Puma Biotech (PBYI) Q3 Loss Narrows, Nerlynx Pulls Stock Down

Shares of Puma Biotechnology, Inc. (NASDAQ:PBYI) plunged 48% on Friday following the company’s third-quarter earnings release on Thursday.

In fact, so far this year, Puma Biotech stock has plummeted 79.7% compared with the industry’s decline of 16.5%.

Puma Biotech incurred a loss of 37 cents per share for the third quarter of 2018, narrower than the Zacks Consensus Estimate of a loss of $1.07 and the year-ago loss of $2.07.

Total revenues consist of net product revenues from the sales of Nerlynx as well as the company’s license revenues. In the third quarter of 2018, total revenues were $62.6 million, of which, $52.6 million were net product revenues and $10 million were license revenues. Moreover, sales beat the Zacks Consensus Estimate of $55 million in the reported quarter and the year-ago figure of $6 million.

Product revenues comprised sales of Puma Biotech’s only marketed product Nerlynx. However, Nerlynx sales were up a mere 3.5% on a sequential basis, which hurt investor sentiments and led to the stock price decline. The softer Nerlynx sales were due to increased patient discontinuations in the last reported quarter.

On third-quarter conference call, the company stated that the percentage of patients, who discontinued Nerlynx due to adverse events, has increased since the second quarter and is now approximately 18% since the product’s launch.

Nerlynx was launched in July 2017 in the United States for an extended adjuvant treatment of HER2-positive early stage breast cancer in patients, previously treated with Roche’s (OTC:RHHBY) Herceptin-based adjuvant therapy. In September 2018, the European Commission gave a marketing approval to Nerlynx for the same indication.

Puma Biotech plans to commercialize Nerlynx in Europe during 2019, starting with a launch in Germany during the first half of 2019 followed by other European countries in the second half of 2019.

During the third quarter, the new drug submission for Nerlynx was accepted in Canada for the given indication. Additionally, Puma Biotech’s licensing partner CANbridge Pharmaceutical filed a new drug application (NDA) for Nerlynx to the National Medical Products Administration (NMPA) in China. The drug received a confirmation from the regulatory agency in China for the same disease.

Puma Biotech expects to submit regulatory applications for Nerlynx in additional countries later this year as well as in the first half of 2019.

During the reported quarter’s conference call, the company mentioned that as of Oct 31, there are 2,139 active patients on Nerlynx, of which, an estimated 87% received the drug through specialty pharmacies. The company expects Nerlynx sales to be in the range of $175-$200 million for fiscal year 2018.

Total operating costs (including SBC) in the third quarter were $73.9 million, down almost 11.5% year over year.

Research and development (R&D) expenses were $36.4 million, down 26.5% from the year-ago period owing to lower clinical study costs and stock-based compensation expenses. Puma Biotech expects its R&D costs to decrease in subsequent quarters as clinical studies wind down.

Selling, general and administrative expenses reduced 12.3% year over year to $28.5 million.

Other Updates

Several additional studies on Nerlynx targeting different types of breast cancer patient populations and in earlier-line settings are under way. Also, multiple phase II combination programs evaluating Nerlynx for the treatment of breast cancer are on. Significantly, Puma Biotech hopes to present data from the phase III NALA analysis, assessing Nerlynx for addressing third-line HER2-positive metastatic breast cancer patients during the fourth quarter of 2018 or the first half of 2019.

In July 2018, Puma Biotech signed a collaborative agreement with privately held Strata Oncology, Inc to drive patient enrollment in the phase II SUMMIT study on Nerlynx. As of October, the study enrolled approximately 250 patients. The company plans to report additional data from the study by this year-end or the first half of 2019.

Puma Biotech is also conducting another phase II CONTROL study for using antidiarrheal prophylaxis on neratinib-associated diarrhea regarding patients with HER2-positive early-stage breast cancer. The company plans to report additional data from this study during the fourth quarter of 2018.

Apart from the HER2-positive breast cancer indication, the company believes that neratinib holds great potential for treating multiple cancers including NSCLC and other tumor types, which over-express or have a mutation in HER2. The label expansion of the drug will allow it to treat and access an expanded patient population.

Zacks Rank & Other Stocks to Consider

Puma Biotech currently carries a Zacks Rank #2 (Buy). Two other top-ranked stocks in the healthcare sector are Gilead Sciences, Inc. (NASDAQ:GILD) and Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences’ earnings estimates have been revised 4.4% upward for 2018 and 4.2% for 2019 over the past 60 days.

Alexion’s earnings estimates have moved 4.3% north for 2018 and 1.5% for 2019 over the past 60 days. The stock has inched up 2.8% so far this year.

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