Puma Biotechnology's Alan Auerbach Hopes to Catch Lightning in a Bottle (Again)

By Motley Fool StaffMarketsFool.com

After developing the top-selling prostate cancer drug Zytiga, healthcare entrepreneur Alan Auerbach sold Cougar Biotech to Johnson & Johnsonfor $1 billion back in 2009. Today, Auerbach is at the helm of Puma Biotechnology(NYSE: PBYI), a clinical-stage biotech that could get a FDA nod of approval for a breast cancer drug next year. Will Auerbach's success in the past help make Puma Biotechnology an investor's best friend?

In this clip from The Motley Fool's Industry Focus: Healthcarepodcast, analyst Kristine Harjes and contributor Todd Campbell discuss Auerbach's plans for Puma and the risks he'll have to overcome to cross the finish line.

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A full transcript follows the video.

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This podcast was recorded on July 27, 2016.

Kristine Harjes: One last company and person that we wanted to talk about today. His name is Alan Auerbach. This is the CEO of Puma Bio.

Todd Campbell: Yeah, Puma Bio is a very, very interesting company. It's been a roller coaster ride for long time Puma Bio investors. Shares took off back in 2014 on positive data for a drug for breast cancer that they were working on called Neratinib. However, concerns over safety that emerged because of some grade 3 and 4 cases of diarrhea kind of weighed down shares, and as a result they've retrenched a lot. However, investors may not want to be giving up on Puma at this point, because Auerbach is the person who's successfully behind the development of the top-selling prostate cancer drugs Zytiga, which now generates out about $2.4 billion in annualized revenue for Johnson & Johnson. Johnson & Johnson bought Cougar back in 2009 for about $1 billion. Puma Biotech, his new company, has just filed for FDA approval of its breast cancer drug Neratinib. It could have a drug theoretically that hits the market next year.

Harjes: Despite some of these issues that you mentioned with patients suffering from diarrhea, which it does of course mean that compliance could be an issue, they are looking at using another drug alongside of it to try to minimize some of that, and it's worked to some efficacy so far. It's a drug that's a tyrosine-kinase inhibitor. In theory, it should stop a process called signal transduction in order to halt the spread of breast cancer. As you likely know, breast cancer is extremely prevalent, so this is a market that could really, really use some new treatments available. There are about 1.6 --

Campbell: Right, Kristine! 1.6 million new cases of breast cancer every year. It's major health issue. Obviously, anything that can be done to delay the progression of breast cancer is important. At first, the approval is for its use in the adjuvant setting, so it's going to be used to try and help delay the progression of the disease after patients have already been treating with other drugs like Herceptin. But that could still be a very big patient population. Given the fact that Puma's market cap is only about $1.4, $1.5 billion, there could be some value in stepping up and paying attention to this one too.

Harjes: They're definitely tiny at the moment. As you mentioned, they used to have a much larger market cap, back in mid 2014 they peaked at around $8 billion. All things considered, if they can get back up to that level, those are some really strong gains from current levels. But it's a risky stock, too.

Campbell: Yeah. You never know how the FDA is going to view some of these things. I think that adding the agent that can help control the likely of the diarrhea side effects is important, and that could resolve a lot of FDA concerns regarding safety. Diarrhea does occur in cancer treatment, so it's not something like this is the only drug where this happens, but it is something that raises some question marks and makes me wonder, what are the odds of approval? We don't know. Again one to pay attention to, but it is a little bit risky.

Kristine Harjes owns shares of Johnson and Johnson. Todd Campbell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Johnson and Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.