A sign in the lobby of Westwood pharmaceutical firm Puma Biotechnology Inc. greets visitors with both a wink and a warning: “Do not enter the Puma trail without a guide.”

With 44-year-old Chicago native Alan Auerbach at the helm, the company’s shareholders and its roughly 90 employees have been in great hands so far.

On July 21, Auerbach got a call informing him that Phase III clinical trials of his company’s breast cancer drug, neratinib, were successful. On July 22, Puma announced the results after the market closed, and the next day the company’s shares rocketed from about $59 to $233 – a 295 percent leap.

That made Auerbach, a Brentwood bachelor and the company’s largest shareholder, one of the wealthiest people in Los Angeles, with a net worth of about $1.6 billion.

You’d think every detail of the fateful call would be seared into his mind. But you’d be wrong.

“I don’t remember where I was,” he said, nonchalantly.

Seated in a conference room at Puma’s Wilshire Boulevard office, wearing a suit jacket, collared shirt and slacks, his demeanor is relaxed, perhaps more so due to a slight cold, yet always business like. Casual yet careful in conversation, Auerbach seems not unlike the big cat whose name his company has adopted – focused but cautious.

Puma’s headquarters in the Oppenheimer Tower is a quiet, corporate, cubicled setting that seems less like a biotech firm than an insurance office. There’s nary a lab nor white-coated doctor anywhere to be found. Walking through the office, a framed picture of a puma peeks out from behind two employees huddled around a desk, spicing up the otherwise sterile surroundings.

That’s because rather than performing scientific research, Puma’s business model is known as “No research. Development only,” and it involves licensing a drug from another pharmaceutical firm that’s already in preclinical or clinical testing but for one reason or another has hit a snag. Its focus is solely on managing neratinib’s three-year clinical trials at hospitals and clinics in 41 countries.

Singular focus

Puma acquired neratinib, its only product, from New York’s Pfizer Inc. It has agreed to pay Pfizer up to $188 million in licensing fees plus royalties should the drug come to market – a potentially small sum considering analysts project it could reap $5 billion a year in sales.

Puma’s latest trial results showed that treatment with neratinib resulted in a 33 percent improvement in disease-free survival compared with a placebo for patients with early stage HER2-positive breast cancer after they had also been given a drug called herceptin.

“If you can reduce the rate of recurrence by 30 percent, then you could reduce the death rate by 30 percent,” said Eric Schmidt, a Puma analyst and managing director at Cowen Group in New York.

The news a few weeks ago signaled the potential for federal approval next year, allowing neratinib to hit the market soon thereafter. That’s a dramatic turn; only a few months ago, many investors had soured on the company’s prospects, first due to disappointing midstage clinical data and then again after below-par Phase III trial results for a breast cancer drug called tykerb being developed by British pharmaceutical giant GlaxoSmithKline.

“We were all assigning pretty low odds of success,” Schmidt acknowledged.

Over the course of two months, Puma’s share price lost nearly half its value, closing below $55 a share June 4. But Auerbach said he remained confident all along.

“During that entire thing I was extremely calm,” he said. “You can’t look at any side-by-side study and show anything where neratinib does not always beat tykerb. I know we have a better drug.”

That sense of assurance came from the due diligence Auerbach, a former industry analyst, did before he took the drug off Pfizer’s books three years ago.

“This is a drug that Pfizer discarded,” said Ahmed Enany, president and chief executive of the Southern California Biomedical Council. “You have to give Alan credit for his foresight and vision to see multibillion-dollar potential there.”

Getting started

Auerbach left Chicago for a bachelor’s in biomedical engineering from Boston University, taking a master’s in the same field from USC. After graduate school, Auerbach worked for L.A.’s Diagnostic Products Corp., now a division of Siemens, where he designed and implemented clinical trials in oncology.

Though he didn’t have any background in finance, many of his friends worked as investment bankers on Wall Street and they’d routinely hit him up for advice on which biotech firms to bet on.

When he kept picking winners, his buddies told him he should think about being an analyst for a living.

“I said to them, ‘I have no idea what that word even means. How do I even do that?’” he said.

After some prodding from friends, Auerbach looked into the field, but he had no interest in moving to New York. Eventually, he interviewed with Jon Merriman, then-managing director and head of capital markets at Seidler Equity Partners in Marina del Rey, over a meal at Baja Cantina.

“I just thought he was extremely bright, knowledgeable, curious and very personable,” Merriman remembered of their initial conversation. “It was pretty clear he had great articulation and grasp of the broader issues.”

After a three-month trial during which Auerbach worked for free, Merriman brought him onto the payroll as an analyst. Auerbach then followed Merriman to private equity firm Van Kasper & Co. less than a year later, which was later acquired by Wells Fargo & Co.

“He was a super analyst for us,” said Merriman, now chief executive at Merriman Holdings Inc. in San Francisco. “We were as a firm always interested in smaller companies … trying to find situations that were unfollowed, unliked or misunderstood. Alan was great at that.”

Keen eye

One of Auerbach’s finds stood out in Merriman’s mind. EntreMed Inc. in Rockville, Md., now known as CASI Pharmaceuticals, one of the first companies to develop cancer drugs that killed blood vessels supplying the tumor.

“It was a very small company and it turned out to be a rocket. He was on it very early,” Merriman recalled.

Auerbach gave EntreMed a “buy” rating in the late 1990s with the stock priced at about $11 a share. In March 2000, roughly three years later, the company’s value had risen about 800 percent.

Whether it is his past stock-picking success, the moment of truth for his current company or matters more personal, looking back does not appear to be part of Auerbach’s nature.

“The first thought that I had,” he said of the call about neratinib’s trials, “was we have a really great opportunity to help out a lot of patients here.”

Like millions of others, Auerbach has a personal connection to cancer. His father was diagnosed with late-stage colon cancer a year before he started his first company, Cougar Biotechnology Inc., in 2003.

Auerbach explained that his dad’s diagnosis changed the way he thought about the pharmaceutical industry, a sector he had followed for six years as a biotech analyst at Wells Fargo Securities in Los Angeles.

“A big company may say, ‘We need something that hits $1 billion in sales,’” Auerbach said. “Where it changes is when you say, ‘Should the companies be as concerned about what the peak sales are or should they care about making a difference for the patients?’ Then the rest of it will take care of itself.”

The cancer eventually claimed his father’s life, but Auerbach can’t immediately recall when.

“Oh, God,” he said, racking his brain. “I don’t remember, a while ago.”

Auerbach decided to leave the financial side of the business and look for prospective drugs that major drug companies didn’t want anymore. After speaking with doctors he had developed relationships with as an analyst, Auerbach settled on a prostate cancer drug now known as zytiga, which he licensed from BTG in London after founding Cougar in 2003.

“The drug had been sitting on a shelf for a long period of time,” Auerbach said.

On prowl

Cougar was sold to New Brunswick, N.J., health care giant Johnson & Johnson in 2009 for $1 billion. Auerbach’s personal cut approached $50 million, a portion of which he used to launch Puma in September 2010. By November 2011, Auerbach had raised $60 million from previous Cougar investors, including Baltimore’s T. Rowe Price as well as Boston money managers Fidelity Investments and Adage Capital Partners. (Those investors have stayed with the company, holding 9.8 percent, 9.5 percent and 18.9 percent of its common stock, respectively.)

Auerbach’s 6.9 million shares represent nearly 19 percent of the company. At Puma’s closing price of $229 on Aug. 6, his stake was worth $1.58 billion. If he had had that wealth in May, he would have come in at No. 31 on the Business Journal’s list of Wealthiest Angelenos, behind Neil Kadisha and ahead of George Joseph.

The Food and Drug Administration still has to pore over all of Puma’s data before doctors can start prescribing neratinib, and questions remain about some side effects, such as the severity of diarrhea it causes in some patients.

But Schmidt, the analyst, said he expects more good things from the company’s stock.

“We could have a long way to go on the upside,” he said.

So will Auerbach decide to sell Puma, too?

“Every day we’re faced with the opportunity to make that decision,” he said. “The key is to always do what’s best for the patients and what’s best for the shareholders. It’s that simple.”

If he does wind up starting another company down the road, chances are it will be named after another big cat – a theme Auerbach said he chose because his philosophy is to hunt for new drugs that others have stopped developing.

“When I started the second company, I said to the investors, ‘What should we call it?’” he said. “Every one of them said, you have got to do something in the same genre, so that’s where Puma came from.”