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Puma Biotech Out-Licenses Nerlynx Rights in Europe, Stock Down

Zacks Equity Research

Puma Biotechnology, Inc. PBYI announced that it has signed a license agreement with the French pharmaceutical company Pierre Fabre, giving the latter the exclusive rights to develop/commercialize Nerlynx (neratinib) in Europe and across parts of Africa.

Nerlynx is approved as an extended adjuvant treatment of HER2-positive early stage breast cancer in adult patients, previously treated with Roche’s RHHBY Herceptin-based adjuvant therapy. The drug was approved in Europe last September.

Per the agreement, Puma Biotech is eligible to receive an upfront payment of $60 million and up to $345 million in regulatory milestones plus double-digit royalties on Nerlynx sales. Pierre Fabre will enjoy exclusive marketing rights to Nerlynx in the European countries excluding Russia and Ukraine. Going forward, the French company will also be responsible for conducting additional clinical studies for Nerlynx label expansion in Europe.

However, it seems that the deal did not go down well with some investors and consequently, the stock took a hit. In fact, shares of Puma Biotech were down more than 8% following this news on Monday. However, the stock has soared 75.1% so far this year, outperforming the industry’s rally of 12.5%.

We would like to remind investors that Nerlynx was approved in the United States during July 2017. Sales of the drug have improved steadily since its launch and were above the management’s expectations last year. For 2018, Nerlynx generated sales of $200.5 million, slightly higher than the management’s guided range of $175-$200 million.

Several supplementary studies on Nerlynx targeting different types of breast cancer patient populations and in earlier-line settings are currently underway. Last month, Puma Biotech posted the updated interim results from the ongoing phase II SUMMIT basket study on Nerlynx for treating patients with HER2 mutated cervical cancer.

Outcomes from the study showed that treatment with Nerlynx led to durable responses and disease control in metastatic patients suffering HER2-mutant cervical cancer.

Apart from the HER2-positive breast cancer indication, the company believes that Nerlynx holds high potential for addressing several other cancers as well. The drug’s label expansion will thus allow treatment and access to an expanded subject count, thereby boosting its sales in the future.

Zacks Rank & Other Key Picks

Puma Biotech currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the healthcare sector include Kamada Ltd. KMDA and PDL BioPharma, Inc. PDLI, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kamada’s earnings estimates have moved 34.3% north for 2019 and 5% for 2020 over the past 60 days. The stock has risen 12.2% so far this year.

PDL BioPharma’s earnings estimates have moved 100% north for 2019 and 30% for 2020 over the past 60 days. The stock has gained 28.6% year to date.

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