Puma leaps to biotech’s aid

Analysis

After the kicking biotech stocks took last week the sector was desperate for some good news, so yesterday’s positive readout from the ExteNET trial of Puma’s neratinib could not have come at a better time.

Perhaps the most important thing about the result is that it establishes neratinib in extended adjuvant use for breast cancer, a brand new setting in which Puma could have a monopoly. Whether the group is worth the $6.6bn at which it is valued this morning – or indeed the $13bn that UBS analysts see in a bull-case scenario – is another matter.

The stock has had a rollercoaster ride on growing doubts about neratinib’s potential in other uses. But with the benefit of hindsight this morning’s 270% share price surge shows that the post-Asco selloff, triggered by a read-across from the Altto trial of GlaxoSmithKline’s Tykerb, provided a great entry point.

Winning indication

Whatever doubts exist about other indications, extended adjuvant use, in which neratinib is given for a year after one year’s adjuvant Herceptin in Her2-positive breast cancer patients, looks like a winner.

A three-year cut of the phase III ExteNET data, including one year’s follow-up, has shown neratinib to be the first Her2-targeting agent to demonstrate a benefit in this setting, improving disease-free survival, the primary endpoint, by 33% versus placebo, with p=0.0046.

In comparison, the Hera study failed to demonstrate the benefit of extending Herceptin adjuvant use from one to two years. On a call yesterday Puma said it was aware of no other agents being tested in this setting, and thus it foresaw no near-term competition; US and European neratinib filings are due in the first half of next year.

Thus neither the incomplete recruitment into ExteNET nor the fact that this was a legacy Pfizer trial could derail it (How another low-profile trial could swing Puma, June 11, 2014). As for safety, this dataset has yet to be validated, but Puma says it expects neratinib’s notorious diarrhoea side effect to have occurred in 30% of patients; ExteNET did not use prophylactic Imodium.

One question is how real an indication this extended adjuvant use is. It might have been more logical to have added neratinib on top of Herceptin – as Roche is doing with Perjeta in the Aphinity trial; ExteNET does not show the benefit of neratinib over two years' Herceptin, though Puma will point to Hera’s failure as proof that two years’ Herceptin in any case is no better than one.

The group also said neratinib seemed to be working in certain populations where Perjeta and Kadcyla did not, and called this “yet another differentiating factor”.

Consensus 2020 sales for neratinib stand at $595m, according to EvaluatePharma, though estimates will now surge. UBS said yesterday that extended adjuvant use should lead to $1.7bn in 2020, with additional uses taking the total up to $2.5bn. Valuation polemics aside, the key point to remember is that Herceptin generates some $4bn a year in adjuvant breast cancer use.

Neoadjuvant read-through

ExteNET also had an important implication on possible use in the neoadjuvant, or pre-surgery, setting. The Altto study had cast doubt on the use of small studies as substitutes for much larger adjuvant trials in this use.

But Puma said ExteNET could act as a confirmatory trial – neratinib had earlier shown an arguably positive effect in the phase II neoadjuvant I-SPY 2 study – and could thus help with the neoadjuvant indication too.

A separate piece of positive news yesterday was the renegotiation of the deal under which Puma had licensed neratinib from Pfizer. In return for Puma taking on the cost of ongoing legacy trials – $30m this year – Pfizer agreed to lower the sales royalty Puma will owe it from a tiered 10-20% to a “fixed rate in the low to mid teens”.

Curiously, Puma seemed to suggest that it renegotiated the deal before revealing the ExteNET data, though it appears unthinkable that Pfizer would have agreed in the full knowledge that results were imminent.

Assuming that Pfizer was shown the data it could be argued that it is a bad sign that the big pharma group nevertheless decided not to pull the acquisition trigger. Still, since Pfizer already has a significant royalty interest in neratinib there seems little point in it shelling out megabucks to acquire Puma outright.

Puma might therefore not be any closer to being taken out, which some investors might have been hoping for. But given the valuation that the market is willing to ascribe to it, and the fact it might soon have a marketed drug in a huge new indication, that need not necessarily be a bad thing.

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobEPVantage on Twitter

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