Puma Biotech’s new cancer drug Nerlynx suffered a terrible quarter. What gives?

Puma Biotech has only retained commercial rights to its cancer drug Nerlynx in the U.S. and Japan after a series of licensing deals. But even the remaining U.S. launch doesn’t seem to be going well.  

In the first quarter, Nerlynx ginned up sales of $45.6 million, Puma said Thursday. That’s way below analyst expectations of around $66 million and didn’t even match up to the $50.8 million Nerlynx pulled in during the second quarter last year.

Executives on the Q1 call offered a lot of explanations, including an increase in the number of patients discontinuing therapy. That was the driving force behind the slowdown, the execs said, promising the company is working hard to improve those stats. But analysts want to wait until Q2 numbers come in before giving management a pass.

For starters, many patients who began treatment in early 2018 completed treatment in Q1, chief commercial officer Steven Lo said, because Nerlynx is given for a year in the extended adjuvant setting—that’s after Roche’s Herceptin as a first post-surgery therapy to help prevent a recurrence. But that doesn’t explain why new patients didn’t fill the gap.

One major shortfall analysts piled onto—and Lo acknowledged as “an important driver for the success of Nerlynx”—is patient discontinuations.

The company saw higher rates of discontinuation, primarily because of side effects in general, and diarrhea specifically, Lo explained. Some doctors didn’t prescribe any medications to prevent diarrhea, which Lo attributed to a lack of awareness. And even when doctors did, some patients may not have filled those prevention-oriented prescriptions, he said.

“To address the increase in discontinuations, we are continuing to increase our efforts of educating physicians, nurses and patients about the importance of anti-diarrheal management,” Lo said. “In addition to this, we have a concerted effort to re-educate doctors about dose reductions and dose holds to increase tolerability. This allows patients to stay on Nerlynx and not permanently discontinue.”

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Moreover, Puma suffered an unusually high sales force turnover in Q1. Among its 80 sales territories, 18 didn’t have a sales rep at some point in the quarter, which probably led to a decrease in patient volume, Lo said. Two factors caused the gap: Puma is competing with many other oncology drugmakers for talent, and the company was replacing some reps in underperforming territories.

Net pricing also came under pressure in Q1, as the gross-to-net gap grew to 18% from 4% in the previous quarter. That's mainly because of $2 million in Medicaid charges, Chief Financial Officer Maximo Nougues said.

Based on the poor Q1 performance, Puma dialed down its full-year expectations to $220 million to $240 million, versus $255 million to $280 million previously. The lowered guidance depends on quarter-over-quarter sequential growth of 12% to 20% through the rest of the year, RBC Capital analyst Kennen KcKay noted. Lo, for his part, said physicians will be more comfortable managing side effects as they gain more experience with the drug.

Now that only two sales vacancies remain, and the company has poured a lot of resources into re-educating physicians and patients, the total number of bottles prescribed in April increased 20% over March, reaching 1,600, according to Lo. But analysts from Cantor Fitzgerald, SVB Leerink and J.P. Morgan all wanted to see more.

“We still think that some risks remain to 2019 guidance unless we see a significant rebound in volume,” Cantor analyst Alethia Young wrote in a Friday note to clients. She even went so far as to suggest a “significant overhaul” to the commercial team as “the company has provided many reasons why we have seen bumpy quarterly trends for Nerlynx” since launch, but also cautioned that a makeover at this point might cause greater disruption.

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SVB Leerink’s Thomas Smith, for his part, said the Q1 miss “may fuel concerns that Nerlynx sales may have peaked in the currently approved HER2+ extended adjuvant setting,” despite a monthly uptick in April. For that, he also said he’d prefer to stay on the sidelines on the drug’s future.

The drug does have one near-term upside—an opportunity for label expansion if it can pull it off. The company recently unveiled data from a phase 3 trial in third-line breast cancer. While the drug showed significant improvement at stalling tumor’s progression, it only showed a numeric benefit at extending patients' lives.

As Smith wrote in his Friday note, the comparator drug used in the trial, Novartis’ Tykerb, is no longer considered the standard of care in the third-line setting, and sales of that drug have been steadily declining. Industry leaders polled by SVB Leerink suggested that “using Tykerb as a comparator may have limited commercial relevance unless the magnitude of benefit over Tykerb is overwhelming.”

The company will present full data at the upcoming American Society of Clinical Oncology meeting in early June. CEO Alan Auerbach said Puma has met with the FDA on the new indication and is now planning to file for approval in June or July.