What happened

Shares of the cancer specialist Puma Biotechnology, Inc. (NASDAQ:PBYI) are getting blasted in after-hours trading today following the release of the company's third-quarter earnings report. Specifically, the stock dropped by more than 37% in extended trading today. 

What's causing investors to hit the exits? While Puma's breast cancer drug Nerlynx raked in $52.6 million for the three-month period, the drug's commercial momentum appears to be slowing. Quarter over quarter, Nerlynx's sales only rose by 3.5%, after all. 

Man standing in front of a downward-trending graph with an expression of shock on his face.

Image Source: Getty Images.

So what

Wall Street has been growing increasingly weary of Nerlynx's lack of commercial momentum, and these latest numbers appear to justify that reaction. While most cancer drugs -- especially those indicated for a form of breast cancer -- generally show exceptionally strong sales trajectories for several years after launch, Nerlynx's sales are clearly starting to flatten out only a little over a year after the drug's debut. 

Now what

Is this 37% drop in Puma's share price justified? The good news for shareholders is that this sell-off is probably way overdone. Nerlynx's sales, after all, are widely expected to pick up as the drug's international footprint expands. In fact, Puma's shares were only trading at a forward-looking (2019) price-to-sales ratio of 4.3 prior to this downturn. That's a rock-bottom valuation for a cancer drug company. 

The take-home point is that Wall Street seems to be overreacting to Puma's third-quarter report. Bargain hunters, therefore, might want to consider picking up some shares of this promising biotech, especially if this marked sell-off holds into tomorrow's session.  

 

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.