A Bull And Bear Review Positive Results For Puma Biotech's Late-Stage Breast Cancer Drug Trial

Puma Biotechnology Inc PBYI released positive top-line results for its lead drug candidate PB272, or Nerlynx, which is being evaluated for treating HER2+ metastatic breast cancer patients who have failed two or more prior lines of HER2+ directed treatments.

Nerlynx along with capecitabine produced positive progression-free survival benefit in third-line metastatic setting, but did not achieve statistical significance with respect to overall survival, which are both co-primary end points for the study. The FDA mandates that success in any one of the metrics is considered to be positive.

The drug had been approved by the FDA in July 2017 to treat early-stage, HER2+ breast cancer for an extended period after surgery in people who have previously been treated with Roche Holdings AG Basel ADR Common Stock RHHBY's Herceptin.

The Analysts

Guggenheim Securities analyst Michael Schmidt maintained a Buy rating and raised Puma's price target from $35 to $38.

Bank of America Merrill Lynch analyst Ying Huang reiterated an Underperform rating, but the price target from $25 to $26.

The Thesis

Guggenheim: Q4 Earnings, Guidance Due In February Key Catalyst

The positive NALA data has served to slightly improve the outlook for Puma, especially as shares are down 78 percent year-to-date compared to a more modest 11 percent retreat by the S&P 400 Mid-cap Index, Guggenheim's Schmidt said in a Tuesday note.

The data also comes as a small relief for investors concerned about the sagging sales growth of Nerlynx, which dropped from 41 percent in Q2 2018 to 4 percent in Q3 2018.

Schmidt models 29 percent sales growth for Nerlynx in 2019 despite NALA not being a substantial driver until 2020, given filing timelines. The growth expectation, according to the analyst, is premised on the drug continuing to grow in the already-approved indication in the U.S., its European launch and off-label use for HER2+ mBC ahead of FDA approval, likely in late 2019 or early 2020.

"In this context, we believe 4Q18 earnings represent an important potential catalyst for the stock and mgmt. confirmed it will provide 2019 financial guidance then," the analyst wrote in a note.

BofA: Skeptical Of Commercial Opportunity In Third-Line Metastatic Setting

Progression-free survival alone may not be sufficient for FDA approval, Huang said in a note. Even if the therapy is approved in the third-line metastatic setting, the analyst expressed skepticism regarding the commercial opportunity, given the high discontinuation rate and potentially short treatment durations of late-line therapy.

However, premising on the potential for FDA approval for the expanded indication, BofA increased the probability of success from 77 percent to 18 percent, resulting in an upward price target adjustment.