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Why Puma Biotechnology Stock Soared Today

What happened

Shares of the commercial-stage biotech Puma Biotechnology (NASDAQ: PBYI) rose by as much as 27.9% today on heavy volume. The spark?

Puma's shares were shooting higher today in response to the news that European regulators apparently are willing to reverse course regarding their decision on the biotech's controversial breast cancer drug neratinib. The drugmaker's shares have cooled off since their red-hot start but they remain up by a healthy 23.4% as of 3:46 p.m. EDT.

A female cancer patient staring out of a window.
A female cancer patient staring out of a window.

Image Source: Getty Images.

So what

Unlike the U.S. Food and Drug Administration (FDA) that granted the drug approval last year, European regulators rejected neratinib during its first official review roughly five months ago today. However, the company said that the European Medicines Agency agreed to re-examine that negative opinion, and all signs pointed to an eventual approval. That's a big deal because an approval in Europe should produce hundreds of millions in additional sales going forward.

Now what

Although European authorities still need to hold a final vote at their next meeting, Puma appears confident that today's re-examination will turn into a positive outcome for the drug. If so, Puma may be able to start generating sales in Europe before year's end. That's key because Puma's stock is arguably only fairly valued at present.

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In other words, this mid-cap biotech stock might be an outright bargain at current levels if this last major regulatory hurdle can be overcome and the company begins to generate sales for this all-important drug in the EU. In fact, Puma's shares presently may be trading at a price-to-sales ratio of less than 4 relative to its 2019 revenues. That's a steal for a commercial-stage biotech with an FDA- and EU-approved breast cancer drug.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.