What happened

Shares of Puma Biotechnology (NASDAQ:PBYI) are up 28% at 3:20 p.m. EDT after the Food and Drug Administration (FDA) advisory committee voted 12-4 recommending that Puma's breast-cancer drug neratinib be approved.

So what

Puma Biotechnology is trying to get neratinib approved as an extended treatment after patients get surgery, followed by Roche's Herceptin and chemotherapy. The drug lowers the reoccurrence of breast cancer compared to placebo, but has side effects, including severe diarrhea in many patients.

The vote by the advisory committee of outside experts isn't binding -- the agency rejected drugs that have received positive recommendations in the past. But given there weren't any huge red flags in the documents from the FDA posted ahead of the meeting, and an overwhelming number of committee members voted for the drug, an approval seems likely.

Doctor talking to patient.

Image source: Getty Images.

Now what

Assuming the drug is approved, the big question now is how much Puma Biotechnology can make selling neratinib. There are quite a few patients who have taken Herceptin and chemotherapy after surgery, but doctors on the committee thought that it should be limited to patients who have taken the drug in the past two years.

Neratinib also appears to work better in patients whose tumors are positive for both HER2 and the estrogen receptor, so its use might be primarily in patients who fall in that category, reducing its potential market.

Complicating the issue further, Roche has shown that another one its drugs, Perjeta, in combination with Herceptin and chemotherapy, works better than Herceptin and chemotherapy alone. If the new triple combination becomes the standard of care, which seems likely, it's unclear how comfortable doctors will be using neratinib after the triple combination, even though the clinical trial tested it after Herceptin and chemotherapy alone.

Brian Orelli and The Motley Fool have no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.