Puma Biotechnology Stock Is Flying; Time to Buy?

Is now the time to buy Puma Biotechnology?

Jul 23, 2014 at 3:04PM

Puma Biotechnology (NYSE:PBYI) is up huge after reporting positive phase 3 data for its breast cancer drug neratinib. The primary endpoint of the trial was Disease Free Survival (DFS), the results of the trial indicated a 33% increase in DFS versus the placebo group. The trial (ExteNET Trial) was a double blind, phase 3 placebo controlled study after adjuvant treatment with trastuzamab (Herceptin) in women with early stage HER-2 positive breast cancer.

What this means for investors
Neratinib now looks like it has a high probability of approval, and the company plans to file for FDA regulatory approval in the first half of 2015. Neratinib has been the main compound Puma has been focused on developing, with phase 2 and 3 trials testing the drug in a variety of cancers, including breast, NSCLC, and solid tumors.

Puma Biotechnology also announced an amendment to its licensing agreement with Pfizer, reducing the royalty rate it will be required to pay on Neratinib. The royalty rate is revised from its original 10-20% sales of Neratinib to a fixed rate in the low to mid teens. This royalty decrease is projected to increase research and development expenses by $30 million, with a significant amount of this occurring in 2014, decreasing with time as the trial is completed. This looks like a positive for Puma shareholders, as this change dramatically increases the potential value of the drug.

As if all this news weren't good enough, analysts at Citi are arguing that the company could be a takeout target. Nonetheless, there are major risks to investing in Puma after this large run up though. Firstly, despite the positive trial data, there is still a chance that neratinib will not be approved which could be a huge negative catalyst. Also even if it is approved, there is no guarantee that commercialization will succeed --  marketing and distribution execution is still a major unknown, particularly for a small, clinical-stage biotech.

My Foolish take
Ultimately Puma showed some great data for neratinib, and there could be additional upside from a takeout. However, there are still major risks and given the huge run-up the shares look like they have a lot of expectation baked in. If you believe that neratinib will be approved and expect the company to do a good job of commercialization, Puma could be a good long term investment despite the short-term volatility.

Leaked: This coming blockbuster will make even Puma jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool’s new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Hunter Diamond has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers