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Why Puma Biotechnology, Inc. Stock Is Getting Crushed Today

George Budwell, The Motley Fool

What happened

Shares of the cancer specialist Puma Biotechnology, Inc. (NASDAQ: PBYI) are getting blasted in after-hours trading today following the release of the company's third-quarter earnings report. Specifically, the stock dropped by more than 37% in extended trading today. 

What's causing investors to hit the exits? While Puma's breast cancer drug Nerlynx raked in $52.6 million for the three-month period, the drug's commercial momentum appears to be slowing. Quarter over quarter, Nerlynx's sales only rose by 3.5%, after all. 

Man standing in front of a downward-trending graph with an expression of shock on his face.

Image Source: Getty Images.

So what

Wall Street has been growing increasingly weary of Nerlynx's lack of commercial momentum, and these latest numbers appear to justify that reaction. While most cancer drugs -- especially those indicated for a form of breast cancer -- generally show exceptionally strong sales trajectories for several years after launch, Nerlynx's sales are clearly starting to flatten out only a little over a year after the drug's debut. 

Now what

Is this 37% drop in Puma's share price justified? The good news for shareholders is that this sell-off is probably way overdone. Nerlynx's sales, after all, are widely expected to pick up as the drug's international footprint expands. In fact, Puma's shares were only trading at a forward-looking (2019) price-to-sales ratio of 4.3 prior to this downturn. That's a rock-bottom valuation for a cancer drug company. 

The take-home point is that Wall Street seems to be overreacting to Puma's third-quarter report. Bargain hunters, therefore, might want to consider picking up some shares of this promising biotech, especially if this marked sell-off holds into tomorrow's session.  

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.