(By Rich Bieglmeier) Although the market stunk it up in the back-half of last week, some stocks still got some love from Wall Street. Coal stocks such as James River Coal Co. (JRCC) and Alpha Natural Resources, Inc. (ANR) dominated the top of accumulation screen. The higher Mitt Romney's poll numbers go; the higher coal stock prices are sure to follow.
Since we covered Alpha Natural Resources last week, iStock will direct its attention to a different industry this week.
Puma Biotechnology, Inc. (PBYI) exploded on Friday. The development stage biotechnology company moved to the New York Stock Exchange from the OTC Bulletin Board and completed a secondary stock offering of 7.5 million shares at $16. Another 1,125,000 will be available for the next 30 days at $16. It's a pretty good bet they'll be in high demand for the underwriters.
Puma is a one tick pony at the moment with one cancer drug in the pipeline. PB272 (neratinib) is a potent irreversible tyrosine kinase inhibitor, or TKI which is management believes can be used to treat gastric and breast cancer. The drug is currently in phase II as an oral treatment for patients with HER2-positive breast cancer.
According to breastcancer.org, the HER2 (human epidermal growth factor receptor 2) gene makes HER2 proteins. "HER2 proteins are receptors on breast cells. Normally, HER2 receptors help control how a healthy breast cell grows, divides, and repairs itself. But in about 25% of breast cancers, the HER2 gene doesn't work correctly and makes too many copies of itself (known as HER2 gene amplification). All these extra HER2 genes tell breast cells to make too many HER2 receptors (HER2 protein overexpression). This makes breast cells grow and divide in an uncontrolled way."
The Mayo Clinic says HER2 is the cause of one out of five breast cancers, and elevated levels of HER2 can occur in many types of other cancers. Unfortunately, for our mothers, grandmothers, sisters and wives, one in eight women will be diagnosed with breast cancer. BreastCancer.org reports, "In 2011, an estimated 230,480 new cases of invasive breast cancer were expected to be diagnosed in women in the U.S., along with 57,650 new cases of non-invasive (in situ) breast cancer." The nasty disease claims the lives of nearly 40,000 loved ones per year. In total, there are approximately 2.6 million women living history of breast cancer.
The sick math adds up to approximately 58,000 cases of HER2 cancer per year, plus an additional 500,000+ women who were previously diagnosed. Clearly, PB272 has enormous potential. However, the drug isn't expected to be approved before 2014.
As of Friday's close, PBYI has a market cap of $448 million; although, the company has little to no revenue. Even if neratinib is a billion-dollar drug by 2015, at its current price, the company is way overvalued, in our view.
It appears the Street is betting on management. Puma is founded by a few of the same folks who started Cougar Biotechnology and peddled it to Johnson & Johnson (JNJ) for $1 billion in cash. Apparently, they have a thing for naming their companies after slang terms for women who date younger men, too: PUMA and COUGAR, coincidence?
Without a catalyst in the near-term, besides momentum, and a stretched out stock price for a company that only earned $23,000 in interest income for its most-recent quarter, iStock thinks the shorts will start to show up, soon.
With the combination of likely profit taking, shorts to come, and overvaluation, iStock would run away from Puma Biotechnology, Inc. (PBYI
), for now.