The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed 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, 2011.

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., and all references to "Puma" refer to Puma Biotechnology, Inc., a privately-held Delaware corporation formed on September 15, 2010, prior to giving effect to the reverse merger transaction between the Company and Puma that closed on October 4, 2011. This transaction was accounted for as a reverse acquisition whereby 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 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 Puma, the historical operations of Puma, and our operations following the closing date of the reverse merger transaction.

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 advanced breast cancer patients and gastric cancer patients;

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

• PB357, which we believe can serve as a backup compound to PB272, and which we plan to evaluate for further development in 2012.

A large portion of our expenses to date have been related to our assuming clinical development of our lead product candidate, PB272 (neratinib (oral)), and the transition of the neratinib program from the licensor. During this transition period, as we built up our infrastructure and assumed responsibility for the neratinib program, there was a duplication of efforts that took place which resulted in higher than normal operating expenses. The transition has largely been completed and therefore the operating expenses incurred due to this transition, which was the major expense for the first quarter of 2012, will decrease significantly over subsequent quarters.

Additionally, our expenses to date have been related to hiring staff and the build out of our corporate infrastructure. As we proceed with clinical development of PB272 (neratinib (oral)), and as we further develop PB272 (neratinib (intravenous)), and PB357, our second and third product candidates, respectively, we expect our internal research and development expenses along with expenses relating to our third party contractors will increase.

To the extent we are successful in acquiring additional product candidates for our development pipeline, our need to finance research and development 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 private sales of our common stock.

Research and development, or R&D, expenses include costs associated with services provided by consultants who conduct clinical services on our behalf, contract organizations for manufacturing of clinical materials and

clinical trials. During the three months ended March 31, 2012, our R&D expenses consisted primarily of transition costs, as clinical trial responsibilities shifted to us and our outside clinical research organization, or CRO, salaries and related personnel costs, and fees paid to other consultants. We expense our R&D costs as they are incurred.

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.

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 three months ended March 31, 2012 from our accounting policies at December 31, 2011, as reported in our 2011 Annual Report as filed on Form 10-K.

Results of Operations

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

General and administrative expenses:

For the three months ended March 31, 2012, G&A expenses were approximately $1.2 million. G&A expenses for the three months ended March 31, 2011, were nominal as we had not commenced meaningful operations during that period. G&A expenses for the three months ended March 31, 2012, were as follows:

                General and administrative expenses
                Payroll and related costs             $   489,899
                Professional fees                         508,193
                Facility and equipment costs              146,521
                Employee stock-based compensation         (71,876 )
                Other                                     161,889

                                                      $ 1,234,626

G&A expenses for the three months ended March 31, 2012 consisted primarily of payroll and payroll-related costs of approximately $490,000, professional fees and expenses of approximately $508,000, and facility and equipment costs of approximately $147,000 Major expenses incurred in professional fees were legal fees for SEC filings, intellectual property review, contract review and general legal support. We expect to continue to incur significant legal fees in the coming periods. We expect the facility expense to remain at least at comparable levels to the three months ended March 31, 2012, for the next several months; however, we are currently looking for satellite office space in the San Francisco area. Employee stock-based compensation for the three months ended March 31, 2012 was approximately $77,000, offset by a reduction in the valuation of the outstanding anti-dilutive warrant held by our President and Chief Executive Officer of approximately $149,000, compared to $0 for the three months ended March 31, 2011. All other costs such as IT support, travel, recruiting and postage were approximately $162,000 for the three months ended March 31, 2012.

Research and development expenses:

For the three months ended March 31, 2012, R&D expenses were approximately $10.6 million compared to $0 for the three months ended March 31, 2011. R&D expenses for the three months ended March 31, 2012 were as follows:

             Research and development expenses
             Outside clinical development services      $  8,156,028
             Regulatory affairs and quality assurance      1,424,124
             Internal clinical development                   760,084
             Employee stock-based compensation               120,655
             Contract manufacturing                          107,491

                                                        $ 10,568,382

For the three months ended March 31, 2012, R&D expenses consisted primarily of outside clinical development costs of approximately $8.2 million relating to the transition of clinical trial responsibility to us from the licensor of our three drug candidates, and regulatory affairs and quality assurance expenses of $1.4 million, which includes a one-time cost of approximately $0.4 million related to the installation and configuration of software to aid in the creation, storage, and submission of documents to the FDA and other regulatory agencies. Outside clinical development costs are expected to decrease significantly in subsequent quarters as the transition has been completed and duplicate expenses incurred by us, our CRO, the licensor and other consultants in connection with the transition of clinical trial responsibility will be eliminated. Other R&D expenses include payroll and employee related expenses and expenses for travel and other consultant services. Employee stock based compensation for the three months ended March 31, 2012, was approximately $121,000. Contract manufacturing costs were approximately $107,000, and consist primarily of employee and employee related expenses and expenses for travel and consulting services.

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 revenues 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.

Interest income:

For the three months ended March 31, 2012, we recognized approximately $26,000 in interest income compared to $0 of interest income for the three months ended March 31, 2011. Based on market conditions, we placed our excess funds in money market accounts and "high yield" savings accounts.

Liquidity and Capital Resources

The following table summarizes our liquidity and capital resources as of
March 31, 2012 and is intended to supplement the more detailed discussion that
follows:



             Liquidity and capital resources      March 31, 2012
             Cash and cash equivalents         $         50,173,262
             Working capital                             41,228,082
             Stockholders' equity                        42,595,201

                                                Three months ended
                                                  March 31, 2012
             Cash provided by (used in):
             Operating activities              $         (2,784,242 )
             Investing activities                          (424,230 )
             Financing activities                                -

             Increase (decrease) in cash       $         (3,208,472 )

Operating Activities:

We reported a net loss of approximately $11.8 million and negative cash flows from operating activities of approximately $2.8 million for the three months ended March 31, 2012. Our net loss from Puma's date of inception, September 15, 2010, to March 31, 2012, amounted to approximately $22.1 million, while negative cash flows from operating activities amounted to approximately $4.6 million for the same period.

Net cash used in operating activities through March 31, 2012, includes a net loss of $11.8 million, reduced by approximately $9.0 million of adjustments to reconcile net loss to net cash used in operating activities. Adjustments include non-cash items related to expense from the issuance of stock options of approximately $198,000, adjustments to the warrant valuation of $149,000 and an allowance received from the landlord of approximately $236,000. Other items included in the adjustment of net loss in the operating activities were an increase in accounts payable and accrued expenses of approximately $8.9 million related to charges from transition activities billed to us as we take over clinical trial responsibilities and represents some duplication of effort as the licensor transitioned knowledge and responsibility to us, an increase in the accrual of deferred rent of approximately $68,000, and an increase in prepaid and other assets of approximately $257,000.

Investing Activities:

Net cash used in investing activities was approximately $424,000 for the three months ended March 31, 2012. Payments of approximately $187,000 for the purchase of computer equipment and systems and approximately $237,000 related to leasehold improvements were included in net cash used in investing activities.

Financing Activities:

We did not engage in any financing activities during the three months ended March 31, 2012.

Current and Future Financing Needs:

We have incurred negative cash flows from operations since we started our business, and we expect to continue incurring significant losses for the foreseeable future. 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 research and development efforts. We anticipate that our cash on hand, including our cash equivalents as of March 31, 2012, will be sufficient to enable us to meet our anticipated expenditures for at least the next 12 months. Given the current and desired pace of clinical development of our three product candidates, over the next 12 months we estimate that our research and development spending will be approximately $20 million to $25 million. We will need approximately $5 million to $6 million for general and administrative expenses over the next 12 months. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control.

Our continued operations will depend on whether we are able to raise additional funds through a strategic alliance with a third party concerning one or more of our product candidates, public or private sales of equity or debt and other sources of funds. Through March 31, 2012, a significant portion of our financing has been through private placements of our equity securities. 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 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. In addition, we can give no assurances that any additional capital raised will be sufficient to meet our needs. 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, delay or discontinue the development of one or more of our product candidates or forego attractive business opportunities, and our business, financial condition and results of operations would be materially harmed. In such an event, we will be required to undertake a thorough review of our programs, and the opportunities presented by such programs, and allocate our resources in the manner most prudent.

Off-Balance Sheet Arrangements

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

Contractual Obligations

As a smaller reporting company, we are not required to provide this information.