Breast Cancer Drug Can Bring Exponential Sales Growth for Puma Biotechnology

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The world of biotech can be a rags-to-riches story for companies that build up a drug candidate and secure FDA approval for it. And the larger the drug target group is, the more exciting it can be. Puma Biotechnology Inc. (NASDAQ: PBYI) announced last summer that it had received approval by the U.S. Food and Drug Administration (FDA) for the drug Nerlynx (neratinib) for the extended adjuvant treatment of adult patients with early stage HER2-overexpressed/amplified breast cancer, following adjuvant trastuzumab-based therapy.

The company originally had expected neratinib to become commercially available in September 2017 and to be marketed as Nerlynx. At the time of the mid-July announcement, Puma’s shares jumped 7% to around $92 — only to rise to as much as $130 by last November.

The FDA approval was based on the Phase 3 ExteNET trial of neratinib. The results of this trial demonstrated that, after two years of follow-up, invasive disease-free survival was 94.2% in patients treated with neratinib compared with 91.9% in those receiving placebo.

While Puma’s Nerlynx is not approved for commercialization outside of the United States, Puma and Pint Pharma International announced in early April that the two companies have entered into an agreement for Pint Pharma to commercialize the drug in Argentina, Brazil, Chile, Colombia, Mexico and the rest of Latin America. Pint Pharma will be responsible for seeking the requisite regulatory approvals and, once approved on a country by country basis, for commercializing Nerlynx in Latin America. Puma was set to receive a payment up-front as well as potential regulatory and commercial milestone payments totaling up to $34.5 million. In addition to those payments, Puma stands to receive what it called significant double-digit royalties on Nerlynx sales in Latin America.

There is a rather large opportunity with Nerlynx as well. The company previously pointed out that approximately 20% to 25% of breast cancer tumors overexpress the HER2 protein and that HER2-positive breast cancer is often more aggressive than other types of breast cancer.

Last year effectively marked the first that Puma generated revenues, with almost $27.7 million in total revenues in 2017. The company spent more than $200 million in research and development in 2017, 2016 and even in 2015. And for the future, Puma’s consensus revenue estimates are $218.1 million for 2018 and $430.5 million for 2019. One analyst report even sees Puma’s sales reaching $565 million in 2019 — and 2019 is the year that Puma is expected to start seeing profitability from operations.

It isn’t cheap bringing a big drug like this to market. By the end of 2017, Puma had an accumulated loss amount of almost $1.1 billion from its years of aggressive R&D spending without real revenues.

Puma Biotechnology currently trades at close to $66 a share, and that gives the company a market capitalization of $2.5 billion. To show just how much this stock has been up and down: outside of the drop seen from its peak last year, its 52-week range is $28.35 to $136.90. The Thomson Reuters consensus analyst target price is $98.50, but one analyst sees Puma rising to almost $150 per share if the best case scenarios in drug sales come to pass.