Here's Why Wednesday Is The Next Big Catalyst For Puma Biotech

Puma Biotechnology Inc PBYI shares skyrocketed 39.1 percent in Monday’s trading session after the FDA’s review of breast cancer drug candidate neratinib released on Monday was relatively benign. However, even after the big Monday move, JPMorgan said the options market is pricing in 60 percent implied volatility in the stock this week ahead of neratinib’s approval vote on Wednesday.

FDA's Concerns: Side Effects, Design Changes

The FDA raised concerns about neratinib’s diarrhea risk and changes made to the pivotal clinical trial.

“The tolerability of neratinib in this patient population is a concern given the frequent dose interruptions, reductions and discontinuations observed, mostly due to diarrhea,” the FDA wrote.

Related Link: The Government's Best Weapon Against Heroin Might Be Marijuana

While the criticisms are certainly not good news, Puma investors were well aware of these particular concerns prior to the FDA's review. Nearly 40 percent of the patients treated with neratinib reportedly experienced at least grade-3 diarrhea.

The study design changes will likely be central to the decision of whether or not to approve neratinib. In March 2016, the FDA recommended Puma delay its approval application for neratinib due to the design changes, but the company went ahead with the application anyway.

Upcoming FDA Panel

FDA Oncology Center director Richard Pazdur has allotted just five hours for the neratinib advisory committee meeting. Such a relatively short session could be bad news for Puma. Pazdur had scheduled half-hour sessions in the past to shoot down flawed cancer drugs.

It’s easy to see how rejection of neratinib could generate 60-percent downside for Puma. However, with the stock’s current 33.1 short percent of float, an approval could easily send shares soaring 60 percent as well. The FDA advisory panel for neratinib begins at 8 a.m. Wednesday.

At last check, shares of Puma were up 4.47 percent at $54.95.