Puma roars but neratinib's real value remains opaque

In some ways the astonishing 68% surge in the valuation of Puma Biotechnology yesterday – adding almost $1bn to the company’s market value – was predictable. A press release stating that its breast cancer drug, neratinib, had been judged to have a high probability of succeeding in phase III was always going to excite bubbly US biotech investors.

But clinical victory is not the only outcome investors are now pricing in; expectation of a takeout of the company and its unpartnered asset will also be boosting the share price. This unfettered optimism ignores both that neratinib has yet to be rigorously tested in anything close to enough patients to make a real call on its promise, and the fact that even if it does make it to market, Pfizer will be taking 10-20% of any sales.

Puma licensed neratinib from Pfizer back in 2011; the agreed royalties on net sales were part of that deal (New company Puma roars with Pfizer licensing deal, October 6, 2011). It remains the only product in Puma’s pipeline, and therefore accounts for the entirety of the company’s bloated $2.3bn market cap.

Presumably the plan is to find a buyer for the product and company at some stage, a strategy that chief executive Alan Auerbach pursued successfully with his previous company, Cougar Biotechnology (J&J goes hunting and bags a Cougar, May 22, 2009). With a proportion of sales already cornered, another licensing deal would leave even less economic interest for Puma itself.

Any interested acquirers will also have to take into account the existing royalty stream, plus any milestones, that become due should neratinib make it to market. This does not rule out third party interest – Astellas paid $4bn for OSI even though Roche had ex-US rights for its lead compound, Tarceva – but it does make Pfizer the most logical candidate.

And the pharma giant has already passed on the compound once before, and stands to benefit from the drug’s success. So there seem few reasons for the company to pay top dollar to regain neratinib before real proof of the drug’s potential is available – why would it want to shoulder the R&D bill, for a start? – and even if neratinib does live up to investors’ wildest hopes, Pfizer will not overpay for the remaining 80% of sales.

I spy data

The endgame aside, it is still very hard to judge the real value of neratinib, a pan-Her2 kinase inhibitor that is being tested in breast cancer. The phase II data that prompted the excitement were from an investigator-sponsored trial, I-Spy 2; results were hard to interpret given the complexity of the trial and the fact that much detail was held back for medical meetings. The fact that the drug was only tested in 65 Her2-positive patients – members of what is likely to be the eventual target population for the drug – also limits the conclusions that can be drawn.

These facts did not dampen the enthusiasm of Mr Auerbach, however; on a conference call he made it clear that he believes the results bode very well for the drug.

As well as pointing to strong potential in the neoadjuvant setting tested in I-Spy 2, the data gives confidence in what neratinib might do in the adjuvant setting, he said, a much bigger indication. Data from a legacy phase III trial started by Pfizer are due next year in this use.

He also pointed out that I-Spy 2 only tested neratinib plus chemotherapy – any move forward would see the agent added to Herceptin and possibly Perjeta or Tykerb, in line with current standard of care – which should further add to the efficacy of the drug. And he said that the I-Spy 2 results were likely worse case, as the investigators did not use anti-diarrhoeals that Puma now uses as standard in trials of the drug, due to GI side effects that the vast majority of patients experience.

These are bold conclusions to draw from a small trial. Yes, the investigators have deemed neratinib worthy to progress into phase III trials, and encouraging signs of activity are evident.

But it is too soon to predict phase III success, and bet on the phone call from Pfizer.

To contact the writer of this story email Amy Brown in London at AmyB@epvantage.com or follow @AmyEPVantage on Twitter

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