What happened

Shares of Puma Biotechnology Inc. (PBYI -5.30%), a cancer-focused biotechnology company, are getting hammered after a disappointing third-quarter earnings report. The troubled stock has fallen 49.5% as of 1:01 p.m. EDT on Friday.

So what 

Breast cancer is one of the most common malignancies, which is why investors were expecting blockbuster sales after the FDA approved Nerlynx in July 2017. Nerlynx sales reached $52.6 million during the third quarter, which was just 3.5% higher than during the previous three months.

Sad man looking at a downward sloping chart.

Image source: Getty Images.

Recent Nerlynx sales suggest its place in the treatment paradigm isn't going to drive this drug into blockbuster territory. The drug is available for HER2+ patients who have already been treated with Herceptin, a drug generally used after surgery.

Nerlynx's addressable patient pool is large enough that Evaluate Pharma predicted sales would reach $1.25 billion in 2022. What analysts hadn't accounted for were risk-to-benefit questions the FDA's advisory committee raised during the drug's review process. During studies leading to its approval, 40% of trial patients experienced diarrhea severe enough to require hospitalization.

For patients who can handle the gastrointestinal discomfort, Nerlynx treatment carries a list price of more than $11,000 per month, which seems like a lot to put up with for a somewhat limited benefit. At a two-year follow-up observation, 94.2% of patients treated with Nerlynx were still disease-free compared to just 91.9% of the group given a placebo. Patients in the Nerlynx group were treated for a median of 11.6 months, which can be a huge expense for patients who have just been through surgery and Herceptin treatment.

Now what

The good news is that Puma Biotechnology probably won't need to tap investors for more capital. The company finished September with $128 million in cash, cash equivalents, and marketable securities after operations lost just $11.3 million during the quarter.