Goldman Recommends Selling Puma Biotech, Clovis Oncology; Cites Company-Specific, Competitive Risks

Belying the popular notion that oncology biotechs are lucrative investment options,Goldman Sachs is taking a bearish stance on Puma Biotechnology Inc PBYI and Clovis Oncology Inc CLVS.

The Analyst

Analyst Paul Choi downgraded Puma from Neutral to Sell and reduced the price target from $24 to $8.

The analyst reiterated a Sell rating on Clovis shares and lowered the price target from $13 to $3.

The Thesis

Smid-cap oncology biotech stocks, especially those with exposure to precision oncology and targeted therapy, have nearly doubled year-to-date, Choi said in a Tuesday note. (See his track record here.)

Yet Puma and Clovis have meaningfully underperformed, with investor expectations having worsened further, the analyst said.

Choi said he sees potential for further downside due to underappreciated company-specific and competitive risks.

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Puma Faces Headline Risk From Rival Breast Cancer Drug

Competitive data from Seattle Genetics, Inc. SGEN's tucatinib at the end of 2019 creates a challenging setup for Puma's Nerlyx, for which the next potential driver is likely to be in HER2+ metastatic breast cancer, the analyst said. 

"We believe that even if tucatinib is not differentiated on efficacy, it may garner more market share on greater tolerability based on mCRC data shown at ESMO." 

Goldman Sachs reduced its 2025 sales estimate for Puma by 25% on a lower expected uptake in the metastatic setting and slower international adoption of Nerlynx.

Diminished Top-Line Outlook, Investment Seen As Overhangs On Clovis

With respect to Clovis, Choi projects risk to longer-term consensus estimates that have baked in meaningful growth driven from Rubraca's use in prostate cancer and a frontline/combo use with PD-1s.

Following AstraZeneca plc AZN- Merck & Co., Inc. MRK's Lynparza PROfound prostate and PAOLA-1/PRIMA first-line maintenance ovarian data, Goldman reduced its peak Rubraca sales estimate by 25% on lower expected share in prostate and ovarian.

"Given the diminished topline outlook and continuing investment in rucaparib label expansion, we see the high cash burn and convertible debt burden continuing to be overhangs on the stock," Choi said.

Price Action

Puma shares were tumbling 17.43% to $8.32 at the time of publication, while Clovis shares were down 9.14% at $3.27.