Biotech stocks took a drubbing in the markets last week, but Puma Biotechnology Inc. fell even more than its peers as investors dumped shares after being disappointed by results of a clinical trial for its experimental breast cancer drug.
Shares of the Westwood company plunged 18 percent on April 7 on the news. It was the biggest one-day percentage drop since shortly after Puma went public two years ago.
Puma was the biggest loser on the LABJ Stock Index for the week ended April 9, down 19 percent to $87.89. (See Page 54.) Shares fell another 8 percent the next day to close at $81.47.
Chief Executive Alan Auerbach said it was a case of market expectations surging ahead too far and then coming back in line with reality.
When the company announced initial second phase test results for its breast cancer drug neratinib in December, the results only applied to a small subset of breast cancer patients, the 25 percent or so who tested positive for a protein that promotes growth of cancer cells. Those results showed a statistically significant benefit for neratinib compared with a conventional therapy.
The results for the remaining 75 percent of patients were not released until last week at the annual meeting of the American Association for Cancer Research in San Diego. But those results, while positive, were just short of the statistically significant threshold.
Nonetheless, Auerbach said the results justified moving the drug into phase three clinical trials later this year. But that news was lost amid the share selloff.
“What happened here was that back in December, investors had assumed that the statistically significant benefit would be across the board,” Auerbach said. “So expectations became elevated.”
The December announcement came amid a surge of investor interest in biotech stocks, which only magnified the effect.
When news filtered through last week about the results for the larger group, things played out in reverse as investors fled growth stocks for value stocks.
A Bloomberg index of 16 biomed and biotech companies fell 8 percent for the week ending April 10, with all but one company registering share price drops. The Bloomberg index fell 6 percent on April 10 alone. With the biotech market weakening, Puma investors hit the sell button.
Nevertheless, shares on April 10 were up 158 percent for the past 12 months.
In the view of one analyst who follows Puma, the selloff went too far. Eric Schmidt, analyst with Cowen and Co. in New York, maintained his “outperform” rating on for Puma stock.
The test results “were a more complex and nuanced observation than we believe investors expected,” Schmidt said in a note to investors after the results were announced.
