Here’s What Just Happened With Puma Biotechnology, Inc. (NASDAQ:PBYI) and CymaBay Therapeutics, Inc. (NASDAQ:CBAY)

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Monday was a big day in the biotechnology space. A number of companies moved on various inputs, with some logging gains and other taking hits. Here’s a look at two early week movers in the sector, what’s driving the action and where things are likely to go next.

The two companies in focus for the session today are Puma Biotechnology, Inc. (NASDAQ:PBYI) and CymaBay Therapeutics, Inc. (NASDAQ:CBAY).

First up, then, Puma.

This one’s a classic biotechnology move. The company announced on Monday that the Food and Drug Administration (FDA) in the US has approved one of its lead development candidates. The drug in question is called NERLYNX (scientific name, neratinib) and the latest approval green lights it for the treatment of patients with early stage HER2-overexpressed/amplified breast cancer. It’s what’s called a once-daily oral tyrosine kinase inhibitor. This category of treatment has been grabbing headlines in the sector over the last few years, with tyrosine kinases having long been a potential target in oncology therapy. They are a type of enzyme that play a role in a range of cell processes – processes primarily associated with replication (things like signaling, protein activation, DNA replication, all that good stuff). In cancer cells, the TK process is exaggerated in the sense that it leads to the unchecked proliferation that’s associated with the disease. Unchecked proliferation translates to metastasis and – in turn – a poor prognosis.

So, by inhibiting theses enzymes, the idea is that the drug can stop the disease progressing through aggressive replication.

Anyway, that’s the MOA. The key thing here is that Puma was able to demonstrate that the drug worked in this indication and – just as importantly – worked safely. IN turn, on the back of this demonstrable clinical benefit, it’s been able to get the regulatory authority in the US to green light it for commercialization.

Markets are responding just as might be expected to the news, with the company currently trading at a significant premium to its pre-announcement market capitalization. Ahead of the news, Puma was trading in and around $86 a piece. During after hours trading (the announcement came after the markets closed), Puma ran up to $93 a share.

We expect this one will continue to trend upwards as the session kicks off on Tuesday and standard participation jumps in on the trend.

Next up, CymaBay.

This one is a two input move. The company announced some date from an ongoing phase II study of a drug called seladelpar on Monday. The drug is targeting a condition called primary biliary cholangitis (PBC) is a long-term liver disease in which the bile ducts in the liver become damaged. As the bile builds up the liver can become damaged and scarred and this scarring can result in a long term failure of the organ. It’s a serious condition and – right now – standard of care therapies aren’t overly effective.

With seladelpar, then, the company is trying to fill the demand gap in this indication.

So, the data suggested that the drug looks to work, at least in principle. As per the analysis, which was a planned interim analysis, patients dosed showed (after 12 weeks of treatment) a significant reduction in alkaline phosphatase (AP) levels of 39% and 45% for the 5 mg and 10 mg groups, respectively. AP levels are a biomarker for severity in this condition and so a reduction in AP levels points towards a reduction of severity and an improvement in the disease.

So that’s the good news.

Almost immediately subsequent to the positive announcement, however, the company reported that it intends to sell 10 million shares of its common stock by way of an equity raise. Thus capital should fund through to completion of the ongoing trial, which is good news, but it’s also going to dilute current shareholders pretty heavily, which is not so good news. Dilution is part of the game at this end of the biotechnology sector and it’s something that shareholders generally know (and accept) that they are going to have to shoulder. With that said, it will almost always take the shine off a bit of positive news, and that’s what we’ve seen on this occasion. The company initially gained strength on the data announcement but has since given back some of its run. We expect it to taper out going forward into the middle of this week.

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