Shares of Puma Biotechnology, Inc. PBYI have lost 31.2% so far this year after skyrocketing a massive 200% in 2017. Also, Puma’s stock price movement in 2018 compares unfavorably with the industry’s decline of 4.9%.
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Let’s consider the factors causing this slump despite a sturdy performance last year.
What Drives Share Price in the Previous Year
Puma’s cancer drug Nerlynx’s (neratinib) receipt of the FDA approval last July, mainly shot up the company’s shares in 2017. The drug won a nod for the extended adjuvant treatment of patients with early-stage HER2 over expressed/amplified breast cancer, previously treated with Roche’s RHHBY Herceptin-based adjuvant therapy. Significantly, Nerlynx was the first anti-HER2 medicine to be approved as an extended adjuvant therapy for the aforementioned indication.
The FDA approval of Nerlynx for breast cancer was a huge boost to Puma, given the treatment’s immense commercial potential in the target market.
Moreover, last November, Puma entered into an exclusive licensing agreement with Specialised Therapeutics Asia, a Singapore-based biopharmaceutical company to commercialize Nerlynx in Australia, New Zealand and South-East Asia. This agreement will provide the company with funds in the form of milestone payments and double-digit royalties on Nerlynx sales.
What Hits Share Price in the Current Year
The adverse opinion adopted by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency for Nerlynx this February regarding the same indication was mainly responsible for the company’s share price plunge. This slimmed Nerlynx’s chances of clinching an approval in the region.
Per CHMP, the benefit risk assessment is unfavorable because the study results are based on evidence from a single pivotal trial. However, Puma plans to submit a request for re-examining the opinion by the regulatory agency soon.
Moreover, though HER2-positive breast cancer market provides vast commercial potential, Nerlynx faces stiff competition from established products namely Roche’s Herceptin, Perjeta and Kadcyla, GlaxoSmithKline plc’s GSK Tykerb and Novartis AG’s NVS Kisqali.
It is important to note that quite a few other companies are also striving hard to bring cancer curative treatments to the table for addressing the target market.
Sadly, in want of a strong pipeline, the company remains totally dependent on Nerlynx for growth. Hence, any kind of regulatory setback for Nerlynx could affect the company’s growth prospects.
Zacks Rank
Puma carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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