Citigroup: Puma Biotech, Up 300% Since May, Is A Takeover Target

Despite the 280 percent year-to-date gains in Puma Biotechnology Inc PBYI shares, Citigroup is projecting shares could go higher. 

Citi maintained its Buy on Puma Biotechnology and raised its price target from $114 to $156.

At the time of writing, shares of Puma Biotechnology were up 0.41 percent at $123.50.

Shares Up 102% Since FDA Approval

 

The NALA study is a clinical trial for testing Puma's investigational drug neratinib, known as Nerlynx, when given as a combo treatment with the approved breast cancer drug capecitabine. The patient population consists of adults who have received at least two previous HER2-directed treatments for metastatic breast cancer.

Puma Biotechnology's shares have been up 102 percent since late May, when an FDA panel voted 12 to 4 in favor of approving neratinib, said Citi analyst Yigal Nochomovitz. The shares have ran up about 40 percent since the FDA approved Nerlynx for the extended adjuvant treatment of early-stage HER2-positive breast cancer on July 17. An extended adjuvant therapy is one which is taken after an initial treatment to further lower the risk of relapse. (See Nochomovitz' track record here.)

An Acquisition Target? 

 

Puma shares have eclipsed Citi's previous $114 price target, Nochomovitz said, adding that Citi identified the company as an acquisition target as early as the first quarter of 2016.

Citi is ready to "fully flex" its acquisition thesis, which took its price target to $156, the analyst said. This, according to the firm, would make Puma Biotechnology a $6 billion company. Citi's projected peak adjuvant revenues for Nerlynx of about $1.4 billion implies only a 4x multiple.

"If Puma raises debt, that is fine," Nochomovitz said. Five out of the eight acquired firms highlighted by Citi have had an appreciable debt-to-cash ratio, the analyst said. 

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