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Here's Why Puma Biotechnology Inc. Is Sinking Today

By Cory Renauer - May 10, 2018 at 1:06PM

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The Nerlynx launch might not be progressing as well as it seems on the surface.

What happened

Shares of Puma Biotechnology Inc. (PBYI -0.18%), a cancer-focused biotech, are sinking following a first-quarter earnings report issued after the bell yesterday. By all accounts, it was a solid quarter for the company's first commercial-stage product, but concerns for Nerlynx's future pushed the stock down 17.3% as of 11:27 a.m. EDT on Thursday.

So what 

Puma Biotechnology's first marketed product has inspired some analysts to predict peak annual sales in excess of $1 billion, but there's a catch: Nerlynx is intended as a treatment to stop breast cancer from recurring following treatment with Herceptin. Breast cancer affects enough people worldwide to drive sales that high, but Puma still needs to prove the side effects its drug is known to cause won't prevent real-world patients from remaining on treatment for long periods. With this in mind, a 23.7% discontinuation rate so far from patients receiving their treatment from specialty pharmacies was troubling.

Person drawing a downward sloping chart.

Image source: Getty Images.

Puma was quick to point out plenty of benign situations that end up recorded as discontinuations, such as switching sources. Also, the rate of patients who stop therapy due to side effects has only been around 12% since the drug launched last July.

Now what

Lofty estimates for Nerlynx also include an eventual approval in the EU, but a negative committee opinion nearly dashed those hopes earlier this year. Puma expects to hear about a reexamination of that opinion in June or July.

Investors hoping for data from the 600-patient NALA trial with Nerlynx as a third-line breast cancer treatment will have to wait a while longer. The trial completed enrollment last July, but the rate of disease progression among patients has been slower than historical data suggested when the company promised speedier results.

If Nerlynx is causing the slower disease progression rate, the stock could recover some of its recent losses. Investigators will unblind the data once a certain number of progression events occur, probably in the fourth quarter.

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