Earnings Beat at Pharmacyclics

Zacks

Pharmacyclics Inc.  (PCYC) reported earnings of 56 cents per share for the quarter ended Dec 31, 2012, below the year-ago earnings of 78 cents per share. Earnings were however ahead of the Zacks Consensus Estimate of 24 cents. Earnings fell short of the year-ago figure primarily due to lower revenues.

We note that Pharmacyclics changed its fiscal year end from Jun 30 to Dec 31, effective from Dec 31, 2012.

Quarter in Details

Total revenue for the quarter ended Dec 31, 2012, declined 25.6% to $58.0 million. Revenues during the quarter consisted of license and milestone revenues along with collaborative service revenues. Revenues beat the Zacks Consensus Estimate of $48 million.

Pharmacyclics received a clinical milestone payment of $50 million in the reported quarter under its collaboration and license agreement with Janssen Biotech, a Johnson & Johnson (JNJ) company. The company has received milestone payments amounting to $150 million under its agreement with Janssen so far. Pharmacyclics is eligible to receive further payments up to $675 million under the agreement.

Pharmacyclics also has a collaborative agreement with Novo Nordisk (NVO) under which Novo Nordisk acquired the worldwide rights of Pharmacyclics’ PCI-27483. PCI-27483 is being developed for the treating a restricted indication outside oncology. The company received $5 million from Novo Nordisk during the reported period.

Pharmacyclics’ total operating expenses for the quarter ended Dec 31, 2012 came in at $16.7 million, up 4% year over year. The company’s general and administrative expenses increased 62.4% to $6.4 million while research and development expenses declined 15% to $10.3 million.

Pipeline Update

Pharmacyclics’ lead pipeline candidate is ibrutinib which is being developed in collaboration with Janssen. The company currently has five late stage studies which are evaluating Pharmacyclics’ ibrutinib for the treatment of chronic lymphocytic leukemia / small lymphocytic lymphoma (CLL/SLL) and mantle cell lymphoma (:MCL).

We remind investors that in 2012 the company received orphan drug and fast track designations in the US for ibrutinib for the treatment of CLL. The candidate also enjoys orphan drug and fast track designations for the treatment of MCL.

Pharmacyclics is also developing candidates for the treatment of non-Hodgkin's lymphoma, refractory follicular lymphoma and multiple myeloma (MM). Most of these candidates are in phase II development.

We expect investors focus to remain on the development of ibrutinib. The company is in discussion with the regulatory authorities to develop the candidate further. Pharmacyclics, a biopharmaceutical company, currently carries a Zacks Rank #3 (Hold). However, Medivation, Inc. (MDVN), another bio pharma stock, is much more favorably placed. It carries a Zacks Rank #2 (Buy).

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