Why Puma Biotechnology Shares Are Crashing 18.2% Today

By Todd CampbellMarketsFool.com

What happened

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Puma Biotechnology(NASDAQ: PBYI) stock has plummeted 18.2% as of 12:53 p.m. EDT following news that Dr. Robert Charnas, its head of regulatory affairs and project management, is hitting the exits ahead of a scheduled Food and Drug Administration (FDA) advisory panel meeting on May 24.

So what

Puma Biotechnology has only one product in its clinical-stage drug pipeline, and that drug, neratinib, has been the subject of a lot of scrutiny after trials showed that a large number of patients taking it suffered from high-grade diarrhea.

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Puma Biotech's CEO Alan Auerbach hired Charnaslast year to help get neratinib across the regulatory finish line. Previously,Charnas worked at Johnson & Johnson in its research and development department. He was responsible for ongoing development of Zytiga, a prostate cancer drug that J&J acquired in 2009 when it bought Auerbach's previous company, Couger Biotech. Charnas joined Cougar in 2008.

Yesterday, Puma Biotech said Charnas is leaving because of health reasons. However, there's some conflicting information circulating that there may have been some disagreements between him and his co-workers. If so, no one is saying for sure what those disagreements were about.

Now what

News of his departure so close to the FDA advisory committee meeting is disconcerting, regardless of Charnas' reasons for leaving.

After all, neratinib is far from a lock to win the committee's recommendation for approval. It's being considered as an extended maintenance therapy to help delay disease recurrence in breast cancer patients who have previously been treated for one year with Herceptin. In trials, neratinib hit its mark in terms of efficacy, but many of its patients reported severe diarrhea.

In hopes of overcoming a rejection because of this safety risk, Puma Biotech has been studying the use of the anti-diarrhea drug loperamide and steroids alongside neratinib. Ideally, a diarrhea incidence rate below 20% would be desirable, but interim trial results showed a 27% rate of grade 3 or higher diarrhea when using loperamide. Steroids may lower that rate further, but their use can cause other unwanted side effects.

It's anyone's guess what will happen at the advisory committee meeting, or what the FDA will ultimately decide to do with neratinib's application. Nevertheless, I think the risk of failure is too high to recommend buying shares ahead of a decision.

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Todd Campbell has no position in any stocks mentioned.His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Johnson & Johnson. The Motley Fool has a disclosure policy.