Puma Biotechnology (NYSE:PBYI) Stock Triples on Amazing Cancer Drug

On Wednesday, Puma Biotechnology (PBYI) had a remarkable rise of 287%, owing mainly to the fact that investors in the healthcare division had ignored the company’s stocks (which is unique considering investors are usually inclined towards contemplating stocks related to biotech). Now these investors are surprised at the positive outcome of the drug manufactured by Puma Biotechnology (PBYI) that is meant to fight against cancer. In the trial that was conducted on a large sample of women suffering from breast cancer, the drug neratinib prevented relapse and recurrence in most of them.

The investors had their own set of reasons for the supposition that Puma Biotechnology (PBYI) will not succeed with their neratinib ‘adjuvant’ study.

The study they conducted prescribed neratinib for one year and then Herceptin, the drug by Roche (RHHBY) for another year and compared it with Herceptin for one year accompanied by a placebo. The investigation being carried out in the research is to try and find out whether two HER2 inhibitors during breast cancer therapy would lead to a greater long term survival rate or just one. At the start of this year, a study of the same sort was carried out between Herceptin and Tykerb, the drug manufactured by GlaxoSmithKline (GSK), but the adjuvant therapy did not prove to be beneficial for breast cancer patients. Similarly, in yet another study, Herceptin aided with another drug prescribed for two years also failed to produce good results. The failures from these studies made it improbable that neratinib, Puma Biotechnology’s (PBYI) drug would make an outstanding breakthrough.

Phil Gross from Adage Capital and the person, who holds the highest number of shares for the company thought otherwise, had his faith on Puma biotechnology’s (PBYPI) neratinib and became quite a rich man on Wednesday. Also benefitting from this outcome is the CEO of Puma Biotechnology (PBYI) Alan Auerbach, who, with the rise in share values, is himself on cloud nine, and for good reason.

Probability is that Auerbach will plan on making his next move, which is to find a suitable buyer for the company or to find for neratinib, an appropriate marketing partner. As of today, Puma Biotechnology (PBYI) has a market price of an estimated $7 billion.

Like Herceptin by Roche, which earns a handsome $4 billion by being used in adjuvant therapy for breast cancer patients, Auerbach of Puma Biotechnology (PBYI) hopes neratinib can earn approximately the same figures too. The strategy is to use it as adjuvant therapy as well, in the second year after the first year course with Herceptin has been completed. However, this may not entirely work out, since very less women would want a therapy of an additional one year, if no recurrence has occurred. In addition to this, neratinib also poses side effects such as diarrhea, which may be a good enough reason for quite a lot of patients to ditch the drug. Having said that, neratinib is still expected to reach sales of about $2-3 billion.

Right before Puma Biotechnology (PBYI) declared their results for neratinib, they also disclosed their agreement with Pfizer regarding the license for neratinib. According to this agreement, Puma shall pay for the cost of the trials of neratinib which totals to $30 million and Pfizer would have the sales royalty for the drug, not a usual 10-20% but in ‘low to mid teens’. Whether or not Pfizer had complete knowledge of the data for neratinib remains a mystery.