Despite wielding a drug with blockbuster potential, Puma Biotechnology (NASDAQ:PBYI) was powerless to stop its shares from losing nearly 80% in value last year. Wall Street analysts worried about the slow pace of sales growth for Nerlynx, the company's only drug asset, but those concerns may be subsiding after the company had a strong showing for the fourth quarter. Indeed, the stock has gained over 90% since the beginning of 2019.

While this year's gains doesn't come close to erasing the horrendous 2018 shareholders experienced (the stock is still 60% lower than it was at the start of 2018), investors might be encouraged by the business's trajectory. At least six different milestones are expected to occur in the year ahead, and sales growth is picking up, so it might be worthwhile to keep an eye on Puma Biotechnology. Here are three takeaways from the company's fourth quarter and full-year earnings.

Check out the latest earnings call transcript for Puma Biotechnology.

A scientist in a lab

Image Source: Getty Images

1. Nerlynx puts the business on the path to profitability

Nerlynx is currently given to individuals with HER2+ breast cancer who have taken the drug Herceptin. Clinical studies have demonstrated that taking Nerlynx for one year gives individuals a better chance of remaining disease-free at the five-year mark. If the drug is successfully developed across a range of HER2+ and HER2-mutated breast cancer indications as both a standalone treatment and part of a combination therapy, analysts estimate its peak annual sales could hit $1.2 billion.

Puma Biotechnology's lone drug asset is far from delivering that level of revenue today: It achieved sales of just $200 million in 2018. But Nerlynx puts the business on the path to reach an important milestone long before it becomes a true blockbuster: profitable operations. 

The company reported a Q4 operating loss of $18.6 million, which was a marked improvement from the year-ago operating loss of $63.6 million. In fact, the business reported operating cash flow of $7.1 million in the Q4 2018. In combination with the fact it began 2019 with over $165 million in cash, cash equivalents, and marketable securities, investors can rest assured Puma Biotechnology is on solid financial footing.

2. Global expansion is underway

Puma Biotechnology announced a wide range of partnerships last year to commercialize Nerlynx globally. The first regulatory approvals outside of the U.S. and Europe are expected to be handed down this year. The commercial collaborations should provide a low-cost way to maximize the drug franchise's revenue and earnings potential, with the company eligible to receive upfront and milestone payments of varying significance, and double-digit percentage royalties on sales in each region.

Here's a look at the global expansion timeline: 

Countries/Region

Partner

Regulatory Approval Expected

Puma Eligible to Receive...

Australia, New Zealand, Southeast Asia

Specialised Therapeutics

First half 2019

$4.5 million in upfront and milestone payments, double-digit royalties.

Israel

Medison

First half 2019

Undisclosed upfront and milestone payments, double-digit royalties.

Canada

Knight Therapeutics

Second half 2019

$7.2 million in upfront and milestone payments, double-digit royalties.

Latin American and South America

Pint Pharma

Second half 2019 (Mexico)

Undisclosed upfront payment, $34.5 million in milestone payments, and double-digit royalties.

China, Taiwan, Hong Kong

CANbridge Pharmaceutical

First half 2020

$40 million upfront, $40 million in commercial milestones, and double-digit royalties.

Source: Investor presentation.

Puma Biotechnology's partnership with Pint Pharma also spans Argentina, Chile, Ecuador, Peru, Colombia, and Brazil, and regulatory approvals in those jurisdictions are expected between the first half of 2020 and the same period of 2021.

Assuming manufacturing capacity is in place for each partner, Puma could begin generating royalty revenue shortly after regulatory approvals are granted. That may not result in significant revenue in the near term, but any cost-free royalty revenue will help shore up the company's financial flexibility with little extra effort.

A clipboard and various glassware from a lab.

Image source: Getty Images.

3. New clinical data on the way in 2019

Licensing Nerlynx to global partners will allow management to focus on development in its core markets: U.S. and Europe. Bandwidth will be a valuable commodity for Puma Biotechnology in 2019.

The company listed six unique milestones it expects to achieve in the year ahead in its Q4 earnings press release. It will start off by meeting with U.S. and European regulators to discuss recent data from a phase 3 trial evaluating Nerlynx as a third-line treatment for individuals with metastatic HER2-mutant breast cancer. The company could submit applications for expanded marketing approval of the drug following the meetings.

Puma is also expecting data readouts and development milestones for earlier-stage trials of Nerlynx in the first half of 2019. Results will be important considering eventual marketing approvals in additional indications are necessary for the drug to meet analyst projections for peak annual sales of $1.2 billion.

A promising one-trick pony

Investors are smart to be cautious about any biotech with just one drug asset. However, the business development milestones and operating results from 2018 suggest Puma Biotechnology is on a promising path. That alone should put the company on your radar, but its stock valuation metrics might cause some investors take further action.

Shares of Puma Biotechnology trade at just 6 times sales, which is relatively cheap for a commercial-stage pharma with plenty of potential ahead. What's more, the company has over 10% of its market capitalization in cash, cash equivalents, and marketable securities. If the business continues on its promising trajectory and reaches profitable operations in 2019, then it seems reasonable it will earn a higher valuation before the end of the year.