Pharmacyclics Incurs Q2 Loss, Revenues Up on Imbruvica Sales - Analyst Blog


Pharmacyclics , Inc .'s ( PCYC ) second quarter 2014 loss (including stock-based compensation expenses) of 49 cents per share was wider than the Zacks Consensus Estimate of a loss of 20 cents. Moreover, loss in the second quarter of 2014 compared unfavorably with the year-ago earnings of 17 cents per share. Results in the quarter were hurt by higher expenses.

Pharmacyclics, Inc - Earnings Surprise | FindTheBest

Total revenue in the second quarter of 2014 jumped to $113 million from $54.7 million in the year-ago quarter, well above the Zacks Consensus Estimate of $90 million. Revenues in the quarter included Imbruvica sales of $109.5 million. We remind investors that Imbruvica was approved by the FDA on an accelerated basis for treating mantle cell lymphoma (MCL) patients in Nov 2013.

Pharmacyclics gained accelerated FDA approval for treating chronic lymphocytic leukemia (CLL) patients who have received at least one prior therapy for the disease in Feb 2014.  Full approval for treating CLL patients who have received at least one prior therapy was gained from the FDA late last month. At the same time, full approval for the treatment of CLL patients (treatment naïve as well as experienced) with deletion of the short arm of chromosome 17 ( del17p) was also obtained.  

Regular approval of Imbruvica for the del 17p CLL indication triggered a milestone payment of $60 million from partner Janssen, a Johnson & Johnson ( JNJ ) company. This will be recognized in the quarter ended Sep 30, 2014. The deal on Imbruvica was inked in Dec 2011 resulting in an upfront payment of $150 million to Pharmacyclics. Pharmacyclics stated in its press release that it has earned milestone payments worth $505 million (inclusive of the $60 million referred above) so far. Pharmacyclics is eligible to receive further milestone payments of up to $320 million.

Both adjusted research & development (R&D, up 25.8%) costs and selling, general & development (SG&A, up 30.7%) expenses were on the upswing during the quarter. The company expects R&D expenses to keep on increasing during the coming quarters due to its pipeline development efforts. Costs associated with the expansion of marketing activities in the preparation of the anticipated launch of Imbruvica in Europe will push up SG&A costs. We note that Pharmacyclics shares 50% of these costs with Janssen.

The EU approval of the drug for the MCL and CLL indications is on track with the European Medicines Agency's Committee for Medicinal Products for Human Use recommending the same last month.

We expect the stock to react negatively to management's decision of not providing a revenue guidance.

Pharmacyclics holds a Zacks Rank #3 (Hold). Better-ranked stocks in the health care sector include Actelion ( ALIOF ) and Celgene Corporation ( CELG ). Both stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CELG , ALIOF , JNJ , PCYC

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