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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 94 added, 95 removed, 284 unchanged (40% of the section changed)

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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.

Additionally, in 2022, we in-licensed and became responsible for the 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.

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We currently market NERLYNX in the United States using our direct specialty sales force consisting of approximately 35 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.

Our sales specialists are supported by an experienced sales leadership team consisting of several regional business leaders and a VP of sales, as well as experienced professionals in marketing, managed markets, access and reimbursement, research, and sales planning and operations.

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.

As of December 31 2024, NERLYNX has received approval for the treatment of certain patients with extended adjuvant and/or metastatic HER2-positive breast cancer in over 40 countries outside the United States.

In September 2022, we entered into an exclusive license agreement with 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.

In clinical trials to date, alisertib has 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 commenced the ALISCA™ -Breast1 Phase II trial (PUMA-ALI-1201) in the fourth quarter of 2024.

Under the terms of the exclusive license agreement, we assumed sole responsibility for the global development and commercialization of alisertib.

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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.

Going forward, we anticipate significant expenses as we continue to develop alisertib in 2025.

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.

To date, our major sources of working capital have been proceeds from produc t 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, 2024, and proceeds that will become available to us through product sales, royalties and sub-license milestone payments.

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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.

Royalty revenue consists of consideration earned related to product sales made by our sub-licensees in their respective territories pursuant to our sub-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 product sales also includes period costs related to royalty charges payable to Pfizer, the amortization of milestone payments made 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.

Selling, general and administrative expenses (“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 expenses 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.

Research and development expenses (“R&D expenses”) include costs associated with services provided by consultants who conduct and perform clinical services on our behalf and contract organizations for the manufacturing of clinical materials.

During the years ended December 31, 2024, 2023 and 2022, our R&D expenses consisted primarily of CRO fees, manufacturing of clinical materials, fees paid to consultants, salaries and related personnel costs and stock-based compensation.

We expense our R&D expenses 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.

We expect R&D expenses to increase in 2025 as we conduct two Phase II clinical trials of alisertib.

Acquired In-Process Research and Development Expense

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The following summarizes our results of operations for the years ended December 31, 2024 and 2023.

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.

For discussion related to the results of operations and changes in financial condition for the year ended December 31, 2023, compared to the year ended December 31, 2022, 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, 2023, which was filed with the United States Securities and Exchange Commission on February 29, 2024.

Total revenue

Total revenue was approximately $230.5 million for the year ended December 31, 2024, compared to $235.6 million for the year ended December 31, 2023.

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.

This decrease in total revenue of $5.2 million was due to a decrease in product revenue, net of approximately $7.9 million, partially offset by an increase in royalty revenue of $2.8 million.

Product revenue, net

Product revenue, net was approximately $195.2 million for the year ended December 31, 2024 , compared to $203.1 million for the year ended December 31, 2023 .

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.

The decrease in product revenue, net was primarily attributable to a volume decrease of approximately 8.7% in bottles of NERLYNX sold, partially offset by an increase in net selling price.

Reserves for variable consideration were approximately 19.5% and 17.9% of product revenue for the years ended December 31, 2024 and 2023, respectively.

The increase in the variable consideration (gross-to-net reserve) was due to prior year adjustments related to lower Medicaid claims.

License revenue

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Royalty revenue was approximately $35.3 million for the year ended December 31, 2024 , compared to $32.5 million for the year ended December 31, 2023 .

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.

The increase was due to increased product sales by our sub-licensees as they increased commercialization of NERLYNX in international territories, primarily in China.

Cost of sales

Cost of sales was approximately $64.4 million for the year ended December 31, 2024 , compared to $62.7 million for the year ended December 31, 2023 .

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.

The $1.7 million increase was primarily due to the increase of product unit sales to our sub-licensees and the related cost of sales (primarily sales in China), partially offset by lower domestic sales.

Selling, general and administrative expenses:

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Payroll and related costs

Provision for credit loss

Provision for credit loss (recovery)

Professional fees and expenses

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Loss on impairment of asset

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;

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;

Total SG&A expenses were approximately $80.2 million and $89.9 million for the years ended December 31, 2024 and December 31, 2023.

The decrease is primarily attributable to the following:

a decrease in payroll and related costs of approximately $1.9 million , primarily due to lower headcount, partially offset by annual salary increases;

a decrease in provision for credit loss (recovery) of approximately $1.4 million , due to an overdue receivable as of December 31, 2023 that was collected in 2024;

a decrease in professional fees and expenses of approximately $4.1 million, primarily due to a decrease in consultant and contractor expenses (primarily marketing related) of approximately $2.7 million, a decrease in legal fees of approximately $1.0 million and a decrease in insurance and other expense of approximately $0.4 million;

a decrease in stock-based compensation expense of approximately $1.3 million , primarily due to lower fair value on equity grants as a result of a lower market price for our common stock;

a decrease 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 in 2023, which was recorded as an operating asset in accordance with ASC 842.

Research and development expenses:

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Stock-based compensation

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;

Total R&D expenses increased approximately 9.0% to $54.9 million for the year ended December 31, 2024 from approximately $50.4 million for the year ended December 31, 2023.

The increase is primarily attributable to the following:

an increase in clinical trial expense of approximately $3.5 million, primarily due to the procurement of alisertib drug product as well as increased alisertib study activity, partially offset by fewer clinical milestones being achieved;

an increase in internal R&D of approximately $1.5 million, primar ily due to higher compensation related to achieving company goals and one-time payroll and severance related expenses.

The increases above were partially offset by:

a decrease in stock-based compensation of approximately $0.7 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:

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Interest expense

Legal verdict expense

Interest income

For the year ended December 31, 2024, we recognized approximately $4.7 million in interest income compared to approximately $2.6 million of interest income for the year ended December 31, 2023.

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.

The $2.1 million increase in interest income was primarily the result of increased balances in cash equivalents and marketable securities.

Interest expense

For the year ended December 31, 2024 , we recognized approximately $12.5 million in interest expense compared to approximately $13.3 million of interest expense for the year ended December 31, 2023 .

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.

There were no such expenses for the year ended December 31, 2023.

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.

The approximately $0.9 million decrease in interest expense was due to the pay down of debt in 2024 as well as ending imputed interest on $8.0 million related to the final installment payment on the Eshelman litigation settlement paid in October 2024.

For the year ended December 31, 2024, we recognized approximately $0.9 million in other income, primarily due to increased income related to the termination of our sublease and resulting settlement payment of $0.5 million, partially offset by unfavorable exchange rates in Euro-denominated transactions.

Deferred income tax benefit

In 2024, we released a portion of our valuation allowance related to our deferred tax assets in the amount of $7.1 million, which significantly increased our net income for the year.

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.

The following table presents our net income and net income per share, as calculated in accordance with GAAP, as adjusted to remove the impact of stock-based compensation.

For the year ended December 31, 2024, stock-based compensation represented approximately 6.1% of the total of SG&A and R&D expenses.

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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

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income and GAAP Net Income Per Share to Non-GAAP Adjusted Net Income Per Share

(in thousands except share and per share data)

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Working capital

Current portion of long-term debt

Long-term debt

Stockholders’ equity

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.

The following table summarizes our cash flows (uses) for the years ended December 31, 2024 and 2023

December 31, 2024

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Financing activities

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

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.

We recorded net income of approximately $30.3 million and $21.6 million for the years ended December 31, 2024 and 2023 , respectively.

We recorded cash flows from operating activities of approximately $38.9 million for the year ended December 31, 2024 and recorded cash flows from operating activities of approximately $27.0 million for the year ended December 31, 2023 .

Net cash provided by operating activities for the year ended December 31, 2024 was $38.9 million which consisted of net income of $30.3 million, adjusted for non-cash items of approximately $19.3 million, including stock-based compensation of $8.2 million, and depreciation and amortization of $11.5 million and recovery of credit loss of $0.5 million.

Total changes in cash flows from operations were due to a change in working capital related primarily to a decrease in accrued expenses of approximately $15.8 million, an increase in inventory of approximately $1.6 million (increase in inventory purchases), offset by a decrease in accounts receivable related to collection of royalties receivable.

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 approximat ely $21.7 mil lion, 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, 2024, cash used in investing activities was approximately $20.4 million.

Cash used in investing activities was primarily due to the purchase of available-for-sale securities of approximately $76.2 million, partially offset by the maturities of available-for-sale securities of approximately $55.8 million.

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.

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

Cash used in financing activities for the year ended December 31, 2024 was approximately $33.8 million.

Of this amount, $34.0 million related to the payment of principal, as well as exit fees, on our debt with Athyrium, partially offset by approximately $0.2 million of proceeds from employee stock options exercised.

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”).

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 subsidiary, 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.

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 the 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 Topic 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.

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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.

In the second quarter of 2024, we began paying the principal payments required to be made quarterly at 11.11% of the original face amount.

The remaining balance will be paid at maturity.

Each principal payment also includes a 2.0% exit payment.

Each quarterly principal payment approximates $11.1 million, and each quarterly exit fee payment approximates $0.2 million.

As of December 31, 2024, 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.

As of December 31, 2024, we may prepay the outstanding principal balance of the notes, in whole or in part, without premium or penalty.

The Athyrium Notes include affirmative and negative covenants applicable to us.

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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, re presenting all of our debt.

We were in compliance with all applicable covenants under the Athyrium Notes.

We are 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, 2024, we were in compliance with such covenants.

As of December 31, 2024 , the principal balance outstanding under the Athyrium Notes was $66.7 million, representi ng all of our debt.

Current and Future Financing Needs

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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.

We may choose to begin new R&D efforts, launch additional marketing efforts or pursue other in-licensing opportunities.

These efforts will require funding in addition to the cash and cash equivalents totaling approximately $69.2 million and approximately $31.7 million in marketable securities available at December 31, 2024.

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Off-Balance Sheet Arrangements

We do not have any “off-balance sheet arrangements,” as defined by the SEC regulations.

We do not have any “off-balance sheet arrangements,” as defined by SEC regulations.

Contractual Obligations

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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.

We would be obligated to pay for services rendered up to that point, which amounts to total contractual obligations of $42.3 million within the next twelve mo nths.

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 a greement, 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 .

As of December 31, 2024, our obligations for potential milestone payments totaled app roximately $16.3 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 a greement, as consideration for the license, we are required to make substantial payments upon the achievement of certain milestones totaling approxim ately $187.5 million if all such milestones are achieved, of whi ch $102.5 million h ave been achieved as of December 31, 2024 .

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.

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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.

Und er Accounting Standards Co dification (“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.

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Revenue is recognized by measuring the progress toward complete satisfaction of the performance obligations using an input measure.

In September 2024, the Pharmacovigilance Risk Assessment Committee approved a change in existing post approval requirements for overall results and a reduction in sample size for the Pierre Fabre NERLYFE post-marketing study in Europe.

As of December 31, 2024, there is a post-marketing liability of $4.6 million, and the final costs of the study are being assessed.

Any adjustment to the liability will be recorded as license revenue as the original $9.0 million estimate in study costs were recorded as a reduction to license revenue.

Royalty Revenue:

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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.

Accounting Pronouncements Adopted During the Current Year

Segment Reporting Disclosures

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

The standard expands reportable segment disclosure requirements for public business entities primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit (referred to as the “significant expense principle”).

We have adopted this standard for our fiscal year 2024 annual financial statements and interim financial statements thereafter and have applied this standard retrospectively for all prior periods presented in the financial statements.

See Note 2–Significant Accounting Policies for further information.

Recently Issued Accounting Standards

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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.

The ASU is effective for us 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.

We do not expect the adoption of ASU 2023-06 to have a material effect on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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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.

ASU 2023-09 is effective for our 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 finan cial statements, and significant terms and conditions associated with the transactions.

ASU 2021-10 must be adopted for fiscal years beginning after December 15, 2021.

We are currently evaluating the effect that adoption of ASU 2023-09 will have on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures:

The ASU requires more detailed information about specified categories of expenses included in certain expense captions presented on the face of the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

We adopted this guidance during 2022, and recognized approximately $3.8 million in payroll tax credits under the CARES Act.

The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis