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Epizyme: Strong Early Data But Reserving Judgment Until Final Results
- Early data read outs from EPZ-6438 were robust.
- Results open up potential to dose the drug at higher levels and for more cycles which could potentially lead to more and stronger tumor responses.
- EPZ-6438 more likely to be part of combination therapy than used as monotherapy.
- Data on WT EZH2 activity in NHL opens up new market for EPZ-6438.
- Updating Price Target to $35.32/share. Reiterate Buy rating.
Puma Biotechnology: Shares Overbought At Current Levels
- ExteNET data too limited to derive any definitive conclusions on strength.
- 1 year of Neratinib after 1 year of Herceptin treatment paradigm is debatable as year 1 adjuvant treatment with Herceptin is likely to be replaced by other more potent drugs.
- FDA likely to consider short term and long term HERA data on 1 year versus 2 years treatment with Herceptin to reach regulatory approval decision on Neratinib.
- Significant diarrhea issue yet to be resolved.
- Updating Price Target to $74.70/share from prior $61.88/share to account for ExteNET data. Sell rating on the stock.
Epizyme: Undervalued Rare Asset With Outsized Potential
- Lead drugs EPZ-5676 and EPZ-6438 are first-in-class HMT inhibitors that are backed by significant scientific literature and strong preclinical data.
- Considerable opportunity for short-term gains as investors buy shares ahead of clinical data expected in 2H14. Stock is expected to run up substantially in the interim.
- The bar for FDA approval of the company’s drugs is set relatively low as the agents are being developed to treat relapsed and refractory patients with ultra rare disorders.
- Story is significantly derisked as Celgene, GlaxoSmithKline, and Eisai are funding most of the company’s drug development pipeline.
- I derive a sum-of-the-parts based Price Target of $33.28/share with considerable opportunity for upside over the next few months and years.
Puma Biotechnology: Risk Reward Imbalance
- No impact of interim results of the Phase II study evaluating Neratinib in HER2+ breast cancer with brain metastases on the drug's revenue generation capacity in the disorder.
- Pathological Complete Response (pCR) rates associated with neo adjuvant breast cancer studies will remain an approvable end point at least until the APHINITY trial data are reported.
- Key impact on Neratinib from the ALTTO study was the outstanding performance of Herceptin.
- Reducing Price Target to $61.88/share based on greater risk of Neratinib failing in the adjuvant setting and lower market penetration in neo adjuvant disease due to continued high diarrhea rates.
Puma Biotechnology: ISPY2 Data Added Little To The Neratinib Conversation
- Bayesian probabilities confound pCR results.
- Diarrhea results inconclusive.
- Upcoming data from NSABP study has the answers.
- Adjusting Price Target to $76.26/share to reflect multiple contraction.
Puma Biotechnology: A Short Thesis For Investors
- Lead asset Neratinib is not best in class or first in class. Significant Grade 3 or 4 diarrhea is a major side-effect.
- The drug carries the risk of class effect given it’s similarity to Tykerb that doctors use sparingly due to toxicities.
- Given that Neratinib in most indications will be 3rd or 4th to market, PBYI will find it challenging to promote the drug in a space dominated by Roche.
- Although, Neratinib is being studied as treatment for various types of HER2+ breast cancer, the clinical and regulatory pathway for most indications is unclear.
- I believe the class effect and toxicity risk associated with Neratinib are being overlooked in the stock’s current valuation. My PT of $86.27/share reflects an appropriate risk rate.
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