|ATHENEX, INC. filed this Form 10-Q on 05/09/2019|
Selling, general and administrative, (“SG&A”), expenses primarily consist of compensation, including salary, employee benefits and stock-based compensation expenses for sales and marketing personnel, and for administrative personnel that support our general operations such as executive management, legal counsel, financial accounting, information technology, and human resources personnel. SG&A expenses also include professional fees for legal, patent, consulting, auditing and tax services, as well as other direct and allocated expenses for rent and maintenance of facilities, development of the facility in Dunkirk, NY, insurance and other supplies used in the selling, marketing, general and administrative activities. SG&A expenses also include costs associated with our commercialization efforts for our proprietary drugs, such as market research, brand strategy and development work on market access, scientific publication, product distribution and patient support. Our expenses related to operating as a public company may increase when we are no longer able to rely on the “emerging growth company” exemption to certain disclosure and attestation requirements pursuant to the Jumpstart our Business Startups Act of 2012 (JOBS Act).
Results of Operations
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
The following table sets forth a summary of our condensed consolidated results of operations for the three months ended March 31, 2019 and 2018, together with the changes in those items in dollars and as a percentage. This information should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.
Our product sales increased significantly to $25.2 million for the three months ended March 31, 2019, from $12.6 million for the three months ended March 31, 2019. However, total revenue for the three months ended March 31, 2019 decreased by $12.5 million, or 33%, as compared to $37.8 million for the three months ended March 31, 2018. The decrease was primarily due to a decrease in licensing revenue of $25.0 million related to a milestone payment in the first quarter of 2018, together with a $0.6 million decrease in both medical device product sales and contract manufacturing revenue. This decrease in total revenue was offset by the significant increase in product sales, including a $6.0 million increase in specialty product sales, a $5.0 million increase in 503B product sales, driven significantly by Vasopressin, and a $2.1 million increase in API product sales.
Cost of Sales
Cost of sales for the three months ended March 31, 2019 totaled $19.9 million, an increase of $8.6 million, or 76%, as compared to $11.3 million for the three months ended March 31, 2018. This was primarily due to the increase of $6.2 million in cost of sales from the sale of specialty products and $2.4 million in cost of sales from 503B and API products.