Saturday, February 25, 2012

Pharmacyclics: When The Power Of A Pipeline Overshadows The Market's Influence On Value

From Seeking Alpha

Maybe it is still a buy? I'm thinking of putting my money where leukemia is.

Pharmacyclic’s (PCYC) story is one of a few where the power of pipeline drugs has overshadowed the stock market’s technical influence on a biotech company's value. In other words, in the case of Pharmacyclics, investors should be looking for something extraordinary in the firm’s pipeline, in its choices of its programs, in its plans and strategies in developing its pipeline products and its capability of executing its plans and reaching its goals. Pharmacyclics’ Bruton’s tyrosine Kinase (BTK) inhibitor PCI-32765 therapeutic is unique. In December 2011, Pharmacyclics was granted U.S. patent that testifies to the drug’s exceptionality. It is, indeed, the first irreversible inhibitor in the BTK zone.

BTK is an important cell-signaling enzyme found in blood cells including B-cells. B-cell activation is driven by the B-cell receptor (BCR). Pharmacyclics’ PCI-32765 target BTK is a crucial part of the BCR signaling pathway, believed to promote cell proliferation, adhesion, and survival many types of B-cell cancers. So, by blocking BTK, PCI-32765 halts proliferation, disrupts tumor cell adhesion, and causes malignant B-cells apoptosis (cell death). Inhibition of BTK also blocks the recruitment and function of other immune cells including monocytes, macrophages and mast cells. Studies in mice have shown that orally-dosed PCI-32765 reduces the level of circulating auto-antibodies and can reverse the course of arthritis. PCI-32765 also inhibited production and the development of kidney disease in a mouse model of systemic lupus erythematosus ((SLE).

Therefore, PCI-32765 inhibition of BTK is expected to treat various human diseases associated with the abnormal activation of B-cells, including B-cell cancers, autoimmune diseases and other inflammatory diseases. PCI-32765 is orally active, selective and irreversible small molecule. It is in fact in clinical trials for B-cell cancers (chronic lymphocytic leukemia (CLL), small lymphocytic lymphoma (SLL), mantle cell lymphoma, diffuse large B-cell lymphoma (DLBCL) and multiple myeloma).

More important than hypothesizing based on literature, or relying on early preclinical observations, we preferred to wait for a clinical confirmation of the safety and efficacy of PCI-32765. We obtained the good news at the 53rd American Society of Hematology (Ash) Annual Meeting in December 2011. At that meeting, the director of Mantle Cell Lymphoma (MCL) Program at MD Anderson Cancer Center, University of Texas presented data demonstrating that PCI-32765 had a high rate of overall response as a single therapy in patients with relapsed or refractory mantle cell lymphoma, including patients that had been previously treated with bortezomib (Velcade®). The overall response rate was 71% in Velcade-naive patients and 65% in Velcade-exposed patients. At the time of this analysis 89% of responding patients have ongoing responses and the median follow-up was at 3.7 months. The most common adverse events were Grade 1 (mild) or 2 (moderate) fatigue, diarrhea and nausea. Three patients discontinued the study due to adverse events regardless of causality. Overall, these data supported Phase III evaluation of PCI-32765 as a single agent in patients previously treated for MCL.

Other presentations in the Ash meeting provided significant insight on the efficacy and safety of PCI-32765 in chronic lymphocytic leukemia and activated B-cell subtype diffuse large B-cell lymphoma. We found the results sufficient to confirm PCI-32765 therapeutic potential and validate Bruton’s tyrosine Kinase as a superior target for the treatment of the B-Cell cancers.

The performance of PCI-32765 in Phase II trials attracted many firms to partner with Pharmacyclics on the drug but PCYC preferred Janssen Pharmaceutical of Johnson & Johnson (JNJ) as its partner. The terms of the partnership agreement, including the $150 upfront payment, the additional $825 million milestone payments, the percentage of the contribution to the cost of development (Pharmacyclics 40% and Janssen 60%) while equally splitting the profits (or losses) worldwid,e has offered evidence of the importance of what Pharmacyclics has in hand.

Again we say that Pharmacyclic's uninterrupted stock rally is not based on market speculations, but on the mere refreshing reality of the firm’s pipeline. Bruton’s tyrosine Kinase (BTK) inhibitor drug PCI-32765 is the first irreversible inhibitor to show in the BTK domaine and we have reasons to believe that its oral pan-histone deacetylases (HDAC) inhibitor drug PCI-24781 (abexinostat hydrochloride) could be important among a few molecules in the epigenomics zone, contributing to the ongoing process of transforming basic science into applied science. We will tackle this program in a future article about Pharmacyclics

Both drugs and their targets qualify Pharmacyclics as candidate for takeover by large-pocketed pharmaceutical or biotech companies.

Simply said, Pharmacyclics has made huge steps forwards towards advancing the treatments of cancers and chronic debilitating diseases. Is this not what the biotechnology industry is all about?

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3 Comments:

Anonymous John said...

Lots of new information by Dr. Kunkel.

http://www.veracast.com/webcasts/citigroup/healthcare2012/45104294.cfm

February 28, 2012 at 10:49 AM  
Anonymous Anonymous said...

The second to the last paragraph raises the issue of duration of growth. If the products are to be sold off or the company acquired, how much growth potential is there for the stock price?
Regards, TomD

February 28, 2012 at 11:03 AM  
Anonymous John said...

The company will not be sold - Mr. Duggan, the CEO and largest shareholder is a long haul guy. THe number of Genentech Execs coming in last fall tell you this is a long term proposition.

Additionally, you would not sell after just partnering for a billion dollars. THe partnering was smart since PCYC does not have a sales force of any kind, and that is a huge cost for companies first going to market.

By the way, Mr. Duggan never took any stock options, not a single one. He has bought all 13 million of his shares with his cash, and takes no salary. Not pumping - just facts.

Genetech sold out to Roche for $40 billion when their market cap was $10 bil (4X premium). Right now, PCYC market cap is $1.7 bil They have a long way to go and if you sell too early, you miss the upside.

The Big Kahuna in the pipeline is BTK for auto-immune

February 28, 2012 at 2:57 PM  

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