Puma Biotechnology Shares Tumble +25%, Citi Remains Optimistic Despite 'Challenges'

In a report published Sunday, Citi analyst Yaron Werber warns investors of upcoming challenges for Puma Biotechnology (NYSE: PBYI) following the announcement that the phase 2 monotherapy cohort of neratinib in HER2+ brain metastases failed to meet its primary endpoint.

ASCO Meeting: PB272 Results

At the American Society of Clinical Oncology (ASCO) 2014 Annual Meeting, Puma announced the “positive” phase 2 results of the company's investigational drug PB272 (neratinib) for the treatment of HER2 positive metastatic breast cancer that has metastasized to the brain. Despite the initial indications of activity, the company announced serious adverse effects from the drug.

The press release states, “The results for the first cohort of the study presented showed that the most frequently observed severe adverse event for the 40 patients evaluable for safety was diarrhea. In the first 12 patients treated in the study, there was no prophylaxis with antidiarrheal agents (loperamide) given in order to try to reduce the neratinib-related diarrhea. In these 12 patients, 29% of the patients experienced grade 3 or higher diarrhea and 25% experienced grade 2 diarrhea.”

In the second cohort, the patients were treated with low doses of loperamide to reduce the neratinib-related diarrhea. Although the numbers were reduced, Puma has continued to treat patients with higher doses of loperamide to reduce the ill-effects.

ALTTO Trial Misses Endpoints

The company also announced that the ALTTO trial in 8,381 women missed its primary DFS endpoint at the ASCO Meeting.

Citi analyst Werber wrote, “Tykerb + Herceptin increased DFS by a modest 2% over Herceptin alone (p=0.048) but it missed the bar for stat sign (p<0.025). We believe this failure is due to an underpowering of the study as the number of DFS events was much lower than expected likely due to enrollment of lower risk patients (40% LN- and 45% tumor size ≤2cm). High rates of diarrhea limited Tykerb's efficacy as only 60%-78% of women were able to get >85% of the planned dose of Tykerb. To us, this shows how difficult it is to show a benefit in the adjuvant setting and is the reason why we are cautious on the outcome for neratinib is the adjuvant ExteNET setting.”

Concern Over Utility of pCR

Following ALTTO's negative results, the analyst questions “the utility of pCR as a surrogate endpoint in neoadjuvant studies.” Data from Perjeta's APHINITY and neratinib's ExteNET studies will aid in pCR's fate. Werber commented that the FDA is likely to keep pCR as a surrogate endpoint as the studies do not test if pCR is predictive of clinical EFS/OS benefits in the neoadjuvant setting.

Citi added, “But we admit that this might be a mute-point and FDA may buckle to the academic pressure if future adjuvant studies are negative. In general, the rate of success in the adjuvant setting across several solid tumors has been abysmally low.”

Citi Remains Optimistic

Citi has a Buy rating and $123.00 price target on Puma Biotechnology. The analyst believes “neratinib will become a part of the standard of care of neoadjuvant therapy along with Herceptin+Perjeta with approval possible in 2017. In addition, we anticipate that neratinib will replace Tykerb in 3rd line and in women with brain mets starting in H2:16.”

The analyst added that the potential for neratinib+Torisel for HER2-mut lung cancer is intriguing.

Stock Action

Shares of Puma Biotechnology closed at $76.43 on Friday. In pre-market trading, the stock fell more than 19 percent to $64.00. Shares have continued to trend lower. Puma is currently trading at $60.50, down more than 26 percent from Friday's close.