Puma Biotechnology Inc (NYSE:PBYI) just announced its abstract for an upcoming 2016 San Antonio Breast Cancer Symposium (SABCS), which will take place on December 6 – 10, 2016, in San Antonio, Texas. The company took a dive on the announcement, and while today’s market has seen a bit of early morning strength, it’s far from recovered, and it looks as though the company is going to be heading into the final month of the year at a bit of a discount.

The thing is, we think that this discount might be an opportunity to load up ahead of a recovery. The data isn’t great, but it’s not that bad, and we think markets will soon realize this and – in turn – sentiment will shift towards a normalization.

Here’s why.

First, a quick look at the drug, and what all the fuss is about.

The drug is called neratinib, and Puma is developing it as a breast cancer target. Specifically, it’s going after early stage HER2 breast cancer patients, who have already received Herceptin (the standard of care in this adjuvant focus indication) as an adjuvant treatment.

Efficacy data is very strong, and the drug has been shown to improve progression free survival (PFS) in patients that underwent neratinib treatment. There’s a downside, however, and it’s rooted in the adverse event profile of the drug.

Basically, the drug causes pretty severe diarrhea in a high proportion of patients. Specifically, grade three diarrhea, which is defined as an increase in total stools of 7 or more daily, accompanied by incontinence. It’s generally not regarded as hospitalization-inducing (this is the primary differentiator between grade three and grade four) but it can be dangerous in some patients, and it goes without saying its unpleasant.

The company identified the issue pretty early on in the development timeline, and has spent its time since trying to put together a regiment that can maintain efficacy in PFS, while reducing diarrhea incidence rate. It’s found one, and the regimen is neratinib plus something called loperamide. Still, however, grade three diarrhea occurs in 27% of patients (an improvement on the 40% without loperamide, but not great), and it’s this data that has sent the company tumbling.

So what’s our thesis on a turnaround?

Well, Puma has some accompanying (interim) data that suggests the addition of a steroid called budenoside reduces the rate to 12.5%. It’s not great to have to buddy up so many drugs, but that number is likely going to be far more acceptable for the FDA when it comes to making the final decision.

That’s not all, however.

The grade three diarrhea AE came about as part of the first cycle (the first 28 weeks) and looks to be restricted to this period. It’s a reasonable assumption that patients will be willing to accept the likelihood that they have a close to one in three chance of serious diarrhea, if it’s limited to the first 28 days of what might be a year or more worth of treatment. No, it’s not pleasant, but at this stage of cancer development, and especially in something lie breast cancer, which can be extremely aggressive beyond the early stages, it seems the cost benefit falls in favor of the long term benefit side of the equation.

Finally, there were no (or very very few) hospitalizations in the control arm of the study (these are the ones that just took neratinib). In other words, even with no combination to reduce severity, the chances of patients requiring hospitalization on the back of drug related AEs are very slim. This is the kind of thing that will draw the lie between approval and decline for the agency, and while it’s on the edge as a single therapy, with a combo, neratinib looks to be very much on the right side of this line.

The important thing here is that the company has demonstrated a marked effect on progression free survival. Yes, there are some pretty nasty side effects, but the FDA is regularly faced with these sorts of cost benefit decisions in oncology – that’s the nature of oncology. It makes far more sense to allow the drug to hit markets, and let the patient/physician determine whether that patient is able/willing to accept the side effects.