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Puma Biotech (PBYI) Q2 Loss Narrows, Nerlynx Drives Sales

Zacks

Puma Biotechnology, Inc. PBYI incurred a loss of $1.17 per share for the second quarter of 2018, narrower than the Zacks Consensus Estimate of a loss of $1.26 per share and the year-ago loss of $2.10.

However, the net loss included stock-based compensation (SBC) expense, representing a significant portion of overall expenditure. Excluding SBC, net loss came in at 59 cents per share, narrower than $1.38 in the year-ago period.

Total revenues consist of net product revenues from the sales of Nerlynx — the only marketed product of Puma Biotech — as well as the company’s license revenues. However, in the second quarter of 2018, total revenues recorded were $50.8 million, all of which were recognized as net product revenues. Sales marginally beat the Zacks Consensus Estimate of $50.41 million in the reported quarter. The company did not record any license revenues during the period.

Shares of Puma impressively rallied 18% in after-hours trading following its earnings release. However, the stock has plummeted 50.8% so far this year, underperforming the industry’s decline of 4.6%.


Quarter in Detail

Nerlynx was launched last July in the United States for an extended adjuvant treatment of HER2-positive early stage breast cancer in patients, previously treated with Roche’s RHHBY Herceptin-based adjuvant therapy. The drug generated sales of $50.8 million in the quarter under review, a sequential surge of 41.1% from $36 million recorded in first-quarter 2018.

On the conference call, the company mentioned that as of Jul 31, there are 2,076 active patients on Nerlynx, of which, an estimated 12% received the drug through specialty distributors and the rest through specialty pharmacies. The solid sequential increase in Nerlynx sales led to this share price rise in after-hours trading.

Nerlynx is however, under review in the EU for the same indication. In June, the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending a marketing approval for Nerlynx in Europe. The CHMP recommendation will now be reviewed by the European Commission (EC) to approve Nerlynx for the same disease with the decision expected in third-quarter 2018.

Puma expects to submit regulatory applications for Nerlynx in additional countries in the second half of 2018 as well as the first half of 2019.

Total operating costs (including SBC) in the second quarter were $92.2 million, up almost 18% year over year.

Research and development (R&D) expenses were $43.3 million, down 18.8% from the year-ago period owing to lower clinical study costs and stock-based compensation expenses. Puma expects its R&D costs to decrease in subsequent quarters as clinical studies wind down.

Selling, general and administrative expenses soared 61% year over year to $40.1 million due to higher external expenses for supporting the commercialization of Nerlynx.

Other Update

In July, Puma Biotech filed a regulatory application seeking an approval for Nerlynx in Canada. Notably, Puma entered into a collaborative agreement with Strata Oncology, Inc to drive patient enrollment in the phase II SUMMIT study on Nerlynx. Per the agreement, Strata will refer HER2-mutated advanced cancer patients identified through the Strata Trial for enrollment in the trial of PB272 neratinib.

Several additional studies on Nerlynx targeting different types of breast cancer patient populations and in earlier-line settings are under way. Also, multiple phase II combination programs evaluating Nerlynx for the treatment of breast cancer are on. Significantly, Puma hopes to present data from the phase III NALA analysis, assessing Nerlynx for addressing third-line HER2-positive metastatic breast cancer during thesecond half of 2018 or the first half of 2019. Previously, this data was supposed to be presented in fourth-quarter 2018. The company stated that the delay in data demonstration is because the event rate in the study has been coming in slower than expected.

Apart from the HER2-positive breast cancer indication, the company believes that neratinib holds great potential for treating many other cancers including NSCLC and other tumor types, which overexpress or have a mutation in HER2.

2018 Guidance

For 2018, Puma continues to envision Nerlynx sales in the range of $175-$200 million.

Puma Biotechnology, Inc. Price, Consensus and EPS Surprise

Puma Biotechnology, Inc. Price, Consensus and EPS Surprise | Puma Biotechnology, Inc. Quote

Zacks Rank & Stocks to Consider

Puma Biotech currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the healthcare sector are Gilead Sciences, Inc. GILD and Illumina, Inc. ILMN, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences’ earnings estimates have been moved 7.7% north for 2018 and 2.2% for 2019 over the past 60 days. The stock has gained 8.9% year to date.

Illumina’s earnings estimates have been revised 11.1% upward for 2018 and 8.9% for 2019 over the past 60 days. The stock has risen 52.6% so far this year.

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