What happened

Shares of Puma Biotechnology (PBYI -1.70%) collapsed by nearly 54% last month, according to data provided by S&P Global Market Intelligence. The pharmaceutical company reported first-quarter 2019 operating results reflecting a worrisome development: A significant number of patients are discontinuing treatment with Nerlynx, the company's only drug product, because of severe side effects that reduce quality of life.

Even before the drug earned marketing approval from the Food and Drug Administration, analysts wondered if the risk/benefit profile of the drug was worth it. Nerlynx provides only a small survival benefit, costs over $10,000 per month, and causes moderate to severe diarrhea in most patients. Those concerns took a back seat to revenue growth in the first 12 months following market launch, but Q1 results -- the first outside that 12-month window -- have brought them back to the forefront.

A scientist in a lab with a disappointed look on his face.

Image source: Getty Images.

So what

Puma Biotechnology reported that Q1 2019 product revenue declined 25% from Q4 2018, which is an unusual occurrence for what's supposed to be a fast-growing drug. Management offered four reasons for the quarter-over-quarter decline.

First, Nerlynx is only administered for 12 months, so patients who began treatment soon after launch in early 2018 have now discontinued treatment. Second, Puma Biotechnology had vacancies in 18 of 80 sales territories during the most recent quarter. Third, a growing number of patients discontinued treatment. Fourth, some patients experienced a "dose delay" that resulted in fewer bottles sold.

The latter two are most concerning, since the primary reason for delaying dosing or discontinuing treatment is experiencing severe side effects.

Now what

Despite the slow start to the year, management decided to stick with its initial full-year 2019 product revenue guidance calling for $220 million to $240 million in net sales. That will be impossible to meet if patients continue to opt out of treatment, which Wall Street is clearly keeping an eye on. Case in point: At a recent industry conference, Puma Biotechnology reported positive results for two late-stage trials that could increase the approved use of Nerlynx, but shares didn't budge. Investors should likely avoid the stock until more information is known about patient habits.