Puma Shares Plunge, Bulls Flee as Cancer Patients Stop Drug

(Bloomberg) -- Shares of Puma Biotechnology Inc. sank as much as 41 percent Friday -- on pace for their lowest close in more than six years -- after first quarter earnings revealed that more patients than expected were discontinuing treatment with its breast cancer drug.

Puma’s only drug -- Nerlynx -- has long been linked to severe diarrhea and the company has been issuing vouchers to help patients buy anti-diarrheal medicines as well as educating doctors on easing the unpleasant side-effect. Those efforts weren’t enough to stave off the number of patients discontinuing treatment, and first quarter sales of Nerlynx missed even analysts’ lowest expectations.

If more details on prevention were added to the drug’s label, that could help women stay on the drug longer, Cantor Fitzgerald analyst Alethia Young wrote in a note to clients, but Puma’s “commercial effort needs significant overhaul.” That is keeping her on the sidelines, she wrote in a note, slashing her 12-month price target by more than half and dropping her rating to neutral.

With the stock trading as low as $17.80 Puma is on track to close at the lowest level since late 2012.

Here’s what the analysts are saying:

Cantor Fitzgerald, Alethia Young

“Since the launch, the company has provided many reasons why we have seen bumpy quarterly trends for Nerlynx,” Young wrote in a client note. “The company needs a significant overhaul of its commercial efforts, which could certainly lead to more disruption.”

“Moving to the sidelines as we have been patient with the variable trends of launch, but we think that trends may be soft for the time being.”

Puma cut to neutral from overweight, price target $20 from $57.

Citi, Yigal Nochomovitz

“We had believed the Nerlynx launch could continue to work favorably in 1Q19 and were proven wrong. Our revised view is the discontinuation risk realized in 1Q19 will not be an easy fix.”

While April trends suggest issues may be isolated to the first quarter, the next quarter will probably be similar to last year’s, so “volume growth is no longer realistic.” Cutting Nerlynx 2024 peak U.S. sales estimate to $350 million from $600 million as a medicine following treatment with Roche’s Herceptin (trastuzumab). Sales in this setting “will be driven by price not demand.”

With a price target of $24, Citi cuts Puma to neutral: “we unfortunately can no longer handicap the risks to the Nerlynx launch effectively.”

SVB Leerink, Thomas Smith

“We previously noted caution ahead of the quarter, given lack of visibility into weekly/monthly prescribing for Nerlynx and a potential reversal of tailwinds that aided sales in the 4Q18.”

“An increase in discontinuations, due to both patients completing therapy as well as toxicity, contributed to the miss, and despite incremental monthly unit volume growth in April, may fuel concerns that Nerlynx sales may have peaked in the currently approved HER2+ extended adjuvant setting.”

Puma price target $22 from $26, rated market perform.

Cowen, Chris Shibutani

“Nerlynx sales widely missed expectations owing to a mix of factors, some familiar (greater discontinuations), others more discomforting (~20% of sales force positions vacant during some portion of the quarter).”

“With diminishing confidence that growth can regain footing, we temper penetration and duration assumptions,” Cowen wrote.

Puma rated market perform, price target $41 from $56.

Data

Puma 0 buys, 7 holds,, 3 sells; average price target of $26: Bloomberg data

Shares were up 48% this year before today, compared to Russell 2000 Health Care returns of 14%.

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