Drug Maker Put to Test

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Puma Biotechnology Inc. is at a crossroads. Its shares have fallen precipitously over concerns about the outcome of a major test of its oral breast cancer treatment drug, neratinib, next week.

An independent panel of experts is scheduled to review the efficacy and safety data for the Westwood company’s primary drug on May 24 and will make a recommendation to the U.S. Food and Drug Administration, which is expected to decide by July 21 whether to approve neratinib’s use.

“It’s a critical moment for the company,” said Yigal Nochomovitz, an analyst for Citigroup Global Markets Inc. in New York. “Like we’ve been saying for a long time, we expect approval. We think the panel is going to go well. But it’s a very important catalyst.”

The market grew skittish about Puma after its announcement May 4 that Robert Charnas, senior vice president of regulatory affairs and project management, had resigned for health reasons weeks before the review. The company’s stock fell nearly 16 percent to close at $30.65 on May 5 and had stayed basically flat through May 10.

Nochomovitz said the market misinterpreted Charnas’ resignation, saying the former Puma executive had a minimal role in preparing for the panel’s review and hadn’t been the company’s point person for the FDA.

If the panel gives neratinib a thumbs up, the value of the company’s stock could double, Nochomovitz said. If the application is rejected, Puma can later reapply for review of the drug for a different use.

Because Puma has been operating at a loss, according to the company’s 2016 annual report, funding could be a concern. It reported a net loss of $276 million ($8.29 a share) in 2016, compared with a loss of $239 million ($7.45) in 2015.

“We do not expect to achieve any product revenues until neratinib is commercialized, which could occur as early as the end of 2017, though we cannot assure you that we will commercialize neratinib this year or ever,” the report said.

Although he rated the stock a “high-risk buy,” Nochomovitz said he projected that if approved this year, U.S. sales of neratinib could hit $1.3 billion annually by 2024. If approved by European regulators and if the company finds a partner there, sales of neratinib in Europe could generate an additional $350 million for Puma in 2024, he added.

There’s also the possibility that Puma could be acquired.

Alan Auerbach, Puma’s founder and chief executive, sold his prior company, Cougar Biotechnology Inc., to Johnson & Johnson for about $1 billion in 2009.

“Ever since he started Puma, people have been, like, When is he selling this one?” Nochomovitz said. “With the approval of this drug, I think it’s going to be a really attractive asset to pharma.”

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