) 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
Pharmacyclics, Inc - Earnings Surprise |
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 (
) 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
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 (
) and Celgene Corporation (
). Both stocks sport a Zacks Rank #1 (Strong Buy).
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