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PCYC Earns Milestone Payments on Imbruvica

Zacks Equity Research

The confirmation of the validity of Janssen’s (a Johnson & Johnson (JNJ) company) marketing application for oncology drug Imbruvica (ibrutinib) by the European Medicines Agency triggered a $50 million milestone payment to partner Pharmacyclics Inc. (PCYC) from the former.

The news from Europe comes close on the heels of the U.S. Food and Drug Administration (:FDA) clearing the drug as a monotherapy for treating patients suffering from mantle cell lymphoma (:MCL). The patients were treated at least once previously for the disease. Imbruvica will compete with drugs like Celgene Corporation’s (CELG) Revlimid in the MCL market. Imbruvica is also being studied for other indications.

The U.S. approval had triggered a milestone payment of $60 million from Johnson & Johnson to Pharmacyclics bringing the total milestone payment earned by the latter to $110 million in the final quarter of 2013. We note that Pharmacyclics had received milestone payments of $275 million under its agreement with Janssen as of Sep 30, 2013. With the company earning $110 million in the fourth quarter of 2013, Pharmacyclics is eligible to receive further payments of up to $440 million under the deal.

There were further activities regarding Imbruvica at Pharmacyclics. Following the U.S. approval of Imbruvica for MCL, Pharmacyclics inked a supply deal with China based WuXi PharmaTech (Cayman) Inc. (WX).

We are positive on Pharmacyclics’ deal with WuXi Pharma given the expertise of the Chinese contract research firm in the relevant field. Moreover, Pharmacyclics stated that the FDA issued no form 483 observations after inspecting WuXi Pharma’s manufacturing facilities in August this year.

While Pharmacyclics holds a Zacks Rank #2 (Buy), WuXi Pharma is a better-ranked stock with a Zacks Rank #1 (Strong Buy).

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