications we may pursue in the future, with respect to any of our current or future drug candidates or products,
could threaten our ability to commercialize any of our current or future drug candidates or products. Changes in either the
patent laws or in the interpretations of patent laws in the United States or other countries may diminish the value of our
intellectual property.
The patents we have licensed may be affected by certain provisions of the America Invents Act (“AIA”), enacted in
2011. For example, under the AIA, members of the public may seek to challenge an issued patent by petitioning the U.S.
Patent and Trademark Office (“USPTO”) to institute a post grant proceeding, such as a Post Grant Review (“PGR”), or
Inter Parties Review (“IPR”). Once a post grant proceeding is instituted, the USPTO may find grounds to revoke the
challenged patent or specific claims therein. A similar procedure (known as a patent opposition) has existed in Europe for
many years, and we have defended, and continue to defend, our European patents in certain of those proceedings. We
cannot predict whether any other licensed patents will become the subject of a post grant proceeding or patent opposition. If
a significant product patent is successfully challenged in a post grant proceeding or patent opposition, it may be revoked,
which would have a serious negative impact on our ability to maintain exclusivity in the marketplace for our commercial
products affected by such revocation and could adversely affect our future revenues and profitability.
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In addition, others may independently develop similar or alternative products and technologies that may be outside
the scope of our intellectual property. Furthermore, others may have invented technology claimed by our patents before we
or our licensors did so, and they may have filed patents claiming such technology before we did so, weakening our ability
to obtain and maintain patent protection for such technology. Should third parties obtain patent rights to similar products or
technology, this may have an adverse effect on our business.
We may also rely on trade secrets to protect our technology, especially where we do not believe patent protection is
appropriate or obtainable. Trade secrets, however, are difficult to protect. While we believe that we will use reasonable
efforts to protect our trade secrets, our own or our strategic partners’ employees, consultants, contractors or advisors may
unintentionally or willfully disclose our information to competitors. Such disclosure could adversely affect our ability to
prevent further disclosures of our trade secrets. We seek to protect this information, in part, through the use of non-
disclosure and confidentiality agreements with employees, consultants, advisors and others. These agreements may be
breached, and we may not have adequate remedies for a breach. In addition, we cannot ensure that those agreements will be
enforceable, provide adequate protection for our trade secrets, know-how or other proprietary information, or prevent their
unauthorized use or disclosure.
To the extent that consultants or key employees apply technological information independently developed by them
or by others to our potential products, disputes may arise as to the proprietary rights in such information, which may not be
resolved in our favor. Consultants and key employees who work with our confidential and proprietary technologies are
required to assign all intellectual property rights in their discoveries to us. However, these consultants or key employees
may terminate their relationship with us, and we cannot preclude them indefinitely from dealing with our competitors. If
our trade secrets become known to competitors with greater experience and financial resources, the competitors may copy
or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies. If
we were to prosecute a claim that a third party had illegally obtained and was using our trade secrets, it could be expensive
and time consuming and the outcome could be unpredictable. In addition, courts outside the United States are sometimes
less willing to protect trade secrets than courts in the United States. Moreover, if our competitors independently develop
equivalent knowledge, we would lack any legal or contractual claim to prevent them from using such information, and our
business could be harmed.
Additionally, our products may face generic or biosimilar competition before patent exclusivity expires in various
jurisdictions. To date, we have been involved in litigation in the United States against the one ANDA applicant that
submitted a Paragraph IV certification directed to our patents (Sandoz), and also in China against parties that filed
applications and/or received approval for generic versions of Nerlynx. In order to eliminate the burden, expense, distraction
and uncertainties of litigation, we entered a settlement and license agreement in 2022 that would permit Sandoz to begin
selling a generic version of neratinib in the United States on or around December 8, 2030.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting, and defending our intellectual property rights in all countries throughout the world would be
prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less
extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property
rights to the same extent as federal and state laws in the United States. For instance, some jurisdictions, such as China and
India, do not consider methods of treating the human body as patentable. Further, licensing partners may not prosecute
patents in certain jurisdictions in which we may obtain commercial rights, thereby precluding the possibility of later
obtaining patent protection in these countries. Consequently, we may not be able to prevent third parties from practicing our
inventions in all countries outside the United States, or from selling or importing products made using our inventions in and
into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not
obtained patent protection to develop their own products and may also export infringing products to territories where we
have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our
products, and our intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in
foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the
enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to biotechnology
products, which could make it difficult for us to stop the infringement of our intellectual property rights or marketing of
competing products in violation of our proprietary rights generally. Proceedings to enforce our proprietary rights in foreign
jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other
aspects of our business, could put our proprietary rights at risk of being invalidated or interpreted narrowly, could put our
patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in
any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.
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Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a
significant commercial advantage from the intellectual property that we develop or license.
Certain fees, including maintenance, renewal, annuity, and other governmental fees, on patents and/or applications
are periodically due to be paid to the USPTO and various foreign governmental patent agencies at certain stages over the
lifetime of the patents and/or applications. We have systems in place and employ third-party firms to monitor due dates and
pay these fees. We also employ law firms and other reputable professionals to assist us in the event an inadvertent lapse can
be cured by payment of a late fee or by other means according to the applicable jurisdictional laws and rules. Non-
compliance, in certain circumstances, can result in abandonment or lapse of the patent (or patent application) and result in a
partial or even complete loss of patent rights in the particular jurisdiction. Our competitors might be able to enter the market
under such circumstances, resulting in a possible material adverse effect on our business.
Our ability to commercialize our products will depend on our ability to sell such products without infringing the patent
or proprietary rights of third parties. If we are sued for infringing intellectual property rights of third parties, it will be
costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our
business.
Our ability to commercialize our products will depend on our ability to sell such products without infringing the
patents or other proprietary rights of third parties. Third-party intellectual property rights in our field are complicated and
continuously evolving. The coverage of patents is subject to interpretation by the courts, and this interpretation is not
always consistent.
Other companies may have or may acquire intellectual property rights that could be enforced against us. If they do
so, we may be required to alter our products, formulations, processes, methods or other technologies, obtain a license,
assuming one can be obtained, or cease our product-related activities. Holders of such intellectual property rights are not
required to give us a license if one were required. If our products or technologies infringe the intellectual property rights of
others, such parties could bring legal action against us or our licensors or collaborators claiming damages and seeking to
enjoin any activities that they believe infringe their intellectual property rights. If we are sued for patent infringement, we
would need to demonstrate that our products or methods of use either do not infringe the patent claims of the relevant
patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving the invalidity of a
patent is particularly difficult in the United States, since it requires a showing of clear and convincing evidence to overcome
the presumption of validity enjoyed by issued patents. If we are found to infringe a third-party patent, we may need to cease
the commercial sale of our products.
Because patent applications can take many years to issue, there may be currently pending applications unknown to
us or reissue applications that may later result in issued patents upon which our products or technologies may infringe.
There could also be existing patents of which we are unaware that our products or technologies may infringe. In addition, if
third parties file patent applications or obtain patents claiming products or technologies also claimed by us in pending
applications or issued patents, we may have to participate in interference proceedings in the USPTO, to determine priority
of invention. If third parties file IPR or PGR petitions in the USPTO to invalidate our issued U.S. patents, we may have to
participate in such proceedings to defend such patents. If third parties file oppositions in foreign countries, we may also
have to participate in opposition proceedings in foreign tribunals to defend the patentability of our filed foreign patent
applications. The outcome of such proceedings in the United States and foreign countries is unpredictable. Some of our
competitors may be able to sustain the costs of such proceedings and of complex patent litigation more effectively than we
can because they have substantially greater resources. Additionally, any uncertainties resulting from the initiation and
continuation of any such proceedings or litigation may have a material adverse effect on our ability to raise the funds
necessary to continue our operations.
If a third-party claims that we infringe its intellectual property rights, it could cause our business to suffer in a
number of ways, including:
• we may become involved in time-consuming and expensive litigation, even if the claim is without merit, the
third party’s patent is ultimately invalid or unenforceable, or we are ultimately found to have not infringed;
• we may become liable for substantial damages for past infringement if a court decides that our technologies
infringe upon a third party’s patent;
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• we may be ordered by a court to stop making, using, selling, offering for sale, importing or licensing our
products or technologies without a license from a patent holder, and such license may not be available on
commercially acceptable terms, if at all, or may require us to pay substantial royalties or grant cross-licenses
to our patents; and
• we may have to redesign our products so that they do not infringe upon others’ patent rights, which may not
be possible or could require substantial investment and/or time.
If any of these events occur, our business could suffer, and the market price of our common stock may decline.
As is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously
employed at other companies in these industries, including our competitors or potential competitors. We may become
subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other
proprietary information of their former employers, although no such claims are pending. Litigation may be necessary to
defend against these claims. Even if we successfully defend any such claims, we may incur substantial costs in such
defense, and our management may be distracted by these claims.
Risks Related to Owning our Common Stock
The price of our common stock could be subject to volatility related or unrelated to our operations.
The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations
in response to various factors, some of which are beyond our control. These factors include:
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the level of sales of NERLYNX;
the overall demand for NERLYNX, including the customer ordering and discontinuation patterns;
actual or anticipated quarterly variation in our results of operations or the results of our competitors;
announcements regarding results of any clinical trials relating to our drug candidates;
announcements of medical innovations or new products by our competitors;
developments involving our sublicensees;
issuance of new or changed securities analyst reports or recommendations for our stock;
developments or disputes concerning our intellectual property or other proprietary rights;
commencement of, or developments in, litigation involving us;
• market conditions in the biopharmaceutical industry;
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timing and announcement of regulatory approvals;
changes in government regulation that affect us or the biopharmaceutical industry more generally;
any future sales of our common stock or other securities in connection with raising additional capital or
otherwise;
any major change to the composition of our board of directors or management; and
general economic conditions and slow or negative growth of our markets.
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The stock market in general, and market prices for the securities of biotechnology companies like ours in particular,
have from time to time experienced volatility that often has been unrelated to the operating performance of the underlying
companies. These broad market and industry fluctuations may adversely affect the market price of our common stock,
regardless of our operating performance.
We have been subject to securities litigation in the past, and volatility in the price of our common stock may subject us to
securities litigation in the future.
In the past, securities class action litigation has often been brought against a company following periods of volatility
in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have
experienced significant stock price volatility in recent years. These types of lawsuits are subject to inherent uncertainties,
and are expensive and time-consuming to investigate, defend and resolve. For instance, in Hsu v. Puma Biotechnology, Inc.,
the plaintiff alleged that we and certain of our executive officers made false or misleading statements and failed to disclose
material adverse facts about our business, operations, prospects and performance in violation of the Exchange Act. In
February 2019, a jury found that three of the four challenged statements were not false and misleading, and thus found in
the defendants' favor on those claims. In December 2021, the Court issued an order preliminarily approving the parties'
settlement which provides for two installment payments by us of approximately $27.1 million each, which were paid in
January and June 2022. On August 3, 2022, the Court ordered final approval of the parties’ settlement and dismissed the
case, and the matter is now concluded. Any other litigation to which we are a party may similarly divert our management’s
attention and financial and other resources or result in an onerous or unfavorable judgment that may not be reversed upon
appeal or in payments of substantial monetary damages or fines. Additionally, we may decide to settle such lawsuits on
similarly unfavorable terms, which could adversely affect our business, financial condition, results of operations or stock
price.
Issuance of stock to fund our operations may dilute your investment and reduce your equity interest.
We may need to raise capital in the future to fund the development of our drug candidates or for other purposes. Any
equity financing may have a significant dilutive effect to stockholders and a material decrease in our existing stockholders’
equity interest in us. In November 2021, we also entered into an Open Market Sales AgreementSM with Jefferies LLC
pursuant to which we may offer and sell shares of common stock having an aggregate offering price of up to $50.0 million
from time to time, in any method that is deemed to be an “at the market” offering as defined in Rule 415(a)(4) of the
Securities Act. Equity financing, if obtained, could result in substantial dilution to our existing stockholders. At its sole
discretion, our board of directors may issue additional securities without seeking stockholder approval, and we do not know
when we will need additional capital or, if we do, whether it will be available to us.
Upon the exercise of our outstanding warrant, holders of our common stock may experience immediate dilution and the
market price of our common stock may be adversely affected.
Our founder, Chief Executive Officer and President, Alan H. Auerbach, holds a warrant for 2,116,250 shares with an
exercise price of $16.00 per share. If any portion of the outstanding warrant is exercised for shares of our common stock
when the market price is higher than the exercise price prior to its expiration in October 2026, our stockholders may
experience immediate dilution and the market price of our common stock may be adversely affected.
We incur increased costs and demands upon management as a result of complying with the laws and regulations
affecting public companies.
As a public company, we incur significant legal, accounting and other expenses, including costs associated with
public company reporting requirements. We also incur costs associated with current corporate governance requirements,
including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, as amended (the
“Sarbanes-Oxley Act”), as well as rules implemented by the SEC, or NASDAQ or any stock exchange or inter-dealer
quotations system on which our common stock may be listed in the future. The expenses incurred by public companies for
reporting and corporate governance purposes have increased dramatically in recent years. These rules and regulations
increase our legal and financial compliance costs and make some activities more time-consuming and costly.
These rules and regulations may also make it difficult and expensive for us to maintain the appropriate level of
director and officer insurance for a company with our market capitalization. If we are unable to maintain an appropriate
level of such insurance, we may be required to accept reduced policy limits and coverage or larger deductible limits. As a
result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our
executive officers.
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If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial
statements could be impaired, which could harm our operating results, our ability to operate our business and investors’
views of us.
We are subject to the rules and regulations of the SEC, including those rules and regulations mandated by the
Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act requires public companies to include in their annual report a
statement of management’s responsibilities for establishing and maintaining adequate internal control over financial
reporting, together with an assessment of the effectiveness of those internal controls. Section 404 also requires the
independent auditors of certain public companies to attest to, and report on, this management assessment. Ensuring that we
have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial
statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Our failure to
maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could
have a material adverse effect on our business. We could lose investor confidence in the accuracy and completeness of our
financial reports, which could have an adverse effect on the price of our common stock. In addition, if our efforts to comply
with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies
due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may
be harmed.
If securities or industry analysts do not publish, or cease publishing, research reports about us, our business or our
market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume
could decline.
The trading market for our common stock is and will be influenced by whether industry or securities analysts publish
research and reports about us, our business, our market or our competitors and, if any analysts do publish such reports, what
they publish in those reports. We may not obtain analyst coverage in the future. Any analysts who do cover us may make
adverse recommendations regarding our stock, adversely change their recommendations from time to time, and/or provide
more favorable relative recommendations about our competitors. If any analyst who may cover us in the future were to
cease coverage of our company or fail to regularly publish reports on us, or if analysts fail to cover us or publish reports
about us at all, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume
to decline.
We do not foresee paying cash dividends in the foreseeable future.
We currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in
the foreseeable future, and the payment of dividends is also restricted under our Note Purchase Agreement with
Athyrium. As a result, you should not rely on an investment in our securities if you require dividend income. Capital
appreciation, if any, of our shares may be your sole source of gain for the foreseeable future. Moreover, you may not be
able to re-sell your shares in us at or above the price you paid for them.
Our ability to use our net operating losses and research and development credit carryforwards to offset future taxable
income may be subject to certain limitations.
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), a
corporation that undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity
ownership over a three year period, is subject to limitations on its ability to utilize its pre-change net operating losses
(“NOLs”), and its research and development credit carryforwards to offset future taxable income. Our existing NOLs and
research and development credit carryforwards may be subject to limitations arising from previous ownership changes, and
if we undergo an ownership change, our ability to utilize NOLs and research and development credit carryforwards could
be further limited by Sections 382 and 383 of the Code. Future changes in our stock ownership, some of which might be
beyond our control, could result in an ownership change under Sections 382 and 383 of the Code. Furthermore, our ability
to utilize NOLs and research and development credit carryforwards of any companies we may acquire in the future may be
subject to limitations, in accordance with Sections 382 and 383 of the Code. For these reasons, in the event we experience a
change of control, we may not be able to utilize a material portion of the NOLs and research and development credit
carryforwards, even if we attain profitability.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We have integrated cybersecurity risk management into our broader risk management framework to promote a
company-wide culture of cybersecurity risk management. This integration is intended to make cybersecurity
considerations an integral part of our decision-making processes. Our cybersecurity risk management program is integrated
into our overall enterprise risk management program, and shares common methodologies, reporting channels and
governance processes that apply across the enterprise risk management program to other legal, compliance, strategic,
operational, and financial risk areas.
Our cybersecurity risk management program includes:
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risk assessments designed to help identify material cybersecurity risks to our critical systems, information,
products, services, and our broader enterprise information technology environment;
a management team responsible for managing (1) our cybersecurity risk assessment processes, (2) our
security controls, and (3) our response to cybersecurity incidents;
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our
security controls;
cybersecurity awareness training of our employees, incident response personnel, and senior management;
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
a third-party risk management process for service providers, suppliers, and vendors.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity
incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business
strategy, results of operations, or financial condition.
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit
Committee (the “Committee”) oversight of cybersecurity and other information technology risks. The Committee oversees
management’s implementation of our cybersecurity risk management program.
The Committee receives periodic reports from management on our cybersecurity risks. In addition, management
updates the Committee, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser
impact potential.
The Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full
Board also receives briefings from management on our cyber risk management program. Board members receive
presentations on cybersecurity topics from internal security staff or external experts as part of the Board’s continuing
education on topics that impact public companies. Our management team, including our Chief Financial Officer, Senior
Director of Information Technology and Senior Vice President, Quality Assurance, is responsible for assessing and
managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity
risk management program and supervises both our internal technology and quality assurance compliance personnel and our
retained external cybersecurity consultants. Our management team has experience in risk management as well as in the
technology and finance industries, equipping them to oversee cybersecurity risks effectively.
Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents
through various means, which may include briefings from internal security personnel; threat intelligence and other
information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts
and reports produced by security tools deployed in the information technology environment.
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ITEM 2. PROPERTIES
We lease approximately 65,656 square feet of office space in the building located at 10880 Wilshire Boulevard, Los
Angeles, California for use as our corporate headquarters. This lease commenced in December 2011 and over time has been
amended to add rentable square footage. In February 2019, we entered into a long-term sublease agreement whereby we
sublease 12,429 square feet of this office space to a third party subtenant. Also, in August 2023, we entered into a long-
term sublease agreement whereby we sublease 13,916 square feet of this office space to a third party subtenant. The rental
amounts payable to us pursuant to both subleases increase approximately 3% and terminate in March 2026. We also lease
approximately 29,470 square feet of office space in the building located at 701 Gateway Blvd, South San Francisco,
California. The lease for the South San Francisco facility commenced in October 2012. The lease will terminate around
March 2026, with an option to extend for an additional five-year term. We believe that our existing office space, along with
the additional office space in South San Francisco, is adequate to meet current and anticipated future requirements and that
additional or substitute space will be available as needed to accommodate any expansions that our operations require.
ITEM 3. LEGAL PROCEEDINGS
Legal Malpractice Suit
On September 17, 2020, the Company filed a lawsuit against Hedrick Gardner Kincheloe & Garofalo, L.L.P. and
David L. Levy, the attorneys who previously represented the Company in Eshelman v. Puma Biotechnology, Inc., et al. in
the Superior Court of Mecklenburg County, North Carolina. The Company is alleging legal malpractice based on the
defendants’ negligent handling of the defense of the Company in Eshelman v. Puma Biotechnology, Inc., et al. The
Company is seeking recovery of the entire amount awarded in Eshelman v. Puma Biotechnology, Inc., et al. and all legal
fees and expenses incurred in appealing from the judgment and retrying the damages phase of the trial. On November 23,
2020, the defendant filed an answer to the complaint denying the allegations of negligence. On August 19, 2022, the
Company filed a voluntary dismissal of the legal malpractice action, without prejudice, to allow the Eshelman v. Puma
Biotechnology, Inc., et al. to conclude before proceedings. On June 2, 2023, the Company re-filed the lawsuit against
Hedrick Gardner Kincheloe & Garofalo, L.L.P. and David L. Levy, the attorneys who previously represented the Company
in Eshelman v. Puma Biotechnology, Inc., et al. in the Superior Court of Mecklenburg County, North Carolina. On August
22, 2023, the defendants filed motions to dismiss the case. These motions were presented at a hearing on February 20,
2024, but there has yet to be a ruling.
Mfolozi Dlamini, individually and on behalf of all others similarly situated v. Puma Biotechnology, Inc.
On May 26, 2023, Mfolozi Dlamini filed a Class Action Complaint against the Company in the United States
District Court for the Central District of California, alleging injuries as a result of unauthorized disclosure of certain
individuals’ personally identifiable information in connection with a data security incident discovered by the Company in
June 2022. On September 21, 2023, the plaintiff and the Company agreed to dismiss the action with prejudice.
Patent-Related Proceedings
AstraZeneca Litigation
On September 22, 2021, the Company filed suit against AstraZeneca Pharmaceuticals, LP, AstraZeneca AB, and
AstraZeneca PLC for infringement of United States Patent Nos. 10,603,314 (“the ’314 patent”) and 10,596,162 (“the ’162
patent”) (Puma Biotechnology, Inc. et al. v. AstraZeneca Pharmaceuticals LP et al., 1:21CV01338 (D. Del. Sep. 22,
2021)). The Company’s complaint alleges that AstraZeneca’s commercial manufacture, use, offer for sale, sale,
distribution, and/or importation of Tagrisso® (osimertinib) products for the treatment of gefitinib and/or erlotinib-resistant
non-small cell lung cancer infringes the ’314 and ’162 patents. The Company is an exclusive licensee of the ’314 and ’162
patents under the Pfizer Agreement. Wyeth is a co-plaintiff. Plaintiffs seek a judgment that AstraZeneca’s product infringes
the asserted patents and an award of monetary damages in an amount to be proven at trial. AstraZeneca AB and
AstraZeneca Pharmaceuticals LP filed an answer and counterclaims on November 5, 2021, including claims challenging the
asserted patents as not infringed and/or invalid, and accusing plaintiffs of unclean hands and patent misuse. The parties
stipulated to dismiss AstraZeneca PLC as a defendant and Pfizer as a Counterclaim Defendant on December 10, 2021,
which the Court so ordered on December 13, 2021. The Company filed its answer to AstraZeneca’s counterclaims on
December 17, 2021, denying those claims. The case was reassigned to visiting Judge Matthew Kennelly of the Northern
District of Illinois. A Markman Hearing was conducted on March 17, 2023, and the Court issued its claim construction
decision on March 29, 2023. Fact discovery closed on May 19, 2023, and expert discovery closed on November 17, 2023.
The parties recently exchanged motions for summary judgment on certain issues and also Daubert challenges to certain
expert opinions. A jury trial is scheduled to begin on May 13, 2024.
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Acebright China Litigation
On January 18, 2022, Shanghai Acebright Pharmaceuticals Group Co., Ltd. (“Acebright”) filed an ANDA with the
National Medical Products Administration in China (“NMPA”) seeking approval to market a generic version of the
Company’s NERLYNX® (neratinib) tablet, 40mg in China. Acebright seeks approval prior to the expiration of three patents
listed on the China Patent Information Registration Platform for Marketed Drugs (“Chinese Orange Book”), namely,
Chinese Patent Nos. ZL201410082103.7, ZL201080060546.6, and ZL200880118789.3 (the “'789 patent”, and collectively,
the “NERLYNX® Patents”), alleging in a Type 4.2 patent declaration that its generic version of NERLYNX does not fall
within the scope of the claims of NERLYNX® Patents listed in the Chinese Orange Book. The patent declaration of
Acebright was published in the Chinese Orange Book on January 19, 2022. On March 2, 2022, the Company filed petitions
with the China National Intellectual Property Administration (“CNIPA”) and requested administrative determination that
Acebright’s generic neratinib tablet falls within the scope of the claims of NERLYNX® Patents listed in the Chinese
Orange Book. The Company’s request for administrative determination was accepted by CNIPA on March 18, 2022. The
Company has notified NMPA of the acceptance of the request for administrative determination for NMPA to institute a stay
of Acebright’s ANDA for nine months. On July 11, 2022, CNIPA decided that claims 5 and 6 of Patent No.
ZL200880118789.3 are not eligible for registration in the Chinese Orange Book on the ground that these two
pharmaceutical method-of-use claims fall in the scope of “patents of crystalline forms,” which are not eligible for listing in
the Chinese Orange Book. On September 9, 2022, CNIPA decided that the generic drug in Acebright’s ANDA does not fall
within the protection scope of claims 1, 3, 5 and 6 of Patent No. ZL201410082103.7 and claims 1-4, 7 and 9-13 of Patent
No. ZL201080060546.6. The three CNIPA administrative decisions on NERLYNX® Patents have lifted the stay of
Acebright’s ANDA by NMPA. The Company has appealed each CNIPA administrative decision in January 2023 at the
Beijing Intellectual Property Court (“BJIPC”). The three appeals were accepted by BJIPC on February 20, 2023. The
Company also filed three civil complaints based on the three NERLYNX® Patents against Acebright with the BJIPC in July
2022 and requested court determination that Acebright’s generic neratinib tablet falls within the scope of the claims of
NERLYNX® Patents. On May 6, 2023, the Company withdrew two civil lawsuits and two appeals in relation to Chinese
Patent Nos. ZL201410082103.7 and ZL201080060546.6 at the BJIPC. On May 24, 2023, the BJIPC accepted the
Company’s withdrawal request. On July 24, 2023, the Company withdrew the remaining one civil lawsuit and one appeal
in relation to Chinese Patent No. ZL200880118789.3 at the BJIPC. On August 15, 2023, the BJIPC accepted the
Company’s withdrawal request. On September 12, 2023, the NMPA approved Acebright’s ANDA to market a generic
version of the Company’s NERLYNX® in China with the approval number of GuoYaoZhunZi H20234141.
On December 28, 2023, the Company filed a civil lawsuit against Acebright for infringement of the '789 patent
under Article 11 of the Chinese Patent Law before Jiangsu Nanjing Intermediate People’s Court. The Company’s complaint
alleges that Acebright’s offer for sale of a generic version of the Company’s NERLYNX® product infringes the '789 patent.
The Company seeks a judgment that Acebright’s product infringes the '789 patent and Acebright’s act of offer for sale shall
be enjoined. On January 2, 2024, Jiangsu Nanjing Intermediate People’s Court accepted the civil complaint.
Aosaikang China Litigation
On November 17, 2022, Jiangsu Aosaikang Pharmaceutical Co. Ltd. (“Aosaikang”) filed an ANDA with NMPA in
China seeking approval to market a generic version of the Company’s NERLYNX®. The ANDA application No. is
CYHS2202006. Aosaikang made Type 4.2 declarations against the four Orange Book Patents ZL201410082103.7,
ZL201080060546.6, ZL200880118789.3 and ZL201710057547.9, alleging that its generic version of NERLYNX does not
fall within the scope of the claims of the Orange Book patents. Aosaikang also alleged that Patents ZL200880118789.3 and
ZL201710057547.9 are not eligible for Chinese Orange Book listing.
On December 28, 2022, the Company submitted four Article 76 petitions against the Aosaikang ANDA with the
CNIPA and requested administrative determination that Aosaikang’s generic neratinib tablet falls within the scope of the
claims of the four Orange Book patents. On January 6, 2023, the CNIPA accepted the Company’s request for
administrative determination in relation to Patent Nos. ZL201410082103.7 and ZL201080060546.6. Also on January 6,
2023, the CNIPA declined to accept the Company’s request for administrative determination in relation to Patent Nos.
ZL200880118789.3 and ZL201710057547.9, alleging that the listed claims are not eligible for registration in the Chinese
Orange Book on the ground that these pharmaceutical method-of-use claims fall in the scope of “patents of crystalline
forms,” which are not eligible for listing in the Chinese Orange Book. On January 28, 2023, the Company requested the
NMPA to institute a nine-month stay against Aosaikang ANDA starting from the CNIPA’s acceptance of the Company’s
request for administrative determination. On June 2, 2023, CNIPA decided that the generic drug in Aosaikang’s ANDA
does not fall within the protection scope of claims 1, 3, 5 and 6 of Patent No. ZL201410082103.7 and claims 1-4, 7 and 9-
13 of Patent No. ZL201080060546.6. The two CNIPA administrative decisions on NERLYNX® Patents have lifted the stay
of Aosaikang’s ANDA by NMPA. The Company has the right to appeal each CNIPA administrative decision within six
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months of receiving the decision. The Company also has the right to enforce the four Orange Book patents in civil litigation
before the Chinese court.
Convalife China Litigation
Convalife Pharmaceuticals (Shanghai) Co., Ltd (“Convalife”) filed an ANDA with NMPA in China seeking
approval to market a generic version of the Company’s NERLYNX®. The ANDA application No. is CYHS2202095. On
December 23, 2022, Convalife made Type 4.2 declarations against the four Orange Book Patents ZL201410082103.7,
ZL201080060546.6, ZL200880118789.3 and ZL201710057547.9, alleging that its generic version of NERLYNX does not
fall within the scope of the claims of the Orange Book patents. Convalife also alleged that Patents ZL200880118789.3 and
ZL201710057547.9 are not eligible for Chinese Orange Book listing.
On February 1, 2023, the Company submitted four Article 76 petitions against the Convalife ANDA with the
CNIPA and requested administrative determination that Convalife’s generic neratinib tablet falls within the scope of the
claims of the four Orange Book patents. On February 3, 2023, the CNIPA accepted the Company’s request for
administrative determination in relation to Patent Nos. ZL201410082103.7 and ZL201080060546.6. Also on February 3,
2023, the CNIPA declined to accept the Company’s request for administrative determination in relation to Patent Nos.
ZL200880118789.3 and ZL201710057547.9, alleging that the listed claims are not eligible for registration in the Chinese
Orange Book on the ground that these pharmaceutical method-of-use claims fall in the scope of “patents of crystalline
forms,” which are not eligible for listing in the Chinese Orange Book. On February 24, 2023, the Company requested the
NMPA to institute a nine-month stay against Convalife ANDA starting from the CNIPA’s acceptance of the Company’s
request for administrative determination. On June 2, 2023, CNIPA decided that the generic drug in Convalife’s ANDA does
not fall within the protection scope of claims 1, 3, 5 and 6 of Patent No. ZL201410082103.7 and claims 1-4, 7 and 9-13 of
Patent No. ZL201080060546.6. The two CNIPA administrative decisions on NERLYNX® Patents have lifted the stay of
Convalife’s ANDA by NMPA. The Company has the right to appeal each CNIPA administrative decision within six
months of receiving the decision. The Company also has the right to enforce the four Orange Book patents in civil litigation
before the Chinese court.
Kelun China Litigation
Hunan Kelun Pharmaceutical Co., Ltd. (“Kelun”) filed an ANDA with NMPA in China seeking approval to market a
generic version of the Company’s NERLYNX®. The ANDA application No. is CYHS2300221. On January 28, 2023,
Kelun made Type 4.2 declarations against the four Orange Book Patents ZL201410082103.7, ZL201080060546.6,
ZL200880118789.3 and ZL201710057547.9, alleging that its generic version of NERLYNX does not fall within the scope
of the claims of the Orange Book patents. Kelun also alleged that Patents ZL200880118789.3 and ZL201710057547.9 are
not eligible for Chinese Orange Book listing.
On March 13, 2023, the Company submitted four Article 76 petitions against the Kelun ANDA with the CNIPA and
requested administrative determination that Kelun’s generic neratinib tablet falls within the scope of the claims of the four
Orange Book patents. On March 21, 2023, the CNIPA declined to accept the Company’s request for administrative
determination in relation to Patent Nos. ZL200880118789.3 and ZL201710057547.9, alleging that the listed claims are not
eligible for registration in the Chinese Orange Book on the ground that these pharmaceutical method-of-use claims fall in
the scope of “patents of crystalline forms,” which are not eligible for listing in the Chinese Orange Book. On March 24,
2023, the CNIPA accepted the Company’s request for administrative determination in relation to Patent Nos.
ZL201410082103.7 and ZL201080060546.6. On April 17, 2023, the Company requested the NMPA to institute a nine-
month stay against Kelun’s ANDA starting from the CNIPA’s acceptance of the Company’s request for administrative
determination. On September 14, 2023, the Company withdrew the two requests for administrative determination in
relation to Chinese Patent Nos. ZL201410082103.7 and ZL201080060546.6 at the CNIPA. On September 25, 2023, the
CNIPA accepted the Company’s withdrawal request.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Common Stock
Our common stock has been quoted on the NASDAQ Global Select Market (“NASDAQ”), under the symbol
“PBYI” since January 3, 2017. Prior to January 3, 2017, shares of our common stock had been listed on the New York
Stock Exchange since October 19, 2012.
Record Holders
On February 20, 2024, we had nine holders of record of our common stock. The actual number of stockholders is
greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held
in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose
shares may be held in trust by other entities. We believe approximately 13,100 additional owners held our common stock in
“Street Name” as of February 20, 2024.
Dividends
We have never declared or paid any cash dividends on our capital stock. Currently, we anticipate that we will retain
all available funds for use in the operation and expansion of our business and do not anticipate paying any cash dividends in
the foreseeable future. Any future determination relating to dividend policy will be made at the discretion of our board of
directors and will depend on our future earnings, capital requirements, financial condition, prospects, applicable Delaware
law, which provides that dividends are only payable out of surplus or current net profits, and other factors that our board of
directors deems relevant. Additionally, we are restricted from paying cash dividends under our Note Purchase Agreement
with Athyrium.
Securities Authorized for Issuance Under Equity Compensation Plans
The information included under Item 12 of Part III of this Annual Report, “Securities Authorized for Issuance Under
Equity Compensation Plans,” is hereby incorporated by reference into this Item 5 of Part II of this Annual Report.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
83
Performance Graph
The graph and table below compare the cumulative total return of Puma Biotechnology common stock from
December 31, 2018, through December 31, 2023, with the cumulative total returns on (i) the Nasdaq Biotechnology Index
and (ii) the Nasdaq Composite Index. The comparison assumes investment of $100 on December 31, 2018, in our common
stock and in each index and, for each index, assumes reinvestment of all dividends.
The historical price performance included below is not necessarily indicative of future stock price performance.
Cumulative Total Return
Puma Biotechnology, Inc. Compared to the Nasdaq Biotechnology Index and Nasdaq Composite Index
Puma Biotechnology, Inc. ...............
NASDAQ Biotechnology Index ......
NASDAQ Composite Index ............
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023
21.28
148.72
236.17
100.00
100.00
100.00
43.00
125.11
136.69
50.42
158.17
198.10
20.79
142.19
163.28
14.94
158.20
242.03
The material in this performance graph is not soliciting material, is not deemed filed with the SEC and is not
incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act,
whether made on, before or after the date of this filing and irrespective of any general incorporation language in such filing.
ITEM 6.
[RESERVED]
84
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Annual Report on Form 10-K contains forward-looking statements within the meanings of the federal securities
laws. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially
from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and
uncertainties, see the “Risk Factors” section in Item 1A of Part I of this Form 10-K. We caution the reader not to place
undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Form
10-K. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after
the date of this Form 10-K.
Overview
We are a biopharmaceutical company that develops and commercializes innovative products to enhance cancer care
and improve treatment outcomes for patients. We are currently commercializing NERLYNX, an oral version of neratinib,
for the treatment of certain HER2-positive breast cancers. Additionally, we recently in-licensed and are responsible for
global development and commercialization of alisertib. Alisertib is a selective, small-molecule inhibitor of aurora kinase A
that is designed to disrupt mitosis leading to apoptosis of rapidly proliferating tumor cells that are dependent on aurora
kinase A. Prior to our licensing alisertib from Takeda, alisertib was tested in over 1,300 patients who were treated across 22
company-sponsored trials resulting in a large, well-characterized clinical safety database. Based on information in this
database, we believe alisertib has potential application in the treatment of a range of different cancer types, including
hormone receptor-positive breast cancer, triple-negative breast cancer and small cell lung cancer. We intend to pursue
development of alisertib initially in small cell lung cancer and hormone receptor-positive breast cancer.
NERLYNX is currently approved in the United States for two indications: the extended adjuvant treatment of adult
patients with early stage HER2-overexpressed/amplified breast cancer following adjuvant trastuzumab-based therapy and
for use in combination with capecitabine for the treatment of adult patients with advanced or metastatic HER2-positive
breast cancer who have received two or more prior anti-HER2-based regimens in the metastatic setting.
We currently market NERLYNX in the United States using our direct specialty sales force consisting of
approximately 38 sales specialists. Our sales specialists are supported by an experienced sales leadership team consisting of
regional managers and directors, as well as a commercial team of experienced professionals in marketing, access and
reimbursement, managed markets, marketing research, commercial operations and sales force planning and management.
Outside the United States, we seek to enter into exclusive sub-license agreements with third parties to pursue regulatory
approval, if necessary, and commercialize NERLYNX, if approved. As of December 31 2023, NERLYNX has received
approval for the treatment of certain patients with extended adjuvant or metastatic HER2-positive breast cancer in over
50 countries outside the United States. We are currently party to several sub-licenses in various regions outside the United
States, including Europe (excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia, Israel, South Korea,
and various countries and territories in Central America, South America and Africa.
In September 2022, we entered into an exclusive license agreement with Takeda Pharmaceutical Company Limited
(“Takeda”) to license the worldwide research and development and commercial rights to alisertib. Alisertib is an
investigational, reversible, ATP-competitive inhibitor that is designed to be highly selective for aurora kinase A. Inhibition
of aurora kinase A can lead to disruption of mitotic spindle apparatus assembly, disruption of chromosome segregation, and
inhibition of cell proliferation. In clinical trials to date, alisertib had shown single agent activity and activity in combination
with other cancer drugs in the treatment of many different types of cancers, including hormone receptor-positive breast
cancer, triple-negative breast cancer, small cell lung cancer and head and neck cancer. We initiated the ALISertib in
CAncer (ALISCA-Lung1) Phase II trial (PUMA-ALI-4201) of alisertib monotherapy for the treatment of patients with
extensive stage small cell lung cancer in February 2024, and we plan to commence the ALISCA-Breast 1 trial in the second
half of 2024.
Under the terms of the exclusive license agreement, we assumed sole responsibility for the global development and
commercialization of alisertib. We paid Takeda an upfront license fee of $7.0 million in October 2022, and it is eligible to
receive potential future milestone payments of up to $287.3 million upon our achievement of certain regulatory and
commercial milestones over the course of the exclusive license agreement, as well as tiered royalty payments for any net
sales of alisertib. We recorded in-process research and development expense of $7.0 million during the year ended
December 31, 2022, in connection with the up-front payment related to the asset acquisition. As of December 31, 2023, no
milestones had been accrued as the underlying contingencies were not probable or estimable.
85
Our expenses to date have been related to hiring staff, commencing company-sponsored clinical trials and the build
out of our corporate infrastructure and, since 2017, the commercial launch of NERLYNX. Going forward we anticipate
significant expenses as we continue to develop NERLYNX in additional indications and as we pursue the development of
alisertib in 2024. Accordingly, our success depends not only on the safety and efficacy of our drug candidates, but also on
our ability to finance product development. To date, our major sources of working capital have been proceeds from product
and license revenue, public offerings of our common stock, proceeds from our credit facility and sales of our common stock
in private placements. We intend to satisfy our near-term liquidity requirements through a combination of our existing cash
and cash equivalents and marketable securities as of December 31, 2023, and proceeds that will become available to us
through product sales, royalties and sub-license milestone payments. However, this intention is based on assumptions that
may prove to be wrong. Changes may occur that would consume our available capital faster than anticipated, including
changes in and progress of our development activities, the impact of commercialization efforts, acquisitions of additional
drug candidates and changes in regulation. Some of these developments have had and may continue to have an adverse
effect on our revenue and thus could have an adverse effect on our ability to satisfy the minimum revenue and cash balance
covenants contained in the Athyrium Notes.
Summary of Income and Expenses
Product revenue, net
Product revenue, net consists of revenue from sales of NERLYNX. We sell NERLYNX to a limited number of
specialty pharmacies and specialty distributors in the United States. We record revenue at the net sales price, which
includes an estimate for variable consideration for which reserves are established. Variable consideration consists of trade
discounts and allowances, product returns, provider chargebacks and discounts, government rebates and other incentives.
Product revenue also consists of product sales under sub-license agreements to our sub-licensees, who then sell into
their respective international territories.
License revenue
License revenue consists of consideration earned for performance obligations satisfied pursuant to our sub-license
agreements.
Royalty revenue
Royalty revenue consists of consideration earned related to product sales made by our sub-licensees in their
respective territories pursuant to our license agreements.
Cost of sales
Cost of sales consists of third-party manufacturing costs, freight, and indirect overhead costs associated with sales of
NERLYNX. Cost of product sales also includes period costs related to royalty charges payable to Pfizer, the amortization
of milestone payments under our license agreement with Pfizer, certain inventory manufacturing services, inventory
adjustment charges, unabsorbed manufacturing and overhead costs, and manufacturing variances. Cost of sales includes
applicable license termination fees.
Selling, general and administrative expenses
Selling, general and administrative (“SG&A”) expenses, consist primarily of salaries and payroll-related costs,
stock-based compensation expense, professional fees, business insurance, rent, general legal activities, credit loss expense
and other corporate expenses. We expense SG&A costs as they are incurred.
Research and development expenses
Research and development (“R&D”) expenses include costs associated with services provided by consultants who
conduct clinical services on our behalf, contract organizations for manufacturing of clinical materials and clinical trials.
During the years ended December 31, 2023, 2022 and 2021, our R&D expenses consisted primarily of CRO fees, fees paid
to consultants, salaries and related personnel costs and stock-based compensation. We expense our R&D costs as they are
incurred. Internal R&D expenses primarily consist of payroll-related costs and also include equipment costs, travel
expenses and supplies. We expect R&D expenses to increase significantly in 2024 as we initiate two Phase II clinical trials
of alisertib.
86
Acquired In-Process Research and Development Expense
Acquired in-process research and development expense includes the rights to develop new drug candidates.
Payments to acquire a new drug candidate are immediately expensed as acquired in-process research and development
provided that the drug candidate has not achieved regulatory approval for marketing and, absent obtaining such approval,
has no alternative future use.
Results of Operations
The following summarizes our results of operations for the years ended December 31, 2023 and 2022. For
discussion related to the results of operations and changes in financial condition for the year ended December 31, 2022,
compared to the year ended December 31, 2021, please refer to Item 7 of Part II, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our Annual Report for the Year Ended December 31, 2022, which was
filed with the United States Securities and Exchange Commission on March 2, 2023.
Total revenue
Total revenue was approximately $235.6 million for the year ended December 31, 2023, compared to $228.0 million
for the year ended December 31, 2022. This increase in total revenue of $7.6 million was due to an increase in product
revenue, net of approximately $3.1 million and an increase in royalty revenue of $4.5 million.
Product revenue, net
Product revenue, net was approximately $203.1 million for the year ended December 31, 2023, compared to
$200.0 million for the year ended December 31, 2022. The increase in product revenue, net was primarily attributable to an
increase in net selling price, partially offset by a volume decrease of approximately 6.3% in bottles of NERLYNX
sold. Reserves for variable consideration were approximately 17.9% of product revenue for the years ended December 31,
2023 and 2022.
License revenue
There was no license revenue for the years ended December 31, 2023 and December 31, 2022.
Royalty revenue
Royalty revenue was approximately $32.5 million for the year ended December 31, 2023, compared to $28.0 million
for the year ended December 31, 2022. The increase was due to increased product sales by our sub-licensees as they
increased commercialization of NERLYNX in additional territories, including an increase in China sales.
Cost of sales
Cost of sales was approximately $62.7 million for the year ended December 31, 2023, compared to $55.1 million for
the year ended December 31, 2022. The $7.6 million increase was primarily due to the increase of product unit sales to
our sub-licensees and the related cost of sales, including higher royalty expense. There was also an increase
in intangible amortization related to the $12.5 million we paid to Pfizer for meeting a commercial sales milestone as
of December 31, 2022.
87
Selling, general and administrative expenses:
Selling, general, and administrative expenses
(in thousands)
For the Year Ended
December 31,
Change
$
%
2023
2022
2023/2022
2023/2022
Payroll and related costs ............................................... $
Provision for credit loss ................................................
Professional fees and expenses.....................................
Travel and meetings .....................................................
Facilities and equipment costs ......................................
Stock-based compensation ...........................................
Loss on impairment of asset .........................................
Other .............................................................................
$
33,436 $
881
34,011
5,537
5,116
6,909
625
3,418
89,933 $
29,933 $
—
38,122
5,057
5,338
8,046
—
3,482
89,978 $
3,503
881
(4,111)
480
(222)
(1,137)
625
(64)
(45)
11.7%
100.0%
-10.8%
9.5%
-4.2%
-14.1%
100.0%
-1.8%
-0.1%
Total SG&A expenses were consistent at approximately $90.0 million for the years ended December 31,
2023 and December 31, 2022. The slight increase is primarily attributable to the following:
•
•
•
•
an increase in payroll and related costs of approximately $3.5 million, primarily due to a $2.0 million tax
credit under the Coronavirus Aid Relief Economic Security Act (the “CARES Act”) recorded during the year
ended December 31, 2022, without a comparable tax credit in 2023, a $2.9 million increase in salary and
benefits, offset by a decrease of $1.5 million in bonus expense;
an increase in provision for credit loss of approximately $0.9 million, due to royalties receivable due from a
sub-license partner, compared to no provision for credit loss expense for the year ended December 31, 2022;
an increase in travel and meetings expense of approximately $0.5 million, primarily due to additional sales
field personnel in 2023; and
an increase in loss on impairment of asset expense of $0.6 million in connection with our decision to sublease
a portion of our leased office space, which was recorded as an operating asset in accordance with ASC 842.
The increases above were partially offset by:
•
•
a decrease in professional fees and expenses of approximately $4.1 million, primarily due to a decrease in
consultant and contractor expenses approximately $3.1 million, a decrease in insurance and other expenses of
approximately $1.8 million, offset by an increase in legal fees of approximately $0.8 million; and
a decrease in stock-based compensation expense of approximately $1.1 million, primarily due to lower fair
value on equity grants as a result of a lower market price for our common stock.
Research and development expenses:
Research and development expenses
(in thousands)
For the Year Ended
December 31,
Change
$
%
2023
2022
2023/2022
2023/2022
Clinical trial expense .................................................... $
Internal R&D ................................................................
Consultant and contractors ...........................................
Stock-based compensation ...........................................
$
13,611 $
30,731
2,701
3,339
50,382 $
17,367 $
27,511
3,582
3,780
52,240 $
(3,756)
3,220
(881)
(441)
(1,858)
-21.6%
11.7%
-24.6%
-11.7%
-3.6%
88
Total R&D expenses decreased approximately 3.6% to $50.4 million for the year ended December 31, 2023 from
approximately $52.2 million for the year ended December 31, 2022. The decrease is primarily attributable to the following:
•
•
•
a decrease in clinical trial expense of approximately $3.8 million, primarily due to the reduction and closure
of clinical trial sites with respect to NERLYNX;
a decrease in consultant and contractors of approximately $0.9 million, primarily due to the reduction and
closure of clinical trial sites with respect to NERLYNX; and
a decrease in stock-based compensation of approximately $0.4 million, primarily due to lower fair value on
equity grants as a result of a lower market price for our common stock.
The decreases above were partially offset by:
•
an increase in internal R&D of approximately $3.2 million, primarily due to a $1.8 million tax credit recorded
during the year ended December 31, 2022 under the CARES Act without a comparable tax credit in 2023,
and approximately $1.3 million increase primarily due to 2023 salary increases.
Acquired In-Process Research and Development Expense
For the year ended December 31, 2022, we entered into an exclusive license agreement with Takeda to license the
worldwide research and development and commercial rights to alisertib, a new drug candidate. We recorded acquired in-
process research and development expense related to the up-front payment of $7.0 million.
Other income and expenses:
Other income (expenses)
(in thousands)
For the Year Ended
December 31,
2023
2022
Change
$
2023/2022
%
2023/2022
Interest income ..................................................... $
Interest expense ....................................................
Legal verdict expense ...........................................
Other income ........................................................
$
2,605 $
(13,330)
—
759
(9,966) $
813 $
(11,592)
(12,456)
(28)
(23,263) $
1,792
(1,738 )
12,456
787
13,297
220.4%
15.0%
-100.0%
-2810.7%
-57.2%
Interest income
For the year ended December 31, 2023, we recognized approximately $2.6 million in interest income compared to
approximately $0.8 million of interest income for the year ended December 31, 2022. The $1.8 million increase in interest
income was primarily the result of higher interest rates and an increase in return on investment securities compared to the
same period in 2022.
Interest expense
For the year ended December 31, 2023, we recognized approximately $13.3 million in interest expense compared to
approximately $11.6 million of interest expense for the year ended December 31, 2022. The approximately $1.7 million
increase in interest expense was primarily related to higher interest rates on our Athyrium Notes, which is partially
determined by the three-month SOFR rate, as well as imputed interest on $8.0 million related to the final installment
payment on the Eshelman litigation settlement due on or before November 1, 2024.
Legal verdict expense
For the year ended December 31, 2022, we increased our legal expense accrual by approximately $12.5 million with
respect to the Eshelman v. Puma Biotechnology, Inc., et al. judgment. There were no such expenses for the year ended
December 31, 2023.
89
Other income
For the year ended December 31, 2023, we recognized approximately $0.4 million in foreign currency transaction
gains related to euro denominated receivables with an international partner.
Non-GAAP Financial Measures:
In addition to our operating results, as calculated in accordance with generally accepted accounting principles in the
United States, (“GAAP”), we use certain non-GAAP financial measures when planning, monitoring, and evaluating our
operational performance. The following table presents our net income (loss) and net income (loss) per share, as calculated
in accordance with GAAP, as adjusted to remove the impact of stock-based compensation. For the year ended December
31, 2023, stock-based compensation represented approximately 7.3% of the total of SG&A and R&D expenses. Our
management believes that these non-GAAP financial measures are useful to enhance understanding of our financial
performance, are more indicative of our operational performance and facilitate a better comparison among fiscal periods.
These non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP reporting measures.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Income (Loss) and GAAP Net Loss Per Share to Non-
GAAP Adjusted Net Income (Loss) Per Share
(in thousands except share and per share data)
GAAP net income ................................................................................................... $
Adjustments:
Stock-based compensation -
Selling, general and administrative (1) ...................................................................
Research and development (2) ................................................................................
Non-GAAP adjusted net income ............................................................................. $
GAAP net income per share—basic ......................................................................... $
Adjustment to net income (as detailed above) ..........................................................
Non-GAAP adjusted basic net income per share .................................................... $
GAAP net income per share—diluted ...................................................................... $
Adjustment to net income (as detailed above) ..........................................................
Non-GAAP adjusted diluted net income per share ................................................. $
For the Year Ended
December 31,
2023
2022
21,591
$
2
6,908
3,339
31,838
$
8,046
3,780
11,828
$
0.46
0.22
0.68 (3) $
$
0.45
0.22
0.67 (4) $
—
0.26
0.26 (3)
—
0.26
0.26 (4)
(1) To reflect a non-cash charge to operating expense for selling, general, and administrative stock-based compensation.
(2) To reflect a non-cash charge to operating expense for research and development stock-based compensation.
(3) Non-GAAP adjusted basic net income per share was calculated based on 47,134,331 and 44,674,501 weighted-average
shares of common stock outstanding for the years ended December 31, 2023 and 2022, respectively.
(4) Non-GAAP adjusted diluted net income per share was calculated based on 47,550,852 and 44,929,998 weighted-
average shares of common stock outstanding for the years ended December 31, 2023 and 2022, respectively.
90
Liquidity and Capital Resources
The following table summarizes our liquidity and capital resources as of and for the years ended December 31, 2023
and 2022 and is intended to supplement the more detailed discussion that follows:
Liquidity and capital resources (in thousands)
Cash and cash equivalents ........................................................................................ $
Marketable securities ................................................................................................ $
Working capital ........................................................................................................ $
Long term debt ......................................................................................................... $
Stockholders' equity ................................................................................................. $
As of
December 31,
2023
As of
December 31,
2022
84,585 $
11,354 $
56,803 $
65,659 $
53,442 $
76,201
4,873
56,797
98,307
21,608
We also have long-term debt, net of $65.7 million and $98.3 million for the years ended December 31, 2023 and
2022, respectively, related to our Athyrium debt.
Year Ended
December 31,
2023
Year Ended
December 31,
2022
Cash provided by (used in):
Operating activities .................................................................................................. $
Investing activities ....................................................................................................
Financing activities ..................................................................................................
Net increase in cash, cash equivalents and restricted cash ....................................... $
27,009 $
(19,125)
—
7,884 $
(15,827)
7,104
12,223
3,500
Operating Activities
We recorded net income of approximately $21.6 million and two thousand dollars for the years ended December 31,
2023 and 2022, respectively. We recorded cash flows from operating activities of approximately $27.0 million for the year
ended December 31, 2023 and recorded negative cash flows from operating activities of approximately $15.8 million for
the year ended December 31, 2022.
Net cash provided by operating activities for the year ended December 31, 2023 was $27.0 million which consisted
of net income of $21.6 million, adjusted for non-cash items of approximately $23.3 million, including stock-based
compensation of $10.2 million, and depreciation and amortization of $11.5 million, provision of credit loss of
$0.9 million and loss on impairment of ROU asset of $0.6 million. Total changes in cash flows from operations were due to
changes in working capital and primarily related to an increase in inventory of approximately $2.6 million (increase in
inventory purchases) and an increase in accounts receivable, net of approximately $8.4 million (increase and timing of
fourth quarter total revenues) and a decrease in accrued expenses of approximately $7.6 million.
Net cash used in operating activities for the year ended December 31, 2022 of $15.8 million consisted of net
income of two thousand dollars, adjusted for non-cash items of approximately $21.7 million, including stock-based
compensation and depreciation and amortization. Total changes in cash flows from operations were due to changes in
working capital and included a decrease in inventory of approximately $2.6 million and a decrease in prepaid expenses and
other of approximately $2.4 million. These changes were offset by an increase in accounts receivable, net of
approximately $7.8 million, an increase in other current assets of approximately $2.0 million, a decrease in post-marketing
commitment liability of approximately $0.9 million, a decrease in accounts payable of approximately $4.7 million, and a
decrease in accrued expenses of approximately $33.1 million.
Investing Activities
During the year ended December 31, 2023, cash used in investing activities was approximately $19.1 million. Cash
used in investing activities was primarily due to the purchase of the intangible asset of $12.5 million we paid to Pfizer for
meeting a commercial sales milestone and the purchase of available-for-sale securities of approximately $23.8 million,
partially offset by the maturities of available-for-sale securities of approximately $17.3 million.
91
During the year ended December 31, 2022, cash provided by investing activities was approximately $7.1 million.
This included the maturity of available-for-sale securities of approximately $18.9 million, partially offset by the purchase of
available-for-sale securities of approximately $4.8 million, and the purchase of in-process R&D of $7.0 million as part of
the Takeda Agreement.
Financing Activities
There were no financing activities recorded for the year ended December 31, 2023. Cash provided by financing
activities for the year ended December 31, 2022 was approximately $12.2 million, representing cash raised, net of offering
expenses, from the Purchase Agreement entered into on March 8, 2022 with Mr. Auerbach and Athyrium, and the Purchase
Agreement entered into with Mr. Auerbach on December 9, 2022.
Athyrium Note Purchase Agreement
We issued senior notes for an aggregate principal amount of $100.0 million pursuant to the note purchase agreement
dated July 23, 2021, by us, and our subsidiaries, and Athyrium, as Administrative Agent, and certain other investor parties
(the “Note Purchase Agreement”), with an initial maturity date of July 23, 2026 (the “Athyrium Notes”). The Athyrium
Notes were issued for face amount of $100.0 million net of an original issue discount of $1.5 million. The Athyrium Notes
also require a 2.0% exit payment to be made on each payment of principal. The borrowings under the Athyrium Notes,
together with cash on hand, were used to repay our outstanding indebtedness, including the applicable exit and prepayment
fees owed to lenders under our prior credit facility with Oxford (the “Prior Oxford Credit Facility”). We can borrow up to
an additional $25.0 million under the Note Purchase Agreement for certain purposes specified in the Note Purchase
Agreement. The Athyrium Notes are secured by substantially all of our assets. We incurred $1.9 million of deferred
financing costs with the initial borrowing of the Athyrium Notes.
Interest on the Athyrium Notes is calculated in part based on the Secured Overnight Financing Rate (“SOFR”),
which replaced the “London Interbank Offering Rate” as the floating benchmark for interest rate calculations applicable to
the Athyrium Notes pursuant to the terms of the Third Amendment to Note Purchase Agreement dated as of September 16,
2022 (the “Third Amendment”). The modification of the Note Purchase Agreement pursuant to the Third Amendment did
not meet the requirements of a debt extinguishment under ASC 470-50 - Debt Modifications and Exchanges and no gain or
loss was recognized. We performed a quantitative analysis and determined that the terms of the new debt and original debt
instrument are not substantially different. Accordingly, the Third Amendment is accounted for as a debt modification.
Following the effectiveness of the Third Amendment, the Athyrium Notes bear interest at an annual rate equal to the
sum of (a) eight percent (8.00%) plus (b) the lesser of (i) the sum of (x) three-month term SOFR for an interest period of
three months plus (y) 0.26161% (26.161 basis points) and (ii) three and one-half of one percent (3.50%) per annum. Interest
is payable quarterly on the last business day of March, June, September and December each year. Beginning June 30, 2024,
principal payments are required to be made quarterly at 11.11% of the original face amount with the remaining balance paid
at maturity. Each principal payment will also include a 2.0% exit payment. As of December 31, 2023, the effective interest
rate for the loan was 12.99%.
At our option, we may prepay the outstanding principal balance of the notes in whole or in part, subject to a
prepayment fee of 2.0% of the amount prepaid if the prepayment occurs on or prior to the second anniversary of the
issuance date of such notes, plus the present value of remaining interest that would have accrued through and including the
second anniversary date, and 2.0% of the amount prepaid if the prepayment occurs after the second anniversary but on or
prior to the third anniversary of the issuance date of such notes.
The Athyrium Notes include affirmative and negative covenants applicable to us. The affirmative covenants include,
among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial
reports, maintain insurance coverage, and satisfy certain requirements regarding deposit accounts. The negative covenants
include, among others, restrictions on our transferring collateral, incurring additional indebtedness, engaging in mergers or
acquisitions, paying dividends or making other distributions, making investments, creating liens, selling assets and
suffering a change in control, in each case subject to certain exceptions. We are also required to maintain minimum cash
balances and to achieve certain minimum product revenue targets, measured as of the last day of each fiscal quarter on a
trailing year-to-date basis.
As of December 31, 2023, the principal balance outstanding under the Athyrium Notes was $100.0 million,
representing all of our debt. We were in compliance with all applicable covenants under the Athyrium Notes.
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Current and Future Financing Needs
We did not receive or record any product revenue until the third quarter of 2017. We have spent, and expect to
continue to spend, substantial amounts in connection with implementing our business strategy, including our planned
product development efforts, our clinical trials, our R&D efforts and our commercialization efforts.
We may choose to begin new R&D efforts, or we may choose to launch additional marketing efforts. For example,
we recently in-licensed alisertib from Takeda and assumed sole responsibility for its global development and
commercialization. These efforts will require funding in addition to the cash and cash equivalents totaling
approximately $84.6 million and approximately $11.4 million in marketable securities available at December 31, 2023.
While our consolidated financial statements have been prepared on a going concern basis, we may incur significant losses
in the future and will need to generate significant revenue to sustain operations and successfully commercialize neratinib
and develop alisertib. While we have been successful in raising financing in the past, there can be no assurance that we will
be able to do so in the future. Our ability to obtain funding may be adversely impacted by uncertain market conditions, our
success in commercializing neratinib, our success in developing alisertib, unfavorable decisions of regulatory authorities or
adverse clinical trial results. The outcome of these matters cannot be predicted at this time. We believe that our existing
cash and cash equivalents and marketable securities as of December 31, 2023, and proceeds that will become available to us
through product sales and sub-license payments are sufficient to satisfy our operating cash and capital needs for at least one
year after the filing of this Annual Report.
In addition, we have based our estimate of capital needs on assumptions that may prove to be wrong. Changes may
occur that would consume our available capital faster than anticipated, including changes in and progress of our
development activities, the impact of commercialization efforts, acquisitions of additional drug candidates and changes in
regulation. Potential sources of financing include strategic relationships, public or private sales of equity or debt and other
sources of funds. We may seek to access the public or private equity markets when conditions are favorable due to our
long-term capital requirements. If we raise funds by selling additional shares of common stock or other securities
convertible into common stock, the ownership interests of our existing stockholders will be diluted. If we are not able to
obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly
limit our operations, and our business, financial condition and results of operations would be materially harmed. In such an
event, we will be required to undertake a thorough review of our programs, and the opportunities presented by such
programs, and allocate our resources in the manner most prudent.
Off-Balance Sheet Arrangements
We do not have any “off-balance sheet arrangements,” as defined by the SEC regulations.
Contractual Obligations
Contractual obligations represent future cash commitments and liabilities under agreements with third parties and
exclude contingent liabilities for which we cannot reasonably predict future payment. Our contractual obligations result
from leases for office space and office equipment and the principal and interest owed under our Note Purchase Agreement.
We also have unrecognized tax benefits that, if recognized, would affect the effective tax rate at December 31, 2023. We do
not have tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefit will
significantly increase or decrease within 12 months of the reporting date. Additionally, the expected timing of payment of
the obligations presented below is estimated based on current information.
The following table represents our contractual obligations as of December 31, 2023, aggregated by type (in
thousands):
Contractual Obligations
Operating Lease Obligations ..................................................
Long Term Debt Obligations (principal and interest) ............
Total .......................................................................................
Total
Less than 1 year
1 - 3 years
13,296
119,574
132,870
5,805
44,709
50,514
7,491
74,865
82,356
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We also engage with CROs and contract manufacturing organizations (“CMOs”) in addition to engaging in contracts
for the management of its ongoing clinical trials and pre-commercialization efforts. We may cancel these agreements with a
30 to 45 day written notice to the outside vendor. We would be obligated to pay for services rendered up to that point,
which amounts to total contractual obligations of $66.0 million within the next twelve months. The contracts also contain
variable costs that are hard to predict as they are based on such things as patients enrolled and clinical trial sites, which can
vary, and therefore, are not included in the total obligations amount. The remaining milestone amounts were not included in
the table above as the timing of when or if these payments will be made is uncertain. As of December 31, 2023,
our obligations for potential milestone payments totaled approximately $15.5 million. This amount will be paid by us if all
milestones are reached and would reduce the overall contractual obligation if one or more milestone is never reached.
In regard to our contractual obligations in relation to the Pfizer in-license agreement, as consideration for the license,
we are required to make substantial payments upon the achievement of certain milestones totaling approximately $187.5
million if all such milestones are achieved, of which $102.5 million have been achieved as of December 31, 2023. The
remaining milestone amounts were not included in the table above as the timing of when or if these payments will be made
is uncertain. In connection with the FDA approval of NERLYNX in July 2017, we triggered a one-time milestone payment
pursuant to the agreement. In June 2020, we entered into a letter agreement with Pfizer relating to the method of payment
associated with a milestone payment under our license agreement with Pfizer (see Note 13-Commitments and
Contingencies in the accompanying notes to the financial statements). In addition, we reached a commercial milestone by
achieving aggregate worldwide net sales of $250.0 million in calendar year 2022, resulting in a payable to Pfizer of $12.5
million. The commercial milestone payable was paid in February 2023. Should we commercialize any more of the
compounds licensed from Pfizer or any products containing any of these compounds, we will be obligated to pay to Pfizer
annual royalties at a fixed rate in the low to mid-teens of net sales of all such products, subject to certain reductions and
offsets in some circumstances. Our royalty obligation continues, on a product-by-product and country-by-country basis,
until the later of (i) the last to expire licensed patent covering the applicable licensed product in such country, or (ii) the
earlier of generic competition for such licensed product reaching a certain level in such country or expiration of a certain
time period after first commercial sale of such licensed product in such country. In the event that we sublicense the rights
granted to us under the license agreement with Pfizer to a third party, the same milestone and royalty payments are
required. We can terminate the license agreement at will, or for safety concerns, in each case upon specified advance notice.
In regard to our contractual obligations with Takeda, as consideration for the license, we are required to make
substantial payments upon the achievement of certain milestones totaling $287.3 million if all such milestones are achieved.
As of December 31, 2023, no milestones had been achieved.
See Note 12-Income Taxes and Note 13-Commitments and Contingencies in the accompanying notes to the financial
statements for a summary of our uncertain tax positions and contracts held by us as of December 31, 2023. As of December
31, 2023, the amount of unrecognized tax benefit was $2.8 million, and is also not included in the table above as the timing
of when or if these payments will be made is uncertain.
Critical Accounting Estimates
The discussion and analysis of our consolidated financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in conformity with GAAP. The preparation of these
consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets,
liabilities, and expenses, and related disclosure of contingent assets and liabilities reported in our consolidated financial
statements. The estimation process requires assumptions to be made about future events and conditions and, as a result, is
inherently subjective and uncertain. Actual results could differ materially from our estimates.
The SEC defines critical accounting policies as those that are, in management’s view, most important to the
portrayal of our financial condition and results of operations and most demanding of our judgment. We consider the
following policies to be critical to an understanding of our consolidated financial statements and the uncertainties
associated with the complex judgments made by us that could impact our results of operations, financial position, and cash
flows.
Revenue Recognition
Under Accounting Standards Codification (“ASC”) Topic 606 - Revenue from Contracts with Customers (“ASC
606”) we recognize revenue when a customer obtains control of the promised goods or services, in an amount that reflects
the consideration which we expect to be entitled in exchange for those goods or services. We had no contracts with
customers until the FDA approved NERLYNX on July 17, 2017. Subsequent to receiving FDA approval, we entered into a
limited number of arrangements with specialty pharmacies and specialty distributors in the United States to distribute
94
NERLYNX. These arrangements are our initial contracts with customers. We have determined that these sales channels
with customers are similar.
Product Revenue, Net:
We sell NERLYNX to a limited number of specialty pharmacies and specialty distributors in the United States.
These customers subsequently resell our products to patients and certain medical centers or hospitals. In addition to
distribution agreements with these customers, we enter into arrangements with healthcare providers and payors that provide
for government mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of our
products. Product revenue also consists of product sales under sub-license agreements to our sub-licensees, who then sell
into their respective international territories.
We recognize revenue on product sales when the specialty pharmacy or specialty distributor, as applicable, obtains
control of our product, which occurs at a point in time (upon delivery). Product revenue is recorded net of applicable
reserves for variable consideration.
Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are
recorded in cost of sales.
Reserves for Variable Consideration:
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of
variable consideration for which reserves are established. Components of variable consideration include trade discounts and
allowances, product returns, provider chargebacks and discounts, government rebates, payor rebates, and other incentives,
such as voluntary patient assistance, and other allowances that are offered within contracts between us and our customers,
payors, and other indirect customers relating to the sale of our products. These reserves, as detailed below, are based on the
amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable or a current
liability. These estimates take into consideration a range of possible outcomes that are probability-weighted in accordance
with the expected value method in ASC 606 for relevant factors such as current contractual and statutory requirements,
specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall,
these reserves reflect our best estimates of the amount of consideration to which it is entitled based on the terms of the
respective underlying contracts.
The amount of variable consideration that is included in the transaction price may be constrained and is included in
the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue
recognized under the contract will not occur in a future period. Our analyses also contemplated application of the constraint
in accordance with the guidance, under which it determined a significant reversal of revenue would not occur in a future
period for the estimates detailed below as of December 31, 2023 and, therefore, the transaction price was not reduced
further during the year ended December 31, 2023. Actual amounts of consideration ultimately received may differ from our
estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net
product revenue and earnings in the period such variances become known.
Trade Discounts and Allowances:
We generally provide customers with discounts which include incentive fees that are explicitly stated in our
contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. In addition, we
compensate (through trade discounts and allowances) our customers for sales order management, data, and distribution
services. However, we have determined such services received to date are not distinct from our sale of products to the
customer and, therefore, these payments have been recorded as a reduction of revenue within the statement of operations.
Product Returns:
Consistent with industry practice, we offer the specialty pharmacies and specialty distributors limited product return
rights for damaged and expiring products, provided it is within a specified period around the product expiration date as set
forth in the applicable individual distribution agreement. We estimate the amount of our product sales that may be returned
by our customers and record this estimate as a reduction of revenue in the period the related product revenue is recognized,
as well as a reduction to accounts receivables, net on the consolidated balance sheets. We currently estimate product returns
using our sales information, including our visibility into the inventory remaining in the distribution channel. We have an
insignificant amount of returns to date and believe that returns of our products will continue to be minimal.
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Provider Chargebacks and Discounts:
Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual
commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to customers who
directly purchase the product from us. Customers charge us for the difference between what they pay for the product and
the ultimate selling price to the qualified healthcare providers. These reserves are established in the same period that the
related revenue is recognized, resulting in a reduction of product revenue and a reduction to accounts receivable, net on the
consolidated balance sheets. Chargeback amounts are generally determined at the time of resale to the qualified healthcare
provider by customers, and we generally issue credits for such amounts within a few weeks of the customer’s notification to
us of the resale. Chargebacks consist of credits that we expect to issue for units that remain in the distribution channel at
each reporting period end that we expect will be sold to qualified healthcare providers, and chargebacks that customers
have claimed, but for which we have not yet issued a payment.
Government Rebates:
We are subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in
the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a
current liability which is included in accrued expenses on the consolidated balance sheets. Our liability for these rebates
consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been
received, estimates of claims for the current quarter, and estimated future claims that will be made for product that has been
recognized as revenue, but which remains in the distribution channel at the end of each reporting period.
Payor Rebates:
We contract with certain private payor organizations, primarily insurance companies and pharmacy benefit
managers, for the payment of rebates with respect to utilization of its products. We estimate these rebates and record such
estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the
establishment of a current liability.
Other Incentives:
Other incentives which we offer include voluntary patient assistance programs, such as the co-pay assistance
program, which are intended to provide financial assistance to qualified commercially insured patients with prescription
drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims
and the cost per claim that we expect to receive associated with product that has been recognized as revenue, but remains in
the distribution channel at the end of each reporting period. The adjustments are recorded in the same period the related
revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is
included as a component of accrued expenses on the consolidated balance sheets.
License Revenue:
We recognize license revenue under certain of our sub-license agreements that are within the scope of ASC 606. The
terms of these agreements may contain multiple performance obligations, which may include licenses and research and
development activities. We evaluate these agreements under ASC 606 to determine the distinct performance obligations.
Non-refundable, up-front fees that are not contingent on any future performance and require no consequential continuing
involvement by us, are recognized as revenue when the license term commences and the licensed data, technology or
product is delivered. We defer recognition of non-refundable upfront license fees if the performance obligations are not
satisfied.
Prior to recognizing revenue, we make estimates of the transaction price, including variable consideration that is
subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is
probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty
associated with the variable consideration is subsequently resolved. Variable consideration may include nonrefundable
upfront license fees, payments for research and development activities, reimbursement of certain third-party costs,
payments based upon the achievement of specified milestones, and royalty payments based on product sales derived from
the collaboration.
96
If there are multiple distinct performance obligations, we allocate the transaction price to each distinct performance
obligation based on its relative standalone selling price. The standalone selling price is generally determined based on the
prices charged to customers or using expected cost-plus margin. Revenue is recognized by measuring the progress toward
complete satisfaction of the performance obligations using an input measure.
Royalty Revenue:
For sub-license agreements that are within the scope of ASC 606, we recognize revenue when the related sales occur
in accordance with the sales-based royalty exception under ASC 606-10-55-65. Royalty revenue consists of consideration
earned related to international sales of NERLYNX made by our sub-licensees in their respective territories. We recognize
royalty revenue when the performance obligations have been satisfied.
Legal Contingencies and Expense
For legal contingencies, we accrue a liability for an estimated loss if the potential loss from any claim or legal
proceeding is considered probable and the amount can be reasonably estimated. Legal fees and expenses are expensed as
incurred based on invoices or estimates provided by legal counsel. We periodically evaluate available information, both
internal and external, relative to such contingencies and adjust the accrual as necessary. We determine whether a
contingency should be disclosed by assessing whether a material loss is deemed reasonably possible. In determining
whether a loss should be accrued, we evaluate, among other factors, the degree of probability of an unfavorable outcome
and the ability to make a reasonable estimate of the amount of the loss (see Note 13-Commitments and Contingencies in the
accompanying notes to the financial statements).
Acquired In-Process Research and Development Expense
We have acquired, and may continue to acquire, the rights to develop new drug candidates. Payments to acquire a
new drug candidate are immediately expensed as acquired in-process research and development provided that the drug
candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future
use.
Recently Issued Accounting Standards
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements – Codification Amendments in
Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU modifies the disclosure or presentation
requirements of a variety of Topics in the Codification to align with the SEC’s regulations. The ASU also makes those
requirements applicable to entities that were not previously subject to the SEC’s requirements. The ASU is effective for the
Company two years after the effective date to remove the related disclosure from Regulation S-X or S-K. As of the date
these financial statements have been made available for issuance, the SEC has not yet removed any related disclosure. The
Company does not expect the adoption of ASU 2023-06 to have a material effect on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation
of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for
the Company’s annual reporting periods beginning after December 15, 2025. Adoption is either with a prospective method
or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect
that adoption of ASU 2023-09 will have on its consolidated financial statements.
Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures requires
enhanced disclosures about segment expenses on an annual and interim basis. The impact of the adoption of this ASU is not
expected to have a material effect on our consolidated financial statements.
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832), which enhances
disclosure of transactions with governments that are accounted for by applying a grant or contribution model. ASU 2021-10
requires entities to provide information about the nature of the transactions, the related accounting policies used to account
for the transactions, the effect of the transactions on an entity's financial statements, and significant terms and conditions
associated with the transactions. ASU 2021-10 must be adopted for fiscal years beginning after December 15, 2021. Early
adoption is permitted. We adopted this guidance during 2022, and recognized approximately $3.8 million in payroll tax
credits under the CARES Act.
97
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Some of the securities in which we invest have market risk in that a change in prevailing interest rates may cause the
principal amount of the cash equivalents to fluctuate. Financial instruments that potentially subject us to significant
concentrations of credit risk consist primarily of cash and cash equivalents. We invest our excess cash primarily in cash
equivalents such as money market investments as of December 31, 2023. The primary objectives of our investment
activities are to ensure liquidity and to preserve principal while at the same time maximizing the income we receive from
our cash and cash equivalents without significantly increasing risk. Additionally, we established guidelines regarding
approved investments and maturities of investments, which are designed to maintain safety and liquidity.
Because of the short-term maturities of our cash equivalents, we do not believe that a 10% increase in interest rates
would have a material effect on the realized value of our cash equivalents.
We also have interest rate exposure as a result of borrowings outstanding under the Athyrium Notes. As of
December 31, 2023, the aggregate outstanding principal amounts of the Athyrium Notes was $100.0 million. The Athyrium
Notes bear interest at a rate per annum equal to the sum of 8.00% plus the adjusted three-month term SOFR and the lesser
of (a) the sum of (i) three-month term SOFR and (ii) 0.26161% (26.161 basis points) and (b) three and one-half of one
percent (3.50%) per annum. If overall interest rates had increased by one hundred basis points during the year
ended December 31, 2023, our interest expense would have increased by $1.0 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
All financial statements and supplementary data required by this Item are listed in Part IV, Item 15 of this Annual
Report and are presented beginning on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed
in our reports under the Exchange Act, is recorded, processed, summarized and reported within the timelines specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired
control objectives and in reaching a reasonable level of assurance, management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined under
Exchange Act Rule 13a-15(e)) as of December 31, 2023. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that these disclosure controls and procedures were effective as of December 31, 2023.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the year ended December
31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
98
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of
America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as
of December 31, 2023. Management based its assessment on the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated Framework - 2013 (COSO 2013 framework).
Based on this evaluation, our management concluded that, as of December 31, 2023, our internal control over financial
reporting was effective.
Our internal control over financial reporting as of December 31, 2023 has been audited by KPMG LLP, our
independent registered public accounting firm, as stated in their report, which expresses an unqualified opinion on the
effectiveness of our internal control over financial reporting as of December 31, 2023.
ITEM 9B. OTHER INFORMATION
Trading Plans
During the fiscal quarter ended December 31, 2023, our directors and officers (as defined in Rule 16a-1(f) under
the Exchange Act) who adopted or terminated contracts, instructions, written plans or arrangements for the purchase or sale
of our securities are set forth in the table below:
Trading Arrangement
Name and Title
Brian Stuglik,
Board Member
Troy Wilson,
Board Member
Jay Moyes,
Board Member
Adrian Senderowicz,
Board Member
Action
Adopt December 16, 2023
Date
Rule 10b5-1*
X
Adopt December 15, 2023
Adopt December 17, 2023
Adopt December 15, 2023
X
X
X
* Intended to satisfy the affirmative defense of Rule 10b5-1(c)
** Not intended to satisfy the affirmative defense of Rule 10b5-1(c)
Non-
Rule 10b5-1**
Total Shares of
Common Stock to
be Sold
Up to 9,900 shares
Expiration Date
June 30, 2024
Up to 27,000 shares June 30, 2024
Up to 22,000 shares June 30, 2024
Up to 27,000 shares June 30, 2024
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
99
Part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item will be included in our 2024 Proxy Statement, which will be filed with the
SEC, and is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be included in our 2024 Proxy Statement, which will be filed with the
SEC, and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this Item will be included in our 2024 Proxy Statement, which will be filed with the
SEC, and is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item will be included in our 2024 Proxy Statement, which will be filed with the
SEC, and is incorporated by reference herein.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item will be included in our 2024 Proxy Statement, which will be filed with the
SEC, and is incorporated by reference herein.
100
Part IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Reference is made to the Index to Consolidated Financial Statements beginning on Page F-1 hereof.
Consolidated Financial Statement Schedules
(a) Documents Filed as Part of Report
(1) Consolidated Financial Statements
• Report of Independent Registered Public Accounting Firm .....................................................................................
• Consolidated Balance Sheets at December 31, 2023 and 2022 .................................................................................
• Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021 ..........................
• Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022
F-2
F-4
F-5
and 2021 ................................................................................................................................................................
F-6
• Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2023, 2022
and 2021 ................................................................................................................................................................
• Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 ........................
• Notes to Consolidated Financial Statements .............................................................................................................
F-7
F-8
F-9
(2) Consolidated Financial Statement Schedules
Consolidated Financial Statement Schedules have been omitted because they are either not required or not
applicable, or because the information required to be presented is included in the consolidated financial statements or the
notes thereto included in this Annual Report.
(3) Exhibits
The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual
Report and such Exhibit Index is incorporated by reference herein.
ITEM 16. Form 10-K SUMMARY
None.
101
Exhibit
Number
2.1
3.1
3.2
3.3
3.4
4.1
4.2#
4.2(a)#
4.3
10.1(a)*
10.1(b)*
10.1(c)**
10.1(d)**
EXHIBIT INDEX
Description
Agreement and Plan of Merger, dated September 29, 2011, by and among Innovative Acquisitions Corp.,
IAC Merger Corporation, a Delaware corporation and wholly-owned subsidiary of the Company, and
Puma Biotechnology, Inc., a Delaware corporation (filed as Exhibit 2.1 to the Company’s Current Report
on Form 8-K filed with the SEC on October 4, 2011 and incorporated herein by reference)
Certificate of Merger relating to the merger of IAC Merger Corporation with and into Puma
Biotechnology, Inc., filed with the Secretary of State of Delaware on October 4, 2011 (filed as Exhibit 3.1
to the Company’s Current Report on Form 8-K filed with the SEC on October 11, 2011 and incorporated
herein by reference)
Certificate of Ownership and Merger relating to the merger of Puma Biotechnology, Inc. with and into
Innovative Acquisitions Corp., filed with the Secretary of State of the State of Delaware on October 4,
2011 (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on October
11, 2011 and incorporated herein by reference)
Second Amended and Restated Certificate of Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on June 14, 2016 (filed as Exhibit 3.1 to the Company’s Current Report on
Form 8-K filed with the SEC on June 15, 2016 and incorporated herein by reference)
Fourth Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Current
Report on Form 8-K filed with the SEC on August 18, 2023 and incorporated herein by reference)
Form of Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on
Form S-1/A filed with the SEC on February 1, 2012 and incorporated herein by reference)
Warrant to Purchase Shares of Common Stock of Puma Biotechnology, Inc., dated October 4, 2011,
issued to Alan H. Auerbach (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with
the SEC on October 11, 2011 and incorporated herein by reference)
Amendment to Warrant to Purchase Shares of Common Stock of Puma Biotechnology, Inc., dated April 1,
2021, by and between the Company and Alan H. Auerbach (filed as Exhibit 4.1 to the Company’s Current
Report on Form 8-K filed with the SEC on June 17, 2021 and incorporated herein by reference)
Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act
of 1934 (filed as Exhibit 4.3 to the Company’s Annual Report on Form 10-K filed with the SEC on
February 28, 2020 and incorporated herein by reference)
License Agreement, dated August 18, 2011, by and between the Company, as successor to Puma
Biotechnology, Inc., and Pfizer Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-
K/A filed with the SEC on December 16, 2011 and incorporated herein by reference)
Amendment No. 1 to License Agreement dated July 18, 2014, between the Company and Pfizer Inc. (filed
as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 10,
2014 and incorporated herein by reference)
Pfizer Letter Agreement dated June 8, 2020, by and between the Company and Pfizer Inc. (filed as Exhibit
10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2020 and
incorporated herein by reference)
Amendment No. 2 to License Agreement dated October 29, 2020, between the Company and Pfizer
Inc. (filed as Exhibit 10.1(d) to the Company's Annual Report on Form 10-K filed with the SEC on March
1, 2021 and incorporated by reference)
102
10.2(a)#
10.2(b)#
10.2(c)#
10.2(d)#
10.2(e)#
10.2(f)#
10.2(g)#
10.2(h)#
10.2(i)#
10.2(j)#
10.2(k)#
10.2(l)#
10.2(m)#
10.2(n)#
10.3(a)
Puma Biotechnology, Inc. 2011 Incentive Award Plan (filed as Exhibit 10.4 to the Company’s Current
Report on Form 8-K filed with the SEC on October 11, 2011 and incorporated herein by reference)
First Amendment to Puma Biotechnology, Inc. 2011 Incentive Award Plan (filed as Appendix A to the
Company’s Proxy Statement on Form DEFR14A filed with the SEC on June 4, 2014 and incorporated
herein by reference)
Second Amendment to Puma Biotechnology, Inc. 2011 Incentive Award Plan (filed as Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on August 10, 2015 and incorporated
herein by reference)
Third Amendment to Puma Biotechnology, Inc. 2011 Incentive Award Plan (filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed with the SEC on June 14, 2017 and incorporated herein by
reference)
Fourth Amendment to Puma Biotechnology, Inc. 2011 Incentive Award Plan (filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed with the SEC on June 14, 2017 and incorporated herein by
reference)
Fifth Amendment to Puma Biotechnology, Inc. 2011 Incentive Award Plan (filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed with the SEC on June 17, 2021 and incorporated herein by
reference)
Puma Biotechnology, Inc. 2017 Employment Inducement Incentive Award Plan (filed as Exhibit 99.1 to
the Company’s Registration Statement on Form S-8 filed with the SEC on February 28, 2020 and
incorporated herein by reference)
First Amendment to Puma Biotechnology, Inc. 2017 Employment Inducement Incentive Award Plan
(filed as Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed with the SEC on
February 28, 2020 and incorporated herein by reference)
Second Amendment to Puma Biotechnology, Inc. 2017 Incentive Award Plan (filed as Exhibit 99.12 to
the Company's Current Report on Form S-8 filed with the SEC on September 16, 2021 and incorporated
herein by reference)
Form of Stock Option Grant Notice and Stock Option Agreement, issued pursuant to the 2011 Incentive
Award Plan (filed as Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed with the SEC on
March 29, 2012 and incorporated herein by reference)
Form of Chief Executive Officer Stock Option Grant Notice and Stock Option Agreement, issued
pursuant to the 2011 Incentive Award Plan (filed as Exhibit 10.6 to the Company’s Annual Report on
Form 10-K filed with the SEC on March 29, 2012 and incorporated herein by reference)
Form of Performance Share Award Agreement, issued pursuant to the 2011 Incentive Award Plan (filed as
Exhibit 10.2(d) to the Company’s Annual Report on Form 10-K filed with the SEC on March 3, 2014 and
incorporated herein by reference)
Form of Restricted Stock Unit Award Agreement, issued pursuant to the 2011 Incentive Award Plan (filed
as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2016
and incorporated herein by reference)
Form of Stock Option Grant Notice and Stock Option Agreement, issued pursuant to the 2017
Employment Inducement Incentive Award Plan (filed as Exhibit 10.2(k) to the Company’s Annual Report
on Form 10-K filed with the SEC on March 1, 2019 and incorporated herein by reference)
Office Lease by and between the Company and CA - 10880 Wilshire Limited Partnership, executed on
December 7, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the
SEC on December 13, 2011 and incorporated herein by reference)
103
10.3(b)
10.3(c)
10.3(d)
10.3(e)
10.4#
10.5(a)
10.5(b)
10.5(c)
10.5(d)
10.6#
10.7#
10.7(a)#
10.8(a)*
10.8(b)*
10.9#
First Amendment to the Office Lease, dated as of November 28, 2012, by and between the Company and
CA - 10880 Wilshire Limited Partnership (filed as Exhibit 10.13(b) to the Company’s Annual Report on
Form 10-K filed with the SEC on April 1, 2013 and incorporated herein by reference)
Second Amendment to the Office Lease, dated as of December 3, 2013, by and between the Company and
CA - 10880 Wilshire Limited Partnership (filed as Exhibit 10.6(c) to the Company’s Annual Report on
Form 10-K filed with the SEC on March 3, 2014 and incorporated herein by reference)
Third Amendment to the Office Lease, dated as of March 18, 2014, by and between the Company and CA
- 10880 Wilshire Limited Partnership (filed as Exhibit 10.5(d) to the Company’s Annual Report on Form
10-K filed with the SEC on March 2, 2015 and incorporated herein by reference)
Fourth Amendment to the Office Lease, dated as of July 31, 2015, by and between the Company and CA -
10880 Wilshire Limited Partnership (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q filed with the SEC on November 9, 2015 and incorporated herein by reference)
Employment Agreement, dated January 19, 2012, by and between the Company and Alan H. Auerbach
(filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 24,
2012 and incorporated herein by reference)
Office Lease by and between DWF III Gateway, LLC and the Company, executed June 7, 2012 (filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 13, 2012 and
incorporated herein by reference)
First Amendment to Lease, dated as of May 19, 2014, by and between DWF III Gateway, LLC and Puma
Biotechnology, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the
SEC on May 23, 2014 and incorporated herein by reference)
Second Amendment to Lease, dated as of June 10, 2014, by and between DWF III Gateway, LLC and
Puma Biotechnology, Inc. (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed
with the SEC on August 10, 2015 and incorporated herein by reference)
Third Amendment to Lease, dated as of July 21, 2015, by and between PR 707 Gateway, LLC (as
successor in interest to DWF III Gateway, LLC) and the Company (filed as Exhibit 10.2 to the Company’s
Quarterly Report on Form 10-Q filed with the SEC on November 9, 2015 and incorporated herein by
reference)
Form of Indemnification Agreement (filed as Exhibit 10.17 to the Company’s Registration Statement on
Form S-1/A filed with the SEC on October 15, 2012 and incorporated herein by reference)
Amended Non-Employee Director Compensation Program (filed as Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q filed with the SEC on May 7, 2020 and incorporated herein by reference)
Amended Non-Employee Director Compensation Program, dated April 27, 2022 (filed as Exhibit 10.1 to
the Company’s Current Report on Form 10-Q filed with the SEC on May 5, 2022 and incorporated herein
by reference)
License Agreement, dated November 20, 2017, by and between the Company and Specialised
Therapeutics Asia Pte Ltd. (filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed
with the SEC on March 9, 2018 and incorporated herein by reference)
Amendment No. 1, dated April 20, 2018, to the License Agreement by and between the Company and
Specialised Therapeutics Asia Pte Ltd. (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q filed with the SEC on August 9, 2018 and incorporated herein by reference)
Letter Agreement, dated December 8, 2017, between the Company and Douglas Hunt (filed as Exhibit
10.15 to the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2018 and
incorporated herein by reference)
104
10.10(a)*
10.10(b)*
Collaboration and License Agreement, dated January 30, 2018, between the Company and CANbridge
Biomed Limited (as successor in interest to CANbridgepharma Limited) (filed as Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2018 and incorporated herein
by reference)
Side Letter Agreement, dated November 19, 2018, between the Company and CANbridge Biomed
Limited (as successor in interest to CANbridgepharma Limited) (filed as Exhibit 10.15(b) to the
Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2019 and incorporated herein
by reference)
10.10(c)**
Termination Agreement, dated February 24, 2021, by and between the Company and CANbridge
BIOMED Limited (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the
SEC on May 6, 2021 and incorporated herein by reference)
10.11*
10.12*
10.13#
10.14(a)*
10.14(b)**
10.15(a)**
10.15(b)**
10.15(c)**
10.15(d)**
10.16#
10.17(a)**
License Agreement, dated March 30, 2018, between the Company and Pint Pharma International SA (filed
as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2018
and incorporated herein by reference)
Supply Agreement, dated April 20, 2018, by and between the Company and Specialised Therapeutics Asia
Pte. Ltd. (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on
August 9, 2018 and incorporated herein by reference)
Letter Agreement, dated September 28, 2018, between the Company and Maximo F. Nougues (filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 9, 2018 and
incorporated herein by reference)
License Agreement, dated January 9, 2019, by and between the Company and Knight Therapeutics Inc.
(filed as Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed with the SEC on March 1,
2019 and incorporated herein by reference)
Amendment to the License Agreement, dated December 18, 2019, by and between the Company and
Knight Therapeutics, Inc. (filed as Exhibit 10.17(b) to the Company’s Annual Report on Form 10-K filed
with the SEC on February 28, 2020 and incorporated herein by reference)
License Agreement, dated March 29, 2019, by and between the Company and Pierre Fabre Medicament
SAS (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May
10, 2019 and incorporated herein by reference)
First Amendment to the License Agreement, dated September 17, 2019, by and between the Company and
Pierre Fabre Medicament SAS (filed as Exhibit 10.18(b) to the Company’s Annual Report on Form 10-K
filed with the SEC on February 28, 2020 and incorporated herein by reference)
Second Amendment to the License Agreement, dated November 25, 2019, by and between the Company
and Pierre Fabre Medicament SAS (filed as Exhibit 10.18(c) to the Company’s Annual Report on Form
10-K filed with the SEC on February 28, 2020 and incorporated herein by reference)
Amendment No. 3 to the License Agreement, dated February 24, 2021, by and between the Company and
Pierre Fabre Medicament SAS (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q
filed with the SEC on May 6, 2021 and incorporated herein by reference)
Letter Agreement, dated February 13, 2020, by and between the Company and Jeff J. Ludwig (filed as
Exhibit 10.19 to the Company's Annual Report on Form 10-K filed with the SEC on March 1, 2021 and
incorporated herein by reference)
Note Purchase Agreement, dated July 23, 2021, by and between the Company and Athyrium
Opportunities IV Co-Invest 1 LP, as Administrative Agent (filed as Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q filed with the SEC on November 4, 2021 and incorporated herein by
reference)
105
10.17(b)**
First Amendment to Note Purchase Agreement, dated February 8, 2022, by and between the Company and
Athyrium Opportunities IV CO-Invest 1 LP, as Administrative Agent (filed as Exhibit 10.18(b) to the
Company’s Annual Report on Form 10-K filed with the SEC on March 3, 2022 and incorporated herein
by reference)
10.17(c)
10.17(d)
Second Amendment to Note Purchase Agreement, dated May 18, 2022, by and between the Company and
Athyrium Opportunities IV CO-Invest 1 LP, as Administrative Agent (filed as Exhibit 10.17(c) to the
Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2023 and incorporated herein
by reference)
Third Amendment to Note Purchase Agreement, dated September 16, 2022, by and between the Company
and Athyrium Opportunities IV CO-Invest 1 LP, as Administrative Agent (filed as Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on November 3, 2022 and incorporated
herein by reference)
10.17(e)**
Fourth Amendment to Note Purchase Agreement, dated November 29, 2022, by and between the
Company and Athyrium Opportunities IV CO-Invest 1 LP, as Administrative Agent (filed as Exhibit
10.17(e) to the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2023 and
incorporated herein by reference)
10.17(f)
10.17(g)
10.18
10.19**
21.1+
23.1+
24.1+
31.1+
31.2+
32.1++
32.2++
Limited Waiver and Fifth Amendment to Note Purchase Agreement, dated July 7, 2023, by and between
the Company and Athyrium Opportunities IV CO-Invest 1 LP, as Administrative Agent (filed as Exhibit
10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 3, 2023, and
incorporated herein by reference)
Sixth Amendment to Note Purchase Agreement, dated September 8, 2023, by and between the Company
and Athyrium Opportunities IV CO-Invest 1 LP, as Administrative Agent (filed as Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2023, and incorporated
herein by reference)
Open Market Sale AgreementSM, dated November 4, 2021, by and between the Company and Jeffries LLC
(filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 4,
2021 and incorporated herein by reference)
Exclusive License Agreement, dated September 16, 2022, by and between the Company and Millennium
Pharmaceuticals, Inc., a wholly owned subsidiary of Takeda Pharmaceutical Company Limited (filed as
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 3, 2022
and incorporated herein by reference)
Subsidiaries
Consent of KPMG LLP
Power of Attorney (included on signature page)
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
97.1+
Puma Biotechnology, Inc. Policy for Recovery of Erroneously Awarded Compensation
106
101.INS+
Inline XBRL Instance Document
101.SCH+
Inline XBRL Taxonomy Extension Schema Document
101.CAL+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE+
Inline XBRL Taxonomy Extension Linkbase Document
104+
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+
++
*
**
Filed herewith
Furnished herewith
Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item
601(b)(10) or certain schedules and attachments to this exhibit have been omitted pursuant to Regulation
S-K, Item 601(a)(5). Such omitted information is not material and would likely cause competitive harm to
the registrant if publicly disclosed.
#
Management contract or compensatory plan or arrangement.
107
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 29, 2024.
Signatures
PUMA BIOTECHNOLOGY, INC.
By: /s/ Alan H. Auerbach
Alan H. Auerbach
President & Chief Executive Officer
Power of Attorney
KNOWN BY ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Alan H. Auerbach and Maximo Nougues, or either of them, as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any documents related to this report
and filed pursuant to the Securities Exchange Act of 1934, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in
connection therewith as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or substitutes may lawfully do or cause to be done
by virtue hereof. This power of attorney shall be governed by and construed with the laws of the State of Delaware and
applicable federal securities laws.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Alan H. Auerbach
Alan H. Auerbach
(Principal Executive Officer)
/s/ Maximo Nougues
Maximo Nougues
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Alessandra Cesano
Alessandra Cesano
/s/ Allison Dorval
Allison Dorval
/s/ Michael P. Miller
Michael P. Miller
/s/ Jay M. Moyes
Jay M. Moyes
/s/ Adrian M. Senderowicz
Adrian M. Senderowicz
/s/ Brian M. Stuglik
Brian M. Stuglik
/s/ Troy E. Wilson
Troy E. Wilson
108
Date
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (KPMG LLP, Los Angeles, CA Auditor Firm ID: 185) ..
Consolidated Balance Sheets at December 31, 2023 and 2022 .....................................................................................
Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021 ..............................
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022
Page
F-2
F-4
F-5
and 2021 ...................................................................................................................................................................
F-6
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2023, 2022
and 2021 ...................................................................................................................................................................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 .............................
Notes to Consolidated Financial Statements .................................................................................................................
F-7
F-8
F-9
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Puma Biotechnology, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Puma Biotechnology, Inc. and subsidiaries (the
Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31,
2023, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s
internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting
principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control
over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
F-2
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Estimate of certain variable consideration related to product revenue, net
As discussed in Note 2 to the consolidated financial statements, the Company recognizes product revenue, net that
includes estimates of variable consideration. For the year ended December 31, 2023, the Company recorded
product revenue, net of $203.1 million. The components of variable consideration include trade discounts and
allowances, product returns, provider chargebacks and discounts, government rebates, payor rebates, and other
incentives. These estimates take into consideration a range of possible outcomes that are probability-weighted in
accordance with the expected value method in Accounting Standards Codification (ASC) 606, Revenue from
Contracts with Customers. The range of possible outcomes is driven by relevant factors such as current contractual
and statutory requirements, specific known market events and trends, industry data, and forecasted customer
buying and payment patterns.
We identified the estimate of variable consideration for provider chargebacks and government rebates, including
consideration of the constraint on variable consideration, related to product revenue, net as a critical audit matter.
Evaluating the key assumptions of forecasted patient buying and payment patterns underlying the estimate for
provider chargebacks and government rebates involved especially challenging auditor judgment due to their
measurement uncertainty. We performed a sensitivity analysis in order to identify the key assumptions used to
estimate the Company’s variable consideration. These key assumptions relate to estimating which of the
Company’s revenue transactions will ultimately be subject to a related provider chargeback or government rebate.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the development of the key
assumptions used to determine variable consideration for provider chargebacks and government rebates, including
consideration of the constraint on variable consideration. We evaluated the forecasted patient buying and payment
patterns used to determine the provider chargebacks and government rebates by comparing them to the Company’s
historical data, statutory information, and executed third-party contracts. We assessed the Company’s assumed
patient buying and payment patterns by (1) independently recalculating historical actual patient buying and
payment pattern rates based on historical actual claim data, and (2) comparing current period forecasts to historical
actual rates. We evaluated the Company’s ability to accurately estimate provider chargebacks and government
rebates, including consideration of the constraint on variable consideration, by comparing historically recorded
accruals to the actual amount that was ultimately paid by the Company.
/s/ KPMG LLP
We have served as the Company’s auditor since 2017.
Los Angeles, California
February 29, 2024
F-3
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents ........................................................................................... $
Marketable securities ...................................................................................................
Accounts receivable, net of allowance for credit loss of $881 and $0 .........................
Inventory, net ...............................................................................................................
Prepaid expenses, current ............................................................................................
Other assets, current .....................................................................................................
Total current assets ..........................................................................................................
Lease right-of-use assets, net .......................................................................................
Property and equipment, net ........................................................................................
Intangible assets, net ....................................................................................................
Restricted cash, long-term ...........................................................................................
Prepaid expenses and other, long-term ........................................................................
Total assets ...................................................................................................................... $
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................................................................... $
Accrued expenses, current ...........................................................................................
Accrued in-licensed rights, current ..............................................................................
Post-marketing commitment liability, current .............................................................
Lease liabilities, current ...............................................................................................
Current portion of long-term debt ................................................................................
Total current liabilities ....................................................................................................
Accrued expenses, long-term .......................................................................................
Lease liabilities, long-term ..........................................................................................
Post-marketing commitment liability, long-term .........................................................
Long-term debt, net .....................................................................................................
Total liabilities.................................................................................................................
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock - $.0001 par value per share; 100,000,000 shares authorized;
47,646,787 shares issued and outstanding at December 31, 2023 and 46,345,660
issued and outstanding at December 31, 2022 .........................................................
Additional paid-in capital ............................................................................................
Accumulated other comprehensive loss .......................................................................
Accumulated deficit .....................................................................................................
Total stockholders' equity ................................................................................................
Total liabilities and stockholders' equity ......................................................................... $
84,585 $
11,354
47,837
7,080
4,417
912
156,185
7,792
855
60,871
2,091
2,734
230,528 $
6,889 $
52,721
—
975
4,800
33,997
99,382
121
7,034
4,890
65,659
177,086
76,201
4,873
40,350
4,526
5,902
2,429
134,281
11,362
1,146
70,610
2,591
2,069
222,059
6,440
53,034
12,500
1,370
4,140
—
77,484
7,391
11,834
5,435
98,307
200,451
5
1,398,605
(4)
(1,345,164)
53,442
230,528 $
5
1,388,358
—
(1,366,755 )
21,608
222,059
See Accompanying Notes to the Consolidated Financial Statements
F-4
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
For the Year Ended December 31,
2022
2023
2021
Revenues:
Product revenue, net ....................................................................... $
License revenue ..............................................................................
Royalty revenue ..............................................................................
Total revenue ......................................................................................
Operating costs and expenses:
Cost of sales ....................................................................................
Selling, general and administrative .................................................
Research and development .............................................................
Acquired in-process research and development ..............................
Total operating costs and expenses ....................................................
Income from operations ......................................................................
Other income (expenses):
Interest income................................................................................
Interest expense ..............................................................................
Legal verdict expense .....................................................................
Loss on debt extinguishment ..........................................................
Other income (expense) ..................................................................
Total other expenses, net ....................................................................
Net income (loss) before income taxes .............................................. $
Income tax expense .........................................................................
Net income (loss) ............................................................................... $
Net income (loss) per share of common stock—basic ....................... $
Net income (loss) per share of common stock—diluted .................... $
Weighted-average shares of common stock outstanding—basic........
Weighted-average shares of common stock outstanding—diluted .....
203,107 $
—
32,530
235,637
62,682
89,933
50,382
—
202,997
32,640
200,023 $
—
28,008
228,031
55,093
89,978
52,240
7,000
204,311
23,720
189,064
51,750
12,341
253,155
63,701
116,294
71,870
—
251,865
1,290
2,605
(13,330)
—
—
759
(9,966)
22,674 $
(1,083)
21,591 $
0.46 $
0.45 $
47,134,331
47,550,852
813
(11,592 )
(12,456 )
—
(28 )
(23,263 )
457 $
(455 )
2 $
0.00 $
0.00 $
44,674,501
44,929,998
160
(12,807)
(9,591)
(8,146)
292
(30,092)
(28,802)
(324)
(29,126)
(0.72)
(0.72)
40,638,852
40,638,852
See Accompanying Notes to the Consolidated Financial Statements
F-5
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
For the Year Ended December 31,
2022
2023
2021
Net income (loss) ............................................................................... $
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities, net of
21,591 $
2
(29,126)
tax of $0 ...................................................................................
Comprehensive income (loss) ............................................................ $
(4)
21,587 $
2
4 $
(2)
(29,128)
See Accompanying Notes to the Consolidated Financial Statements
F-6
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share and per share data)
Common Stock
Additional
Paid-in
Amount Capital
Shares
Comprehensive Accumulated
Loss
Deficit
Total
Accumulated
Other
Balance at December 31, 2020 ..... 40,086,387
—
Stock-based compensation ........
Shares issued or restricted stock
units vested under employee
stock plans ............................. 1,089,120
Unrealized loss on available-
4 1,331,676
32,633
—
—
—
(1,337,631)
—
(5,951)
32,633
—
—
—
—
—
for-sale securities ..................
Net loss .....................................
—
—
Balance at December 31, 2021 ..... 41,175,507 $
—
Stock-based compensation ........
Shares issued or restricted stock
units vested under employee
stock plans ............................. 1,017,744
—
—
—
—
4 $ 1,364,309 $
11,826
—
—
(2)
(29,126)
—
(2) $ (1,366,757) $
—
—
(2)
(29,126)
(2,446)
11,826
—
—
—
—
—
Shares issued under private
investments in public equity,
net of issuance costs of
approximately $0.2M ............ 4,152,409
Unrealized gain on available-
1
12,223
for-sale securities ..................
Net income ................................
—
—
Balance at December 31, 2022 ..... 46,345,660 $
—
Stock-based compensation ........
Shares issued or restricted stock
units vested under employee
stock plans ............................. 1,301,127
—
—
—
—
5 $ 1,388,358 $
10,247
—
—
2
—
—
—
—
12,224
—
2
(1,366,755) $
—
2
2
21,608
10,247
—
—
—
—
—
Unrealized loss on available-
for-sale securities ..................
Net income ................................
—
—
Balance at December 31, 2023 ..... 47,646,787 $
—
—
—
—
5 $ 1,398,605 $
—
(4)
—
21,591
(4) $ (1,345,164) $
(4)
21,591
53,442
See Accompanying Notes to the Consolidated Financial Statements
F-7
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Year Ended December 31,
2021
2022
2023
21,591 $
2 $
(29,126)
Operating activities:
Net income (loss) ................................................................................... $
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization ...............................................................
In-process research and development expenses .....................................
Stock-based compensation .....................................................................
Provision for credit loss (recovery) ........................................................
Disposal of property and equipment ......................................................
Loss on impairment of asset ...................................................................
Loss on debt extinguishment ..................................................................
Changes in operating assets and liabilities:
Accounts receivable, net .................................................................
Inventory, net ..................................................................................
Prepaid expenses and other .............................................................
Other current assets .........................................................................
Accounts payable ............................................................................
Operating lease assets and liabilities, net ........................................
Accrued expenses and other ............................................................
Post-marketing commitment liability ..............................................
Net cash provided by (used in) operating activities ...............................
11,519
—
10,247
881
—
625
—
(8,368 )
(2,554 )
820
1,517
449
(1,195 )
(7,583 )
(940 )
27,009
Investing activities:
Purchase of property and equipment ......................................................
Acquired in-process research and development .....................................
Purchase of available-for-sale securities ................................................
Maturity of available-for-sale securities .................................................
Purchase of intangible assets ..................................................................
Net cash (used in) provided by investing activities ................................
(140 )
—
(23,813 )
17,328
(12,500 )
(19,125 )
Financing activities:
Gross proceeds from private investments in public equity .....................
Issuance costs associated with private investments in public equity ......
Proceeds from debt .................................................................................
Payment of debt .....................................................................................
Payment of prepayment costs, end of loan payment and other
extinguishment costs ...........................................................................
Payment of debt issuance costs ..............................................................
Installment payment for purchase of intangible asset ............................
Net cash provided by (used in) financing activities ...............................
Net increase (decrease) in cash, cash equivalents and restricted cash ...........
Cash, cash equivalents and restricted cash, beginning of period ...................
Cash, cash equivalents and restricted cash, end of period .............................
—
—
—
—
—
—
—
—
7,884
78,792
86,676
9,840
7,000
11,826
—
1
—
—
(7,824)
2,583
2,367
(1,982)
(4,734)
(920)
(33,065)
(921)
(15,827)
—
(7,000)
(4,836)
18,940
—
7,104
12,500
(277)
—
—
—
—
—
12,223
3,500
75,292
78,792
11,305
—
32,633
(1,000)
1
—
8,146
(5,983)
(3,655)
2,669
3,194
(902)
(707)
5,209
(1,134)
20,650
—
—
(38,073)
27,192
—
(10,881)
—
—
98,500
(100,000)
(8,521)
(1,910)
(20,000)
(31,931)
(22,162)
97,454
75,292
Supplemental disclosures of non-cash investing and financing activities:
Intangibles in accrued in-license rights .................................................. $
Property and equipment purchases in accounts payable ........................ $
— $
26 $
12,500 $
— $
—
—
Supplemental disclosure of cash flow information:
Interest paid ............................................................................................ $
Income taxes paid ................................................................................... $
11,628 $
737 $
10,319 $
384 $
10,342
324
See Accompanying Notes to the Consolidated Financial Statements
F-8
PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Business and Basis of Presentation
Puma Biotechnology, Inc., (the “Company”) is a biopharmaceutical company based in Los Angeles, California that
develops and commercializes innovative products to enhance cancer care and improve treatment outcomes for patients. The
Company is currently commercializing NERLYNX®, an oral version of neratinib (“NERLYNX”), for the treatment
of HER2-positive breast cancer. Additionally, the Company in-licensed, and is responsible for global development and
commercialization of, alisertib. Alisertib is a selective, small molecule inhibitor of aurora kinase A that is designed to
disrupt mitosis leading to apoptosis of rapidly proliferating tumor cells dependent on aurora kinase. The Company believes
alisertib has potential application in the treatment of a range of different cancer types, including hormone receptor positive
breast cancer, triple-negative breast cancer and small cell lung cancer.
The Company has one subsidiary, Puma Biotechnology, B.V., a Netherlands company. This subsidiary
was established for the purpose of legal representation in the European Union. The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
The accompanying consolidated financial statements of the Company and its subsidiary has been prepared in
accordance with generally accepted accounting principles in the United States (“US GAAP”).
The Company has incurred significant operating losses since its inception. While the Company recently reported net
income, we cannot assure that we will continue to do so and will need to continue to generate significant revenue to sustain
operations and successfully commercialize neratinib. In 2017, the Company received U.S. Food and Drug Administration
(“FDA”) approval for its first product, NERLYNX® (neratinib)(“NERLYNX”), formerly known as PB272 (neratinib, oral),
for the extended adjuvant treatment of adult patients with early stage HER2-overexpressed/amplified breast cancer
following adjuvant trastuzumab-based therapy. Following FDA approval in July 2017, NERLYNX became available by
prescription in the United States, and the Company commenced commercialization.
In February 2020, NERLYNX was also approved by the FDA in combination with capecitabine for the treatment of
adult patients with advanced or metastatic HER2-positive breast cancer who have received two or more prior anti-HER2-
based regimens in the metastatic setting.
In 2018, the European Commission (“EC”) granted marketing authorization for NERLYNX in the European Union
(“EU”) for the extended adjuvant treatment of adult patients with early stage hormone receptor positive HER2-
overexpressed/amplified breast cancer and who are less than one year from the completion of prior adjuvant trastuzumab-
based therapy.
The Company is required to make substantial payments to Pfizer upon the achievement of certain milestones and has
contractual obligations for clinical trial contracts.
The Company has entered into other exclusive sub-license agreements with various parties to pursue regulatory
approval, if necessary, and commercialize NERLYNX, if approved, in many regions outside the United States, including
Europe (excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia, Israel, South Korea, and various
countries and territories in Central and South America. The Company plans to continue to pursue commercialization of
NERLYNX in other countries outside the United States, if approved.
In September 2022, the Company entered an exclusive license agreement with a subsidiary of Takeda
Pharmaceutical Company Limited (“Takeda”) to license the worldwide research and development and commercial rights to
alisertib, a selective, small-molecule, orally administered inhibitor of aurora kinase A. Alisertib is an adenosine
triphosphate–competitive and reversible inhibitor of aurora kinase A and results in disruption of mitosis leading to
apoptosis of rapidly proliferating tumor cells that are dependent on aurora kinase A. Alisertib has been tested in clinical
trials in patients with metastatic cancers including breast cancer, small cell lung cancer, head and neck cancer, ovarian
cancer, peripheral T cell lymphoma and acute myeloid leukemia. Under the terms of the exclusive license agreement, the
Company assumed sole responsibility for the global development and commercialization of alisertib. The Company paid
Takeda an upfront license fee of $7.0 million in October 2022 and is eligible to receive potential future milestone payments
of up to $287.3 million upon the Company’s achievement of certain regulatory and commercial milestones over the course
of the exclusive license agreement, as well as tiered royalty payments for any net sales of alisertib. The Company recorded
in-process research and development expense of $7.0 million during the year ended December 31, 2022, in connection with
F-9
the up-front payment related to the asset acquisition. As of December 31, 2023, no milestones had been accrued as the
underlying contingencies were not probable or estimable.
The Company has reported net income of approximately $21.6 million and cash provided by operations of
approximately $27.0 million for the year ended December 31, 2023. The Company’s commercialization, research and
development or marketing efforts may require funding in addition to the cash and cash equivalents and marketable
securities totaling approximately $95.9 million at December 31, 2023. The Company believes that its existing cash and cash
equivalents and marketable securities as of December 31, 2023 and proceeds that will become available to the Company
through product sales and sub-license payments are sufficient to satisfy its operating cash needs, including amounts due
under the Company's Note Purchase Agreement with Athyrium, for at least one year after the filing of the Annual Report
on Form 10-K in which these financial statements are included. The Company continues to remain dependent on its ability
to obtain sufficient funding to sustain operations and continue to successfully commercialize neratinib in the United States.
While the Company has been successful in raising capital in the past, there can be no assurance that it will be able to do so
in the future. The Company’s ability to obtain funding may be adversely impacted by uncertain market and economic
conditions, the Company’s success in commercializing neratinib, unfavorable decisions of regulatory authorities or adverse
clinical trial results. The outcome of these matters cannot be predicted at this time. Additionally, the terms of the
Company’s Note Purchase Agreement place restrictions on the Company’s ability to operate the business and on the
Company’s financial flexibility, and the Company may be unable to achieve the revenue necessary to satisfy the minimum
revenue and cash balance covenants as specified in the agreement.
Since its inception through December 31, 2023, the Company’s financing has primarily been proceeds from product,
royalty, and license revenue, public offerings of its common stock, private equity placements, and various debt instruments.
Note 2—Significant Accounting Policies
The significant accounting policies followed in the preparation of these consolidated financial statements are as
follows:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. These
reclassifications had no effect on the reported results of operations. An adjustment to the presentation of operating lease
assets and liabilities, net has been made to the Consolidated Statements of Cash Flows for the year ended December 31,
2022.
Segment Reporting
Management has determined that the Company operates in one business segment, which is the development and
commercialization of innovative products to enhance cancer care.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect reported amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the balance sheet, and reported amounts of revenues and expenses for the period presented.
Accordingly, actual results could differ from those estimates.
Significant estimates include estimates for variable consideration for which reserves were established. These
estimates are included in the calculation of net revenues and include trade discounts and allowances, product returns,
provider chargebacks and discounts, government rebates, payor rebates, and other incentives, such as voluntary patient
assistance, and other allowances that are offered within contracts between the Company and its customers, payors, and
other indirect customers relating to the Company’s sale of its products. Other significant estimates also include those
related to legal and other expense accruals.
F-10
Net Income (Loss) per Share of Common Stock
Basic net income (loss) per share of common stock is computed by dividing net loss applicable to common
stockholders by the weighted average number of shares of common stock outstanding during the periods presented, as
required by ASC 260, Earnings per Share. For purposes of calculating diluted loss per share of common stock, the
denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive
common stock equivalents, such as stock options, restricted stock units (“RSUs”) and warrants. A common stock
equivalent is not included in the denominator when calculating diluted earnings per common share if the effect of such
common stock equivalent would be anti-dilutive. The following potentially dilutive outstanding common stock
equivalents were excluded from diluted net income (loss) per share because of their anti-dilutive effect:
Options outstanding ............................................................................
Warrant outstanding ...........................................................................
Unvested restricted stock units ...........................................................
Totals ..................................................................................................
Revenue Recognition
For the Year Ended December 31,
2022
4,212,481
2,116,250
478,108
6,806,839
2023
3,836,328
2,116,250
977,392
6,929,970
2021
4,595,247
2,116,250
1,399,317
8,110,814
Under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) the Company recognizes revenue
when its customer obtains control of the promised goods or services, in an amount that reflects the consideration that the
entity expects to be entitled in exchange for those goods or services. The Company had no contracts with customers until
the FDA approved NERLYNX on July 17, 2017. Subsequent to receiving FDA approval, the Company entered into a
limited number of arrangements with specialty pharmacies and specialty distributors in the United States to distribute
NERLYNX. These arrangements are the Company’s initial contracts with customers. The Company has determined that
these sales channels with customers are similar.
Product Revenue, Net
The Company sells NERLYNX to a limited number of specialty pharmacies and specialty distributors in the United
States. These customers subsequently resell the Company’s products to patients and certain medical centers or hospitals. In
addition to distribution agreements with these customers, the Company enters into arrangements with healthcare providers
and payors that provide for government mandated and/or privately negotiated rebates, chargebacks and discounts with
respect to the purchase of the Company’s products.
The Company recognizes revenue on product sales when the specialty pharmacy or specialty distributor, as
applicable, obtains control of the Company's product, which occurs at a point in time (upon delivery). Product revenue is
recorded net of applicable reserves for variable consideration, including discounts and allowances. The Company’s
payment terms range between 10 and 68 days.
Product revenue also consists of product sales under sub-license agreements to our sub-licensees, who then sell into
their respective international territories.
Shipping and handling costs for product shipments occur prior to the customer obtaining control of the goods and are
recorded in cost of sales.
If taxes relating to product sales should be collected from customers and remitted to governmental authorities, they
will be excluded from revenue. The Company expenses incremental costs of obtaining a contract when incurred if the
expected amortization period of the asset that the Company would have recognized is one year or less. However, no such
costs were incurred during the year ended December 31, 2023.
For the year ended December 31, 2023,four customers individually comprised approximately 31.4%, 17.2%, 15.2%
and 11.9% respectively, of the Company’s total product revenue. For the year ended December 31, 2022, two major
customers accounted for approximately 35% and 20%, respectively, of the Company’s total product revenue. For the
year ended December 31, 2021, two major customers accounted for approximately 31% and 22%, respectively, of the
Company’s total product revenue.
F-11
Reserves for Variable Consideration
Revenue from product sales is recorded at the net sales price (transaction price), which includes estimates of variable
consideration for which reserves are established. Components of variable consideration include trade discounts and
allowances, product returns, provider chargebacks and discounts, government rebates, payor rebates, and other incentives,
such as voluntary patient assistance, and other allowances that are offered within contracts between the Company and its
customers, payors, and other indirect customers relating to the Company’s sale of its products. These reserves, as detailed
below, are based on the related sales, and are classified as reductions of accounts receivable, net when the right of offset
exists in accordance with ASU 2013-1, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting
Assets and Liabilities, or as a current liability. These estimates take into consideration a range of possible outcomes that are
probability-weighted in accordance with the expected value method in ASC 606 for relevant factors such as current
contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer
buying and payment patterns. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to
which it is entitled based on the terms of the respective underlying contracts.
The amount of variable consideration that is included in the transaction price may be constrained and is included in
the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue
recognized under the contract will not occur in a future period. The Company’s analysis also contemplated application of
the constraint in accordance with the guidance, under which it determined a significant reversal of revenue would not occur
in a future period for the estimates detailed below as of December 31, 2023 and, therefore, the transaction price was not
reduced further during the year ended December 31, 2023. Actual amounts of consideration ultimately received may differ
from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust
these estimates, which would affect net product revenue and earnings in the period such variances become known.
Trade Discounts and Allowances
The Company generally provides customers with discounts, which include incentive fees that are explicitly stated in
the Company’s contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized.
The reserve for discounts is established in the same period that the related revenue is recognized, together with reductions
to accounts receivables, net on the consolidated balance sheets. In addition, the Company compensates its customers for
sales order management, data, and distribution services. The Company has determined such services received to date are
not distinct from the Company’s sale of products to its customers and, therefore, these payments have been recorded as a
reduction of revenue within the statement of operations.
Product Returns
Consistent with industry practice, the Company offers the specialty pharmacies and specialty distributors that are its
customers limited product return rights for damaged and expiring product, provided it is within a specified period around
the product expiration date as set forth in the applicable individual distribution agreement. The Company estimates the
amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the
period the related product revenue is recognized, as well as a reduction to accounts receivables, net on the consolidated
balance sheets. The Company currently estimates product returns using its own sales information, including its visibility
into the inventory remaining in the distribution channel. The Company has an insignificant number of returns to date and
believes that returns of its products will continue to be minimal.
Provider Chargebacks and Discounts
Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual
commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to its customers
who directly purchase the product from the Company. Customers charge the Company for the difference between what they
pay for the product and the ultimate selling price to the qualified healthcare providers. The reserve for chargebacks is
established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and a
reduction to accounts receivable, net on the consolidated balance sheets. Chargeback amounts are generally determined at
the time of resale to the qualified healthcare provider by customers, and the Company generally issues credits for such
amounts within a few weeks of the customer’s notification to the Company of the resale. Chargebacks consist of credits the
Company expects to issue for units that remain in the distribution channel at each reporting period end that the Company
expects will be sold to qualified healthcare providers and chargebacks that customers have claimed, but for which the
Company has not yet issued a payment.
F-12
Government Rebates
The Company is subject to discount obligations under state Medicaid programs and Medicare. These reserves are
recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the
establishment of a current liability, which is included in accrued expenses on the consolidated balance sheets. The
Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or
for which an invoice has not yet been received, estimates of claims for the current quarter, and estimates of future claims
that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end
of each reporting period.
Payor Rebates
The Company contracts with certain private payor organizations, primarily insurance companies and pharmacy
benefit managers, for the payment of rebates with respect to utilization of its products. The Company estimates these
rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product
revenue, net and the establishment of a current liability, which is included in accrued expenses on the consolidated balance
sheets.
Other Incentives
Other incentives the Company offers include voluntary patient assistance programs, such as the co-pay assistance
program, which are intended to provide financial assistance to qualified commercially insured patients with prescription
drug co-payments required by payors. The calculation of the accrual for co-pay assistance is based on an estimate of claims
and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue, but
remains in the distribution channel at the end of each reporting period. The adjustments are recorded in the same period the
related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which
is included as a component of accrued expenses on the consolidated balance sheets.
License Revenue
The Company also recognizes license revenue under certain of the Company’s sub-license agreements that are
within the scope of ASC 606. The terms of these agreements may contain multiple performance obligations, which may
include licenses and research and development activities. The Company evaluates these agreements under ASC 606 to
determine the distinct performance obligations. Non-refundable, upfront fees that are not contingent on any future
performance and require no consequential continuing involvement by the Company, are recognized as revenue when the
license term commences and the licensed data, technology or product is delivered. The Company defers recognition of non-
refundable upfront license fees if the performance obligations are not satisfied. The Company’s payment terms range
between the execution date of the sub-license agreement and 45 days.
Prior to recognizing revenue, the Company makes estimates of the transaction price, including variable consideration
that is subject to a constraint. Amounts of variable consideration are included in the transaction price to the extent that it is
probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty
associated with the variable consideration is subsequently resolved.
If there are multiple distinct performance obligations, the Company allocates the transaction price to each distinct
performance obligation based on its relative standalone selling price. The standalone selling price is generally determined
based on the prices charged to customers or using expected cost-plus margin. Revenue is recognized by measuring the
progress toward complete satisfaction of the performance obligations using an input measure.
Since 2018, the Company has entered into sub-license agreements with certain sub-licensees in territories outside of
the United States. These sub-licensing agreements grant certain intellectual property rights and set forth various respective
obligations with respect to actions such as development, pursuit and maintenance of regulatory approvals,
commercialization and supply of NERLYNX in the sub-licensees’ respective territories.
License fees under the sub-license agreements include one-time upfront payments when each sub-license agreement
was executed and potential additional one-time milestone payments due to the Company upon successful completion of
certain performance obligations, such as achieving regulatory approvals or sales target thresholds, and potential double-
digit royalties on sales of the licensed product, calculated as a percentage of net sales of the licensed product throughout
each sub-licensee’s respective territory. As of December 31, 2023, the total potential milestone payments that would be due
to the Company upon achievement of all respective performance obligations under the sub-license agreements is
F-13
approximately $579.8 million. At this time, the Company cannot estimate if or when these milestone-related performance
obligations might be achieved.
Royalty Revenue
For sub-license agreements that are within the scope of ASC 606, the Company recognizes revenue when the related
sales occur in accordance with the sales-based royalty exception under ASC 606-10-55-65. Royalty revenue consists of
consideration earned related to international sales of NERLYNX made by the Company’s sub-licensees in their respective
territories. The Company recognizes royalty revenue when the performance obligations have been satisfied. The
Company’s payment terms range between 10 and 45 days.
Legal Contingencies and Expense
For legal contingencies, the Company accrues a liability for an estimated loss if the potential loss from any claim or
legal proceeding is considered probable and the amount can be reasonably estimated. Legal fees and expenses are expensed
as incurred based on invoices or estimates provided by legal counsel. The Company periodically evaluates available
information, both internal and external, relative to such contingencies and adjusts the accrual as necessary. The Company
determines whether a contingency should be disclosed by assessing whether a material loss is deemed reasonably possible.
In determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability of
an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss (see Note 13-Commitments
and Contingencies).
Royalty Expenses
Royalties incurred in connection with the Company’s license agreement with Pfizer, as disclosed in Note 13-
Commitments and Contingencies, are expensed to cost of sales as revenue from product sales is recognized.
Research and Development Expenses
Research and development (“R&D”) expenses are charged to operations as incurred. The major components of
research and development costs include clinical manufacturing costs, clinical trial expenses, consulting and other third-
party costs, salaries and employee benefits, stock-based compensation expense, supplies and materials, and allocations of
various overhead costs. Clinical trial expenses include, but are not limited to, investigator fees, site costs, comparator drug
costs, and clinical research organization (“CRO”) costs. In the normal course of business, the Company contracts with third
parties to perform various clinical trial activities in the ongoing development of potential products. The financial terms of
these agreements are subject to negotiation and variations from contract to contract and may result in uneven payment
flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment
of patients and the completion of portions of the clinical trial or similar conditions. The Company’s accruals for clinical
trials are based on estimates of the services received and efforts expended pursuant to contracts with numerous clinical trial
sites, cooperative groups and CROs. As actual costs become known, the Company adjusts its accruals in that period.
In instances where the Company enters into agreements with third parties for clinical trials and other consulting
activities, upfront amounts are recorded to prepaid expenses and other in the accompanying consolidated balance sheets and
expensed as services are performed or as the underlying goods are delivered. If the Company does not expect the services to
be rendered or goods to be delivered, any remaining capitalized amounts for non-refundable upfront payments are charged
to expense immediately. Amounts due under such arrangements may be either fixed fee or fee for service, and may include
upfront payments, monthly payments and payments upon the completion of milestones or receipt of deliverables.
Costs related to the acquisition of technology rights and patents for which development work is still in process are
charged to operations as incurred and considered a component of research and development costs.
Acquired In-Process Research and Development Expense
The Company has acquired, and may continue to acquire, the rights to develop new drug candidates. Payments to
acquire a new drug candidate are immediately expensed as acquired in-process research and development provided that the
drug candidate has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative
future use.
F-14
Stock-Based Compensation
Stock option awards
ASC Topic 718, Compensation-Stock Compensation (“ASC 718”) requires the fair value of all share-based
payments to employees and non-employees, including grants of stock options, to be recognized in the statement of
operations over the requisite service period. Under ASC 718, employee and non-employee option grants are generally
valued at the grant date and those valuations do not change once they have been established. The fair value of each option
award is estimated on the grant date using the Black-Scholes Option Pricing Method. As allowed by ASC 718, the
Company’s estimate of expected volatility is based on its average volatilities using its expected life, or approximately
the past six years of publicly traded history. The risk-free rate for periods within the contractual life of the option is based
on the U.S. Treasury yield curve in effect at the time of grant valuation. Option forfeitures are estimated when the option is
granted to reduce the option expense to be recognized over the life of the award. The estimated forfeiture rate considers
historical employee turnover rates stratified into employee pools, actual forfeiture experience and other factors. The option
expense is adjusted upon the actual forfeiture of a stock option grant and the Company periodically revises the estimated
forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. Due to its limited history of stock
option exercises, the Company uses the simplified method to determine the expected life of the option grants.
Compensation expense related to modified stock options is measured based on the fair value for the awards as of the
modification date. Any incremental compensation expense arising from the excess of the fair value of the awards on the
modification date compared to the fair value of the awards immediately before the modification date is recognized at the
modification date or ratably over the requisite service period, as appropriate.
Restricted stock units
RSUs are valued on the grant date and the fair value of the RSUs is equal to the market price of the Company’s
common stock on the grant date. RSU expense is recognized over the requisite service period in the statement of operations.
When the requisite service period begins prior to the grant date (because the service inception date occurs prior to the grant
date), the Company is required to begin recognizing compensation cost before there is a measurement date (i.e., the grant
date). The service inception date is the beginning of the requisite service period. If the service inception date precedes the
grant date, accrual of compensation cost for periods before the grant date shall be based on the fair value of the award at the
reporting date. In the period in which the grant date occurs, cumulative compensation cost shall be adjusted to reflect the
cumulative effect of measuring compensation cost based on fair value at the grant date rather than the fair value previously
used at the service inception date (or any subsequent reporting date). RSU forfeitures are estimated when the RSU is
granted to reduce the RSU expense to be recognized over the life of the award. The estimated forfeiture rate considers
historical employee turnover rates stratified into employee pools, actual forfeiture experience and other factors. The RSU
expense is “trued-up” upon the actual forfeiture of a RSU grant and the Company periodically revises the estimated
forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to
modified restricted stock units is measured based on the fair value for the awards as of the modification date. Any
incremental compensation expense arising from the excess of the fair value of the awards on the modification date
compared to the fair value of the awards immediately before the modification date is recognized at the modification date or
ratably over the requisite service period, as appropriate.
Warrants
Warrants (see Note 10-Stockholders’ Equity (Deficit) for further details) granted to employees and non-employees
are normally valued at the fair value of the instrument on the grant date and are recognized in the statement of operations
over the requisite service period. When the requisite service period precedes the grant date and a market condition exists in
the warrant, the Company values the warrant using the Monte Carlo Simulation Method. When the terms of the warrant
become fixed, the Company values the warrant using the Black-Scholes Option Pricing Method. As allowed by ASC 718,
the Company’s estimate of expected volatility is based on its average volatilities using its past nine years of publicly traded
history. The risk-free rate for periods within the contractual life of the warrant is based on the U.S. Treasury yield curve in
effect at the time of grant valuation. In determining the value of the warrant until the terms are fixed, the Company factors
in the probability of the market condition occurring and several possible scenarios. When the requisite service period
precedes the grant date and is deemed to be complete, the Company records the fair value of the warrant at the time of
issuance as an equity stock-based compensation transaction. The grant date is determined when all pertinent information,
such as exercise price and quantity are known.
F-15
Income Taxes
The Company follows ASC Topic 740, Income Taxes (“ASC 740”) which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the consolidated financial
statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the
consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled.
The standard addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return
should be recorded in the consolidated financial statements. Under ASC 740, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the
tax authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial
statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition, classification, interest and
penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2023, the
Company’s uncertain tax positions includes a reserve for its R&D credits.
Financial Instruments
The carrying value of financial instruments, such as cash equivalents, accounts receivable and accounts payable,
approximate their fair value because of their short-term nature. The carrying value of long-term debt approximates its fair
value as the principal amounts outstanding are subject to variable interest rates that are based on market rates that are
regularly reset.
Cash and Cash Equivalents
The Company classifies all highly liquid instruments with an original maturity of three months or less as cash
equivalents.
Restricted Cash
Restricted cash represents cash held at financial institutions that is pledged as collateral for stand-by letters of credit
for lease and legal verdict commitments. The lease related letters of credit will lapse at the end of the respective lease terms
through 2026. At December 31, 2023 and 2022, the Company had restricted cash in the amount of $2.1 million and
$2.6 million, respectively.
Investment Securities
The Company classifies all investment securities (short-term and long-term) as available-for-sale, as the sale of such
securities may be required prior to maturity to implement management’s strategies. These securities are carried at fair
value, with the unrealized gains and losses, reported as a component of accumulated other comprehensive income (loss) in
stockholders’ equity (deficit) until realized. Realized gains and losses from the sale of available-for-sale securities, if any,
are determined on a specific identification basis. In accordance with ASU 2016-13, Financial Instruments – Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, credit losses on available-for-sale securities are
reported using an expected loss model and recorded to an allowance. No material credit losses on available-for-sale
securities were recognized in the years ending December 31, 2023, Premiums and discounts are amortized or accreted over
the life of the related security as an adjustment to yield using the straight-line method. Interest income is recognized when
earned.
F-16
Assets Measured at Fair Value on a Recurring Basis
ASC Topic 820, Fair Value Measurement (“ASC 820”) provides a single definition of fair value and a common
framework for measuring fair value as well as disclosure requirements for fair value measurements used in financial
statements. Under ASC 820, fair value is determined based upon the exit price that would be received by a company to sell
an asset or paid by a company to transfer a liability in an orderly transaction between market participants, exclusive of any
transaction costs. Fair value measurements are determined by either the principal market or the most advantageous market.
The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal
market to measure fair value, the Company uses the most advantageous market, which is the market from which the
Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering
transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine
which market is the most advantageous and these costs are then excluded when applying a fair value measurement. ASC
820 creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis
for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority
and Level 3 having the lowest.
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs
are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
Following are the major categories of assets measured at fair value on a recurring basis as of December 31, 2023 and
2022, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and
significant unobservable inputs (Level 3) (in thousands):
December 31, 2023
Cash equivalents ........................................................................... $
US Government ............................................................................
Commercial paper ........................................................................
$
Level 1
Level 2
Level 3
Total
29,068 $
3,444
—
32,512 $
8,490 $
—
7,910
16,400 $
— $
—
—
— $
37,558
3,444
7,910
48,912
December 31, 2022
Cash equivalents ........................................................................... $
Commercial paper ........................................................................
Totals ............................................................................................ $
Level 1
Level 2
Level 3
Total
41,673 $
—
41,673 $
— $
4,873
4,873 $
— $
—
— $
41,673
4,873
46,546
The Company’s investments in commercial paper, corporate bonds and U.S. government securities are exposed to
price fluctuations. The fair value measurements for commercial paper, corporate bonds and U.S. government securities are
based upon the quoted prices of similar items in active markets multiplied by the number of securities owned.
F-17
The following tables summarize the Company’s short-term investments (in thousands):
Maturity
(in years)
Amortized
Unrealized
December 31, 2023
Cash equivalents .........................
$
US Government ........................... Less than 1
Commercial paper ....................... Less than 1
Totals .................................................................. $
cost
Gains
Losses
37,561 $
3,443
7,912
48,916 $
— $
1
1
2 $
December 31, 2022
Cash equivalents ..........................
$
Commercial paper ....................... Less than 1
Totals ................................................................... $
cost
Gains
Losses
41,673 $
4,873
46,546 $
— $
—
— $
Maturity
(in years)
Amortized
Unrealized
Estimated
fair value
(3 ) $
—
(3 )
(6 ) $
37,558
3,444
7,910
48,912
Estimated
fair value
— $
—
— $
41,673
4,873
46,546
Concentration of Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, principally consist of
cash and cash equivalents, marketable securities, and accounts receivable, net. The Company’s cash and cash equivalents
and restricted cash in excess of the Federal Deposit Insurance Corporation and the Securities Investor Protection
Corporation insured limits at December 31, 2023, were approximately $84.4 million. The Company does not believe it is
exposed to any significant credit risk due to the quality nature of the financial instruments in which the money is held.
Pursuant to the Company’s internal investment policy, investments must be rated A-1/P-1 or better by Standard and Poor’s
Rating Service and Moody’s Investors Service at the time of purchase.
The Company sells its products in the United States primarily through specialty pharmacies and specialty
distributors. Therefore, wholesale distributors and large pharmacy chains account for a large portion of its accounts
receivables, net and product revenues, net. The creditworthiness of its customers is continuously monitored, and the
Company has internal policies regarding customer credit limits. The Company estimates an allowance for credit loss
primarily based on the credit worthiness of its customers, historical payment patterns, aging of receivable balances and
general economic conditions. The Company recorded $0.9 million credit loss expense in the year ended December 31,
2023, and no such expense in the year ended December 31, 2022. The Company recorded a recovery of credit loss expense
of $1.0 million in year ended December 31, 2021.
As of December 31, 2023 and 2022, accounts receivable from individual customers with balances due in excess of
10% of total accounts receivable totaled $32.3 million and $28.9 million, respectively.
The Company’s success depends on its ability to successfully commercialize NERLYNX. The Company currently
has a single product with limited commercial sales experience, which makes it difficult to evaluate its current business,
predict its future prospects and forecast financial performance and growth. The Company has invested a significant portion
of its efforts and financial resources in the development and commercialization of the lead product, NERLYNX, and
expects NERLYNX to constitute the vast majority of product revenue for the foreseeable future.
The Company relies exclusively on third parties to formulate and manufacture NERLYNX and its drug candidates.
The commercialization of NERLYNX and any other drug candidates, if approved, could be stopped, delayed or made less
profitable if those third parties fail to provide sufficient quantities of product or fail to do so at acceptable quality levels or
prices. The Company has no experience in drug formulation or manufacturing and does not intend to establish its own
manufacturing facilities. The Company lacks the resources and expertise to formulate or manufacture NERLYNX and other
drug candidates. While the drug candidates were developed by Pfizer, both the drug substance and drug product are
manufactured by third-party contractors. The Company is using the same third-party contractors to manufacture, supply,
store and distribute drug supplies for clinical trials and the commercialization of NERLYNX. If the Company is unable to
continue its relationships with one or more of these third-party contractors, it could experience delays in the development or
commercialization efforts as it locates and qualifies new manufacturers. The Company intends to rely on one or more third-
party contractors to manufacture the commercial supply of drugs.
F-18
Inventory
The Company values its inventories at the lower of cost and estimated net realizable value. The Company
determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-
in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting
period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the
impairment is first identified. Such impairment charges, should they occur, are recorded within the cost of sales in the
consolidated statements of operations. The determination of whether inventory costs will be realizable requires estimates by
management. If actual market conditions are less favorable than projected by management, additional write-downs of
inventory may be required, which would be recorded as a cost of sales in the consolidated statements of operations.
The Company capitalizes inventory costs associated with the Company’s products after regulatory approval, if any,
when, based on management’s judgment, future commercialization is considered probable, and the future economic benefit
is expected to be realized. Inventory that can be used in either the production of clinical or commercial product is recorded
as research and development expense when selected for use in a clinical trial. Starter kits, provided to patients prior to
insurance approval, are expensed by the Company to selling, general and administrative expense as incurred.
The Company’s inventory balances are as follows:
Raw materials ................................................................................................................. $
Work-in-process (materials, labor and overhead) ..........................................................
Finished goods (materials, labor and overhead) .............................................................
Total inventories ............................................................................................................ $
5,693 $
820
567
7,080 $
1,679
2,661
186
4,526
December 31,
2023
December 31,
2022
Other Current Assets
Other current assets consisted of the following at December 31 (in thousands):
December 31,
2023
December 31,
2022
CARES Act Credit Receivable ........................................................................................ $
Reimbursement receivable ..............................................................................................
Other ................................................................................................................................
Totals ............................................................................................................................... $
— $
652
260
912 $
1,920
—
509
2,429
Other current assets primarily contain receivables other than trade receivables. For the year ended December 31,
2023, the Company recorded a $0.7 million receivable for reimbursement from a vendor for damaged inventory. For the
year ended December 31, 2022, the Company recorded a $1.9 million receivable related to the Coronavirus Aid Relief
Economic Security Act (the “CARES Act”), which was received in the first quarter of 2022. Other amounts consist
primarily of capitalized sublease commission and a sublease tenant improvement allowance, net of amortization.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed
using the straight-line method over the useful lives of the assets, which is generally three years for computer hardware and
software, three years for phone equipment, and seven years for furniture and fixtures. Leasehold improvements are
amortized using the straight-line method over the lesser of the useful life or the lease term. Upon retirement or sale, the cost
of assets disposed of and the related accumulated depreciation are eliminated from the accounts and any resulting gain or
loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred.
F-19
The Company reviews its long-lived assets used in operations for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable, as required by ASC Topic 360,
Property, Plant, and Equipment (“ASC 360”). The Company performs a recoverability test by comparing the sum of the
estimated undiscounted cash flows over the life of the asset to its carrying value on the consolidated balance sheet. If the
undiscounted cash flows used in the recoverability test are less than the carrying value, the Company would then determine
the fair value of the long-lived asset and recognize an impairment loss for the amount in excess of the carrying value. No
impairments were recorded during the years ended December 31, 2023 and 2022.
Leases
ASC Topic 842, Leases, as adopted in the first quarter of 2019, requires lessees to recognize most leases on the
balance sheet with a corresponding right-of-use asset (“ROU asset”). ROU assets represent the Company’s right to use an
underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising
from the lease. The assets and lease liabilities are recognized at the lease commencement date based on the estimated
present value of fixed lease payments over the lease term. ROU assets are evaluated for impairment using the long-lived
assets impairment guidance, as required by ASC 360. A significant indication of impairment of an ROU asset would
include a change in the extent or manner in which the asset is being used. The Company must make assumptions
that underlie the most significant and subjective estimates in determining whether any impairment exists. Those estimates,
and the underlying assumptions, include estimates of future cash flow utilizing market lease rates and determination of fair
value. If an ROU asset related to an operating lease is impaired, the carrying value of the ROU asset post-impairment
should be amortized on a straight-line basis through the earlier of the end of the useful life of the ROU asset or the end of
the lease term. Post impairment, a lessee must calculate the amortization of the ROU asset and interest expense on the lease
liability separately, although the sum of the two continues to be presented as a single lease cost. If a lease is planned to be
abandoned with no intention of subleasing, the ROU asset should be assessed for impairment.
Leases are classified as financing or operating, which will drive the expense recognition pattern. The Company
elects to exclude short-term leases if and when the Company has them. For additional information, see Note 6-Leases.
The Company leases office space and copy machines, all of which are operating leases. Most leases include the
option to renew, and the exercise of the renewal options is at the Company’s sole discretion. Options to extend or terminate
a lease are considered in the lease term to the extent that the option is reasonably certain of exercise. The leases do not
include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the
expected lease term. Covenants imposed by the leases include letters of credit required to be obtained by the lessee.
The incremental borrowing rate (“IBR”) represents the rate of interest the Company would expect to pay on a
collateralized basis to borrow an amount equal to the lease payments under similar terms. When determinable, the
Company uses the rate implicit in the lease to determine the present value of lease payments. As the Company’s leases do
not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the
commencement date in determining the present value of lease payments. The Company’s average IBR for existing leases as
of December 31, 2023 was 10.9%.
The Company decided to cease the use of a portion of its leased office space in 2023. In connection with the
decreased need for the right to use the ROU asset, the Company entered into a sublease for the underlying asset, in which
the sublease income is less than the original lease payments, indicating impairment. In performing the recoverability test on
the effective date, the undiscounted future estimated cash flows and carrying value were identified for the subleased portion
of the leased building, as an individual asset group, defined under ASC 360. A reduction to the carrying value of the ROU
asset of approximately $0.6 million was recorded, representing the fair value amount in excess of the carrying value, with a
corresponding impairment charge recorded as selling, general and administration expense, in the consolidated statements of
operations for the year ended December 31, 2023.
License Fees and Intangible Assets
The Company expenses amounts paid to acquire licenses associated with products under development when the
ultimate recoverability of the amounts paid is uncertain and the technology has no alternative future use when acquired.
Acquisitions of technology licenses are charged to expense or capitalized based upon the asset achieving technological
feasibility in accordance with management’s assessment regarding the ultimate recoverability of the amounts paid and the
potential for alternative future use. The Company has determined that technological feasibility for its drug candidates is
reached when the requisite regulatory approvals are obtained to make the product available for sale. The Company
capitalizes technology licenses upon reaching technological feasibility.
F-20
The Company maintains definite-lived intangible assets related to the license agreement with Pfizer. These assets are
amortized over their remaining useful lives, which are estimated based on the shorter of the remaining patent life or the
estimated useful life of the underlying product. Intangible assets are amortized using the economic consumption method if
anticipated future revenues can be reasonably estimated. The straight-line method is used when future revenues cannot be
reasonably estimated. Amortization costs are recorded as part of cost of sales.
In September 2022, the Company entered into an exclusive license agreement with Takeda to license the worldwide
research and development and commercial rights to alisertib, a selective, small-molecule, orally administered inhibitor of
aurora kinase A. The up-front payment of $7.0 million was expensed as acquired in-process research and development as
the drug candidate has not achieved regulatory approval for marketing and has no alternative future use.
The Company assesses its intangible assets for impairment if indicators are present or changes in circumstance
suggest that impairment may exist. Events that could result in an impairment, or trigger an interim impairment assessment,
include the receipt of additional clinical or non-clinical data regarding one of the Company’s drug candidates or a
potentially competitive drug candidate, changes in the clinical development program for a drug candidate, or new
information regarding potential sales of the drug. If impairment indicators are present or changes in circumstance suggest
that impairment may exist, the Company performs a recoverability test by comparing the sum of the estimated
undiscounted cash flows of each asset group to its carrying value on the consolidated balance sheet. If the undiscounted
cash flows used in the recoverability test are less than the carrying value, the Company would determine the fair value of
the intangible asset and recognize an impairment loss if the carrying value of the intangible asset exceeds its fair value. In
connection with the FDA approval of NERLYNX in July 2017, the Company triggered a one-time milestone payment
pursuant to its license agreement with Pfizer. In June 2020, the Company entered into a letter agreement with Pfizer relating
to the method of payment associated with a milestone payment under the Company’s license agreement with Pfizer (see
Note 13-Commitments and Contingencies). The Company capitalized the milestone payments as an intangible asset and is
amortizing the asset to cost of sales on a straight-line basis over the estimated useful life of the licensed patent through
2030. In addition, the Company reached a commercial milestone by achieving aggregate worldwide net sales of $250
million in calendar year 2022, resulting in a payable to Pfizer of $12.5 million as of December 31, 2022. The Company
capitalized this milestone as an intangible asset and accrued in-licensed rights on the accompanying consolidated balance
sheets and payment was made in the first quarter of 2023. The Company recorded amortization expense related to its
intangible assets of $9.7 million, $8.0 million, and $8.0 million for the years ended December 31, 2023, 2022 and 2021,
respectively. As of December 31, 2023, estimated future amortization expense related to the Company’s intangible asset
was approximately $9.7 million for each year from 2023 through 2029, and $2.4 million for 2030.
Recently Issued Accounting Standards
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements – Codification Amendments in
Response to the SEC’s Disclosure Update and Simplification Initiative. The ASU modifies the disclosure or presentation
requirements of a variety of Topics in the Codification to align with the SEC’s regulations. The ASU also makes those
requirements applicable to entities that were not previously subject to the SEC’s requirements. The ASU is effective for the
Company two years after the effective date to remove the related disclosure from Regulation S-X or S-K. As of the date
these financial statements have been made available for issuance, the SEC has not yet removed any related disclosure. The
Company does not expect the adoption of ASU 2023-06 to have a material effect on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation
of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for
the Company’s annual reporting periods beginning after December 15, 2025. Adoption is either with a prospective method
or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect
that adoption of ASU 2023-09 will have on its consolidated financial statements.
Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which
requires enhanced disclosures about segment expenses on an annual and interim basis. The impact of the adoption of this
ASU is not expected to have a material effect on our consolidated financial statements.
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832), which enhances
disclosure of transactions with governments that are accounted for by applying a grant or contribution model. ASU 2021-10
requires entities to provide information about the nature of the transactions, the related accounting policies used to account
for the transactions, the effect of the transactions on an entity's financial statements, and significant terms and conditions
associated with the transactions. ASU 2021-10 must be adopted for fiscal years beginning after December 15, 2021. Early
F-21
adoption is permitted. We adopted this guidance during 2022, and recognized approximately $3.8 million in payroll tax
credits under the CARES Act.
Note 3—Accounts Receivable
Accounts receivable, net consisted of the following (in thousands):
December 31,
2023
December 31,
2022
Trade accounts receivable ............................................................................................... $
Royalty revenue receivable .............................................................................................
Total accounts receivable ................................................................................................ $
Allowance for credit losses .............................................................................................
Total accounts receivable, net ......................................................................................... $
27,669 $
21,049
48,718 $
(881 )
47,837 $
27,600
12,750
40,350
—
40,350
Trade accounts receivable consist entirely of amounts owed from the Company’s customers related to product sales.
Royalty revenue receivable represents amounts owed related to royalty revenue recognized based on the Company’s sub-
licensees’ sales in their respective territories in the years ended December 31, 2023 and 2022.
For all accounts receivable, the Company recognized credit losses based on lifetime expected losses. In determining
estimated credit losses, the Company evaluated its historical loss rates, current economic conditions and reasonable and
supportable forecasts of future economic conditions. The Company recorded $0.9 million credit loss expense in the year
ended December 31, 2023, and no such expense in the year ended December 31, 2022. The Company recorded a recovery
of credit loss expense of $1.0 million in year ended December 31, 2021.
Note 4—Prepaid Expenses and Other
Prepaid expenses and other consisted of the following at December 31 (in thousands):
December 31,
2023
December 31,
2022
Current:
CRO services ............................................................................................................ $
Other clinical development ......................................................................................
Insurance ..................................................................................................................
Professional fees.......................................................................................................
Other ........................................................................................................................
Long-term:
Other clinical development ......................................................................................
Other ........................................................................................................................
Totals ............................................................................................................................... $
6 $
534
1,403
1,081
1,393
4,417
210
2,524
2,734
7,151 $
431
1,408
2,318
300
1,445
5,902
—
2,069
2,069
7,971
Other current prepaid amounts consist primarily of deposits, signing bonuses, licenses, subscriptions and software.
Other long-term prepaid amounts consist primarily of prefunding of reimbursement claims.
F-22
Note 5—Property and Equipment
Property and equipment consisted of the following at December 31 (in thousands):
December 31,
2023
December 31,
2022
Leasehold improvements ................................................................................................. $
Computer equipment .......................................................................................................
Telephone equipment ......................................................................................................
Furniture and fixtures ......................................................................................................
Total property and equipment .........................................................................................
Less: accumulated depreciation .......................................................................................
Property and equipment, net ............................................................................................ $
3,779 $
2,095
302
2,359
8,535
(7,680 )
855 $
3,779
2,132
302
2,359
8,572
(7,426)
1,146
For the years ended December 31, 2023, 2022 and 2021, the Company incurred depreciation expense of
$0.4 million, $0.6 million, and $0.7 million, respectively.
Note 6—Leases
In December 2011, the Company entered into a non-cancelable operating lease for office space in Los Angeles,
California, which lease was subsequently amended in November 2012, December 2013, March 2014, July 2015, and
December 2017. The initial term of the lease was for seven years and commenced on December 10, 2011. As amended, the
Company rents approximately 65,656 square feet. The term of the lease runs until March 2026, and rent amounts payable
by the Company increase approximately 3% per year. Concurrent with the execution of the lease, the Company provided
the landlord an automatically renewable stand-by letter of credit in the amount of $1.0 million. The stand-by letter of credit
is collateralized by a high-yield savings account, which is classified as restricted cash, long-term on the accompanying
consolidated balance sheets.
In June 2012, the Company entered into a long-term lease agreement for office space in South San Francisco,
California, which was subsequently amended in May 2014 and July 2015. As amended, the Company rents approximately
29,470 square feet. The term of this lease runs until March 2026, with the option to extend for an additional five-year term,
and rents payable by the Company increase approximately 3% per year. The Company provided the landlord an
automatically renewable stand-by letter of credit in the amount of $1.1 million. The stand-by letter of credit is collateralized
by a high-yield savings account, which is classified as restricted cash, long-term on the accompanying consolidated balance
sheets.
The Company also leases copier equipment for use in the office spaces. Components of copier lease expense include
both fixed and variable lease expenses.
Total rent expense for years ended December 31, 2023, 2022 and 2021 was approximately $4.9 million, $4.9 million
and $5.1 million, respectively. For purposes of determining straight-line rent expense, the lease term is calculated from the
date the Company first takes possession of the facility, including any periods of free rent and any renewal option periods
that the Company is reasonably certain of exercising. The Company’s office and equipment leases generally have
contractually specified minimum rent and annual rent increases are included in the measurement of the ROU asset and
related lease liability. Additionally, under these lease arrangements, the Company may be required to pay directly, or
reimburse the lessors, for real estate taxes, insurance, utilities, maintenance and other operating costs. Such amounts are
generally variable and therefore not included in the measurement of the ROU asset and related lease liability but are instead
recognized as variable lease expense in selling, general and administrative costs in the consolidated statements of
operations when they are incurred.
The future minimum lease payments under ASC 842 as of December 31, 2023 were as follows (in thousands):
2024 ............................................................................................................................................................... $
2025 ...............................................................................................................................................................
2026 ...............................................................................................................................................................
Total minimum lease payments ..................................................................................................................... $
Less: imputed interest ....................................................................................................................................
Total lease liabilities ...................................................................................................................................... $
Amount
5,805
5,983
1,508
13,296
(1,462)
11,834
F-23
In February 2019, the Company entered into a long-term sublease agreement for 12,429 square feet of the office
space in Los Angeles, California. Also, in August 2023, the Company entered into a long-term sublease agreement for an
additional 13,916 square feet of the office space in Los Angeles, California, which commenced in November 2023. As a
result of the long-term sublease entered during 2023, the Company recorded an impairment expense on the right-of-use
asset of approximately $0.6 million. For both subleases, the term of the leases run until March 2026 and the rent amounts
payable to the Company increase approximately 3% per year. The Company recorded sublease income of $0.5 million for
each of the years ended December 31, 2023, 2022 and 2021, in other income (expenses) in the consolidated statements of
operations.
The future minimum lease payments to be received as of December 31, 2023 were as follows (in thousands):
2024 ............................................................................................................................................................... $
2025 ...............................................................................................................................................................
2026 ...............................................................................................................................................................
Total .............................................................................................................................................................. $
Amount
1,013
1,044
266
2,323
Supplemental cash flow information related to leases for the year ended December 31, 2023:
Supplemental cash flow information related to leases for the twelve months ended December 31, 2023:
Operating cash flows used for operating leases (in thousands) .................................................................... $
Right-of-use assets obtained in exchange for new operating lease liabilities ...............................................
Weighted average remaining lease term (in years) .......................................................................................
Weighted average discount rate ....................................................................................................................
6,084
—
2.2
10.9%
Note 7—Intangible Assets
Intangible assets consisted of the following at December 31 (in thousands):
December 31,
2023
December 31,
2022
Acquired and in-licensed rights ....................................................................................... $
Less: accumulated amortization ......................................................................................
Total intangible assets, net .............................................................................................. $
102,500 $
(41,629 )
60,871 $
102,500
(31,890)
70,610
Estimated future intangible amortization expense as of December 31, 2023 is as follows (in thousands):
2024 ............................................................................................................................................................... $
2025 ...............................................................................................................................................................
2026 ...............................................................................................................................................................
2027 ...............................................................................................................................................................
2028 ...............................................................................................................................................................
Thereafter ......................................................................................................................................................
Totals ............................................................................................................................................................. $
9,739
9,739
9,739
9,739
9,739
12,176
60,871
F-24
Note 8—Accrued Expenses
Accrued expenses consisted of the following at December 31 (in thousands):
December 31,
2023
December 31,
2022
Current:
Accrued legal verdict expense .................................................................................. $
Accrued royalties .....................................................................................................
Accrued CRO services .............................................................................................
Accrued variable consideration ................................................................................
Accrued bonus ..........................................................................................................
Accrued compensation .............................................................................................
Accrued other clinical development .........................................................................
Accrued professional fees ........................................................................................
Accrued legal fees ....................................................................................................
Accrued manufacturing costs ...................................................................................
Other ........................................................................................................................
Long-term:
Accrued legal verdict expense ..................................................................................
Accrued other ...........................................................................................................
Totals ............................................................................................................................... $
7,706 $
16,496
940
9,388
5,900
4,379
1,044
245
1,589
4,521
513
52,721
—
121
121
52,842 $
8,000
13,585
1,796
12,304
7,667
4,301
1,233
1,649
1,731
553
215
53,034
7,354
37
7,391
60,425
Included in accrued liabilities is approximately $7.7 million ($8.0 million net of imputed interest) as of December
31, 2023, and $15.4 million ($16.0 million net of imputed interest) as of December 31, 2022, that is related to Eshelman v.
Puma Biotechnology, Inc., et al. On November 10, 2022, the Company announced the parties entered into a settlement
agreement. Pursuant to the settlement agreement, Dr. Eshelman filed a Stipulation of Voluntary Dismissal with Prejudice
on November 7, 2022, and the Company agreed to pay Dr. Eshelman $16.0 million. The settlement amount will be paid in
two separate payments, the first payment of $8.0 million was paid in January 2023, and the second payment of $8.0 million
will be paid on or before November 1, 2024.
Accrued variable consideration represents estimates of adjustments to product revenue, net for which reserves are
established. Accrued royalties represent royalties incurred in connection with the Company’s license agreement with
Pfizer. Accrued CRO services, accrued other clinical development expenses, and accrued legal fees represent the
Company’s estimates of such costs and are recognized as incurred. Accrued compensation includes commissions, vacation
and restructuring costs.
Other accrued expenses consist primarily of grants, software and taxes.
Restructuring Costs
On October 26, 2023, the Company implemented a reduction in our workforce of approximately 5% across the
Company. The Company incurred approximately $0.4 million in related costs, including severance payments and insurance
premiums, of which approximately $0.1 million is included in accrued compensation as of December 31, 2023. The
Company believes that all payments related to this plan will be made by March 31, 2024.
Note 9—Debt
Long-term debt consisted of the following at December 31, 2023 (in thousands):
Total debt, inclusive of $2.0 million exit payment ................................................................ $
Less: debt issuance costs and discounts ................................................................................
Less: current portion ..............................................................................................................
Total long-term debt, net ....................................................................................................... $
102,000 July 23, 2026
(2,344)
(33,997)
65,659
December 31,
2023
Maturity
Date
F-25
Athyrium Note Purchase Agreement
The Company issued senior notes for an aggregate principal amount of $100.0 million pursuant to a note purchase
agreement dated July 23, 2021, by the Company, and its subsidiaries, and Athyrium Opportunities IV Co-Invest 1 LP
(“Athyrium”), as Administrative Agent, and certain other investor parties (the “Note Purchase Agreement”), with an initial
maturity date of July 23, 2026 (the “Athyrium Notes”). The Athyrium Notes were issued for face amount of $100.0 million
net of an original issue discount of $1.5 million. The Athyrium Notes also require a 2.0% exit payment to be made on each
payment of principal. The borrowings under the Athyrium Notes, together with cash on hand, were used to repay the
Company’s outstanding indebtedness, including the applicable exit and prepayment fees owed to lenders under its Oxford
Credit Facility. The Company can borrow up to an additional $25.0 million under the Note Purchase Agreement for certain
purposes specified in the Note Purchase Agreement. The Athyrium Notes are secured by substantially all of the Company’s
assets. The Company incurred $1.9 million of deferred financing costs with the borrowing.
Interest on the Athyrium Notes is calculated in part based on the Secured Overnight Financing Rate (“SOFR”),
which replaced the “London Interbank Offering Rate” as the floating benchmark for interest rate calculations applicable to
the Athyrium Notes pursuant to the terms of the Third Amendment to Note Purchase Agreement dated as of September 16,
2022 (the “Third Amendment”). The modification of the Note Purchase Agreement pursuant to the Third Amendment did
not meet the requirements of a debt extinguishment under ASC 470-50 - Debt Modifications and Exchanges and no gain or
loss was recognized. The Company performed a quantitative analysis and determined that the terms of the new debt and
original debt instrument are not substantially different. Accordingly, the Third Amendment is accounted for as a debt
modification.
Following the effectiveness of the Third Amendment, the Athyrium Notes bear interest at an annual rate equal to the
sum of (a) eight percent (8.00%) plus (b) the lesser of (i) the sum of (x) three-month term SOFR for an interest period of
three months plus (y) 0.26161% (26.161 basis points) and (ii) three and one-half of one percent (3.50%) per annum. Interest
is payable quarterly on the last business day of March, June, September and December each year. Beginning June 30, 2024,
principal payments are required to be made quarterly at 11.11% of the original face amount with the remaining balance paid
at maturity. Each principal payment will also include a 2.0% exit payment. As of December 31, 2023, the effective interest
rate for the loan was 12.99%.
At the Company’s option, the Company may prepay the outstanding principal balance of the notes in whole or in
part, subject to a prepayment fee of 2.0% of the amount prepaid if the prepayment occurs on or prior to the second
anniversary of the issuance date of such notes, plus the present value of remaining interest that would have accrued through
and including the second anniversary date, and 2.0% of the amount prepaid if the prepayment occurs after the second
anniversary but on or prior to the third anniversary of the issuance date of such notes.
The Athyrium Notes include affirmative and negative covenants applicable to the Company. The affirmative
covenants include, among others, covenants requiring the Company to maintain its legal existence and governmental
approvals, deliver certain financial reports, maintain insurance coverage, and satisfy certain requirements regarding deposit
accounts. The negative covenants include, among others, restrictions on the Company’s transferring collateral, incurring
additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making
investments, creating liens, selling assets and suffering a change in control, in each case subject to certain exceptions. The
Company is also required to maintain minimum cash balances and achieve certain minimum product revenue targets,
measured as of the last day of each fiscal quarter on a trailing year-to-date basis. As of December 31, 2023, the Company
was in compliance with such covenants.
As of December 31, 2023, the principal balance outstanding under the Athyrium Notes was $100.0 million,
representing all of the Company’s debt.
The future minimum principal and exit payments under the Athyrium Notes as of December 31, 2023, were as
follows (in thousands):
2024 ........................................................................................................................................................... $
2025 ...........................................................................................................................................................
2026 ...........................................................................................................................................................
Total .......................................................................................................................................................... $
Amount
33,997
45,329
22,674
102,000
F-26
Debt Issuance Costs and Discounts
Debt issuance costs and discounts consist of the following (in thousands):
December 31,
2023
December 31,
2022
Debt issuance costs and discounts (Athyrium Notes) ............................................ $
Less: accumulated amortization .............................................................................
Included in long-term debt ..................................................................................... $
5,410 $
(3,066 )
2,344 $
5,410
(1,717 )
3,693
Debt issuance costs and discounts are financing costs related to the Company’s outstanding debt. Amortization of
debt issuance costs is expensed using the effective interest method and is included in interest expense in the consolidated
statements of operations. For the years ended December 31, 2023, 2022 and 2021, the Company recorded approximately
$1.3 million, $1.2 million and $2.6 million, respectively, of interest expense related to the amortization of debt issuance
costs, discounts and exit fees in the consolidated statements of operations.
Note 10—Stockholders’ Equity (Deficit)
Common Stock
The Company did not issue any shares of common stock upon exercise of stock options for the years ended
December 31, 2023, 2022 and 2021. The Company issued 1,301,127, 1,017,744 and 1,089,120 shares of common stock
upon vesting of RSUs during the years ended December 31, 2023, 2022 and 2021, respectively.
Alan H. Auerbach, the Company’s President, Chief Executive Officer and Chairman of the Board
purchased 2,360,295 shares of the Company's common stock for aggregate gross proceeds of approximately $7.5 million
before deducting any offering expenses under two separate purchase agreements in the year ended December 31, 2022. The
first purchase took place on March 8, 2022 for 1,792,114 shares for a purchase price $2.79 per share and the second
purchase took place on December 9, 2022 for 568,181 shares for a purchase price $4.40. Each purchase price was equal to
the closing price of the Company’s common stock on NASDAQ on the date of each purchase.
Authorized Shares
The Company has 100,000,000 shares of stock authorized for issuance, all of which are common stock, par value
$0.0001 per share.
Warrants
In October 2011, the Company issued an anti-dilutive warrant to Mr. Auerbach. The warrant was issued to provide
Mr. Auerbach with the right to maintain ownership of at least 20% of the Company’s common stock in the event that the
Company raised capital through the sale of its securities in the future.
In connection with the closing of a public offering in October 2012, the exercise price and number of shares
underlying the warrant issued to Mr. Auerbach were established and, accordingly, the final value of the warrant became
fixed. Pursuant to the terms of the warrant, Mr. Auerbach was able to exercise the warrant to acquire 2,116,250 shares of
the Company’s common stock at $16 per share until October 4, 2021. On April 1, 2021, the Company's Board of Directors
approved an amendment to the terms of the warrant by extending the term until October 4, 2026. The amendment was
approved by the Company's stockholders on June 15, 2021.
As a result of this amendment, the Company recorded additional stock-based compensation in the amount of $13.6
million which was included in selling, general and administrative expense for the year ended December 31, 2021. The fair
value of the additional stock-based compensation was estimated using the Black-Scholes Option Pricing Method (see Note
2-Significant Accounting Policies) with the following assumptions as of June 15, 2021, the date of the modification.
Dividend yield ........................................................................................................................................
Expected volatility ..................................................................................................................................
Risk-free interest rate ..............................................................................................................................
Expected life in years ..............................................................................................................................
0.0 %
87.0 %
0.8 %
5.31
F-27
Stock Options and Restricted Stock Units
The Company’s 2011 Incentive Award Plan (“2011 Plan”) was adopted by the Company’s Board of Directors on
September 15, 2011. Pursuant to the 2011 Plan, the Company may grant incentive stock options and nonqualified stock
options, as well as other forms of equity-based compensation. Incentive stock options may be granted only to employees,
while consultants, employees, officers and directors are eligible for the grant of nonqualified options under the 2011 Plan.
The maximum term of stock options granted under the 2011 Plan is 10 years and the awards generally vest over a three-
year period. The exercise price of incentive stock options granted under the 2011 Plan must be at least equal to the fair
value of such shares on the date of grant. On April 1, 2021, the Board of Directors adopted an amendment to the 2011 Plan
to increase the number of shares of the Company's common stock reserved for issuance thereunder by 2,000,000 shares.
The amendment was approved by the Company's stockholders on June 15, 2021. As of December 31, 2023, a total
of 14,545,860 shares of the Company’s common stock have been reserved for issuance under the 2011 Plan.
As of December 31, 2023, 5,222,006 shares of the Company’s common stock are issuable upon the exercise of
outstanding awards granted under the 2011 Plan and 2,104,460 shares of the Company’s common stock are available for
future issuance under the 2011 Plan. The Company awarded only “plain vanilla options” as determined by the SEC Staff
Accounting Bulletin 107, or Share Based Payment. The fair value of options granted to employees and non-employees was
estimated using the Black-Scholes Option Pricing Method (see Note 2-Significant Accounting Policies) with the following
weighted-average assumptions used during the years ended December 31:
Dividend yield .............................................................................................
Expected volatility .......................................................................................
Risk-free interest rate ...................................................................................
Expected life in years ...................................................................................
0.0 %
85.5 %
3.9 %
5.63
0.0 %
86.3 %
1.9 %
5.56
2023
2022
The Company’s 2017 Employment Inducement Incentive Award Plan (“2017 Plan”) was adopted by the Company’s
Board of Directors on April 27, 2017. Pursuant to the 2017 Plan, the Company may grant stock options and restricted stock
units, as well as other forms of equity-based compensation to employees, as an inducement to join the Company. The
maximum term of stock options granted under the 2017 Plan is 10 years and the awards generally vest over a three-year
period. The exercise price of stock options granted under the 2017 Plan must be at least equal to the fair market value of
such shares on the date of grant. On July 15, 2021, the Board of Directors adopted an amendment to the 2017 Plan to
increase the number of shares of the Company's common stock reserved for issuance thereunder by 1,000,000 shares. As of
December 31, 2023, a total of 3,000,000 shares of the Company’s common stock have been reserved for issuance under the
2017 Plan. As of December 31, 2023, 821,647 shares of the Company’s common stock are issuable upon the exercise of
outstanding stock options and vesting of RSUs granted under the 2017 Plan, and 1,141,854 shares of the Company’s
common stock are available for future issuance under the 2017 Plan.
Stock-based compensation expense was as follows for the years ended December 31 (in thousands):
For the Year Ended
December 31,
2023
2022
2021
Stock-based compensation:
Options:
Selling, general, and administrative .................... $
Research and development .................................
Restricted stock units:
Selling, general, and administrative ....................
Research and development .................................
Warrant modification:
2,510 $
611
4,398
2,728
2,993 $
553
5,054
3,226
Selling, general, and administrative ....................
Total stock-based compensation expense ......................... $
—
10,247 $
—
11,826 $
3,873
573
8,239
6,361
13,587
32,633
F-28
Activity with respect to options granted under the 2011 Plan and 2017 Plan is summarized as follows:
Outstanding at December 31, 2021 ............
Granted ...............................................
(Expired) .............................................
Outstanding at December 31, 2022 ............
Granted ...............................................
(Expired) .............................................
Outstanding at December 31, 2023 ............
Nonvested at December 31, 2023 .......
Exercisable .................................................
Weighted
Average
Shares
4,595,247 $
582,353 $
(965,119) $
4,212,481 $
581,614 $
(375,414) $
4,418,681 $
706,980 $
3,711,701 $
Exercise Price
62.43
2.43
38.63
59.59
4.39
66.89
51.70
4.83
60.63
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic Value
(in thousands)
—
—
—
1,046
—
—
1,105
315
790
4.5
9.2
—
5.1 $
9.1
—
5.2 $
8.7 $
4.5 $
At December 31, 2023, total estimated unrecognized compensation cost related to non-vested stock options granted
prior to that date was approximately $1.3 million, which is expected to be recognized over a weighted-average period of 1.0
years. At December 31, 2023, the total estimated unrecognized compensation cost related to non-vested RSUs was
approximately $3.9 million, which is expected to be recognized over a weighted-average period of 1.1 years. The weighted-
average grant date fair value of options granted during the years ended December 31, 2023, 2022 and 2021, was
$3.17, $1.72 and $7.90 per share, respectively. The weighted average grant date fair value of RSUs awarded during the year
ended December 31, 2023, 2022 and 2021 was $3.96, $2.49 and $11.44, respectively.
Stock Option Rollforward
Nonvested shares at December 31, 2021................................................................
Granted ..........................................................................................................
(Vested) .........................................................................................................
Nonvested shares at December 31, 2022 ..............................................................
Granted ..........................................................................................................
(Vested) .........................................................................................................
Nonvested shares at December 31, 2023................................................................
Restricted Stock Unit Rollforward
Nonvested shares at December 31, 2021................................................................
Granted ..........................................................................................................
(Vested) .........................................................................................................
(Forfeited) ......................................................................................................
Nonvested shares at December 31, 2022 ..............................................................
Granted ..........................................................................................................
(Vested) .........................................................................................................
(Forfeited) ......................................................................................................
Nonvested shares at December 31, 2023 ..............................................................
F-29
Shares
Weighted
Average Grant-
Date Fair Value
7.76
1.72
6.61
4.25
3.17
4.15
3.46
835,297 $
582,353 $
(618,274 ) $
799,376 $
581,614 $
(674,010) $
706,980 $
Weighted
Average Grant-
Date Fair Value
11.03
2.49
9.39
7.40
4.92
3.96
5.00
4.66
3.96
Shares
1,399,317 $
1,382,811 $
(1,017,744 ) $
(262,617 ) $
1,501,767 $
1,543,027 $
(1,301,127) $
(118,695) $
1,624,972 $
Note 11—401(k) Savings Plan
During 2012, the Company adopted a 401(k) savings plan for the benefit of its employees. The Company is required
to make matching contributions to the 401(k) plan equal to 100% of the first 3% of wages deferred by each participating
employee and 50% on the next 2% of wages deferred by each participating employee. The Company incurred expenses for
employer matching contributions of approximately $1.6 million, $1.5 million, and $1.5 million for the years ended
December 31, 2023, 2022 and 2021, respectively.
Note 12—Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740,
Income Taxes. Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for
the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been
recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of
operations in the period that includes the enactment date. Income tax expense was as follows for the years ended
December 31 (in thousands):
Current:
Federal ......................................................................... $
State .............................................................................
Foreign .........................................................................
Deferred:
Federal .........................................................................
State .............................................................................
Total .................................................................................... $
2023
2022
2021
— $
905
178
1,083
—
—
—
1,083 $
— $
363
92
455
—
—
—
455 $
—
77
247
324
—
—
—
324
The provision for income taxes in the accompanying consolidated statements of operations differs from the amount
calculated by applying the statutory income tax rate to income (loss) from continuing operations before income taxes.
Approximately $4.2 million of tax expense for the year ended December 31, 2023 is due to stock-based compensation
expense shortfall and the expiration of vested stock options. Approximately $1.8 million of the tax benefit for the year
ended December 31, 2023 is due to R&D tax credits, net of an approximately $0.5 million reserve related to unrecognized
tax benefits for the method of allocation of expenses used in the R&D tax credits calculation. The primary components of
such differences are as follows as of December 31 (in thousands):
Tax computed at the federal statutory rate ............................. $
State taxes ..............................................................................
Foreign taxes ..........................................................................
Permanent items .....................................................................
R&D credits ...........................................................................
Prior year adjustment .............................................................
Change in valuation allowance ..............................................
Total provision ....................................................................... $
2023
2022
2021
4,488 $
1,312
178
4,837
(1,806 )
(1,715 )
(6,211 )
1,083 $
96 $
485
92
6,864
(1,490 )
(455 )
(5,137 )
455 $
(6,045 )
(1,072 )
247
22,689
(3,941 )
916
(12,470 )
324
F-30
Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes give rise to the Company’s deferred income taxes. The components of the
Company’s net deferred tax assets are as follows as of December 31 (in thousands):
2023
2022
2021
Deferred tax assets:
Net operating loss carry forwards ................................ $
Business credit carryforwards ......................................
240,960 $
62,051
253,544 $
59,726
Organization costs
Compensation ..............................................................
Sec 174 R&D expenses .......................................................
Accrued legal verdict ...................................................
Carryforward of disallowed interest.............................
Accrued expenses.........................................................
Lease liabilities ............................................................
Other ............................................................................
Subtotal ........................................................................
Deferred tax liabilities:
Lease right-of-use assets ..............................................
Inventory ......................................................................
Other deferred tax liabilities ........................................
Subtotal ........................................................................
Total deferred tax assets .....................................................
Valuation allowance ...........................................................
Net deferred tax assets ........................................................ $
37,946
19,882
261
1,477
1,976
3,034
4,231
371,818
(1,997 )
(921 )
(149 )
(3,067 )
368,751
(368,751 )
— $
37,876
10,371
3,878
4,761
50
4,035
3,560
377,801
(2,870 )
242
(211 )
(2,839 )
374,962
(374,962 )
— $
258,390
59,514
40,647
14,144
4,537
104
4,839
1,306
383,481
(3,470 )
406
(318 )
(3,382 )
380,099
(380,099 )
—
As the ultimate realization of the potential benefits of the Company’s deferred tax assets is considered unlikely by
management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation
allowances. Accordingly, the Company did not recognize any benefit from income taxes in the accompanying consolidated
statements of operations to offset its pre-tax losses. The valuation allowance decreased by approximately $6.2 million and
approximately $5.1 million for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023, the
Company had federal and state net operating loss carryforwards, respectively, of approximately $874.2 million and
approximately $839.1 million, which will begin to expire in 2033. At December 31, 2023, the Company also has federal
research and development credit carryforwards of approximately $39.7 million. If not utilized, the carryforwards will begin
to expire in 2033. The Company has state research and development credit carryforwards of approximately $25.1 million
which do not expire. Pursuant to the Internal Revenue Code, Sections 382 and 383, use of the Company’s net operating loss
and credit carryforwards could be limited if a cumulative change in ownership of more than 50% occurs within a three-year
period. The Company performed an initial assessment of the potential limitation on net operating loss and credit
carryforwards, and concluded that there will be no limitation for the tax year 2023.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits at December 31 (in
thousands):
Unrecognized tax benefits - January 1 ................................ $
Gross decreases - tax positions in a prior period .................
Gross increases - tax positions in a current period ..............
Unrecognized tax benefits - December 31 ..........................
2,522 $
(163)
452
2,811
4,261 $
(2,113)
374
2,522
3,276
—
985
4,261
2023
2022
2021
During the year ended December 31, 2023, the Company completed an R&D credit study. As a result of the study,
the Company computed the credit under safe harbor rules, which when applied consistently, results in a more conservative
approach of calculating the amount of the R&D credit. The Company concluded that a release of uncertain tax benefits for
the portion of the R&D credit attributable to safe harbor was appropriate, and released a portion of previously recorded
uncertain tax positions reserve.
F-31
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal
course of business, the Company is subject to examination by the federal and state jurisdictions where applicable. There are
currently no pending income tax examinations. The Company’s tax years for 2010 and forward are subject to examination
by the federal and California tax authorities due to the carryforward of unutilized net operating losses and research and
development credits.
Note 13—Commitments and Contingencies
License Agreements
Pfizer License Agreement
In August 2011, the Company entered into an agreement pursuant to which Pfizer agreed to grant it a worldwide
license for the development, manufacture and commercialization of PB272 (neratinib, oral), PB272 (neratinib, intravenous)
and PB357, and certain related compounds. The license is exclusive with respect to certain patent rights owned by or
licensed to Pfizer. Under the agreement, the Company is obligated to commence a new clinical trial for a product
containing one of these compounds within a specified period of time and to use commercially reasonable efforts to
complete clinical trials and to achieve certain milestones as provided in a development plan. From the closing date of the
agreement through December 31, 2011, Pfizer continued to conduct the existing clinical trials on behalf of the Company at
the licensor’s sole expense. At the Company’s request, Pfizer agreed to continue to perform certain services in support of
the existing clinical trials at the Company’s expense. These services will continue through the completion of the
transitioned clinical trials. The license agreement “capped” the out of pocket expense the Company would be responsible to
complete the then existing clinical trials. All agreed upon costs incurred by the Company above the “cost cap” would be
reimbursed by Pfizer. The Company exceeded the “cost cap” during the fourth quarter of 2012. In accordance with the
license agreement, the Company billed Pfizer for agreed upon costs above the “cost cap” until December 31, 2013.
On July 18, 2014, the Company entered into an amendment to the license agreement with Pfizer. The amendment
amends the agreement to (i) reduce the royalty rate payable by the Company to Pfizer on sales of licensed products;
(ii) release Pfizer from its obligation to pay for certain out-of-pocket costs incurred or accrued on or after January 1, 2014
to complete certain ongoing clinical studies; and (iii) provide that Pfizer and the Company will continue to cooperate to
effect the transfer to the Company of certain records, regulatory filings, materials and inventory controlled by Pfizer as
promptly as reasonably practicable.
As consideration for the license, the Company is required to make substantial payments upon the achievement of
certain milestones totaling approximately $187.5 million if all such milestones are achieved, of which $102.5 million have
been achieved as of December 31, 2023. In connection with the FDA approval of NERLYNX in July of 2017, the
Company triggered a one-time milestone payment pursuant to the agreement. In June 2020, the Company entered into a
letter agreement (the “Letter Agreement”), with Pfizer relating to the method of payment associated with a one-time
milestone payment under the license agreement with Pfizer. The Letter Agreement permitted the Company to make the
milestone payment in installments with the remaining amount payable to Pfizer (including interest). The milestone payment
accrued interest at 6.25% per annum. The milestone payment including accrued interest of $1.8 million was paid in full in
September 2021. In addition, the company reached a commercial milestone by achieving aggregate worldwide net sales of
$250 million in calendar year 2022, resulting in a payable to Pfizer of $12.5 million as of December 31, 2022. The
commercial milestone payable is included in accrued in-licensed rights on the accompanying consolidated balance sheets
and was paid in February 2023.
The Company may trigger additional milestone payments in the future. Should the Company commercialize any
more of the compounds licensed from Pfizer or any products containing any of these compounds, the Company will be
obligated to pay to Pfizer annual royalties at a fixed rate in the low to mid-teens of net sales of all such products, subject to
certain reductions and offsets in some circumstances. The Company’s royalty obligation continues, on a product-by-product
and country-by-country basis, until the later of (i) the last to expire licensed patent covering the applicable licensed product
in such country, or (ii) the earlier of generic competition for such licensed product reaching a certain level in such country
or expiration of a certain time period after first commercial sale of such licensed product in such country. In the event that
the Company sublicenses the rights granted to the Company under the license agreement with Pfizer to a third party, the
same milestone and royalty payments are required. The Company can terminate the license agreement at will, or for safety
concerns, in each case upon specified advance notice.
F-32
Takeda License Agreement
In September 2022, the Company entered into an exclusive license agreement with Takeda to license the worldwide
research and development and commercial rights to alisertib, a selective, small-molecule, orally administered inhibitor of
aurora kinase A. Under the terms of the exclusive license agreement, the Company assumed sole responsibility for the
global development and commercialization of alisertib. The Company paid Takeda an upfront license fee of $7 million in
October 2022 and is eligible to receive potential future milestone payments of up to $287.3 million upon the Company’s
achievement of certain regulatory and commercial milestones over the course of the exclusive license agreement, as well as
tiered royalty payments for any net sales of alisertib. The Company recorded in-process research and development expense
of $7.0 million in connection with the up-front payment related to the asset acquisition. As of December 31, 2023, no
milestones had been accrued as the underlying contingencies were not probable or estimable.
Clinical Trial Contracts
The Company engages with CROs and contract manufacturing organizations (“CMOs”) in addition to engaging in
contracts for the management of its ongoing clinical trials and pre-commercialization efforts. The Company may cancel
these agreements with a 30 to 45 day written notice to the outside vendor. The Company would be obligated to pay for
services rendered up to that point, which amounts to total contractual obligations of approximately $66.0 million within the
next twelve months. The contracts also contain variable costs that are hard to predict as they are based on such things as
patients enrolled and clinical trial sites, which can vary, and therefore, are not included in the total obligations
amount. Included in the total contractual obligations amount above are payments to be made when milestones are reached.
As of December 31, 2023, Company obligations for potential milestone payments totaled approximately $15.5 million.
This amount will be paid by the Company if all milestones are reached and would reduce the overall contractual obligation
if one or more milestone is never reached.
Legal Proceedings
The Company and certain of its executive officers were named as defendants in the lawsuits detailed below. The
Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or
considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is
a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If
a loss is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss
is disclosed. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount
and timing of a loss to be recorded.
Included in accrued liabilities is approximately $7.7 million ($8.0 million net of imputed interest) as of December
31, 2023 that is related to Eshelman v. Puma Biotechnology, Inc., et al. The Company announced on November 10,
2022, that the parties entered into a settlement agreement. Pursuant to the settlement agreement, Dr. Eshelman filed a
Stipulation of Voluntary Dismissal with Prejudice on November 7, 2022, and the Company agreed to pay Dr. Eshelman
$16.0 million. The settlement amount will be paid in two separate payments, the first payment of $8.0 million was paid
in January 2023, and the final payment of $8.0 million will be paid on or before November 1, 2024.
Legal Malpractice Suit
On September 17, 2020, the Company filed a lawsuit against Hedrick Gardner Kincheloe & Garofalo, L.L.P. and
David L. Levy, the attorneys who previously represented the Company in Eshelman v. Puma Biotechnology, Inc., et al. in
the Superior Court of Mecklenburg County, North Carolina. The Company is alleging legal malpractice based on the
defendants’ negligent handling of the defense of the Company in Eshelman v. Puma Biotechnology, Inc., et al. The
Company is seeking recovery of the entire amount awarded in Eshelman v. Puma Biotechnology, Inc., et al. and all legal
fees and expenses incurred in appealing from the judgment and retrying the damages phase of the trial. On November 23,
2020, the defendant filed an answer to the complaint denying the allegations of negligence. On August 19, 2022, the
Company filed a voluntary dismissal of the legal malpractice action, without prejudice, to allow the Eshelman v. Puma
Biotechnology, Inc., et al. to conclude before proceedings. On June 2, 2023 the Company re-filed the lawsuit against
Hedrick Gardner Kincheloe & Garofalo, L.L.P. and David L. Levy, the attorneys who previously represented the Company
in Eshelman v. Puma Biotechnology, Inc., et al. in the Superior Court of Mecklenburg County, North Carolina. On August
22, 2023, the defendants filed motions to dismiss the case. These motions were presented at a hearing on February 20,
2024, but there has yet to be a ruling.
F-33
Mfolozi Dlamini, individually and on behalf of all others similarly situated v. Puma Biotechnology, Inc.
On May 26, 2023, Mfolozi Dlamini filed a Class Action Complaint against the Company in the United States
District Court for the Central District of California, alleging injuries as a result of unauthorized disclosure of certain
individuals’ personally identifiable information in connection with a data security incident discovered by the Company in
June 2022. On September 21, 2023, the plaintiff and the Company agreed to dismiss the action with prejudice.
Patent-Related Proceedings
AstraZeneca Litigation
On September 22, 2021, the Company filed suit against AstraZeneca Pharmaceuticals, LP, AstraZeneca AB, and
AstraZeneca PLC for infringement of United States Patent Nos. 10,603,314 (“the ’314 patent”) and 10,596,162 (“the ’162
patent”) (Puma Biotechnology, Inc. et al. v. AstraZeneca Pharmaceuticals LP et al., 1:21CV01338 (D. Del. Sep. 22,
2021)). The Company’s complaint alleges that AstraZeneca’s commercial manufacture, use, offer for sale, sale,
distribution, and/or importation of Tagrisso® (osimertinib) products for the treatment of gefitinib and/or erlotinib-resistant
non-small cell lung cancer infringes the ’314 and ’162 patents. The Company is an exclusive licensee of the ’314 and ’162
patents under the Pfizer Agreement. Wyeth is a co-plaintiff. Plaintiffs seek a judgment that AstraZeneca’s product infringes
the asserted patents and an award of monetary damages in an amount to be proven at trial. AstraZeneca AB and
AstraZeneca Pharmaceuticals LP filed an answer and counterclaims on November 5, 2021, including claims challenging the
asserted patents as not infringed and/or invalid, and accusing plaintiffs of unclean hands and patent misuse. The parties
stipulated to dismiss AstraZeneca PLC as a defendant and Pfizer as a Counterclaim Defendant on December 10, 2021,
which the Court so ordered on December 13, 2021. The Company filed its answer to AstraZeneca’s counterclaims on
December 17, 2021, denying those claims. The case was reassigned to visiting Judge Matthew Kennelly of the Northern
District of Illinois. A Markman Hearing was conducted on March 17, 2023, and the Court issued its claim construction
decision on March 29, 2023. Fact discovery closed on May 19, 2023, and expert discovery closed on November 17, 2023.
The parties recently exchanged motions for summary judgment on certain issues and also Daubert challenges to certain
expert opinions. A jury trial is scheduled to begin on May 13, 2024.
Acebright China Litigation
On January 18, 2022, Shanghai Acebright Pharmaceuticals Group Co., Ltd. (“Acebright”) filed an ANDA with the
National Medical Products Administration in China (“NMPA”) seeking approval to market a generic version of the
Company’s NERLYNX® (neratinib) tablet, 40mg in China. Acebright seeks approval prior to the expiration of three patents
listed on the China Patent Information Registration Platform for Marketed Drugs (“Chinese Orange Book”), namely,
Chinese Patent Nos. ZL201410082103.7, ZL201080060546.6, and ZL200880118789.3 (the “'789 patent”, and collectively,
the “NERLYNX® Patents”), alleging in a Type 4.2 patent declaration that its generic version of NERLYNX does not fall
within the scope of the claims of NERLYNX® Patents listed in the Chinese Orange Book. The patent declaration of
Acebright was published in the Chinese Orange Book on January 19, 2022. On March 2, 2022, the Company filed petitions
with the China National Intellectual Property Administration (“CNIPA”) and requested administrative determination that
Acebright’s generic neratinib tablet falls within the scope of the claims of NERLYNX® Patents listed in the Chinese
Orange Book. The Company’s request for administrative determination was accepted by CNIPA on March 18, 2022. The
Company has notified NMPA of the acceptance of the request for administrative determination for NMPA to institute a stay
of Acebright’s ANDA for nine months. On July 11, 2022, CNIPA decided that claims 5 and 6 of Patent No.
ZL200880118789.3 are not eligible for registration in the Chinese Orange Book on the ground that these two
pharmaceutical method-of-use claims fall in the scope of “patents of crystalline forms,” which are not eligible for listing in
the Chinese Orange Book. On September 9, 2022, CNIPA decided that the generic drug in Acebright’s ANDA does not fall
within the protection scope of claims 1, 3, 5 and 6 of Patent No. ZL201410082103.7 and claims 1-4, 7 and 9-13 of Patent
No. ZL201080060546.6. The three CNIPA administrative decisions on NERLYNX® Patents have lifted the stay of
Acebright’s ANDA by NMPA. The Company has appealed each CNIPA administrative decision in January 2023 at the
Beijing Intellectual Property Court (“BJIPC”). The three appeals were accepted by BJIPC on February 20, 2023. The
Company also filed three civil complaints based on the three NERLYNX® Patents against Acebright with the BJIPC in July
2022 and requested court determination that Acebright’s generic neratinib tablet falls within the scope of the claims of
NERLYNX® Patents. On May 6, 2023, the Company withdrew two civil lawsuits and two appeals in relation to Chinese
Patent Nos. ZL201410082103.7 and ZL201080060546.6 at the BJIPC. On May 24, 2023, the BJIPC accepted the
Company’s withdrawal request. On July 24, 2023, the Company withdrew the remaining one civil lawsuit and one appeal
in relation to Chinese Patent No. ZL200880118789.3 at the BJIPC. On August 15, 2023, the BJIPC accepted the
Company’s withdrawal request. On September 12, 2023, the NMPA approved Acebright’s ANDA to market a generic
version of the Company’s NERLYNX® in China with the approval number of GuoYaoZhunZi H20234141.
F-34
On December 28, 2023, the Company filed a civil lawsuit against Acebright for infringement of the '789 patent
under Article 11 of the Chinese Patent Law before Jiangsu Nanjing Intermediate People’s Court. The Company’s complaint
alleges that Acebright’s offer for sale of a generic version of the Company’s NERLYNX® product infringes the '789 patent.
The Company seeks a judgment that Acebright’s product infringes the '789 patent and Acebright’s act of offer for sale shall
be enjoined. On January 2, 2024, Jiangsu Nanjing Intermediate People’s Court accepted the civil complaint.
Aosaikang China Litigation
On November 17, 2022, Jiangsu Aosaikang Pharmaceutical Co. Ltd. (“Aosaikang”) filed an ANDA with NMPA in
China seeking approval to market a generic version of the Company’s NERLYNX®. The ANDA application No. is
CYHS2202006. Aosaikang made Type 4.2 declarations against the four Orange Book Patents ZL201410082103.7,
ZL201080060546.6, ZL200880118789.3 and ZL201710057547.9, alleging that its generic version of NERLYNX does not
fall within the scope of the claims of the Orange Book patents. Aosaikang also alleged that Patents ZL200880118789.3 and
ZL201710057547.9 are not eligible for Chinese Orange Book listing.
On December 28, 2022, the Company submitted four Article 76 petitions against the Aosaikang ANDA with the
CNIPA and requested administrative determination that Aosaikang’s generic neratinib tablet falls within the scope of the
claims of the four Orange Book patents. On January 6, 2023, the CNIPA accepted the Company’s request for
administrative determination in relation to Patent Nos. ZL201410082103.7 and ZL201080060546.6. Also on January 6,
2023, the CNIPA declined to accept the Company’s request for administrative determination in relation to Patent Nos.
ZL200880118789.3 and ZL201710057547.9, alleging that the listed claims are not eligible for registration in the Chinese
Orange Book on the ground that these pharmaceutical method-of-use claims fall in the scope of “patents of crystalline
forms,” which are not eligible for listing in the Chinese Orange Book. On January 28, 2023, the Company requested the
NMPA to institute a nine-month stay against Aosaikang ANDA starting from the CNIPA’s acceptance of the Company’s
request for administrative determination. On June 2, 2023, CNIPA decided that the generic drug in Aosaikang’s ANDA
does not fall within the protection scope of claims 1, 3, 5 and 6 of Patent No. ZL201410082103.7 and claims 1-4, 7 and 9-
13 of Patent No. ZL201080060546.6. The two CNIPA administrative decisions on NERLYNX® Patents have lifted the stay
of Aosaikang’s ANDA by NMPA. The Company has the right to appeal each CNIPA administrative decision within six
months of receiving the decision. The Company also has the right to enforce the four Orange Book patents in civil litigation
before the Chinese court.
Convalife China Litigation
Convalife Pharmaceuticals (Shanghai) Co., Ltd (“Convalife”) filed an ANDA with NMPA in China seeking
approval to market a generic version of the Company’s NERLYNX®. The ANDA application No. is CYHS2202095. On
December 23, 2022, Convalife made Type 4.2 declarations against the four Orange Book Patents ZL201410082103.7,
ZL201080060546.6, ZL200880118789.3 and ZL201710057547.9, alleging that its generic version of NERLYNX does not
fall within the scope of the claims of the Orange Book patents. Convalife also alleged that Patents ZL200880118789.3 and
ZL201710057547.9 are not eligible for Chinese Orange Book listing.
On February 1, 2023, the Company submitted four Article 76 petitions against the Convalife ANDA with the
CNIPA and requested administrative determination that Convalife’s generic neratinib tablet falls within the scope of the
claims of the four Orange Book patents. On February 3, 2023, the CNIPA accepted the Company’s request for
administrative determination in relation to Patent Nos. ZL201410082103.7 and ZL201080060546.6. Also on February 3,
2023, the CNIPA declined to accept the Company’s request for administrative determination in relation to Patent Nos.
ZL200880118789.3 and ZL201710057547.9, alleging that the listed claims are not eligible for registration in the Chinese
Orange Book on the ground that these pharmaceutical method-of-use claims fall in the scope of “patents of crystalline
forms,” which are not eligible for listing in the Chinese Orange Book. On February 24, 2023, the Company requested the
NMPA to institute a nine-month stay against Convalife ANDA starting from the CNIPA’s acceptance of the Company’s
request for administrative determination. On June 2, 2023, CNIPA decided that the generic drug in Convalife’s ANDA does
not fall within the protection scope of claims 1, 3, 5 and 6 of Patent No. ZL201410082103.7 and claims 1-4, 7 and 9-13 of
Patent No. ZL201080060546.6. The two CNIPA administrative decisions on NERLYNX® Patents have lifted the stay of
Convalife’s ANDA by NMPA. The Company has the right to appeal each CNIPA administrative decision within six
months of receiving the decision. The Company also has the right to enforce the four Orange Book patents in civil litigation
before the Chinese court.
F-35
Kelun China Litigation
Hunan Kelun Pharmaceutical Co., Ltd. (“Kelun”) filed an ANDA with NMPA in China seeking approval to market a
generic version of the Company’s NERLYNX®. The ANDA application No. is CYHS2300221. On January 28, 2023,
Kelun made Type 4.2 declarations against the four Orange Book Patents ZL201410082103.7, ZL201080060546.6,
ZL200880118789.3 and ZL201710057547.9, alleging that its generic version of NERLYNX does not fall within the scope
of the claims of the Orange Book patents. Kelun also alleged that Patents ZL200880118789.3 and ZL201710057547.9 are
not eligible for Chinese Orange Book listing.
On March 13, 2023, the Company submitted four Article 76 petitions against the Kelun ANDA with the CNIPA and
requested administrative determination that Kelun’s generic neratinib tablet falls within the scope of the claims of the four
Orange Book patents. On March 21, 2023, the CNIPA declined to accept the Company’s request for administrative
determination in relation to Patent Nos. ZL200880118789.3 and ZL201710057547.9, alleging that the listed claims are not
eligible for registration in the Chinese Orange Book on the ground that these pharmaceutical method-of-use claims fall in
the scope of “patents of crystalline forms,” which are not eligible for listing in the Chinese Orange Book. On March 24,
2023, the CNIPA accepted the Company’s request for administrative determination in relation to Patent Nos.
ZL201410082103.7 and ZL201080060546.6. On April 17, 2023, the Company requested the NMPA to institute a nine-
month stay against Kelun’s ANDA starting from the CNIPA’s acceptance of the Company’s request for administrative
determination. On September 14, 2023, the Company withdrew the two requests for administrative determination in
relation to Chinese Patent Nos. ZL201410082103.7 and ZL201080060546.6 at the CNIPA. On September 25, 2023, the
CNIPA accepted the Company’s withdrawal request.
F-36
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alan H. Auerbach, certify that:
1. I have reviewed this Annual Report on Form 10-K of Puma Biotechnology, Inc. for the year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 29, 2024
/s/ Alan H. Auerbach
Alan H. Auerbach
Principal Executive Officer
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Maximo F. Nougues, certify that:
1. I have reviewed this Annual Report on Form 10-K of Puma Biotechnology, Inc. for the year ended December 31, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 29, 2024
/s/ Maximo F. Nougues
Maximo F. Nougues
Principal Financial and Accounting Officer
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
The following certification is being furnished solely to accompany the Annual Report on Form 10-K of Puma
Biotechnology, Inc. for the year ended December 31, 2023, pursuant to 18 U.S.C. § 1350 and in accordance with SEC
Release No. 33-8238. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, nor shall it be incorporated by reference in any filing of Puma Biotechnology, Inc. under the
Securities Act of 1933, as amended, whether made before or after the date hereof, regardless of any general incorporation
language in such filing.
Certification of Principal Executive Officer
I, Alan H. Auerbach, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of Puma Biotechnology, Inc. for the year ended
December 31, 2023, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material
respects, the financial condition and results of operations of Puma Biotechnology, Inc.
Date: February 29, 2024
/s/ Alan H. Auerbach
Alan H. Auerbach
Principal Executive Officer
A signed original of this written statement required by Section 906 has been provided to Puma Biotechnology, Inc.
and will be retained by Puma Biotechnology, Inc. and furnished to the Securities and Exchange Commission or its staff
upon request.
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
The following certification is being furnished solely to accompany the Annual Report on Form 10-K of Puma
Biotechnology, Inc. for the year ended December 31, 2023, pursuant to 18 U.S.C. § 1350 and in accordance with SEC
Release No. 33-8238. This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, nor shall it be incorporated by reference in any filing of Puma Biotechnology, Inc. under the
Securities Act of 1933, as amended, whether made before or after the date hereof, regardless of any general incorporation
language in such filing.
Certification of Principal Financial Officer
I, Maximo F. Nougues, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of Puma Biotechnology, Inc. for the year ended
December 31, 2023, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material
respects, the financial condition and results of operations of Puma Biotechnology, Inc.
Date: February 29, 2024
/s/ Maximo F. Nougues
Maximo F. Nougues
Principal Financial and Accounting Officer
A signed original of this written statement required by Section 906 has been provided to Puma Biotechnology, Inc.
and will be retained by Puma Biotechnology, Inc. and furnished to the Securities and Exchange Commission or its staff
upon request.
COMPANY LEADERSHIP
BOARD OF DIRECTORS
Alan H. Auerbach
Chairman, Chief Executive Officer and President
Puma Biotechnology, Inc.
Alessandra Cesano, M.D., Ph.D.
Chief Medical Officer
ESSA Pharma Inc.
Allison Dorval
Chief Financial Officer
Verve Therapeutics, Inc.
STOCKHOLDER INFORMATION
Corporate Headquarters
Puma Biotechnology, Inc.
10880 Wilshire Blvd., Suite 2150
Los Angeles, CA 90024
424-248-6500
Investor Relations
Securities analysts, investment professionals and stockholders
should direct inquiries to Investor Relations at 424-248-6500 or
ir@pumabiotechnology.com.
For additional information about Puma, please visit our website at
https://www.pumabiotechnology.com.
Michael P. Miller
Executive Vice President U.S. Commercial (retired)
Jazz Pharmaceuticals plc
Common Stock
Puma’s common stock is listed on The NASDAQ Stock Market
under the trading symbol “PBYI.”
Transfer Agent
EQ Shareowner Services SM
Mail:
P.O. Box 64854
St. Paul, MN 55164
FPO
Telephone:
800-468-9716
651-450-4064
Courier:
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120--4100
Website: www.shareowneronline.com
Annual Meeting
The 2024 Annual Meeting of Stockholders will be held at
1:00 p.m. PDT on Tuesday, June 18, 2024 at
Puma Biotechnology, Inc.
10880 Wilshire Boulevard, Suite 2150
Los Angeles, CA 90024
Independent Registered Public Accounting Firm
KPMG LLP
550 South Hope St.
Suite 1500
Los Angeles, CA 90071
Jay M. Moyes
Chief Financial Officer (retired)
Sera Prognostics, Inc.
Adrian M. Senderowicz, M.D.
Senior Advisor
Constellation Pharmaceuticals
Brian Stuglik, R.Ph.
Chief Executive Officer (retired)
Verastem, Inc.
Troy E. Wilson, Ph.D., J.D.
President, Chief Executive Officer and Chairman
Kura Oncology, Inc.
CORPORATE OFFICERS
Alan H. Auerbach
Chairman, Chief Executive Officer and President
Maximo F. Nougues
Chief Financial Officer
Jeff J. Ludwig
Chief Commercial Officer
Alvin Wong, Pharma.D.
Chief Scientific Officer
Douglas Hunt, B.SC (Hons).
Senior Vice President, Regulatory Affairs,
Pharmacovigilance, Medical Affairs and Law
Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements regarding the
commercialization of NERLYNX®, the potential indications of the Company’s drug candidates and the development of those drug candidates, and the announcement of data relative to the Company’s
clinical trials. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “estimates,” “expects,” “may,” “will,” “would,” “plans,” “projects,” “continuing,”
“ongoing,” “believes,” “intends,” and similar words or phrases intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Discussions
containing these forward-looking statements may be found throughout this document, including the sections entitled “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. All forward-looking statements included in this document
involve risks and uncertainties that could cause the Company’s actual results to differ materially from the anticipated results and expectations expressed in these forward-looking statements. These
forward-looking statements are based on current expectations, forecasts and assumptions, and actual outcomes and results could differ materially from those in the forward-looking statements due
to a number of factors, which include, but are not limited to, any adverse impact on the Company’s business, strategy, plans and objectives of management, future operations and/or financial position,
growth opportunities in the market in which the Company operates, or the global economy and financial markets, generally, from rising interest rates and inflationary concerns, and the risk factors
disclosed in the periodic and current reports filed by the Company with the Securities and Exchange Commission from time to time, including the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2023, which is included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date such statements
are made. The Company assumes no obligation to update these forward-looking statements, except as required by law.
Expanding Our Horizons
Puma Biotechnology, Inc.
10880 Wilshire Blvd., Suite 2150
Los Angeles, CA 90024
pumabiotechnology.com