Puma shares triple on positive PhIII neratinib data, plans to file for approval

Shares of Puma Biotechnology ($PBYI) soared more than 220% after the markets closed on Tuesday as investors cheered the biotech's positive Phase III numbers for a late-stage study of their lead drug neratinib (PB272). Puma also spread the word that it had agreed to cover an extra $30 million in R&D costs as it nailed down a royalty rate with Pfizer ($PFE) on neratinib. And the company says it will now start prepping for a regulatory filing on the drug, now expected in the first half of 2015.

Investigators tested the drug as an adjuvant to Herceptin in HER2-positive breast cancer patients, comparing results against a placebo over two years or their death. Investigators for the biotech say they tracked a 33% improvement over placebo in disease-free survival. There was also a reported 37% improvement in disease-free survival including ductal carcinoma in situ versus placebo for the secondary endpoint.

Investors went crazy for the results, tripling the price of the stock in a matter of minutes.

Los Angeles-based Puma had in-licensed the drug from Pfizer, which had agreed to cover much of the cost of some legacy trials that were then underway in exchange for a royalty ranging from 10% to 20%. Puma agreed to cover those costs in their amended deal announced Tuesday evening--with much of the $30 million estimated cost hitting this year--and Pfizer agreed to a royalty in the low to mid-teens, which would help avoid some of the high-end royalties it may have been on the hook for.

Puma didn't reveal the scope of the licensing deal when it struck the pact back in 2011. But its 10-K for the year notes that in addition to the royalty, the biotech agreed to pay Pfizer up to $187.5 million in milestones--a modest figure which must look particularly sweet in light of today's news.

The pan-ErbB TKI has had tox problems in the clinic. Most notably patients have suffered from diarrhea, which has been so severe in some cases it's limited the doses used in trials. For very sick cancer patients, though, the FDA has often accepted some harsh effects on quality of life in exchange for a shot at better survival rates. Cowen's Eric Schmidt also notes that the side effect can be better controlled with the right medications.

"Tolerability has been neratinib's short suit, and the company has guided investors to expect a high rate (~30%) of grade 3 diarrhea as imodium prophylaxis was not employed in this study," Schmidt noted today. "Consultants note that the new paradigm of high dose imodium prophylaxis has been successful, and we expect it to reduce grade 3 diarrhea rates to 5-10% in the real world setting. In our view, such rates are acceptable in light of neratinib's compelling efficacy."

Analysts have offered some mixed opinions on Puma's chances in Phase III, but a success here could translate into sales of more than $1 billion, hitting the blockbuster mark. The management team at Puma was being closely watched after their success with Cougar, which J&J bought for $1 billion in cash. Schmidt, though, put peak sales in 2028 at a whopping $6 billion.

"This represents the first trial with a HER2 targeted agent that has shown a statistically significant benefit in the extended adjuvant setting, which we believe provides a meaningful point of differentiation for neratinib in the treatment of HER2 positive breast cancer," said Puma CEO Alan H. Auerbach. "While the use of trastuzumab in the adjuvant setting has led to a reduction in disease recurrence in patients with early stage HER2-positive breast cancer, there remains an unmet clinical need for further improvement in outcome in order to attempt to further reduce this risk of recurrence. The results of the ExteNET study demonstrate that we may be able to provide this type of improvement with neratinib to further help the patients with this disease."

- here's the release on the Phase III
- and the release on the amended Pfizer deal

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