Biotech stocks are not for the faint of heart by any stretch of the imagination. Puma Biotechnology (NASDAQ:PBYI) has repeatedly shown the investing world why this is the case, and today's 200% plus movement upward should drive this point home. 

PBYI Chart

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After soaring by over 350% last year, Puma has fallen hard in recent months due to a mysterious case of investor pessimism for its cancer drug PB272, aka neratinib. Specifically, Puma shares cratered by 25% in a single day after the company earlier this year announced partial midstage trial results for neratinib as a potential treatment for breast cancer that has spread to the brain.

What bummed investors out apparently was that neratinib produced severe diarrhea in a number of patients participating in the study. As I mentioned previously, I found this panic selling to be overdone at the time, largely because neratinib's undesirable side-effect profile was known prior to the company licensing the drug from Pfizer (NYSE:PFE). Moreover, this particular type of adverse effect(NYSE:PFE)can be managed effectively through the proactive use of antidiarrheals, and Puma has taken the steps to do so in its ongoing trials.  

Pfizer turns pessimistic, makes a stunningly bad business decision 
The investing community was apparently not alone in thinking that neratinib's commercial potential was overblown. Pfizer this week amended its licensing agreement with Puma for neratinib, pushing the bulk of clinical trial expenses onto Puma and giving up a nice chunk of potential royalty payments in the process.

Per the new agreement, Puma is now responsible for funding the ongoing legacy trials for neratinib, which will substantially increase the company's expenses moving forward. By the same token, Pfizer is now only entitled to a percentage of royalties on net sales in the low to mid teens (previously up to 20%).

Puma has the last laugh
Almost immediately after announcing this amended agreement, Puma on Tuesday released top-line data from a late-stage study for neratinib as a treatment for HER2-positive breast cancer. According to the release, patients receiving neratinib showed a whopping 33% increase in disease-free survival, or DFS, compared to placebo. The company plans on filing for regulatory approval in early 2015.

Neratinib would enter a market that already sports a megablockbuster in Roche's Herceptin. Although neratinib's exact role in the clinic for early stage HER2-positive breast cancer patients remains to be seen, the drug's path toward blockbuster status certainly became a lot easier after Puma posted these strong trial results.

Foolish wrap-up
I think the market and Pfizer's combined pessimism stemmed mainly from the failure of GlaxoSmithKline's drug Tykerb to significantly improve DFS in its late-stage trial for HER2-positive breast cancer patients in an adjuvant setting. Indeed, a number of drugs have failed to outperform Herceptin for this indication, and neratinib looked like it was going to be the next victim. Now that neratinib has shown to improve clinical outcomes for HER2-positive patients in a large late-stage study, it should become an important part of the breast cancer pharma landscape. Which of course begs the question as to whether Puma therefore could be a prime takeover target.