PropThink: PBYI Makes a Big Splash on the NYSE; Why all the Excitement?
By Jake King
Puma Biotechnology (NYSE: PBYI) uplisted to the New York Stock Exchange from the OTC Bulletin Board on Friday, generating significant trading interest in the stock and a 40% rally. The company was founded by some of the same executives who built and then sold Cougar Biotechnology for $1B to Johnson and Johnson (NYSE: JNJ) in 2009. Before noon Friday, more than 1.8M shares had already traded hands, a stark contrast to the stock's 17,000 average. Puma also increased the size of its previously announced common stock offering from 6.5M to 7.5M shares today, priced at $16, with a 1.125M over-allotment for underwriters; the sale should generate more than $100M after expenses.
Puma is a relatively new cancer-focused drug developer and has only been trading publicly since April. The company's lead and only compound is PB272 (neratinib), an oral tyrosine kinase inhibitor being tested as a single agent and in combinations for metastatic and mutated breast cancer; the drug is in a number of Phase II trials. If management's track record is any indication, Puma hopes to find success in-licensing and developing clinically-tested cancer drugs. When Cougar was sold, the company had three products in late-stage development, including what is now known commercially as Zytiga; analysts estimate peak sales of $1B for the prostate cancer drug. The company is accruing significant capital through the latest stock offering, and may move to acquire another drug in the near future in order to expand its pipeline
The market is now valuing PBYI at over $450M, a valuation that very few single-candidate Phase II biotechs attain, and only then through significant analyst and market vetting. After trading only sporadically for the last six months, PBYI's action today is largely a result of increased liquidity and momentum due to the stock's NYSE listing. Friday's gains, while impressive, probably won't be sustainable for long. Profit-taking will further pressure PBYI in the near-term, and although interest in the stock should increase, the current $23 share price is overdone. Leerink Swann and Stifel Nicolaus both initiated coverage of the company in the last 6 months with price targets of $20 and $19 respectively, and we agree that a lower share price is more adequate for this young biotech until the market can more accurately evaluate the business.
PropThink is an intelligence service that delivers long and short trading ideas to investors in the healthcare and life sciences sectors. Our focus is on identifying and analyzing technically-complicated companies and equities that are grossly over or under-valued. We offer daily market coverage, weekly feature stories, and a newsletter to investors who subscribe on PropThink.com. To learn more, follow us on Twitter or visit us at http://www.propthink.com.
You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relation ships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. PropThink was not compensated to publish this article. Our full disclaimer is available at http://www.propthink.com/disclaimer.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: PropThink via Thomson Reuters ONE