Puma investors look for second lightning strike

If anyone can be said to be confident that the biotech dream can become reality not once but twice then it is the investors who have just put $120m into Puma Biotechnology in its NYSE debut, making the one-project company’s float the biggest of any US biotech this year.

Puma is run by many of the same executives, including CEO Alan Auerbach, who had founded and sold Cougar Biotechnology to Johnson & Johnson in 2009, and it has done little to disabuse investors of the hope that lightning can strike twice. Even its logo is a near-identical version of Cougar’s. But despite a host of ongoing mid-stage studies in breast cancer, it will be some time before the company has the chance to back up its valuation with hard data.

IPO struggles

Puma’s success in getting the NYSE float away lies in stark contrast to the struggles endured by the small band of other recent biotech IPOs (IPO prices sheared as companies continue to take haircuts, August 14, 2012). Excluding Xizang Haisco Pharmaceutical, which raised $127m on Shenzhen’s Small and Medium-Sized Enterprises Board in January, Puma’s float is the biggest since Clovis Oncology raised $130m last November.

Even Clovis had to scale back expectations. Not so Puma, which as of an end of September S-1 filing was seeking to raise up to $86m; by Friday this amount had been increased three times, with the number of shares offered also being hiked from an initial 5,300 to the current 6,700.

At the $16-per-share offering price Puma floated valued at $321m, boasting a pro forma cash balance of $153m. And as if its performance in the IPO pricing process had not been impressive enough, the stock climbed 40% in its first day’s trading to close at $22.38.

The company was perhaps not a float in the purest sense, since it already had an OTC bulletin board listing thanks to a reverse takeover a year ago. But what is surprising is that the NYSE listing confirmed the valuation achieved on the bulletin board, which is seen as a low-liquidity market that often generates hugely overblown and unrealistic valuations.

Clearly the expectations are huge and management will look to neratinib, a pan-Her2 tyrosine kinase inhibitor acquired from Pfizer that is Puma’s only clinical-stage compound, to deliver (New company Puma roars with Pfizer licensing deal, October 6, 2011).

Plans scaled back

Puma took over an extensive clinical study programme for neratinib – clinicaltrials.gov lists seven active phase II or I/II trials in various breast cancer settings, where the biotech company’s name has substituted Pfizer’s in the trial entry.

But that strategy has been scaled back, with development of oral neratinib to focus mainly on a phase III trial due to begin shortly in second and third-line Her2-positive breast cancer, followed by phase II in a small subset of non-small-cell lung cancer patients with the Her2 mutation. 

Her2-positive metastatic breast cancer is currently treated with Roche’s Herceptin and Perjeta, while GlaxoSmithKline’s Tykerb is approved second line. Puma highlights the median progression-free survival of 40.3 weeks that Her2-positive second-line patients reached in a phase II trial of neratinib, versus the 27.1 weeks that Tykerb showed in phase III.

Among the studies in that are no longer a focus for Puma is a huge phase III trial in 2,842 Her2-positive patients treated with Herceptin in the adjuvant setting, testing neratinib’s effect on reducing the risk of recurrence. Enrolment was terminated this month, and the study is being wound down.

A 126-patient phase II trial in the neoadjuvant setting is to continue but will not complete for another five years, as will an investigator-sponsored phase II study in 45 breast cancer patients with brain metastases.

Analysts on the whole have taken a bullish view, and EvaluatePharma calculates a 75% risk-adjusted NPV of $499m for neratinib. But without any obvious near-term clinical data triggers, investors might have to settle in for the long haul in the wait for a buyout deal.

To contact the writer of this story email Jacob Plieth in London at [email protected]