Puma Biotechnology Inc. roared last week after the company sold 8.6 million new shares and started trading on the New York Stock Exchange.
Shares of the Los Angeles startup rose 40 percent during the week ended Oct. 24, closing at $21.70. That made it the biggest gainer on the LABJ Stock Index. (See page 48.)
Puma, founded in 2010 and publicly traded over the counter since April, is developing cancer treatments. While the company is still in its early stages, investors are likely bullish about Puma’s prospects because of the bona fides of its chief executive and co-founder, Alan Auerbach, and the success of his previous venture.
Auerbach founded Cougar Biotechnology, another developer of cancer treatments. That company sold to Johnson & Johnson in 2009 for $894 million.
Several Cougar backers, including Boston’s Adage Capital Partners GP and funds managed by T. Rowe Price Associates, invested in Puma before last week’s offering. Auerbach said he even named the new company Puma on the advice of former Cougar investors – since they are both names for the same animal.
“We have been very blessed to have a very large group of extremely supportive and world-class institutional investors who invested in Cougar and who invested in Puma,” Auerbach said. “If you look at the shareholder base, there’s a lot of consistency.”
There’s consistency, too, in the companies’ business strategy. Cougar licensed early-stage drugs that had been through at least some form of clinical trial from other firms, then developed the products. That’s what Puma is doing, too.
Puma last year licensed neratinib, an oral treatment for certain types of breast and lung cancers, from Pfizer Inc. Auerbach said working with drugs that have already been used in test patients significantly reduces risk in an inherently risky business.
“If you go earlier, you don’t know the risk profile of a drug and you also don’t know if the drug is going to be effective,” he said. “It’s a risk-mitigation strategy.”
Investors seem to like the approach. Puma raised $129 million in the offering that opened Oct. 18 and closed Oct. 24. Shares were priced at $16, but traded as high as $23.25 on Oct. 19, the company’s first day on the NYSE.
Puma plans to use proceeds from the offering on research, development and clinical trials of its drug candidates, according to filings with the Securities and Exchange Commission. If the drugs prove successful, it could lead to another big sale, although Auerbach said Puma could also license drugs to bigger firms or even become a drug maker itself.
