10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

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	77-0683487
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

10880 Wilshire Boulevard, Suite 2150, Los Angeles, CA 90024

(Address of principal executive offices) (Zip code)

(424) 248-6500

(Registrant’s telephone number, including area code)

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  x    No  ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 30,148,039 shares of Common Stock, par value $0.0001 per share, were outstanding as of November 3, 2014.

PUMA BIOTECHNOLOGY, INC.

- INDEX -

		Page
PART I – FINANCIAL INFORMATION:
Item 1.	Financial Statements:	1
	Condensed Consolidated Balance Sheets as of September 30, 2014 (Unaudited) and December 31, 2013	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2014 and 2013, and from September 15, 2010 (Date of Inception) to September 30, 2014 (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2014 and 2013, and from September 15, 2010 (Date of Inception) to September 30, 2014 (Unaudited)	3
	Condensed Consolidated Statements of Stockholders’ Equity for the Period from September 15, 2010 (Date of Inception) through September 30, 2014 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013, and from September 15, 2010 (Date of Inception) to September 30, 2014 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II – OTHER INFORMATION:
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
Signatures		25

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Any statements about our expectations, beliefs, plans, objectives, assumptions or 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 development of our drug candidates, including when we expect to undertake, initiate and complete clinical trials of our product candidates;

— the regulatory approval of our drug candidates;

— our use of clinical research organizations and other contractors;

— our ability to find collaborative partners for research, development and commercialization of potential products;

— our ability to market any of our products;

— our history of operating losses;

— 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 ability to attract and retain key personnel; and

— our ability to obtain adequate financing.

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 Quarterly Report on Form 10-Q, including, in Part I, the section entitled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements involve risks and uncertainties, including the risks discussed in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013, that could cause our actual results to differ materially from those in the forward-looking statements. Such risks should be considered in evaluating our prospects and future financial performance. We undertake no obligation to update the forward-looking statements or to reflect events or circumstances after the date of this document.

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	September 30,			December 31,
	2014			2013
	(unaudited)			(note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	28,263		$	43,044
Marketable securities		125,597			40,904
Licensor receivable		1,760			9,813
Prepaid expenses and other, current		4,477			2,635
Total current assets		160,097			96,396
Property and equipment, net		1,910			1,684
Prepaid expenses and other, long-term		8,831			5,080
Restricted cash		1,215			1,214
Total assets	$	172,053		$	104,374
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	18,448		$	10,692
Accrued expenses		10,911			8,579
Total current liabilities		29,359			19,271
Deferred rent		1,091			1,116
Total liabilities		30,450			20,387
Commitments and contingencies (note 7)
Stockholders' equity:
Common stock - $.0001 par value;  100,000,000 shares authorized;    30,117,819 issued and outstanding at September 30, 2014, and    28,991,289 issued and outstanding at December 31, 2013		3			3
Additional paid-in capital		375,451			223,232
Accumulated other comprehensive income (loss)		(118	)		3
Deficit accumulated during the development stage		(233,733	)		(139,251	)
Total stockholders' equity		141,603			83,987
Total liabilities and stockholders' equity	$	172,053		$	104,374

See Accompanying Notes to the Condensed Consolidated Financial Statements

1

PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share data)

(unaudited)

													Period from
													September 15, 2010
													(date of inception) to
	Three Months Ended September 30,						Nine Months Ended September 30,						September 30,
	2014			2013			2014			2013			2014
Operating expenses:
General and administrative	$	3,867		$	2,263		$	11,296		$	6,804		$	55,235
Research and development		32,092			12,068			83,387			32,040			178,895
Totals		35,959			14,331			94,683			38,844			234,130
Loss from operations		(35,959	)		(14,331	)		(94,683	)		(38,844	)		(234,130	)
Other income (expenses):
Interest income		111			9			223			128			497
Other income (expense)		4			39			(22	)		3			(100	)
Totals		115			48			201			131			397
Net loss	$	(35,844	)	$	(14,283	)	$	(94,482	)	$	(38,713	)	$	(233,733	)
Net loss applicable to common stock	$	(35,844	)	$	(14,283	)	$	(94,482	)	$	(38,713	)	$	(233,733	)
Net loss per common share—basic    and diluted	$	(1.19	)	$	(0.50	)	$	(3.16	)	$	(1.35	)
Weighted-average common shares    outstanding—basic and diluted		30,117,819			28,682,055			29,936,254			28,678,439

See Accompanying Notes to the Condensed Consolidated Financial Statements

2

PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

													Period from
	Three Months Ended						Nine Months Ended						September 15, 2010
	September 30,						September 30,						(date of inception) to
	2014			2013			2014			2013			September 30, 2014
Net loss	$	(35,844	)	$	(14,283	)	$	(94,482	)	$	(38,713	)	$	(233,733	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities		(41	)		66			(121	)		(8	)		(118	)
Comprehensive loss	$	(35,885	)	$	(14,217	)	$	(94,603	)	$	(38,721	)	$	(233,851	)

See Accompanying Notes to the Condensed Consolidated Financial Statements

3

PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE PERIOD FROM SEPTEMBER 15, 2010 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2014

(in thousands except share data)

(unaudited)

										Deficit
							Accumulated			Accumulated
					Additional		Other			During the
	Common Stock				Paid-in		Comprehensive			Development
	Shares		Amount		Capital		Income (Loss)			Stage			Total
Balances, beginning		—	$	—	$	—	$	—		$	—		$	—
Common stock issued for cash at $0.0001 per share		4,000,000		—		—		—			—			—
Paid-in capital		—		—		7		—			—			7
Net loss		—		—		—		—			(7	)		(7	)
Balance at December 31, 2010		4,000,000		—		7		—			(7	)		—
Paid-in capital		—		—		61		—			—			61
Issuance of shares of common stock through private placements at $3.75 per share, net of issuance costs		16,000,000		2		56,739		—			—			56,741
Conversion of stockholder's note payable to equity		40,000		—		150		—			—			150
Stock option compensation		—		—		67		—			—			67
Anti-dilutive warrant		—		—		7,586		—			—			7,586
Net loss		—		—		—		—			(10,233	)		(10,233	)
Balance at December 31, 2011		20,040,000		2		64,610		—			(10,240	)		54,372
Issuance of shares of common stock through equity placement at $16.00 per share, net of issuance costs		8,625,000		1		129,213		—			—			129,214
Stock option compensation		—		—		1,408		—			—			1,408
Anti-dilutive warrant		—		—		18,222		—			—			18,222
Exercises of stock options		11,666		—		45		—			—			45
Net loss		—		—		—		—			(74,352	)		(74,352	)
Balance at December 31, 2012		28,676,666		3		213,498		—			(84,592	)		128,909
Stock option compensation		—		—		7,519		—			—			7,519
Exercises of stock options		314,623		—		2,215		—			—			2,215
Unrealized gain on available for sale securities		—		—		—		3			—			3
Net loss		—		—		—		—			(54,659	)		(54,659	)
Balance at December 31, 2013		28,991,289		3		223,232		3			(139,251	)		83,987
Stock option compensation		—		—		22,779		—			—			22,779
Issuance of shares of common stock through equity placement at $122.50 per share, net of issuance costs		1,126,530		—		129,440		—			—			129,440
Unrealized loss on available for sale securities		—		—		—		(121	)		—			(121	)
Net loss		—		—		—		—			(94,482	)		(94,482	)
Balance at September 30, 2014		30,117,819	$	3	$	375,451	$	(118	)	$	(233,733	)	$	141,603

See Accompanying Notes to the Condensed Consolidated Financial Statements

4

PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

							Period from
							September 15, 2010
							(date of
	Nine Months Ended						inception) to
	September 30,						September 30,
	2014			2013			2014
Operating activities:
Net loss	$	(94,482	)	$	(38,713	)	$	(233,733	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		438			298			1,137
Build-out allowance received from landlord		—			—			903
Stock option expense		22,779			4,426			31,773
Anti-dilutive warrant		—			—			25,808
Changes in operating assets and liabilities:
Licensor receivable		8,053			(682	)		(1,760	)
Prepaid expenses and other		(5,593	)		(4,357	)		(13,308	)
Accounts payable		7,756			9,248			18,448
Accrued expenses		2,332			(11,723	)		10,911
Accrual of deferred rent		(25	)		34			188
Net cash used in operating activities		(58,742	)		(41,469	)		(159,633	)
Investing activities:
Purchase of property and equipment		(554	)		(435	)		(2,023	)
Expenditures for leasehold improvements		(110	)		(3	)		(1,024	)
Restricted cash		(1	)		(1	)		(1,215	)
Purchase of available-for-sale securities		(132,260	)		(44,385	)		(181,607	)
Sale/maturity of available-for-sale securities		47,446			—			55,892
Net cash used in investing activities		(85,479	)		(44,824	)		(129,977	)
Financing activities:
Proceeds from issuance of stockholder's convertible note payable		—			—			150
Net proceeds from issuance of common stock		129,440			—			315,395
Net proceeds from exercise of options		—			146			2,260
Capital contributions by stockholder		—			—			68
Net cash provided by financing activities		129,440			146			317,873
Net increase (decrease) in cash and cash equivalents		(14,781	)		(86,147	)		28,263
Cash and cash equivalents, beginning of period		43,044			137,408			—
Cash and cash equivalents, end of period	$	28,263		$	51,261		$	28,263
Supplemental disclosures of non-cash investing and    financing activities:
Conversion of stockholder's note payable to common stock	$	—		$	—		$	150

See Accompanying Notes to the Condensed Consolidated Financial Statements

5

PUMA BIOTECHNOLOGY, INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Business and Basis of Presentation:

Business:

Puma Biotechnology, Inc., or Puma, is a development stage biopharmaceutical company based in Los Angeles, California that acquires and develops innovative products for the treatment of various forms of cancer. References in these Notes to Condensed Consolidated Financial Statements to the “Company” refer to Puma Biotechnology, Inc., a private Delaware company formed on September 15, 2010, for periods prior to the Merger (as defined below), which took place on October 4, 2011, and Puma Biotechnology, Inc., a Delaware company formed on April 27, 2007, and formerly known as Innovative Acquisitions Corp., for periods following the Merger. The Company focuses on in-licensing drug candidates that are undergoing or have already completed initial clinical testing for the treatment of cancer and then seeks to further develop those drug candidates for commercial use.

In November 2012, the Company established and incorporated Puma Biotechnology Ltd, a wholly-owned subsidiary, for the sole purpose of serving as Puma’s legal representative in the United Kingdom and the European Union in connection with Puma’s clinical trial activity in those countries.

Basis of Presentation:

The Company is a development stage enterprise since it has not yet generated any revenue from the sale of products.  Through September 30, 2014, its primary focus has been the transition of operational responsibility for its lead drug candidate, PB272 (neratinib (oral)), from Pfizer, Inc., or the Licensor, to the Company (see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Note 7 to these Condensed Consolidated Financial Statements, for additional information on the license agreement) along with the execution of clinical trials in HER2-positive metastatic breast cancer, HER2-positive neoadjuvant breast cancer, HER2-positive adjuvant breast cancer, as well as clinical trials in advanced cancer patients with tumors that have HER2-mutations, including non-small cell lung cancer, HER2-negative breast cancer, and other solid tumors. The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any subsequent period. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The condensed consolidated balance sheet at December 31, 2013, has been derived from the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

The Company has reported a net loss of approximately $35.8 million and $94.5 million and negative cash flows from operations of approximately $24.3 million and $58.7 million for the three and nine months ended September 30, 2014, respectively. The net loss from the date of inception, September 15, 2010, to September 30, 2014, amounted to approximately $233.7 million, while the negative cash flows from operations from the date of inception amounted to approximately $159.6 million. For the three and nine months ended September 30, 2014, the Company’s net loss was impacted by the amendment to the license agreement with Pfizer signed during July 2014, which resulted in the Company recognizing the expenses incurred in connection with the ongoing clinical trials after December 31, 2013.  Management believes that the Company will continue to incur net losses and negative net cash flows from operating activities through the drug development process.

The Company’s continued operations will depend on its ability to raise funds through various potential sources such as equity and debt financing. Through September 30, 2014, the Company’s financing was primarily through public offerings of Company common stock and private equity placements. Given the current and desired pace of clinical development of its product candidates, management estimates that the Company has sufficient cash on hand to fund clinical development through 2015 and into 2016. The Company will need additional financing thereafter until it can achieve profitability, if ever. The Company may choose to raise additional capital before 2016 in order to fund its future development activities. There can be no assurance that such capital will be available on favorable terms, or at all, or that any additional capital that the Company is able to obtain will be sufficient to meet its needs. If it is unable to raise additional capital, the Company could likely be forced to curtail desired development activities, which will delay the development of its product candidates.

6

Merger with Public Company:

On September 29, 2011, the Company entered into an agreement and plan of merger, or the Merger Agreement, with Innovative Acquisitions Corp., or IAC, and IAC’s wholly-owned subsidiary, IAC Merger Corporation, or Merger Sub. On October 4, 2011, the Company completed a reverse merger in which Merger Sub merged with and into the Company and the Company became a wholly-owned subsidiary of IAC, or the Merger. At the effective time of the Merger, the Company’s then issued and outstanding 18,666,733 shares of common stock were exchanged for 18,666,733 shares of common stock of IAC and each share of the Company’s common stock that was outstanding immediately prior to the effective time was cancelled, with one share of the Company common stock issued to IAC. Concurrently, IAC redeemed all of its shares from its pre-Merger stockholders in exchange for aggregate consideration of $40,000 paid by the Company. The Company also paid $40,000 for IAC’s professional fees associated with the Merger directly to legal counsel for IAC’s former stockholders. Following the Merger and the redemption, the Company’s prior stockholders owned the same percentage of IAC’s common stock as they held of the Company’s common stock prior to the Merger.

Upon completion of the Merger, the Company merged with and into IAC, and IAC adopted the Company’s business plan and changed its name to “Puma Biotechnology, Inc.” Further, upon completion of the Merger, the existing officers and directors of IAC resigned and the existing officers and directors of the Company were appointed officers and directors of IAC.

The Merger was accounted for as a reverse acquisition, with the Company as the accounting acquirer and IAC as the accounting acquiree. The merger of a private operating company into a non-operating public shell corporation with nominal net assets is considered to be a capital transaction in substance, rather than a business combination for accounting purposes. Accordingly, the Company treated this transaction as a capital transaction without recording goodwill or adjusting any of its other assets or liabilities. Consideration in the amount of $80,000 paid to the former stockholders of IAC and their attorney was recorded as an other expense item and included in the Company’s net loss for the year ended December 31, 2011.

Note 2—Significant Accounting Policies:

The significant accounting policies followed in the preparation of these condensed consolidated financial statements are as follows:

Use of Estimates:

The preparation of 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 expenses for the period presented. Accordingly, actual results could differ from those estimates. Significant estimates include the cost of services provided by consultants who manage clinical trials and conduct research and clinical trials on behalf of the Company that are billed on a delayed basis. As the actual costs become known, the Company adjusts its estimated cost in that period. The value of stock-based compensation includes estimates based on future events, which are difficult to predict. It is at least reasonably possible that a change in the estimates will occur in the near term.

Principles of Consolidation:

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Licensor Receivable:

Licensor receivable represents the remaining 2013 and prior external “out of pocket” clinical trial costs in excess of an agreed upon “cap” for clinical trials that were ongoing at the time the licensing agreement with the Licensor was reached. In July 2014, the license agreement was amended to make the Company solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013, and to fix the future royalty rate that must be paid to the Licensor upon commercialization in the low to mid teens. The Company has not established a reserve against this receivable as it is deemed to be fully collectible.

7

Marketable 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, if material, reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is determined to be other than temporary results in a revaluation of its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. 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.

Assets Measured at Fair Value on a Recurring Basis:

Accounting Standards Codification, or ASC 820, Fair Value Measurement, provides a single definition of fair value and a common framework for measuring fair value as well as new 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 September 30, 2014, and December 31, 2013, 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):

September 30, 2014	Level 1		Level 2		Level 3		Total
Cash equivalents	$	17,974	$	—	$	—	$	17,974
Marketable securities - corporate bonds		—		92,308		—		92,308
Marketable securities - US government				11,502				11,502
Marketable securities - commercial paper		—		21,786		—		21,786
	$	17,974	$	125,596	$	—	$	143,570
December 31, 2013	Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,598	$	—	$	—	$	41,598
Marketable securities - corporate bonds		—		40,904		—		40,904
	$	41,598	$	40,904	$	—	$	82,502

The Company’s investments in short-term investment securities are exposed to price fluctuations. The fair value measurements for short-term investment securities are based upon the quoted price in active markets multiplied by the number of securities owned, exclusive of any transaction costs and without any adjustments to reflect discounts that may be applied to selling a large block of securities at one time.

Concentration of Risk:

Financial instruments, which potentially subject the Company to concentrations of credit risk, principally consist of cash and cash equivalents. The Company’s cash and cash equivalents in excess of the Federal Deposit Insurance Corporation and the Securities

8

Investor Protection Corporation insured limits at September 30, 2014, were approximately $29.3 million. The Company does not believe it is exposed to any significant credit risk.

Property and Equipment:

Property and equipment are recorded at cost and depreciated over estimated useful lives ranging from three to five years using the straight-line method. Leasehold improvements are recorded at cost and amortized over the shorter of their useful lives or the term of the lease by use of the straight-line method. Maintenance and repair costs are charged to operations as incurred.

The Company assesses the impairment of long-lived assets, primarily property and equipment, whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value, as measured by the anticipated undiscounted net cash flows of the asset. Should impairment exist, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through September 30, 2014.

Research and Development Expenses:

Research and development, or R&D, expenses are charged to operations as incurred. The major components of R&D 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, or 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 cost 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. The objective of the Company’s accrual policy is to match the recording of expenses in the condensed consolidated financial statements to the actual services received and efforts expended. 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 condensed 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.

Research and Development Reimbursement:

The license agreement set a “cap” on the amount of external expenses the Company would incur, beginning January 1, 2012, in completing the clinical trials transferred from the Licensor to the Company. The license agreement was amended in July 2014 which made the Company solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  In addition, as part of the amended license agreement, the Company will pay the Licensor a fixed royalty rate in the low to mid teens upon commercialization of licensed products. The license agreement originally stipulated that the Licensor would be responsible for all external expenses associated with the transferred clinical trials and that the Company would invoice for such costs on a quarterly basis. The Licensor had 60 days to review the invoice and supporting documentation. All amounts reimbursed from the licensor represent charges for services provided by third parties and not the Company. Accordingly, the Company has elected to treat the reimbursed costs as “pass-through” expenses billable to the Licensor and as an offset to R&D expenses. R&D expenses are recorded net of any excess cap costs billed to the Licensor. The Company recognized approximately $3.4 million and $13.1 million of excess cap costs during the three months and nine months ended September 30, 2013, respectively. Pursuant to the amendment to the original license agreement, no reduction in the expenses related to the licensor legacy clinical trials that were in excess of a cap on such expenses set forth in the license agreement was recorded in the three and nine months ended September 30, 2014.  

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Stock-Based Compensation:

Stock option awards:

ASC 718, Compensation-Stock Compensation, or ASC 718, requires the fair value of all share-based payments to employees, including grants of stock options, to be recognized in the statement of operations over the requisite service period. Under ASC 718, employee option grants are generally valued at the date of grant, or 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 for companies with a short period of publicly traded stock history, the Company’s estimate of expected volatility is based on the average expected volatilities of a sampling of five companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage. 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. ASC 718 does not allow companies to account for option forfeitures as they occur; instead, estimated option forfeitures must be calculated when the option is granted to reduce the option expense to be recognized over the life of the award and updated upon receipt of further information as to the amount of options expected to be forfeited. Due to its limited history, the Company uses the simplified method to determine the expected life of the option grants.

Performance shares:

The performance shares are valued on the grant date and the fair value of the performance award is equal to the market price of the Company’s common stock on the grant date. The performance share expense is recognized based on the Company’s estimate of a range of probabilities that the Company’s closing common stock price will be lower or higher than the Company’s common stock price on the grant date on the vesting dates. Based on the range of probabilities, the expense is calculated and recognized over the three-year vesting period.

Net Loss per Common Share:

Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the periods presented, as required by ASC 260, Earnings per Share. Diluted earnings per common share are the same as basic earnings per share because the assumed exercise of the Company’s outstanding options are anti-dilutive. For the three and nine months ended September 30, 2014, potentially dilutive securities excluded from the calculations were 3,778,307 shares issuable upon exercise of options, 28,411 performance shares issuable upon attainment of stock price objectives over the vesting period of the performance share awards and 2,116,250 shares issuable upon exercise of an outstanding warrant. For the three and nine months ended September 30, 2013, potentially dilutive securities excluded from the earnings per common share calculation were 2,373,309 shares issuable upon exercise of options and 2,116,250 shares issuable upon exercise of an outstanding warrant.

Deferred Rent:

The Company has entered into operating lease agreements for its corporate offices in Los Angeles and South San Francisco that contain provisions for future rent increases, leasehold improvement allowances and rent abatements. The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between the rent expense recorded and the amount paid is credited or charged to deferred rent, which is reflected as a separate line item in the accompanying condensed consolidated balance sheets. Additionally, the Company recorded as deferred rent the cost of the leasehold improvements paid by the landlord, which is amortized on a straight-line basis over the term of the lease.

Recently Issued Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09 Revenue from Contracts with Customers, or ASU No. 2014-09, which will supersede nearly all existing revenue recognition guidance under GAAP. ASU No. 2014-09 provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for the Company in the first quarter of 2018. The Company is a development stage entity and will evaluate the effects of this update on its consolidated financial statements when it generates revenues.

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities, or ASU No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as development stage entities (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development

10

stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and stockholder equity.  For public entities, these amendments begin to be effective for periods after December 31, 2014.  Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.  The Company will adopt this standard in future presentations.  The financial impact on the Company is expected to be negligible.

In August 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-15 Presentation of Financial Statements – Going Concern, or ASU No. 2014-15, which provides guidance on how management will evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued.    ASU No. 2014-15 will become effective for the Company in the fourth quarter of 2016, although early adoption is allowed. The Company is currently evaluating this guidance and expects the financial impact on the Company to be negligible.

Reclassifications:

Certain amounts for 2013 have been reclassified to conform to the current year’s presentation.

Note 3—Prepaid Expenses and Other:

Prepaid expenses and other consisted of the following (in thousands):

	September 30,		December 31,
	2014		2013
Short-term:
CRO services	$	1,584	$	863
Other clinical development		2,463		1,089
Insurance		228		554
Other		202		129
		4,477		2,635
Long-term:
CRO services		5,302		1,509
Other clinical development		3,318		3,359
Insurance		159		142
Other		52		70
		8,831		5,080
Totals	$	13,308	$	7,715

Note 4—Property and Equipment:

Property and equipment consisted of the following (in thousands):

	September 30,			December 31,
	2014			2013
Leasehold improvements	$	1,024		$	914
Computer equipment		1,189			874
Telephone equipment		86			82
Furniture and fixtures		748			513
		3,047			2,383
Less: accumulated depreciation and amortization		(1,137	)		(699	)
Totals	$	1,910		$	1,684

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Note 5—Accrued Expenses:

Accrued expenses consisted of the following (in thousands):

	September 30,		December 31,
	2014		2013
Accrued CRO/licensor services	$	3,838	$	4,801
Accrued other clinical development		3,712		2,369
Accrued legal fees		250		84
Accrued compensation		2,975		1,066
Other		136		259
	$	10,911	$	8,579

Accrued CRO/licensor services represent the Company’s estimate of such costs as of September 30, 2014, and will be adjusted in the period the actual costs become known. Accrued compensation includes estimated bonus and earned but unused vacation for full-time employees. When actual performance bonuses are paid out to employees on the employee’s anniversary of hire, the bonus expense will be adjusted to reflect the actual expense for the year. Additionally, vacation is accrued at the rate the employee earns vacation and reduced as vacation is used by the employee.

Note 6—Stockholders’ Equity:

Common Stock:

On February 14, 2014, the Company completed an underwritten public offering of 1,126,530 shares of the Company’s common stock (including an additional 146,938 shares of Company common stock issued and sold pursuant to the underwriters’ option to purchase additional shares), par value $0.0001 per share, at a price of $122.50 per share, less the underwriting discount. The net proceeds received by the Company were approximately $129.4 million after deducting the underwriting discount and offering expenses payable by the Company.

Stock-Based Compensation:

The Company’s 2011 Incentive Award Plan, or the 2011 Plan, was adopted by the Board of Directors and stockholders of the Company on September 15, 2011.  An amendment to the 2011 Plan, or the 2011 Plan Amendment, was adopted by the Board of Directors on June 4, 2014, and the stockholders of the Company on June 10, 2014.    The 2011 Plan Amendment increased the number of shares reserved from 3,529,412 to 6,529,412.  Pursuant to the amended 2011 Plan (referred to hereafter as the 2011 Plan), the Company may grant incentive stock options and nonqualified stock options, as well as other forms of equity-based compensation such as performance shares. 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. 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. The performance shares are valued at market value less par value and vest over three years, with the number of shares to be issued determined by the market price on the vesting date. The maximum number of shares issuable pursuant to a performance share award is established on the grant date.

Employee stock-based compensation for the three and nine months ended September 30, 2014 and 2013, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Stock-based compensation:	(in thousands except share and per share data)
Options-
Research and development	$	8,726	$	1,333	$	17,690	$	3,072
General and administrative, or G&A		1,377		473		4,081		1,354
Performance shares - R&D		346	—			1,008	—
Total stock-based compensation expense	$	10,449	$	1,806	$	22,779	$	4,426
Impact on basic and diluted net loss per share	$	0.35	$	0.06	$	0.76	$	0.15
Weighted average shares (basic and diluted)		30,117,819		28,682,055		29,936,254		28,678,439

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Performance Shares:

During January 2014, performance share awards were granted to certain employees that provide for a maximum of 28,411 common stock shares to be issued. These shares vest over three years on the first, second and third anniversary of December 15, 2013. On each vesting date, if the Company’s closing common stock price is equal to $102.46 per share, one-third of the 28,411 shares will be awarded. If the Company’s closing common stock price is either lesser or greater than $102.46 per share, the number of common stock shares to be issued will be adjusted to be less than one-third of the 28,411 shares. No shares will be awarded if the Company’s closing common stock price is less than $47.53 per share at the vesting dates. The performance shares are valued on the grant date and the fair value of the performance award is equal to the market price of the Company’s common stock on the grant date. The performance share expense is recognized based on the Company’s estimate of a range of probabilities that the Company’s closing common stock price will be lower or higher than $102.46 on the vesting dates. Based on the range of probabilities, the expense is calculated and recognized over the three-year vesting period.

Stock Options:

The fair value of options granted to 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 nine months ended September 30, 2014 and 2013:

	2014			2013
Dividend yield		0.0	%		0.0	%
Expected volatility		81.8	%		85.4	%
Risk-free interest rate		1.8	%		1.3	%
Expected life in years		5.85			5.85

Activity with respect to options granted under the 2011 Plan is summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value                       (in thousands)
Outstanding at December 31, 2013		2,604,224		$	23.75
Granted during 2014		1,211,583		$	124.78
Forfeited during 2014		(37,500	)	$	58.01
Exercised during 2014		—		$	—
Outstanding at September 30, 2014		3,778,307		$	55.12		8.6	$	699,381
Unvested at September 30, 2014		2,298,608		$	82.55		8.3	$	364,868
Exercisable at September 30, 2014		1,479,699		$	12.50		7.8	$	334,513

At September 30, 2014, total estimated unrecognized employee compensation cost related to non-vested stock options and performance shares granted prior to that date were approximately $109.1 million and $1.2 million, respectively. These unrecognized expenses are expected to be recognized over a weighted-average period of 2.5 years for stock options and 1.5 years for performance shares. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2014 and 2013, were $86.83 per share and $25.95 per share, respectively.

				Weighted
				Average
				Grant-Date
Stock options	Shares			Fair Value
Nonvested shares at December 31, 2013		1,838,633		$	20.18
Granted		1,211,583			86.83
Vested/Issued		(714,108	)		12.52
Forfeited		(37,500	)		40.43
Nonvested shares at September 30, 2014		2,298,608		$	57.45

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			Weighted
			Average
			Grant-Date
Performance shares	Shares		Fair Value
Nonvested shares at December 31, 2013		—	$	—
Granted		28,411		102.46
Vested/Issued		—		—
Forfeited		—		—
Nonvested shares at September 30, 2014		28,411	$	102.46

Note 7—Commitments and Contingencies:

In July 2014, the Company signed an amendment to the license agreement with the Licensor.  The amendment to the license agreement provides that the Company will now be solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  The costs were previously the responsibility of the Licensor.  

In addition, under the amended agreement, annual royalties to be paid on net sales of licensed products were reduced from a tiered royalty rate structure ranging between 10 to 20 percent to a fixed rate in the low to mid teens and the Licensor and the Company have agreed to continue to cooperate to effect the transfer to the Company of certain records, regulatory filings, materials and inventory controlled by the Licensor as promptly as reasonably practicable.

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in Item 1 in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with our audited financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2013.

Unless otherwise provided in this Quarterly Report, references to the “Company,” “we,” “us,” and “our” refer to Puma Biotechnology, Inc., a Delaware corporation formed on April 27, 2007, and formerly known as Innovative Acquisitions Corp., together with its wholly-owned subsidiary, Puma Biotechnology Ltd. All references to “Former Puma” refer to Puma Biotechnology, Inc., a privately held Delaware corporation formed on September 15, 2010, that merged with and into us on October 4, 2011. This transaction was accounted for as a reverse acquisition whereby Former Puma was deemed to be the acquirer for accounting and financial reporting purposes and we were deemed to be the acquired party. Consequently, our financial statements prior to the reverse merger transaction reflect the assets and liabilities and the historical operations of Former Puma from its inception on September 15, 2010 through the closing of the reverse merger transaction on October 4, 2011. Our financial statements after completion of the reverse merger transaction include the assets and liabilities of us and Former Puma and the operations of Former Puma and us.

Overview

We are a development stage biopharmaceutical company based in Los Angeles, California with a focus on the acquisition, development and commercialization of innovative products to enhance cancer care. We aim to acquire proprietary rights to these products, by license or otherwise, fund their research and development and bring the products to market. Our efforts and resources to date have been focused primarily on acquiring and developing our pharmaceutical technologies, raising capital and recruiting personnel. As a development stage company, we have had no product sales to date, and we will have no product sales until we receive approval from the United States Food and Drug Administration, or FDA, or equivalent foreign regulatory bodies to begin selling our pharmaceutical candidates. Developing pharmaceutical products, however, is a lengthy and very expensive process. Assuming we do not encounter any unforeseen safety issues during the course of developing our product candidates, we do not expect to receive approval of a product candidate until approximately 2015.

We currently license the rights to three drug candidates:

— PB272 (neratinib (oral)), which we are developing for the treatment of patients with HER2 positive breast cancer, and patients with non-small cell lung cancer, breast cancer and other solid tumors that have a HER2 mutation;

— PB272 (neratinib (intravenous)), which we are developing for the treatment of patients with advanced cancer; and

— PB357, which we believe can serve as a backup compound to PB272, and which we are evaluating for further development.

A large portion of our expenses to date have been related to the clinical development of our lead product candidate, PB272 (neratinib (oral)), and the transition of the neratinib program from the licensor. During this transition period, we built up our infrastructure and assumed responsibility for the neratinib program.

The license agreement for PB272 established a limit for our expenses related to the licensor-initiated clinical trials for PB272 that were ongoing at the time of the agreement and which we refer to as legacy clinical trials. This capped our “out-of-pocket” costs incurred in conducting the legacy clinical trials beginning January 1, 2012. The cap cost was reached during the fourth quarter of 2012, with the Licensor becoming responsible for the cost to complete the licensor legacy clinical trials.  The license agreement was amended in July 2014 whereby we became solely responsible for the costs incurred or accrued in conducting the legacy clinical trials after December 31, 2013.  The license amendment also adjusted the future royalty rate from a tiered royalty rate structure ranging between 10 to 20 percent to a fixed rate in the low to mid teens. Additionally, our expenses to date have been related to hiring staff, commencing company-sponsored clinical trials and the build out of our corporate infrastructure. As we proceed with clinical development of PB272 (neratinib (oral)), recognize expenses associated with the legacy clinical trials and further develop PB272 (neratinib (intravenous)) and PB357, our second and third product candidates, respectively, we expect our R&D expenses and expenses related to our third-party contractors will continue to increase.

To the extent we are successful in acquiring additional product candidates for our development pipeline, our need to finance R&D will increase. Accordingly, our success depends not only on the safety and efficacy of our product candidates, but also on our ability to finance product development. Our major sources of working capital have been proceeds from public offerings of our common stock and sales of our common stock in private placements.

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Critical Accounting Policies

As of the date of the filing of this quarterly report, we believe there have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2014 from our accounting policies at December 31, 2013, as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Summary of Expenses

General and administrative, or G&A, expenses consist primarily of salaries and related personnel costs (including stock-based compensation expense), professional fees, business insurance, rent, general legal activities, and other corporate expenses.

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 including, as of December 31, 2013, the legacy clinical trials. During the three and nine months ended September 30, 2014, our R&D expenses consisted primarily of CRO costs, other clinical development costs and salaries and related personnel costs (including stock-based compensation expenses). We expense our R&D costs as they are incurred.

Results of Operations

Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013

General and administrative expenses:

For the three months ended September 30, 2014, G&A expenses were approximately $3.9 million, compared to approximately $2.3 million for the three months ended September 30, 2013. G&A expenses for the three months ended September 30, 2014 and 2013 were as follows:

	Three Months Ended				Percentage
General and administrative expenses	September 30,				Change
(in thousands)	2014		2013		2014/2013
Payroll and related costs	$	759	$	644		18	%
Professional fees and expenses		939		554		69	%
Facility and equipment costs		433		290		49	%
Employee stock-based compensation expense		1,377		473		191	%
Insurance and business licenses/taxes		158		117		35	%
Other		201		185		9	%
	$	3,867	$	2,263		71	%

For the three months ended September 30, 2014, G&A expenses increased approximately $1.6 million compared to the same period in 2013.  Payroll and related costs increased to approximately $0.8 million for the three months ended September 30, 2014 from approximately $0.6 million for the same period in 2013, as headcount increased to 14 from nine to support our corporate growth.  Professional fees and expenses increased to approximately $0.9 million for the three months ended September 30, 2014 from approximately $0.6 million for the same period in 2013.  Professional fees and expenses consist of legal, auditing and consulting fees for compliance with the Sarbanes-Oxley Act of 2002, as amended, or Sarbanes-Oxley, and investor relations.  Facility and equipment costs increased to approximately $0.4 million as we added leased office space.  We recently leased additional suites in our Los Angeles office and our South San Francisco location and therefore expect our facility costs to continue to increase.   Employee stock-based compensation expense increased to approximately $1.4 million for the three months ended September 30, 2014 compared to approximately $0.5 million for the same period in 2013.  The increase reflects the increase in our stock price as well as the increase in the number of option grants issued to employees.  Insurance and business taxes increased to approximately $0.2 million for the three months ended September 30, 2014, compared to approximately $0.1 million for the same period in 2013 due to increased levels of insurance held by the Company and increased business taxes.  We expect G&A expenses to continue to increase moderately as we increase headcount and as our new leases become effective to support anticipated growth.

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Research and development expenses:

For the three months ended September 30, 2014, R&D expenses were approximately $32.1 million, compared to approximately $12.1 million for the three months ended September 30, 2013. R&D expenses for the three months ended September 30, 2014 and 2013 were as follows:

	Three Months Ended				Percentage
Research and development expenses	September 30,				Change
(in thousands)	2014		2013		2014/2013
Outside CRO/licensor services	$	9,179	$	2,972		209	%
Outside other clinical development		7,696		3,711		107	%
Internal regulatory affairs and quality assurance		2,045		1,720		19	%
Internal clinical development		3,850		2,132		81	%
Internal chemical manufacturing		249		200		25	%
Employee stock-based compensation		9,073		1,333		581	%
	$	32,092	$	12,068		166	%

For the three months ended September 30, 2014, R&D expenses increased approximately $20.0 million compared to the same period in 2013. Approximately $4.4 million of this increase, $3.4 million in outside CRO/licensor services and $1.0 million in outside other clinical development, resulted from the amendment to the license agreement with the licensor.  This amendment makes us solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  These expenses would have previously been the licensor’s responsibility.  We expect additional R&D expenses of approximately $15 million over the remaining life of the trials and further anticipate that a significant portion of this amount will occur in the next two quarters. Outside CRO/licensor services for Company-initiated clinical trials accounted for approximately $2.8 million of the increase.  Outside other clinical development increased to approximately $7.7 million for the three months ended September 30, 2014, compared to approximately $3.7 million for the same period in 2013.  The approximately $4.0 million increase can primarily be attributed to  an increase in contract chemical manufacturing from approximately $0.2 million for the three months ended September 30, 2013, to approximately $3.5 million for the three months ended September 30, 2014, due to the increased activity in Company-initiated clinical trials.  The increases in internal regulatory affairs and quality assurance, internal clinical development and internal chemical manufacturing, as well as employee stock-based compensation, were driven by an increase in full-time R&D headcount to 99 from 58 as of September 30, 2014 and 2013, respectively.  We expect R&D expenses to continue to increase as we recognize the additional expenses associated with the legacy clinical trials and as we hire additional R&D employees during the remainder of 2014 to support the filing of a New Drug Application with the FDA and a Marketing Authorization Application with the European Medicines Agency during 2015.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

General and administrative expenses:

For the nine months ended September 30, 2014, G&A expenses were approximately $11.3 million, compared to approximately $6.8 million for the nine months ended September 30, 2013. G&A expenses for the nine months ended September 30, 2014 and 2013 were as follows:

	Nine Months Ended				Percentage
General and administrative expenses	September 30,				Change
(in thousands)	2014		2013		2014/2013
Payroll and related costs	$	2,255	$	1,880		20	%
Professional fees and expenses		2,287		1,732		32	%
Facility and equipment costs		1,313		929		41	%
Employee stock-based compensation expense		4,081		1,354		202	%
Insurance and business licenses/taxes		518		328		58	%
Other		842		581		45	%
	$	11,296	$	6,804		66	%

For the nine months ended September 30, 2014, G&A expenses increased approximately $4.5 million compared to the same period in 2013.  Payroll and related costs increased to approximately $2.3 million as headcount increased to 14 from nine to support our corporate growth.  Professional fees and expenses increased to approximately $2.3 million for the nine months ended September 30, 2014 from approximately $1.7 million for the same period in 2013 due to supporting our overall growth.  Facility and equipment

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costs increased to approximately $1.3 million as we added leased office space.  We recently leased additional suites in our Los Angeles office and in our South San Francisco location and therefore expect our facility costs to continue to increase.   Employee stock-based compensation expense increased to approximately $4.1 million for the nine months ended September 30, 2014, compared to approximately $1.4 million for the nine months ended September 30, 2013.  The increase reflects the increase in our stock price as well as the increase in the number of option grants issued to employees.  Insurance and business taxes increased to approximately $0.5 million for the nine months ended September 30, 2014, compared to approximately $0.3 million for the same period in 2013, due to increased levels of insurance held by us and increased business taxes.

Research and development expenses:

For the nine months ended September 30, 2014, R&D expenses were approximately $83.4 million, compared to approximately $32.0 million for the nine months ended September 30, 2013. R&D expenses for the nine months ended September 30, 2014 and 2013 were as follows:

	Nine Months Ended				Percentage
Research and development expenses	September 30,				Change
(in thousands)	2014		2013		2014/2013
Outside CRO/licensor services	$	29,785	$	8,966		232	%
Outside other clinical development		18,004		10,464		72	%
Internal regulatory affairs and quality assurance		5,558		4,231		31	%
Internal clinical development		10,673		4,886		118	%
Internal chemical manufacturing		668		421		59	%
Employee stock-based compensation		18,699		3,072		509	%
	$	83,387	$	32,040		160	%

For the nine months ended September 30, 2014, R&D expenses increased approximately $51.4 million compared to the same period in 2013.  Approximately $16.6 million of this increase, $13.4 million in outside CRO/licensor services and $3.2 million in outside other clinical development, resulted from the amendment of the license agreement with the licensor.  This amendment makes us solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  Of the approximately $20.8 million increase in outside CRO/licensor services, approximately $7.4 million were used for Company-initiated clinical trials.  Outside other clinical development increased to approximately $18.0 million for the nine months ended September 30, 2014, compared to approximately $10.5 million for the same period in 2013.  Of the approximately $7.5 million increase, approximately $1.0 million was related to licensor legacy clinical trials and the remaining $6.5 million was related to Company-initiated trials due to the increased activity in these clinical trials.  The increases in internal regulatory affairs and quality assurance, internal clinical development and internal chemical manufacturing, and employee stock-based compensation were driven by an increase in full-time R&D headcount to 99 from 58 as of September 30, 2014 and 2013, respectively.  

While expenditures on current and future clinical development programs, particularly our PB272 program, are expected to be substantial and to increase, they are subject to many uncertainties, including the results of clinical trials and whether we develop any of our drug candidates with a partner or independently. As a result of such uncertainties, we cannot predict with any significant degree of certainty the duration and completion costs of our research and development projects or whether, when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. The duration and cost of clinical trials may vary significantly over the life of a project as a result of unanticipated events arising during clinical development and a variety of other factors, including:

— the number of trials and studies in a clinical program;

— the number of patients who participate in the trials;

— the number of sites included in the trials;

— the rates of patient recruitment and enrollment;

— the duration of patient treatment and follow-up;

— the costs of manufacturing our drug candidates; and

— the costs, requirements, timing of, and ability to secure regulatory approvals.

18

Interest income:

For the three and nine months ended September 30, 2014, we recognized approximately $111,000 and $223,000, respectively, in interest income compared to approximately $9,000 and $128,000, respectively, for the three and nine months ended September 30, 2013. This increase in interest income is due to transferring funds from money market investments to longer-term higher yielding investments.  As these longer-term investments mature,  the interest is realized.  

Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of September 30, 2014, and is intended to supplement the more detailed discussion that follows:

Liquidity and capital resources (in thousands)	September 30, 2014			December 31, 2013
Cash and cash equivalents	$	28,263		$	43,044
Marketable securities		125,597			40,904
Working capital		130,738			77,125
Stockholders' equity		141,603			83,987
	Nine Months Ended			Nine Months Ended
	September 30, 2014			September 30, 2013
Cash provided by (used in):
Operating activities	$	(58,742	)	$	(41,469	)
Investing activities		(85,479	)		(44,824	)
Financing activities		129,440			146
Increase (decrease) in cash	$	(14,781	)	$	(86,147	)

Operating Activities:

For the nine months ended September 30, 2014, and the nine months ended September 30, 2013, we reported net loss of approximately $94.5 million and $38.7 million, respectively, and cash flows used in operating activities of approximately $58.7 million and $41.5 million, respectively. Our net loss from Former Puma’s date of inception, September 15, 2010, through September 30, 2014, amounted to approximately $233.7 million, while negative cash flow from operating activities amounted to approximately $159.6 million for the same period.

For the nine months ended September 30, 2014, the net cash used in operating activities, noted above, consisted of approximately $23.2 million of non-cash items such as depreciation and stock option expense, a decrease in licensor receivable of approximately $8.1 million and an increase of approximately $5.6 million in prepaid expenses and other assets due to the purchase of comparator drugs for use in our clinical trials. Accrued expenses and accounts payable increased approximately $10.1 million during the nine months ended September 30, 2014, due to increased activity in the licensor legacy and our clinical trials during the nine months ended September 30, 2014. The decrease in licensor receivable was related to the amendment of the license agreement.  

For the nine months ended September 30, 2013, the net cash used in operating activities, noted above, consisted of approximately $4.7 million of non-cash items such as depreciation and stock option expense, decreased by an increase in accounts payable and accrued expenses of approximately $2.5 million. Further increasing the net loss to arrive at the net cash used in operating activities was an increase in licensor receivable of approximately $0.7 million. Prepaid expenses increased approximately $4.4 million to make up remaining cash used in operating activities as we made advance payments to CROs and other service providers as we ramped up our Phase II and Phase III trials.

Investing Activities:

During the nine months ended September 30, 2014, net cash used in investing activities was approximately $85.5 million. This was made up of approximately $132.3 million used for investments of excess cash made in accordance with our investment policy, offset by $47.4 million cash received from corporate bonds that matured and approximately $0.6 million used to purchase property and equipment, approximately $0.1 million used for expenditures for leasehold improvements compared to approximately $44.4 million for the purchase of available-for-sale securities and $0.4 million in the purchase of property and equipment during the nine months ended September 30, 2013.

19

Financing Activities:

During the nine months ended September 30, 2014, we received proceeds of approximately $129.4 million from the closing of the February 2014 public offering of our common stock. During the nine months ended September 30, 2013, we received proceeds from the exercise of stock options of $0.1 million.

Current and Future Financing Needs:

We have incurred negative cash flow from operations since we started our business. 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 and our R&D efforts. Given the current and desired pace of clinical development of our product candidates, over the next 12 months we estimate that our R&D spending will be approximately $85 million to $100 million, excluding stock-based compensation. We anticipate spending approximately $8 million to $9 million for general and administrative expenses over the next 12 months, excluding stock-based compensation. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control.

While we believe that the approximately $153.9 million in cash, cash equivalents and marketable securities and the $1.8 million licensor receivable as of September 30, 2014, will be sufficient to enable us to meet our anticipated expenditures through 2015 and into 2016, we may seek to obtain additional capital through the sale of debt or equity securities, if necessary, especially in conjunction with opportunistic acquisitions or licensing arrangements. We expect to continue incurring significant losses for the foreseeable future and our continuing operations will depend on whether we are able to raise additional funds through additional equity or debt financing or by entering into a strategic alliance with a third party concerning one or more of our product candidates. Through September 30, 2014, a significant portion of our financing has been through public offerings and private placements of our equity securities. We will continue to fund operations from cash on hand and through the similar sources of capital previously described. We can give no assurances that any additional capital raised will be sufficient to meet our needs. Further, in light of current economic conditions, including the lack of access to the capital markets being experienced by small companies, particularly in our industry, there can be no assurance that such capital will be available to us on favorable terms or at all. If we are unable to raise additional funds in the future, we may be forced to delay or discontinue the development of one or more of our product candidates and forego attractive business opportunities. Any additional sources of financing will likely involve the sale of our equity securities, which will have a dilutive effect on our stockholders.

In addition, we have based our estimate of funding our capital requirements on assumptions that may prove to be wrong. We may need to obtain additional funds sooner than planned or in greater amounts than we currently anticipate. 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. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. 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 would 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.

Adjusted Statement of Operations:

The following tables present our operating results, as calculated in accordance with the accounting principles generally accepted in the United States, or GAAP, as adjusted to remove the impact of employee stock-based compensation. These non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP reporting measures. We believe these non-GAAP measures enhance understanding of our financial performance, are more indicative of our operational performance and facilitate a better comparison among fiscal periods.

20

Reconciliation of GAAP and Non-GAAP Financial Information

(in thousands except share and per share data)

	GAAP Measure						Non-GAAP			GAAP Measure						Non-GAAP
	(Reported)			Expense			Measure			(Reported)			Expense			Measure
	Three Months			Adjustments			Three Months			Nine Months			Adjustments			Nine Months
	Ended						Ended			Ended						Ended
	September 30,			Stock-based			September 30,			September 30,			Stock-based			September 30,
	2014			compensation			2014			2014			compensation			2014
Operating expense:
General and administrative	$	3,867			(1,377	)	$	2,490		$	11,296		$	(4,081	)	$	7,215
Research and development		32,092			(9,072	)		23,020			83,387			(18,698	)		64,689
Loss from operations		(35,959	)		10,449			(25,510	)		(94,683	)		22,779			(71,904	)
Other income (expense):
Interest income		111			—			111			223			—			223
Other expense		4			—			4			(22	)		—			(22	)
Totals		115			—			115			201			—			201
Net loss	$	(35,844	)	$	10,449		$	(25,395	)	$	(94,482	)	$	22,779		$	(71,703	)
Net loss applicable to common stock	$	(35,844	)	$	10,449		$	(25,395	)	$	(94,482	)	$	22,779		$	(71,703	)
Net loss per common share—basic and diluted	$	(1.19	)	$	0.35		$	(0.84	)	$	(3.16	)	$	0.76		$	(2.40	)
Weighted-average common shares    outstanding—basic and diluted		30,117,819			30,117,819			30,117,819			29,936,254			29,936,254			29,936,254
	GAAP Measure						Non-GAAP			GAAP Measure						Non-GAAP
	(Reported)			Expense			Measure			(Reported)			Expense			Measure
	Three Months			Adjustments			Three Months			Nine Months			Adjustments			Nine Months
	Ended						Ended			Ended						Ended
	September 30,			Stock-based			September 30,			September 30,			Stock-based			September 30,
	2013			compensation			2013			2013			compensation			2013
Operating expense:
General and administrative	$	2,263		$	(473	)	$	1,790		$	6,804		$	(1,354	)	$	5,450
Research and development		12,068			(1,333	)		10,735			32,040			(3,072	)		28,968
Loss from operations		(14,331	)		1,806			(12,525	)		(38,844	)		4,426			(34,418	)
Other income (expense):
Interest income		9			—			9			128			—			128
Other expense		39			—			39			3			—			3
Totals		48			—			48			131			—			131
Net loss	$	(14,283	)	$	1,806		$	(12,477	)	$	(38,713	)	$	4,426		$	(34,287	)
Net loss applicable to common stock	$	(14,283	)	$	1,806		$	(12,477	)	$	(38,713	)	$	4,426		$	(34,287	)
Net loss per common share—basic and diluted	$	(0.50	)	$	0.06		$	(0.44	)	$	(1.35	)	$	0.15		$	(1.20	)
Weighted-average common shares    outstanding—basic and diluted		28,682,055			28,682,055			28,682,055			28,678,439			28,678,439			28,678,439

21

Off-Balance Sheet Arrangements

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investing activities is to preserve principal while maximizing the income we receive from our investments without significantly increasing the risk of loss. Some of the investable securities permitted under our cash management policy may be subject to market risk for changes in interest rates. To mitigate this risk, we maintain a portfolio of cash equivalents and available-for-sale investments in a variety of securities, which may include investment grade commercial paper, money market funds, government debt issued by the United States of America, state debt, certificates of deposit and investment grade corporate debt. Presently, we are exposed to minimal market risks associated with interest rate changes because of the relatively short maturities of our investments and we do not expect interest rate fluctuations to materially affect the aggregate value of our financial instruments. We manage our sensitivity to these risks by maintaining investment grade short-term investments. We do not purchase or hold derivative or commodity instruments or other financial instruments for trading purposes. Additionally, we periodically monitor our investments for adverse material holdings related to the underlying financial solvency of the issuer. As of September 30, 2014, our investments consisted primarily of corporate obligations. Our results of operations and financial condition would not be significantly impacted by either a 10% increase or 10% decrease in interest rates due mainly to the short-term nature of our investment portfolio. We have not used derivative financial instruments in our investment portfolio. Additionally, we do not invest in foreign currencies or other foreign investments.

Item  4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures 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 (the Company’s principal executive officer) and Senior Vice President, Finance and Administration (the Company’s principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosure. 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 Senior Vice President, Finance and Administration, we have evaluated the effectiveness of our disclosure controls and procedures (as defined under Exchange Act Rule 13a-15(e)), as of September 30, 2014. Based on that evaluation, our Chief Executive Officer and Senior Vice President, Finance and Administration have concluded that these disclosure controls and procedures were effective as of September 30, 2014.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

22

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are not involved in any material pending legal proceedings. Additionally, we are not aware of any contemplated proceedings against us by any governmental authority.

Item  1A. RISK FACTORS

Under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, which was filed with the SEC on March 3, 2014, we identified important factors that could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Form 10-Q. There has been no material change in our risk factors subsequent to the filing of our Annual Report. However, the risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties that we currently deem to be immaterial or not currently known to us, as well as other risks reported from time to time in our reports to the SEC, also could cause our actual results to differ materially from our anticipated results or other expectations.

Item  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

We did not sell any of our equity securities without registration under the Securities Act of 1933, as amended, during the quarter ended September 30, 2014.

Use of Proceeds from the Sale of Registered Securities

On October 18, 2012, our Registration Statement on Form S-1, as amended (File No. 333-184187), was declared effective for our first registered offering. As a result of the offering, we received net proceeds of approximately $129.2 million. Through September 30, 2014, approximately $109.9 million of the net proceeds from the offering have been used to fund the ongoing clinical programs for our lead drug candidate and for other general corporate purposes. We have invested the unused proceeds from the offering in a variety of capital preservation investments, including money market funds and short-term, investment grade, interest-bearing securities. There has been no material change in our planned use of proceeds from the offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Neither we nor any “affiliated purchasers” within the definition of Rule 10b-18(a)(3) made any purchases of our equity securities during the quarter ended September 30, 2014.

Item  3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item  5. OTHER INFORMATION

None.

23

Item 6. EXHIBITS

(a) Exhibits required by Item 601 of Regulation S-K.

Exhibit	Description
10.1 *	Amendment No. 1 to License Agreement dated July 18, 2014, between Puma Biotechnology, Inc. and Pfizer, Inc.
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014
32.1	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
32.2	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
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* Portions of this exhibit have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.  The omitted portion has been filed separately with the Securities and Exchange Commission.

24

SIGNATURES

Pursuant to the requirements 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.

	PUMA BIOTECHNOLOGY, INC.
Date: November 10, 2014	By:	/s/ Alan H. Auerbach
		Alan H. Auerbach
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: November 10, 2014	By:	/s/ Charles R. Eyler
		Charles R. Eyler
		Senior Vice President, Finance and Administration and Treasurer
		(Principal Financial and Accounting Officer)

25

EX-10.1

Exhibit 10.1

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXECUTION COPY

Amendment No. 1 to

License Agreement

between

Puma Biotechnology, Inc.

and

Pfizer Inc.

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

THIS AMENDMENT NO. 1 TO LICENSE AGREEMENT (the “Amendment”), is entered into and made effective as of July 18, 2014 (the “Amendment Effective Date”), by and betweenPuma Biotechnology, Inc., a corporation organized and existing under the laws of Delaware with offices at 10880 Wilshire Blvd, Suite 2150, Los Angeles, CA 90024 (“LICENSEE”) and Pfizer Inc., a corporation organized and existing under the laws of Delaware and having offices at 235 East 42^nd Street, New York, NY 10017 (“PFIZER”).  LICENSEE and PFIZER may, from time-to-time, be individually referred to as a “Party” and collectively referred to as the “Parties.”

Background

Whereas, PFIZER and LICENSEE entered into a License Agreement on August 18, 2011 (the “Agreement”) pursuant to which (i) PFIZER granted to LICENSEE, and LICENSEE received from PFIZER, certain licenses under certain of PFIZER’s proprietary technology for the development, manufacture and commercialization of a compound known as neratinib worldwide and (ii) PFIZER transferred, and LICENSEE assumed, control of certain Phase III clinical trials of neratinib for the treatment of cancer;

Whereas, the Parties desire to amend the Agreement to provide (i) that PFIZER will no longer be responsible for any expenses in conducting the Existing Trials under Section 3.6 of the Agreement incurred or accrued on or after January 1, 2014, (ii) for a reduction to the royalty rate payable by LICENSEE to PFIZER on sales of products containing neratinib and (iii) that, though the [***] have been completed, the Parties will continue to cooperate to effect the transfer to LICENSEE of any Third Party Contracts as promptly as reasonably practicable.

Now, Therefore, in consideration of the mutual agreements and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties, intending to be legally bound hereby, agree to the foregoing and as follows:

1. Any capitalized terms used in this Amendment shall have the meaning set forth in the Agreement, unless otherwise defined herein.

2. Section 1.34 of the Agreement shall be revised to read in its entirety as follows:

1.34.     “Licensee Trial Cost Cap” means the [***] the out-of-pocket expenses that LICENSEE may incur between January 1, 2012 and December 31, 2013 (irrespective of when LICENSEE receives the invoices for such expenses) in conducting the Existing Trials under Section 3.6.  The Parties acknowledge and agree that any expenses that LICENSEE incurs as a result of [***] will not be counted towards the Licensee Trial Cost Cap.  In addition, Section 4.4.2 sets forth certain [***], and Section 4.4.3 sets forth [***].  For the avoidance of doubt, following December 31, 2013, any expenses incurred or accrued in conducting

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

the Existing Trials under Section 3.6 following December 31, 2013 shall be the sole responsibility of LICENSEE.

3. Section 3.2.2 of the Agreement shall be revised to read in its entirety as follows:

3.2.2.     Unless otherwise agreed upon in writing by the Parties, the Transition Committee shall meet, in person or by telephone, not less than [***] after the Transition Committee Identification Date and not less than [***] thereafter until [***]. In such meetings, the Transition Committee shall (i) review the progress being made under the Transition Plan and Trial Completion Plan, and the [***], (ii) discuss future activities to be conducted under the Transition Plan and Trial Completion Plan, and the [***], and the extent to which additional resources need to be applied by either Party or both to complete the transition and achieve trial completion, and (iii) review and agree upon any necessary or desired revisions to the Transition Plan or Trial Completion Plan, or the [***].  Upon the request of a Party’s representative on the Transition Committee, subject to the other Party’s prior consent (not to be unreasonably withheld or delayed), other personnel from such Party may attend and participate in such meetings.  It is the objective of the Parties, working through the Transition Committee, and in accordance with the terms and conditions of this Agreement including the Schedules hereto, to insure (A) as smooth and efficient a transition from PFIZER to LICENSEE as reasonably practical of all relevant documentation, materials, contractual obligations and regulatory responsibilities related to Products and the Existing Trials and (B) as smooth and efficient a completion of the Existing Trials as reasonably practicable, in both cases in accordance with accepted pharmaceutical industry norms, ethical practices and Applicable Law.

4. Section 3.6.4 of the Agreement shall be revised to read in its entirety as follows:

3.6.4.     Solely with respect to LICENSEE’s conduct of Trial Completion Activities with respect to Existing Trials on and after January 1, 2012, PFIZER will reimburse LICENSEE for Excess Trial Expenses, if any.  “Excess Trial Expenses” means those out-of-pocket expenses reasonably incurred by LICENSEE between January 1, 2012 and December 31, 2013 (irrespective of when LICENSEE receives the invoices for such expenses) that are, in the aggregate, in excess of the Licensee Trial Cost Cap to conduct such Trial Completion Activities, excluding any expenses that are [***].  LICENSEE will deliver to PFIZER a written report within [***] after the end of each Calendar Quarter during which PFIZER is obligated to reimburse Excess Trial Expenses setting forth in reasonable detail LICENSEE’s out-of-pocket expenses for the Trial Completion Activities and the amount, if any, of Excess Trial Expenses to be reimbursed by PFIZER.  PFIZER will reimburse LICENSEE for applicable Excess Trial Expenses within [***] after its receipt of such report stating such expenses, with such back-up information documenting such expenses as PFIZER

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

may reasonably request, and an invoice for the relevant amount.  Upon execution of this Amendment, PFIZER shall make a one-time payment to LICENSEE in the amount of [***].  The Parties acknowledge and agree that such one-time payment shall discharge PFIZER of any and all further obligations for Excess Trial Expenses, and LICENSEE releases PFIZER from any and all further obligations for Excess Trial Expenses.  Notwithstanding the foregoing, PFIZER shall reimburse LICENSEE for actual payments made after the execution of this Amendment to clinical trial sites, study investigators and for study subject-related pass through costs for the Existing Trials (i.e., “pass-through expenses”) that (i) were incurred on or before December 31, 2013, but not included in the one-time payment of [***], noted above; (ii) are supported by original invoices; and (iii) otherwise meet the definition of Excess Trial Expenses.  

5. Section 4.4.3 of the Agreement shall be revised to read in its entirety as follows:

4.4.3.     To the extent any comparator drugs are required for the Trial Completion Activities beyond the Comparator Inventory transferred to LICENSEE pursuant to the Transition Plan, LICENSEE shall be responsible for acquiring such additional comparator drugs at its own expense; provided that during the period from the Closing Date through December 31, 2011, if LICENSEE has been negotiating in good faith with Third Party suppliers of comparator drugs but has not yet entered into agreements for the supply of comparator drugs with such Third Parties, then at LICENSEE’s request, PFIZER will use reasonable efforts upon reasonable notice to order the quantities of comparator drugs for use in the Existing Advanced Trials requested by LICENSEE in writing, at LICENSEE’s expense [***]; provided further that via the Transition Committee, the Parties will discuss necessary lead times and any other activities related to any such request.

6. Section 5.1.2 of the Agreement shall be revised to read in its entirety as follows:

5.1.2.     Royalty Payments.  

(a)     In further considerationof the licenses and rights granted to LICENSEE hereunder, LICENSEE shall pay to PFIZER the royalties set forth below on Net Sales of Products in the Territory in each Calendar Year during the applicable Royalty Terms (collectively, “Royalties”).  

NET SALES	ROYALTY RATE
Aggregate worldwide Net Sales of all Products	[***] of Net Sales

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

(b)     LICENSEE shall pay to PFIZER the applicable Royalties within [***] following the end of each Calendar Quarter after the date of the First Commercial Sale of a Product.  

(c)      In the event that LICENSEE [***] (the “Third Party Patents”), and if LICENSEE pays [***] under license agreements with such Third Parties [***] (the “Third Party Payments”), then LICENSEE may credit [***] of such Third Party Payments against the Royalties owed and payable on the Net Sales for such Product, as determined on a country-by-country basis.  Notwithstanding the foregoing, in no event shall such credits reduce the Royalties payable to PFIZER [***].

(d)      All payments shall be accompanied by a report that includes reasonably detailed information regarding a total monthly sales calculation, on a country-by-country basis, of Net Sales of each Product (including gross sales and all Deductions) and all Royalties payable to PFIZER for the applicable Calendar Quarter (including any foreign exchange rates employed and conversion calculations).

7. Section 5.2.1 of the Agreement shall be revised to read in its entirety as follows:

5.2.1.     With respect to Net Sales invoiced in U.S. dollars, the Net Sales and the amounts due for Royalties hereunder will be expressed in U.S. dollars. With respect to Net Sales invoiced in a currency other than U.S. dollars, such Net Sales will be converted to U.S. dollars using the average of the applicable daily foreign exchange rates published in the Wall Street Journal (or any other qualified source that is acceptable to both Parties) for the last day of each month of the Calendar Quarter in which such Net Sales occurred, and the amounts due for Royalties hereunder will be expressed in U.S. dollars. For purposes of calculating the Net Sales thresholds set forth in [***], the aggregate Net Sales with respect to each Calendar Quarter within a Calendar Year will be calculated based on the currency exchange rates for the Calendar Quarter in which such Net Sales occurred, in a manner consistent with the exchange rate procedures set forth in the immediately preceding sentence.

8. Section 6.1.1 of the Agreement shall be revised to read in its entirety as follows:

6.1.1.     Relevant Records.  LICENSEE shall keep, and shall cause its Affiliates and sublicensee to keep accurate financial books and records pertaining to: LICENSEE’s and its Affiliates’ and sublicensees’ sale of Products, including any and all calculations of payments due to PFIZER hereunder; LICENSEE’s prosecution, maintenance and enforcement of Patent Rights; and during the time PFIZER is obligated to reimburse Excess Trial Expenses, LICENSEE’s Trial Completion Activities (collectively, “Relevant Records”).  LICENSEE, its

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Affiliates and sublicensees shall maintain the Relevant Records for the longer of: (a) the period of time required by Applicable Law, or (b) three (3) years following expiration or termination of this Agreement.  LICENSEE shall require its sublicensees to provide to LICENSEE copies of all Relevant Records relating to such sublicensees’ sale of Products as necessary to allow PFIZER to review such Relevant Records when conducting an audit of LICENSEE pursuant to Section 6.1.2.

9. PFIZER [***].  The Parties hereby agree to add the following as a new Section 4.7:  

4.7.      [***]; Transfer of Third Party Contracts. [***]; provided, however, that the Parties shall continue to cooperate, under the supervision of the Transition Committee, in a timely manner to effect the transfer to LICENSEE of any Third Party Contracts in accordance with Schedule B as promptly as reasonably practicable pursuant to this Agreement.  Such cooperation shall include, without limitation, the timely execution of all agreements or documents required in order to effect the transfer of Third Party Contracts for services performed in relation to the Existing Trials by Third Parties from PFIZER to LICENSEE.

10. All other terms and conditions of the Agreement shall remain in full force and effect.

11. This Amendment may be executed in counter-parts with the same effect as if both Parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. Signatures to this Amendment transmitted by facsimile, by email in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of this Amendment shall have the same effect as physical delivery of the paper document bearing original signature.

12. This Amendment, together with the Agreement and all Schedules and Exhibits thereto, constitutes the entire agreement between the Parties as to the subject matter of this Amendment, and supersedes and merges all prior and contemporaneous negotiations, representations, agreements and understandings regarding the same.

(Signature page follows.)

[***] INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

IN WITNESS WHEREOF, authorized representatives of the Parties have duly executed this Agreement as of the Effective Date to be effective as of the Effective Date.

Pfizer Inc.		Puma Biotechnology, Inc.
By:	/s/ Garry Nicholson	By:	/s/ Alan Auerbach
	Name: Garry Nicholson		Name: Alan Auerbach
	Title: President		Title: CEO / President

EX-31.1

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 quarterly report on Form 10-Q of Puma Biotechnology, Inc. for the quarter ended September 30, 2014;

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: November 10, 2014	/s/ Alan H. Auerbach
	Alan H. Auerbach Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles R. Eyler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Puma Biotechnology, Inc. for the quarter ended September 30, 2014;

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: November 10, 2014	/s/ Charles R. Eyler
	Charles R. Eyler Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The following certification is being furnished solely to accompany the Quarterly Report of Puma Biotechnology, Inc. for the quarter ended September 30, 2014, 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 Quarterly Report of Puma Biotechnology, Inc. for the quarter ended September 30, 2014, 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: November 10, 2014	/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.

EX-32.2

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The following certification is being furnished solely to accompany the Quarterly Report of Puma Biotechnology, Inc. for the quarter ended September 30, 2014, 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, Charles R. Eyler, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Puma Biotechnology, Inc. for the quarter ended September 30, 2014, 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: November 10, 2014	/s/ Charles R. Eyler
	Charles R. Eyler 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.

XML

Performance Shares (Detail) (Performance Shares, USD $)	9 Months Ended
	Sep. 30, 2014
Performance Shares
Shares
Beginning balance, shares	0
Number of shares granted to employees	28,411
Vested/Issued	0
Forfeited	0
Ending balance, shares	28,411
Weighted Average Grant-Date Fair Value
Beginning balance, Weighted Average Grant-Date Fair Value	$ 0
Granted	$ 102.46
Vested/Issued	$ 0
Forfeited	$ 0
Ending balance, Weighted Average Grant-Date Fair Value	$ 102.46

XML

Components of Prepaid Expenses and Other (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Prepaid Expenses [Line Items]
Prepaid expenses and other, current	$ 4,477	$ 2,635
Prepaid expenses and other, long-term	8,831	5,080
Totals	13,308	7,715
CRO services
Prepaid Expenses [Line Items]
Prepaid expenses and other, current	1,584	863
Prepaid expenses and other, long-term	5,302	1,509
Other clinical development
Prepaid Expenses [Line Items]
Prepaid expenses and other, current	2,463	1,089
Prepaid expenses and other, long-term	3,318	3,359
Insurance
Prepaid Expenses [Line Items]
Prepaid expenses and other, current	228	554
Prepaid expenses and other, long-term	159	142
Other
Prepaid Expenses [Line Items]
Prepaid expenses and other, current	202	129
Prepaid expenses and other, long-term	$ 52	$ 70

XML

Business and Basis of Presentation

9 Months Ended

Sep. 30, 2014

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Business and Basis of Presentation

Note 1—Business and Basis of Presentation:

Business:

Puma Biotechnology, Inc., or Puma, is a development stage biopharmaceutical company based in Los Angeles, California that acquires and develops innovative products for the treatment of various forms of cancer. References in these Notes to Condensed Consolidated Financial Statements to the “Company” refer to Puma Biotechnology, Inc., a private Delaware company formed on September 15, 2010, for periods prior to the Merger (as defined below), which took place on October 4, 2011, and Puma Biotechnology, Inc., a Delaware company formed on April 27, 2007, and formerly known as Innovative Acquisitions Corp., for periods following the Merger. The Company focuses on in-licensing drug candidates that are undergoing or have already completed initial clinical testing for the treatment of cancer and then seeks to further develop those drug candidates for commercial use.

In November 2012, the Company established and incorporated Puma Biotechnology Ltd, a wholly-owned subsidiary, for the sole purpose of serving as Puma’s legal representative in the United Kingdom and the European Union in connection with Puma’s clinical trial activity in those countries.

Basis of Presentation:

The Company is a development stage enterprise since it has not yet generated any revenue from the sale of products.  Through September 30, 2014, its primary focus has been the transition of operational responsibility for its lead drug candidate, PB272 (neratinib (oral)), from Pfizer, Inc., or the Licensor, to the Company (see the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Note 7 to these Condensed Consolidated Financial Statements, for additional information on the license agreement) along with the execution of clinical trials in HER2-positive metastatic breast cancer, HER2-positive neoadjuvant breast cancer, HER2-positive adjuvant breast cancer, as well as clinical trials in advanced cancer patients with tumors that have HER2-mutations, including non-small cell lung cancer, HER2-negative breast cancer, and other solid tumors. The accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC, for interim financial information. Accordingly, the financial statements do not include all information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014, or for any subsequent period. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The condensed consolidated balance sheet at December 31, 2013, has been derived from the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

The Company has reported a net loss of approximately $35.8 million and $94.5 million and negative cash flows from operations of approximately $24.3 million and $58.7 million for the three and nine months ended September 30, 2014, respectively. The net loss from the date of inception, September 15, 2010, to September 30, 2014, amounted to approximately $233.7 million, while the negative cash flows from operations from the date of inception amounted to approximately $159.6 million. For the three and nine months ended September 30, 2014, the Company’s net loss was impacted by the amendment to the license agreement with Pfizer signed during July 2014, which resulted in the Company recognizing the expenses incurred in connection with the ongoing clinical trials after December 31, 2013.  Management believes that the Company will continue to incur net losses and negative net cash flows from operating activities through the drug development process.

The Company’s continued operations will depend on its ability to raise funds through various potential sources such as equity and debt financing. Through September 30, 2014, the Company’s financing was primarily through public offerings of Company common stock and private equity placements. Given the current and desired pace of clinical development of its product candidates, management estimates that the Company has sufficient cash on hand to fund clinical development through 2015 and into 2016. The Company will need additional financing thereafter until it can achieve profitability, if ever. The Company may choose to raise additional capital before 2016 in order to fund its future development activities. There can be no assurance that such capital will be available on favorable terms, or at all, or that any additional capital that the Company is able to obtain will be sufficient to meet its needs. If it is unable to raise additional capital, the Company could likely be forced to curtail desired development activities, which will delay the development of its product candidates.

Merger with Public Company:

On September 29, 2011, the Company entered into an agreement and plan of merger, or the Merger Agreement, with Innovative Acquisitions Corp., or IAC, and IAC’s wholly-owned subsidiary, IAC Merger Corporation, or Merger Sub. On October 4, 2011, the Company completed a reverse merger in which Merger Sub merged with and into the Company and the Company became a wholly-owned subsidiary of IAC, or the Merger. At the effective time of the Merger, the Company’s then issued and outstanding 18,666,733 shares of common stock were exchanged for 18,666,733 shares of common stock of IAC and each share of the Company’s common stock that was outstanding immediately prior to the effective time was cancelled, with one share of the Company common stock issued to IAC. Concurrently, IAC redeemed all of its shares from its pre-Merger stockholders in exchange for aggregate consideration of $40,000 paid by the Company. The Company also paid $40,000 for IAC’s professional fees associated with the Merger directly to legal counsel for IAC’s former stockholders. Following the Merger and the redemption, the Company’s prior stockholders owned the same percentage of IAC’s common stock as they held of the Company’s common stock prior to the Merger.

Upon completion of the Merger, the Company merged with and into IAC, and IAC adopted the Company’s business plan and changed its name to “Puma Biotechnology, Inc.” Further, upon completion of the Merger, the existing officers and directors of IAC resigned and the existing officers and directors of the Company were appointed officers and directors of IAC.

The Merger was accounted for as a reverse acquisition, with the Company as the accounting acquirer and IAC as the accounting acquiree. The merger of a private operating company into a non-operating public shell corporation with nominal net assets is considered to be a capital transaction in substance, rather than a business combination for accounting purposes. Accordingly, the Company treated this transaction as a capital transaction without recording goodwill or adjusting any of its other assets or liabilities. Consideration in the amount of $80,000 paid to the former stockholders of IAC and their attorney was recorded as an other expense item and included in the Company’s net loss for the year ended December 31, 2011.

XML

Stock-Based Compensation Expense (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended		48 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014
Share Based Compensation [Line Items]
Stock-based compensation expense	$ 10,449	$ 1,806	$ 22,779	$ 4,426	$ 31,773
Impact on basic and diluted net loss per share	$ 0.35	$ 0.06	$ 0.76	$ 0.15
Weighted average shares (basic and diluted)	30,117,819	28,682,055	29,936,254	28,678,439
Stock Options | Research and development
Share Based Compensation [Line Items]
Stock-based compensation expense	8,726	1,333	17,690	3,072
Stock Options | General and administrative
Share Based Compensation [Line Items]
Stock-based compensation expense	1,377	473	4,081	1,354
Performance Shares
Share Based Compensation [Line Items]
Stock-based compensation expense	$ 346		$ 1,008

XML

Stockholders Equity - Additional Information (Detail) (USD $)	3 Months Ended	9 Months Ended		12 Months Ended		48 Months Ended		9 Months Ended	1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended	0 Months Ended
	Dec. 31, 2010	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2012	Dec. 31, 2011	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Performance Shares	Jan. 31, 2014 Performance Shares Employees	Sep. 30, 2014 Non Vested Stock Options	Mar. 31, 2014 2011 Incentive Award Plan	Jun. 30, 2014 Amended 2011 Incentive Award Plan	Jan. 31, 2014 Maximum Performance Shares Employees	Sep. 30, 2014 Maximum 2011 Incentive Award Plan	Feb. 14, 2014 Underwritten Public Offering	Feb. 14, 2014 Underwritten Public Offering Overallotment Option Exercise By Underwriters
Stockholders Equity Note [Line Items]
Issuance of common stock, shares															1,126,530	146,938
Common stock, par value		$ 0.0001				$ 0.0001	$ 0.0001								$ 0.0001
Issuance of common stock, per share	$ 0.0001	$ 122.50		$ 16.00	$ 3.75										$ 122.50
Net proceeds from issuance of common stock		$ 129,440,000				$ 315,395,000									$ 129,400,000
Stock options granted, term														10 years
Common stock shares reserved for issuance											3,529,412	6,529,412
Performance share expense recognition period		3 years							3 years
Number of shares granted to employees								28,411					28,411
Closing price per share									$ 102.46				$ 47.53
Estimated unrecognized employee compensation cost related to non-vested stock options granted								$ 1,200,000		$ 109,100,000
Estimated unrecognized employee compensation cost related to non-vested stock options granted, Weighted-average period of recognition								1 year 6 months		2 years 6 months
Weighted-average grant date fair value of options granted		$ 86.83	$ 25.95							$ 86.83

XML

Fair Value Options Weighted-Average Assumptions (Detail) (Stock Options)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Dividend yield	0.00%	0.00%
Expected volatility	81.80%	85.40%
Risk-free interest rate	1.80%	1.30%
Expected life in years	5 years 10 months 6 days	5 years 10 months 6 days

XML

Activity with Respect to Options Granted (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Shares
Beginning balance, shares	2,604,224
Granted, shares	1,211,583
Forfeited, shares	(37,500)
Exercised, shares	0
Ending balance, shares	3,778,307
Unvested, shares	2,298,608
Exercisable, shares	1,479,699
Weighted Average Exercise Price
Beginning Balance, Weighted Average Exercise Price	$ 23.75
Granted, Weighted Average Exercise Price	$ 124.78
Forfeited, Weighted Average Exercise Price	$ 58.01
Exercised, Weighted Average Exercise Price	$ 0
Ending Balance, Weighted Average Exercise Price	$ 55.12
Unvested, Weighted Average Exercise Price	$ 82.55
Exercisable, Weighted Average Exercise Price	$ 12.50
Weighted Average Remaining Contractual Term (years)
Ending balance, Weighted Average Remaining Contractual Term (years)	8 years 7 months 6 days
Unvested, Weighted Average Remaining Contractual Term (years)	8 years 3 months 18 days
Exercisable, Weighted Average Remaining Contractual Term (years)	7 years 9 months 18 days
Aggregate Intrinsic Value
Ending balance, Aggregate Intrinsic Value	$ 699,381
Unvested , Aggregate Intrinsic Value	364,868
Exercisable, Aggregate Intrinsic Value	$ 334,513

XML

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended		48 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014
Operating activities:
Net loss	$ (94,482)	$ (38,713)	$ (233,733)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	438	298	1,137
Build-out allowance received from landlord			903
Stock option expense	22,779	4,426	31,773
Anti-dilutive warrant			25,808
Changes in operating assets and liabilities:
Licensor receivable	8,053	(682)	(1,760)
Prepaid expenses and other	(5,593)	(4,357)	(13,308)
Accounts payable	7,756	9,248	18,448
Accrued expenses	2,332	(11,723)	10,911
Accrual of deferred rent	(25)	34	188
Net cash used in operating activities	(58,742)	(41,469)	(159,633)
Investing activities:
Purchase of property and equipment	(554)	(435)	(2,023)
Expenditures for leasehold improvements	(110)	(3)	(1,024)
Restricted cash	(1)	(1)	(1,215)
Purchase of available-for-sale securities	(132,260)	(44,385)	(181,607)
Sale/maturity of available-for-sale securities	47,446		55,892
Net cash used in investing activities	(85,479)	(44,824)	(129,977)
Financing activities:
Proceeds from issuance of stockholder's convertible note payable			150
Net proceeds from issuance of common stock	129,440		315,395
Net proceeds from exercise of options		146	2,260
Capital contributions by stockholder			68
Net cash provided by financing activities	129,440	146	317,873
Net increase (decrease) in cash and cash equivalents	(14,781)	(86,147)	28,263
Cash and cash equivalents, beginning of period	43,044	137,408
Cash and cash equivalents, end of period	28,263	51,261	28,263
Supplemental disclosures of non-cash investing and financing activities:
Conversion of stockholder's note payable to common stock			$ 150

XML

Stock Options (Detail) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Shares
Beginning balance, shares	2,604,224
Granted	1,211,583
Forfeited	(37,500)
Ending balance, shares	3,778,307
Weighted Average Grant-Date Fair Value
Granted	$ 86.83	$ 25.95
Non Vested Stock Options
Shares
Beginning balance, shares	1,838,633
Granted	1,211,583
Vested/Issued	(714,108)
Forfeited	(37,500)
Ending balance, shares	2,298,608
Weighted Average Grant-Date Fair Value
Beginning balance, Weighted Average Grant-Date Fair Value	$ 20.18
Granted	$ 86.83
Vested/Issued	$ 12.52
Forfeited	$ 40.43
Ending balance, Weighted Average Grant-Date Fair Value	$ 57.45

XML

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 28,263	$ 43,044
Marketable securities	125,597	40,904
Licensor receivable	1,760	9,813
Prepaid expenses and other, current	4,477	2,635
Total current assets	160,097	96,396
Property and equipment, net	1,910	1,684
Prepaid expenses and other, long-term	8,831	5,080
Restricted cash	1,215	1,214
Total assets	172,053	104,374
Current liabilities:
Accounts payable	18,448	10,692
Accrued expenses	10,911	8,579
Total current liabilities	29,359	19,271
Deferred rent	1,091	1,116
Total liabilities	30,450	20,387
Commitments and contingencies (note 7)
Stockholders' equity:
Common stock - $.0001 par value; 100,000,000 shares authorized; 30,117,819 issued and outstanding at September 30, 2014, and 28,991,289 issued and outstanding at December 31, 2013	3	3
Additional paid-in capital	375,451	223,232
Accumulated other comprehensive income (loss)	(118)	3
Deficit accumulated during the development stage	(233,733)	(139,251)
Total stockholders' equity	141,603	83,987
Total liabilities and stockholders' equity	$ 172,053	$ 104,374

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Condensed Consolidated Statements of Stockholders' Equity (USD $) In Thousands, except Share data	Total USD ($)	Private Placement USD ($)	Common Stock USD ($)	Common Stock Private Placement USD ($)	Common Stock Public Offering	Additional Paid-in Capital USD ($)	Additional Paid-in Capital Private Placement USD ($)	Accumulated Other Comprehensive Income (Loss) USD ($)	Deficit Accumulated During the Development Stage USD ($)
Beginning Balance at Sep. 15, 2010	$ 0		$ 0			$ 0		$ 0	$ 0
Common stock issued for cash (in shares)			4,000,000
Common stock issued for cash	0		0			0		0	0
Paid-in capital	7					7
Net loss	(7)								(7)
Ending Balance at Dec. 31, 2010						7			(7)
Ending Balance (in shares) at Dec. 31, 2010			4,000,000
Paid-in capital	61					61
Conversion of stockholder's note payable to equity (in shares)			40,000
Conversion of stockholder's note payable to equity	150					150
Stock option compensation	67					67
Anti-dilutive warrant	7,586					7,586
Issuance of common stock (in shares)				16,000,000
Issuance of common stock		56,741		2			56,739
Net loss	(10,233)								(10,233)
Ending Balance at Dec. 31, 2011	54,372		2			64,610			(10,240)
Ending Balance (in shares) at Dec. 31, 2011			20,040,000
Stock option compensation	1,408					1,408
Anti-dilutive warrant	18,222					18,222
Exercises of stock options (in shares)			11,666
Exercises of stock options	45					45
Issuance of common stock (in shares)					8,625,000
Issuance of common stock	129,214		1			129,213
Net loss	(74,352)								(74,352)
Ending Balance at Dec. 31, 2012	128,909		3			213,498			(84,592)
Ending Balance (in shares) at Dec. 31, 2012			28,676,666
Stock option compensation	7,519					7,519
Exercises of stock options (in shares)			314,623
Exercises of stock options	2,215					2,215
Unrealized Gain (loss) on available for sale securities	3							3
Net loss	(54,659)								(54,659)
Ending Balance at Dec. 31, 2013	83,987		3			223,232		3	(139,251)
Ending Balance (in shares) at Dec. 31, 2013			28,991,289
Stock option compensation	22,779					22,779
Exercises of stock options (in shares)	0
Unrealized Gain (loss) on available for sale securities	(121)							(121)
Issuance of common stock (in shares)					1,126,530
Issuance of common stock	129,440					129,440
Net loss	(94,482)								(94,482)
Ending Balance at Sep. 30, 2014	$ 141,603		$ 3			$ 375,451		$ (118)	$ (233,733)
Ending Balance (in shares) at Sep. 30, 2014			30,117,819

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Business and Basis of Presentation - Additional Information (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended			48 Months Ended
	Sep. 30, 2011	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2010	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Sep. 30, 2014	Sep. 29, 2011
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Net loss		$ (35,844)	$ (14,283)	$ (7)	$ (94,482)	$ (38,713)	$ (54,659)	$ (74,352)	$ (10,233)	$ (233,733)
Net cash used in operating activities		(24,300)			(58,742)	(41,469)				(159,633)
Merger agreement, shares Issued	18,666,733
Merger agreement, shares received in exchange	18,666,733
Merger agreement, shares exchange ratio											100.00%
Share redeemed, aggregate consideration	40
Merger related Professional fees paid	40
Consideration paid for former Stockholders of IAC and their attorney									$ 80

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Assets Measured at Fair Value on Recurring Basis (Detail) (Fair Value, Measurements, Recurring, USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	$ 17,974	$ 41,598
Total	143,570	82,502
US government
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	11,502
Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	17,974	41,598
Total	17,974	41,598
Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash equivalents	0	0
Total	125,596	40,904
Level 2 | US government
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	11,502
Corporate bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	92,308	40,904
Corporate bonds | Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0	0
Corporate bonds | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	92,308	40,904
Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	21,786
Commercial paper | Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	0
Commercial paper | Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities	$ 21,786

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Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Dec. 31, 2010	Sep. 30, 2014	Dec. 31, 2012	Dec. 31, 2011
Statement Of Stockholders Equity [Abstract]
Issuance of common stock, per share	$ 0.0001	$ 122.50	$ 16.00	$ 3.75

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	30,117,819	28,991,289
Common stock, shares outstanding	30,117,819	28,991,289

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Assets Measured at Fair Value on Recurring Basis

Following are the major categories of assets measured at fair value on a recurring basis as of September 30, 2014, and December 31, 2013, 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):

September 30, 2014	Level 1		Level 2		Level 3		Total
Cash equivalents	$	17,974	$	—	$	—	$	17,974
Marketable securities - corporate bonds		—		92,308		—		92,308
Marketable securities - US government				11,502				11,502
Marketable securities - commercial paper		—		21,786		—		21,786
	$	17,974	$	125,596	$	—	$	143,570
December 31, 2013	Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,598	$	—	$	—	$	41,598
Marketable securities - corporate bonds		—		40,904		—		40,904
	$	41,598	$	40,904	$	—	$	82,502

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 03, 2014
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	PBYI
Entity Registrant Name	PUMA BIOTECHNOLOGY, INC.
Entity Central Index Key	0001401667
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		30,148,039

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Prepaid Expenses and Other (Tables)

9 Months Ended

Sep. 30, 2014

Banking And Thrift [Abstract]

Components of Prepaid Expenses and Other

Prepaid expenses and other consisted of the following (in thousands):

	September 30,		December 31,
	2014		2013
Short-term:
CRO services	$	1,584	$	863
Other clinical development		2,463		1,089
Insurance		228		554
Other		202		129
		4,477		2,635
Long-term:
CRO services		5,302		1,509
Other clinical development		3,318		3,359
Insurance		159		142
Other		52		70
		8,831		5,080
Totals	$	13,308	$	7,715

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended		48 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014
Operating expenses:
General and administrative	$ 3,867	$ 2,263	$ 11,296	$ 6,804	$ 55,235
Research and development	32,092	12,068	83,387	32,040	178,895
Totals	35,959	14,331	94,683	38,844	234,130
Loss from operations	(35,959)	(14,331)	(94,683)	(38,844)	(234,130)
Other income (expenses):
Interest income	111	9	223	128	497
Other income (expense)	4	39	(22)	3	(100)
Totals	115	48	201	131	397
Net loss	(35,844)	(14,283)	(94,482)	(38,713)	(233,733)
Net loss applicable to common stock	$ (35,844)	$ (14,283)	$ (94,482)	$ (38,713)	$ (233,733)
Net loss per common share—basic and diluted	$ (1.19)	$ (0.50)	$ (3.16)	$ (1.35)
Weighted-average common shares outstanding—basic and diluted	30,117,819	28,682,055	29,936,254	28,678,439

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Property and Equipment

9 Months Ended

Sep. 30, 2014

Property Plant And Equipment [Abstract]

Property and Equipment

Note 4—Property and Equipment:

Property and equipment consisted of the following (in thousands):

	September 30,			December 31,
	2014			2013
Leasehold improvements	$	1,024		$	914
Computer equipment		1,189			874
Telephone equipment		86			82
Furniture and fixtures		748			513
		3,047			2,383
Less: accumulated depreciation and amortization		(1,137	)		(699	)
Totals	$	1,910		$	1,684

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Prepaid Expenses and Other

9 Months Ended

Sep. 30, 2014

Banking And Thrift [Abstract]

Prepaid Expenses and Other

Note 3—Prepaid Expenses and Other:

Prepaid expenses and other consisted of the following (in thousands):

	September 30,		December 31,
	2014		2013
Short-term:
CRO services	$	1,584	$	863
Other clinical development		2,463		1,089
Insurance		228		554
Other		202		129
		4,477		2,635
Long-term:
CRO services		5,302		1,509
Other clinical development		3,318		3,359
Insurance		159		142
Other		52		70
		8,831		5,080
Totals	$	13,308	$	7,715

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Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Significant Accounting Policies [Line Items]
Cash and cash equivalents in excess of insured limits	$ 29,300,000		$ 29,300,000
License Agreement, number of days to review the invoice and supporting documentation			60 days
Costs of excess cap billed to the licensor		3,400,000		13,100,000
Reduction in expense related to the excess cap costs	$ 0		$ 0
Performance share expense recognition period			3 years
Stock option
Significant Accounting Policies [Line Items]
Anti-dilutive securities excluded from the calculation of diluted earnings per share	3,778,307	2,373,309	3,778,307	2,373,309
Performance Shares
Significant Accounting Policies [Line Items]
Anti-dilutive securities excluded from the calculation of diluted earnings per share	28,411		28,411
Warrants
Significant Accounting Policies [Line Items]
Anti-dilutive securities excluded from the calculation of diluted earnings per share	2,116,250	2,116,250	2,116,250	2,116,250
Maximum
Significant Accounting Policies [Line Items]
Cash equivalents, original maturity			3 months
Property and equipment, useful lives			5 years
Minimum
Significant Accounting Policies [Line Items]
Property and equipment, useful lives			3 years

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2014

Property Plant And Equipment [Abstract]

Property and Equipment

Property and equipment consisted of the following (in thousands):

	September 30,			December 31,
	2014			2013
Leasehold improvements	$	1,024		$	914
Computer equipment		1,189			874
Telephone equipment		86			82
Furniture and fixtures		748			513
		3,047			2,383
Less: accumulated depreciation and amortization		(1,137	)		(699	)
Totals	$	1,910		$	1,684

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 7—Commitments and Contingencies:

In July 2014, the Company signed an amendment to the license agreement with the Licensor.  The amendment to the license agreement provides that the Company will now be solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  The costs were previously the responsibility of the Licensor.  

In addition, under the amended agreement, annual royalties to be paid on net sales of licensed products were reduced from a tiered royalty rate structure ranging between 10 to 20 percent to a fixed rate in the low to mid teens and the Licensor and the Company have agreed to continue to cooperate to effect the transfer to the Company of certain records, regulatory filings, materials and inventory controlled by the Licensor as promptly as reasonably practicable.

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Accrued Expenses

9 Months Ended

Sep. 30, 2014

Payables And Accruals [Abstract]

Accrued Expenses

Note 5—Accrued Expenses:

Accrued expenses consisted of the following (in thousands):

	September 30,		December 31,
	2014		2013
Accrued CRO/licensor services	$	3,838	$	4,801
Accrued other clinical development		3,712		2,369
Accrued legal fees		250		84
Accrued compensation		2,975		1,066
Other		136		259
	$	10,911	$	8,579

Accrued CRO/licensor services represent the Company’s estimate of such costs as of September 30, 2014, and will be adjusted in the period the actual costs become known. Accrued compensation includes estimated bonus and earned but unused vacation for full-time employees. When actual performance bonuses are paid out to employees on the employee’s anniversary of hire, the bonus expense will be adjusted to reflect the actual expense for the year. Additionally, vacation is accrued at the rate the employee earns vacation and reduced as vacation is used by the employee.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Stockholders' Equity

Note 6—Stockholders’ Equity:

Common Stock:

On February 14, 2014, the Company completed an underwritten public offering of 1,126,530 shares of the Company’s common stock (including an additional 146,938 shares of Company common stock issued and sold pursuant to the underwriters’ option to purchase additional shares), par value $0.0001 per share, at a price of $122.50 per share, less the underwriting discount. The net proceeds received by the Company were approximately $129.4 million after deducting the underwriting discount and offering expenses payable by the Company.

Stock-Based Compensation:

The Company’s 2011 Incentive Award Plan, or the 2011 Plan, was adopted by the Board of Directors and stockholders of the Company on September 15, 2011.  An amendment to the 2011 Plan, or the 2011 Plan Amendment, was adopted by the Board of Directors on June 4, 2014, and the stockholders of the Company on June 10, 2014.    The 2011 Plan Amendment increased the number of shares reserved from 3,529,412 to 6,529,412.  Pursuant to the amended 2011 Plan (referred to hereafter as the 2011 Plan), the Company may grant incentive stock options and nonqualified stock options, as well as other forms of equity-based compensation such as performance shares. 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. 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. The performance shares are valued at market value less par value and vest over three years, with the number of shares to be issued determined by the market price on the vesting date. The maximum number of shares issuable pursuant to a performance share award is established on the grant date.

Employee stock-based compensation for the three and nine months ended September 30, 2014 and 2013, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Stock-based compensation:	(in thousands except share and per share data)
Options-
Research and development	$	8,726	$	1,333	$	17,690	$	3,072
General and administrative, or G&A		1,377		473		4,081		1,354
Performance shares - R&D		346	—			1,008	—
Total stock-based compensation expense	$	10,449	$	1,806	$	22,779	$	4,426
Impact on basic and diluted net loss per share	$	0.35	$	0.06	$	0.76	$	0.15
Weighted average shares (basic and diluted)		30,117,819		28,682,055		29,936,254		28,678,439

Performance Shares:

During January 2014, performance share awards were granted to certain employees that provide for a maximum of 28,411 common stock shares to be issued. These shares vest over three years on the first, second and third anniversary of December 15, 2013. On each vesting date, if the Company’s closing common stock price is equal to $102.46 per share, one-third of the 28,411 shares will be awarded. If the Company’s closing common stock price is either lesser or greater than $102.46 per share, the number of common stock shares to be issued will be adjusted to be less than one-third of the 28,411 shares. No shares will be awarded if the Company’s closing common stock price is less than $47.53 per share at the vesting dates. The performance shares are valued on the grant date and the fair value of the performance award is equal to the market price of the Company’s common stock on the grant date. The performance share expense is recognized based on the Company’s estimate of a range of probabilities that the Company’s closing common stock price will be lower or higher than $102.46 on the vesting dates. Based on the range of probabilities, the expense is calculated and recognized over the three-year vesting period.

Stock Options:

The fair value of options granted to 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 nine months ended September 30, 2014 and 2013:

	2014			2013
Dividend yield		0.0	%		0.0	%
Expected volatility		81.8	%		85.4	%
Risk-free interest rate		1.8	%		1.3	%
Expected life in years		5.85			5.85

Activity with respect to options granted under the 2011 Plan is summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value                       (in thousands)
Outstanding at December 31, 2013		2,604,224		$	23.75
Granted during 2014		1,211,583		$	124.78
Forfeited during 2014		(37,500	)	$	58.01
Exercised during 2014		—		$	—
Outstanding at September 30, 2014		3,778,307		$	55.12		8.6	$	699,381
Unvested at September 30, 2014		2,298,608		$	82.55		8.3	$	364,868
Exercisable at September 30, 2014		1,479,699		$	12.50		7.8	$	334,513

At September 30, 2014, total estimated unrecognized employee compensation cost related to non-vested stock options and performance shares granted prior to that date were approximately $109.1 million and $1.2 million, respectively. These unrecognized expenses are expected to be recognized over a weighted-average period of 2.5 years for stock options and 1.5 years for performance shares. The weighted-average grant date fair value of options granted during the nine months ended September 30, 2014 and 2013, were $86.83 per share and $25.95 per share, respectively.

				Weighted
				Average
				Grant-Date
Stock options	Shares			Fair Value
Nonvested shares at December 31, 2013		1,838,633		$	20.18
Granted		1,211,583			86.83
Vested/Issued		(714,108	)		12.52
Forfeited		(37,500	)		40.43
Nonvested shares at September 30, 2014		2,298,608		$	57.45

			Weighted
			Average
			Grant-Date
Performance shares	Shares		Fair Value
Nonvested shares at December 31, 2013		—	$	—
Granted		28,411		102.46
Vested/Issued		—		—
Forfeited		—		—
Nonvested shares at September 30, 2014		28,411	$	102.46

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates:

The preparation of 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 expenses for the period presented. Accordingly, actual results could differ from those estimates. Significant estimates include the cost of services provided by consultants who manage clinical trials and conduct research and clinical trials on behalf of the Company that are billed on a delayed basis. As the actual costs become known, the Company adjusts its estimated cost in that period. The value of stock-based compensation includes estimates based on future events, which are difficult to predict. It is at least reasonably possible that a change in the estimates will occur in the near term.

Principles of Consolidation

Principles of Consolidation:

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Licensor Receivable

Licensor Receivable:

Licensor receivable represents the remaining 2013 and prior external “out of pocket” clinical trial costs in excess of an agreed upon “cap” for clinical trials that were ongoing at the time the licensing agreement with the Licensor was reached. In July 2014, the license agreement was amended to make the Company solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013, and to fix the future royalty rate that must be paid to the Licensor upon commercialization in the low to mid teens. The Company has not established a reserve against this receivable as it is deemed to be fully collectible.

Marketable Securities

Marketable 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, if material, reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is determined to be other than temporary results in a revaluation of its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. 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.

Assets Measured at Fair Value on a Recurring Basis

Assets Measured at Fair Value on a Recurring Basis:

Accounting Standards Codification, or ASC 820, Fair Value Measurement, provides a single definition of fair value and a common framework for measuring fair value as well as new 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 September 30, 2014, and December 31, 2013, 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):

September 30, 2014	Level 1		Level 2		Level 3		Total
Cash equivalents	$	17,974	$	—	$	—	$	17,974
Marketable securities - corporate bonds		—		92,308		—		92,308
Marketable securities - US government				11,502				11,502
Marketable securities - commercial paper		—		21,786		—		21,786
	$	17,974	$	125,596	$	—	$	143,570
December 31, 2013	Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,598	$	—	$	—	$	41,598
Marketable securities - corporate bonds		—		40,904		—		40,904
	$	41,598	$	40,904	$	—	$	82,502

The Company’s investments in short-term investment securities are exposed to price fluctuations. The fair value measurements for short-term investment securities are based upon the quoted price in active markets multiplied by the number of securities owned, exclusive of any transaction costs and without any adjustments to reflect discounts that may be applied to selling a large block of securities at one time.

Concentration of Risk

Concentration of Risk:

Financial instruments, which potentially subject the Company to concentrations of credit risk, principally consist of cash and cash equivalents. The Company’s cash and cash equivalents in excess of the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insured limits at September 30, 2014, were approximately $29.3 million. The Company does not believe it is exposed to any significant credit risk.

Property and Equipment

Property and Equipment:

Property and equipment are recorded at cost and depreciated over estimated useful lives ranging from three to five years using the straight-line method. Leasehold improvements are recorded at cost and amortized over the shorter of their useful lives or the term of the lease by use of the straight-line method. Maintenance and repair costs are charged to operations as incurred.

The Company assesses the impairment of long-lived assets, primarily property and equipment, whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value, as measured by the anticipated undiscounted net cash flows of the asset. Should impairment exist, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through September 30, 2014.

Research and Development Expenses

Research and Development Expenses:

Research and development, or R&D, expenses are charged to operations as incurred. The major components of R&D 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, or 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 cost 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. The objective of the Company’s accrual policy is to match the recording of expenses in the condensed consolidated financial statements to the actual services received and efforts expended. 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 condensed 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.

Research and Development Reimbursement

Research and Development Reimbursement:

The license agreement set a “cap” on the amount of external expenses the Company would incur, beginning January 1, 2012, in completing the clinical trials transferred from the Licensor to the Company. The license agreement was amended in July 2014 which made the Company solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  In addition, as part of the amended license agreement, the Company will pay the Licensor a fixed royalty rate in the low to mid teens upon commercialization of licensed products. The license agreement originally stipulated that the Licensor would be responsible for all external expenses associated with the transferred clinical trials and that the Company would invoice for such costs on a quarterly basis. The Licensor had 60 days to review the invoice and supporting documentation. All amounts reimbursed from the licensor represent charges for services provided by third parties and not the Company. Accordingly, the Company has elected to treat the reimbursed costs as “pass-through” expenses billable to the Licensor and as an offset to R&D expenses. R&D expenses are recorded net of any excess cap costs billed to the Licensor. The Company recognized approximately $3.4 million and $13.1 million of excess cap costs during the three months and nine months ended September 30, 2013, respectively. Pursuant to the amendment to the original license agreement, no reduction in the expenses related to the licensor legacy clinical trials that were in excess of a cap on such expenses set forth in the license agreement was recorded in the three and nine months ended September 30, 2014.  

Stock-Based Compensation

Stock-Based Compensation:

Stock option awards:

ASC 718, Compensation-Stock Compensation, or ASC 718, requires the fair value of all share-based payments to employees, including grants of stock options, to be recognized in the statement of operations over the requisite service period. Under ASC 718, employee option grants are generally valued at the date of grant, or 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 for companies with a short period of publicly traded stock history, the Company’s estimate of expected volatility is based on the average expected volatilities of a sampling of five companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage. 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. ASC 718 does not allow companies to account for option forfeitures as they occur; instead, estimated option forfeitures must be calculated when the option is granted to reduce the option expense to be recognized over the life of the award and updated upon receipt of further information as to the amount of options expected to be forfeited. Due to its limited history, the Company uses the simplified method to determine the expected life of the option grants.

Performance shares:

The performance shares are valued on the grant date and the fair value of the performance award is equal to the market price of the Company’s common stock on the grant date. The performance share expense is recognized based on the Company’s estimate of a range of probabilities that the Company’s closing common stock price will be lower or higher than the Company’s common stock price on the grant date on the vesting dates. Based on the range of probabilities, the expense is calculated and recognized over the three-year vesting period.

Net Loss per Common Share

Net Loss per Common Share:

Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the periods presented, as required by ASC 260, Earnings per Share. Diluted earnings per common share are the same as basic earnings per share because the assumed exercise of the Company’s outstanding options are anti-dilutive. For the three and nine months ended September 30, 2014, potentially dilutive securities excluded from the calculations were 3,778,307 shares issuable upon exercise of options, 28,411 performance shares issuable upon attainment of stock price objectives over the vesting period of the performance share awards and 2,116,250 shares issuable upon exercise of an outstanding warrant. For the three and nine months ended September 30, 2013, potentially dilutive securities excluded from the earnings per common share calculation were 2,373,309 shares issuable upon exercise of options and 2,116,250 shares issuable upon exercise of an outstanding warrant.

Deferred Rent

Deferred Rent:

The Company has entered into operating lease agreements for its corporate offices in Los Angeles and South San Francisco that contain provisions for future rent increases, leasehold improvement allowances and rent abatements. The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between the rent expense recorded and the amount paid is credited or charged to deferred rent, which is reflected as a separate line item in the accompanying condensed consolidated balance sheets. Additionally, the Company recorded as deferred rent the cost of the leasehold improvements paid by the landlord, which is amortized on a straight-line basis over the term of the lease.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09 Revenue from Contracts with Customers, or ASU No. 2014-09, which will supersede nearly all existing revenue recognition guidance under GAAP. ASU No. 2014-09 provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for the Company in the first quarter of 2018. The Company is a development stage entity and will evaluate the effects of this update on its consolidated financial statements when it generates revenues.

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities, or ASU No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as development stage entities (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and stockholder equity.  For public entities, these amendments begin to be effective for periods after December 31, 2014.  Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.  The Company will adopt this standard in future presentations.  The financial impact on the Company is expected to be negligible.

In August 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-15 Presentation of Financial Statements – Going Concern, or ASU No. 2014-15, which provides guidance on how management will evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued.    ASU No. 2014-15 will become effective for the Company in the fourth quarter of 2016, although early adoption is allowed. The Company is currently evaluating this guidance and expects the financial impact on the Company to be negligible.

Reclassifications

Reclassifications:

Certain amounts for 2013 have been reclassified to conform to the current year’s presentation.

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Commitments and Contingencies - Additional Information (Detail)	1 Months Ended
	Jul. 31, 2014
Minimum
Loss Contingencies [Line Items]
Percentage of incremental annual royalties	10.00%
Maximum
Loss Contingencies [Line Items]
Percentage of incremental annual royalties	20.00%

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Recognized Expense of Share Based Compensation

Employee stock-based compensation for the three and nine months ended September 30, 2014 and 2013, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Stock-based compensation:	(in thousands except share and per share data)
Options-
Research and development	$	8,726	$	1,333	$	17,690	$	3,072
General and administrative, or G&A		1,377		473		4,081		1,354
Performance shares - R&D		346	—			1,008	—
Total stock-based compensation expense	$	10,449	$	1,806	$	22,779	$	4,426
Impact on basic and diluted net loss per share	$	0.35	$	0.06	$	0.76	$	0.15
Weighted average shares (basic and diluted)		30,117,819		28,682,055		29,936,254		28,678,439

Fair Value Options Weighted-Average Assumptions

The fair value of options granted to 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 nine months ended September 30, 2014 and 2013:

	2014			2013
Dividend yield		0.0	%		0.0	%
Expected volatility		81.8	%		85.4	%
Risk-free interest rate		1.8	%		1.3	%
Expected life in years		5.85			5.85

Activity with Respect to Options Granted

Activity with respect to options granted under the 2011 Plan is summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value                       (in thousands)
Outstanding at December 31, 2013		2,604,224		$	23.75
Granted during 2014		1,211,583		$	124.78
Forfeited during 2014		(37,500	)	$	58.01
Exercised during 2014		—		$	—
Outstanding at September 30, 2014		3,778,307		$	55.12		8.6	$	699,381
Unvested at September 30, 2014		2,298,608		$	82.55		8.3	$	364,868
Exercisable at September 30, 2014		1,479,699		$	12.50		7.8	$	334,513

Stock Options

				Weighted
				Average
				Grant-Date
Stock options	Shares			Fair Value
Nonvested shares at December 31, 2013		1,838,633		$	20.18
Granted		1,211,583			86.83
Vested/Issued		(714,108	)		12.52
Forfeited		(37,500	)		40.43
Nonvested shares at September 30, 2014		2,298,608		$	57.45

			Weighted
			Average
			Grant-Date
Performance shares	Shares		Fair Value
Nonvested shares at December 31, 2013		—	$	—
Granted		28,411		102.46
Vested/Issued		—		—
Forfeited		—		—
Nonvested shares at September 30, 2014		28,411	$	102.46

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Property and Equipment (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Property Plant And Equipment [Line Items]
Leasehold improvements	$ 1,024	$ 914
Furniture and fixtures	748	513
Property, Plant and Equipment, Gross	3,047	2,383
Less: accumulated depreciation and amortization	(1,137)	(699)
Totals	1,910	1,684
Computer Equipment
Property Plant And Equipment [Line Items]
Property and equipment other, gross	1,189	874
Telephone Equipment
Property Plant And Equipment [Line Items]
Property and equipment other, gross	$ 86	$ 82

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Condensed Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		48 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (35,844)	$ (14,283)	$ (94,482)	$ (38,713)	$ (233,733)
Other comprehensive income (loss):
Other comprehensive income (loss) Unrealized gain (loss) on available-for-sale securities	(41)	66	(121)	(8)	(118)
Comprehensive loss	$ (35,885)	$ (14,217)	$ (94,603)	$ (38,721)	$ (233,851)

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

Note 2—Significant Accounting Policies:

The significant accounting policies followed in the preparation of these condensed consolidated financial statements are as follows:

Use of Estimates:

The preparation of 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 expenses for the period presented. Accordingly, actual results could differ from those estimates. Significant estimates include the cost of services provided by consultants who manage clinical trials and conduct research and clinical trials on behalf of the Company that are billed on a delayed basis. As the actual costs become known, the Company adjusts its estimated cost in that period. The value of stock-based compensation includes estimates based on future events, which are difficult to predict. It is at least reasonably possible that a change in the estimates will occur in the near term.

Principles of Consolidation:

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Cash and Cash Equivalents:

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

Licensor Receivable:

Licensor receivable represents the remaining 2013 and prior external “out of pocket” clinical trial costs in excess of an agreed upon “cap” for clinical trials that were ongoing at the time the licensing agreement with the Licensor was reached. In July 2014, the license agreement was amended to make the Company solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013, and to fix the future royalty rate that must be paid to the Licensor upon commercialization in the low to mid teens. The Company has not established a reserve against this receivable as it is deemed to be fully collectible.

Marketable 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, if material, reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis. A decline in the market value of any available-for-sale security below cost that is determined to be other than temporary results in a revaluation of its carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. 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.

Assets Measured at Fair Value on a Recurring Basis:

Accounting Standards Codification, or ASC 820, Fair Value Measurement, provides a single definition of fair value and a common framework for measuring fair value as well as new 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 September 30, 2014, and December 31, 2013, 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):

September 30, 2014	Level 1		Level 2		Level 3		Total
Cash equivalents	$	17,974	$	—	$	—	$	17,974
Marketable securities - corporate bonds		—		92,308		—		92,308
Marketable securities - US government				11,502				11,502
Marketable securities - commercial paper		—		21,786		—		21,786
	$	17,974	$	125,596	$	—	$	143,570
December 31, 2013	Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,598	$	—	$	—	$	41,598
Marketable securities - corporate bonds		—		40,904		—		40,904
	$	41,598	$	40,904	$	—	$	82,502

The Company’s investments in short-term investment securities are exposed to price fluctuations. The fair value measurements for short-term investment securities are based upon the quoted price in active markets multiplied by the number of securities owned, exclusive of any transaction costs and without any adjustments to reflect discounts that may be applied to selling a large block of securities at one time.

Concentration of Risk:

Financial instruments, which potentially subject the Company to concentrations of credit risk, principally consist of cash and cash equivalents. The Company’s cash and cash equivalents in excess of the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation insured limits at September 30, 2014, were approximately $29.3 million. The Company does not believe it is exposed to any significant credit risk.

Property and Equipment:

Property and equipment are recorded at cost and depreciated over estimated useful lives ranging from three to five years using the straight-line method. Leasehold improvements are recorded at cost and amortized over the shorter of their useful lives or the term of the lease by use of the straight-line method. Maintenance and repair costs are charged to operations as incurred.

The Company assesses the impairment of long-lived assets, primarily property and equipment, whenever events or changes in business circumstances indicate that carrying amounts of the assets may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the asset’s carrying value with its fair value, as measured by the anticipated undiscounted net cash flows of the asset. Should impairment exist, the asset is written down to its estimated fair value. The Company has not recognized any impairment losses through September 30, 2014.

Research and Development Expenses:

Research and development, or R&D, expenses are charged to operations as incurred. The major components of R&D 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, or 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 cost 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. The objective of the Company’s accrual policy is to match the recording of expenses in the condensed consolidated financial statements to the actual services received and efforts expended. 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 condensed 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.

Research and Development Reimbursement:

The license agreement set a “cap” on the amount of external expenses the Company would incur, beginning January 1, 2012, in completing the clinical trials transferred from the Licensor to the Company. The license agreement was amended in July 2014 which made the Company solely responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after December 31, 2013.  In addition, as part of the amended license agreement, the Company will pay the Licensor a fixed royalty rate in the low to mid teens upon commercialization of licensed products. The license agreement originally stipulated that the Licensor would be responsible for all external expenses associated with the transferred clinical trials and that the Company would invoice for such costs on a quarterly basis. The Licensor had 60 days to review the invoice and supporting documentation. All amounts reimbursed from the licensor represent charges for services provided by third parties and not the Company. Accordingly, the Company has elected to treat the reimbursed costs as “pass-through” expenses billable to the Licensor and as an offset to R&D expenses. R&D expenses are recorded net of any excess cap costs billed to the Licensor. The Company recognized approximately $3.4 million and $13.1 million of excess cap costs during the three months and nine months ended September 30, 2013, respectively. Pursuant to the amendment to the original license agreement, no reduction in the expenses related to the licensor legacy clinical trials that were in excess of a cap on such expenses set forth in the license agreement was recorded in the three and nine months ended September 30, 2014.  

Stock-Based Compensation:

Stock option awards:

ASC 718, Compensation-Stock Compensation, or ASC 718, requires the fair value of all share-based payments to employees, including grants of stock options, to be recognized in the statement of operations over the requisite service period. Under ASC 718, employee option grants are generally valued at the date of grant, or 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 for companies with a short period of publicly traded stock history, the Company’s estimate of expected volatility is based on the average expected volatilities of a sampling of five companies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage. 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. ASC 718 does not allow companies to account for option forfeitures as they occur; instead, estimated option forfeitures must be calculated when the option is granted to reduce the option expense to be recognized over the life of the award and updated upon receipt of further information as to the amount of options expected to be forfeited. Due to its limited history, the Company uses the simplified method to determine the expected life of the option grants.

Performance shares:

The performance shares are valued on the grant date and the fair value of the performance award is equal to the market price of the Company’s common stock on the grant date. The performance share expense is recognized based on the Company’s estimate of a range of probabilities that the Company’s closing common stock price will be lower or higher than the Company’s common stock price on the grant date on the vesting dates. Based on the range of probabilities, the expense is calculated and recognized over the three-year vesting period.

Net Loss per Common Share:

Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the periods presented, as required by ASC 260, Earnings per Share. Diluted earnings per common share are the same as basic earnings per share because the assumed exercise of the Company’s outstanding options are anti-dilutive. For the three and nine months ended September 30, 2014, potentially dilutive securities excluded from the calculations were 3,778,307 shares issuable upon exercise of options, 28,411 performance shares issuable upon attainment of stock price objectives over the vesting period of the performance share awards and 2,116,250 shares issuable upon exercise of an outstanding warrant. For the three and nine months ended September 30, 2013, potentially dilutive securities excluded from the earnings per common share calculation were 2,373,309 shares issuable upon exercise of options and 2,116,250 shares issuable upon exercise of an outstanding warrant.

Deferred Rent:

The Company has entered into operating lease agreements for its corporate offices in Los Angeles and South San Francisco that contain provisions for future rent increases, leasehold improvement allowances and rent abatements. The Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease term. The difference between the rent expense recorded and the amount paid is credited or charged to deferred rent, which is reflected as a separate line item in the accompanying condensed consolidated balance sheets. Additionally, the Company recorded as deferred rent the cost of the leasehold improvements paid by the landlord, which is amortized on a straight-line basis over the term of the lease.

Recently Issued Accounting Pronouncements:

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09 Revenue from Contracts with Customers, or ASU No. 2014-09, which will supersede nearly all existing revenue recognition guidance under GAAP. ASU No. 2014-09 provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption and will become effective for the Company in the first quarter of 2018. The Company is a development stage entity and will evaluate the effects of this update on its consolidated financial statements when it generates revenues.

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities, or ASU No. 2014-10, which eliminated certain financial reporting requirements of companies previously identified as development stage entities (Topic 915). The amendments in this ASU simplify accounting guidance by removing all incremental financial reporting requirements for development stage entities. The amendments also reduce data maintenance and, for those entities subject to audit, audit costs by eliminating the requirement for development stage entities to present inception-to-date information in the statements of income, cash flows, and stockholder equity.  For public entities, these amendments begin to be effective for periods after December 31, 2014.  Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.  The Company will adopt this standard in future presentations.  The financial impact on the Company is expected to be negligible.

In August 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-15 Presentation of Financial Statements – Going Concern, or ASU No. 2014-15, which provides guidance on how management will evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued.    ASU No. 2014-15 will become effective for the Company in the fourth quarter of 2016, although early adoption is allowed. The Company is currently evaluating this guidance and expects the financial impact on the Company to be negligible.

Reclassifications:

Certain amounts for 2013 have been reclassified to conform to the current year’s presentation.

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Accrued Expenses (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Payables And Accruals [Abstract]
Accrued CRO/licensor services	$ 3,838	$ 4,801
Accrued other clinical development	3,712	2,369
Accrued legal fees	250	84
Accrued compensation	2,975	1,066
Other	136	259
Totals	$ 10,911	$ 8,579

XML

Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2014

Payables And Accruals [Abstract]

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	September 30,		December 31,
	2014		2013
Accrued CRO/licensor services	$	3,838	$	4,801
Accrued other clinical development		3,712		2,369
Accrued legal fees		250		84
Accrued compensation		2,975		1,066
Other		136		259
	$	10,911	$	8,579