J.P. Morgan Provides Thoughts on Puma Biotechnology Inc (PBYI) Post Conversation with Management

Today, while many news outlets attributed Puma Biotechnology Inc’s (NYSE:PBYI) collapse to the news that the biotech company is under investigation for allegedly failing to inform shareholders about changes in its breast cancer drug Neratinib, the volatility was actually triggered by SABCS abstracts containing updated data for Neratinib. The updated data indicated that the rates of diarrhea using the Loperamide prophylaxis regimen are worse – roughly twice the rate seen when data were last formally updated.

After discussing with management, J.P. Morgan analyst Cory Kasimov is out with some thoughts:

“We wanted to briefly follow-up on our earlier thoughts on today’s volatility in PBYI trading after having an opportunity to speak with the company’s CEO, Alan Auerbach. The bottom line is that we continue to believe today’s sell-off is overdone.”

“He highlighted two key reasons as to why he believes grade 3 rates of diarrhea jumped since the last update at SABCS 2015. The first is non-compliance, which is something that has been discussed in some detail in the past. The second is that they doubled the number of clinical trial sites since the last update, and for many of them, it was their first time using this specific Imodium prophylactic regimen. Unfortunately the education and training around this wasn’t optimal. However, the incidence apparently decreases again as clinics better administer the regimen.”

“With regard to skepticism around the Imodium + budesonide regimen, he acknowledges why investors may be hesitant to read too much into the data with only 16 patients in the abstract. After all, there were only 23 patients when they first reported on the modified Imodium regimen last year,” the analyst continued.

As such, Kasimov reiterated an Overweight rating on shares of Puma Biotechnology, with a price target of $89, which implies an upside of 122% from current levels.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Cory Kasimov has a yearly average return of -10.% and a 36.5% success rate. Kasimov has a -3.4% average return when recommending PBYI, and is ranked #4071 out of 4209 analysts.

Out of the 5 analysts polled by TipRanks, 4 rate Puma Biotechnology stock a Buy, while 1 rates the stock a Hold. With a return potential of 93%, the stock’s consensus target price stands at $94.

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