In the volatile world of biotech, the rise and fall of companies depend on how well new drugs are adopted by patients, as one poor product can potentially bankrupt a small biotech company.
Puma Biotechnology (NASDAQ: PBYI) was one of the biggest losers on the NASDAQ today as it’s shares plunged 32.5 percent upon releasing it’s Q1 2019 financial figures. In particular, the data showed that patients were rejecting Puma’s cancer drug in droves despite the fact that the company had reported respectable revenue increases.
Reporting narrower-than-expected first-quarter losses although sales still beat expectations, Puma’s net product revenue came in well below its own expectations. Centered on its only commercially available drug, the company reported $10.1 million in losses, or 26 cents per share, in the quarter.
While this was an improvement compared to the $24.3 million loss seen in the same time a year ago, the fact that its signature drug, Nerlynx, which is used to treat breast cancer, has struggled to meet expectations has overridden any other positives factors to be found in the financial results.
“Puma experienced lower than expected net product revenue in the first quarter of 2019,” said Alan H. Auerbach, Chief Executive Officer and President of Puma. “This reduction in net revenues was the result of an increase in expenses charged against gross revenue for the quarter. Additionally, net product revenue declined in the quarter as a result of an increase in patients discontinuing treatment with NERLYNX.”
Shares of Puma have already fallen substantially in recent history. When the company announced an exclusive license agreement in Europe for Nerlynx, investors were less than impressed with the terms of the deal in what’s expected to be the drugs second top global market. Puma received a $60 million upfront payment and can receive up to $345 million in payment milestones, which wasn’t enough to satiate hungry investors that were expecting more.
While shares of the company fell by 32.5 percent in today’s trading session, there are some arguments to be made that the company is undervalued. With a market cap at an impressive $1.1 billion (prior to today’s drop) and trading at 4.5 times sales (again, before today’s decline), from a fundamental perspective, the company does seem a little underappreciated.
At the same time, the company has seen its stock swing wildly in 2019. Back in March, shares of Puma jumped almost 40 percent as the hype behind their cancer drug grew. While volatility isn’t something that’s new for biotech investors, investors that do think Puma is a good deal on a fundamental level need to be careful that they don’t get burned in the process.
Puma Biotechnology Company Profile
Puma Biotechnology is a biotechnology company focused on developing novel therapeutics for the treatment of cancer. Puma licenses the commercial rights to its current drug candidates.
The company expects to augment its product pipeline by acquiring, through license or otherwise, additional drug candidates for research and development and potential commercialization.
In evaluating potential drug candidates, Puma employs disciplined decision criteria favoring drug candidates that have undergone at least some clinical study. – Warrior Trading News
