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This is not a misprint: Puma Biotechnology Inc. (NYSE: PBYI) stock surged nearly 300%, or $176.63, to an all-time high of $234.99 intraday Wednesday.
Sending shares of Puma soaring was the company's announcement late Tuesday that its investigational breast-cancer treatment met its main goal in a late-stage phase 3 trial.
Some 4.41 million shares changed hands within the first hour of trading, compared to the stock's average daily volume of 411,453 shares.
With 1,699,005 shares sold short (betting the stock would decline), a chunk of today's volume no doubt came from short sellers racing to cover positions.
PBYI's stratospheric stock rise turned the development stage biopharmaceutical firm, with $1.78 billion market cap, into a $7 billion company overnight. Founded in 2010 and based in Los Angeles, Puma doesn't have a single drug yet on the market.
But that's likely to change now...
Potential for Puma (PBYI) Stock
Puma stock looks good now for a couple of reasons...
The results from Puma's investigational treatment were met with such an overwhelmingly optimistic response because they address HER2-positive breast cancers.
HER2-positive breast cancer is characterized by aggressive growth and a poor prognosis. It is also less responsive to hormone treatment than other cancers are.
In Puma's study, patients with HER2-positive breast cancer were either given the treatment, called neratinib, or a placebo for one year after surgery and treatment with trastuzumab (Herceptin). The 2,821 patients in 41 countries were then followed for two years.
Patients treated with neratinib showed a 33% improvement in disease-free survival over a placebo. Disease-free survival refers to the interim a patient remains alive and free of signs of the illness.
Based on the significantly positive outcomes, Puma will apply for U.S. regulatory approval in the first half of next year.
Neratinib is also being researched as a treatment for patients with non-small cell lung cancer and other solid tumors that have a HER2 mutation.
Analyst upgrades on PBYI followed the promising trial results. Citigroup hiked its price target on Puma to $292 from $99.
Citi sees Puma as a likely acquisition target, saying neratinib is likely to work in other cancers while the company has patent protection until 2030. Citi estimates Puma could fetch $291 to $351 a share in a takeover. The firm maintains a "Buy" rating on the stock.
A potential buyer could be Pfizer Inc. (NYSE: PFE). Puma presently licenses neratinib from the drug giant.
Puma just amended its licensing agreement with Pfizer, under which it was obligated to pay Pfizer incremental yearly royalties of neratinib between 10% and 20%. Puma will now pay Pfizer annual royalties on net sales of neratinib at a fixed percentage rate in the low-to-mid-teens.
Puma's share-price jump is a good illustration of the profit potential in biotech stocks. Despite Fed Chair Janet Yellen's comments last week that biotech stocks were overvalued, investors can find incredible opportunities in this sector.
Money Morning's BioScience Investment Specialist Ernie Tremblay has been alerting investors to the sector's best profit picks all year.
"We're investing in companies that are meeting a basic and critical human need - to treat and cure the serious illnesses that afflict us and cause us misery. That's real value. And that's what will drive bioscience stocks to move upward."
For more from Ernie Tremblay on where to make money in this sector now, read his BioScience Profit Outlook for 2014.
Related Articles:
- Wall Street Journal: Puma Shares Soar on Breast Cancer Therapy Study Results