Pharmacyclics total revenue for fourth quarter 2013 increases 113% to $123.6 million

Feb 20 2014

Pharmacyclics, Inc. (the "Company") (Nasdaq: PCYC) today reported financial results and recent developments for the quarter and year ended December 31, 2013.

Financial Results for the Quarter and Year Ended December 31, 2013

Revenue

Total revenue for the quarter ended December 31, 2013 increased 113% to $123.6 million, from $58.0 million for the quarter ended December 31, 2012. Total revenue for the year ended December 31, 2013 increased 58% to $260.2 million from $164.7 million for the year ended December 31, 2012.

Collaboration and license agreement revenue increased 90% to $110.0 million for the quarter ended December 31, 2013, from $58.0 million for the quarter ended December 31, 2012, primarily driven by an increase in milestone revenue related to our collaboration and license agreement (the "Agreement") with Janssen Biotech, Inc. and its affiliates ("Janssen"). During the quarter ended December 31, 2013, milestone revenue of $110.0 million included $60 million earned related to an approval milestone and $50 million earned related to regulatory milestones under the Agreement. During the quarter ended December 31, 2012, milestone revenue of $50 million was earned related to a development milestone under the Agreement and $5 million of license revenue was earned related to the Company's license agreement with Novo Nordisk A/S.

Collaboration and license agreement revenue increased 50% to $246.6 million for the year ended December 31, 2013, from $164.7 million for the year ended December 31, 2012, primarily driven by an increase in milestone revenue earned under the Agreement. For the year ended December 31, 2013, collaboration and license agreement revenue included milestone revenue of $235 million earned under the Agreement and total collaboration revenue of $11.6 million. For the year ended December 31, 2013, milestone revenue related to the Agreement included $125 million in regulatory milestones earned, a $60 million approval milestone earned and $50 million development milestone earned. For the year ended December 31, 2012, total revenue of $164.7 million included $150 million of development milestone revenue earned under the Agreement, $5 million of license revenue earned related to the Company's license agreement with Novo Nordisk A/S and total collaboration revenue of $9.7 million.

Total revenue for the quarter and year ended December 31, 2013 also increased due to $13.6 million of net product revenue from sales of IMBRUVICA™ (ibrutinib). As previously announced, on November 13, 2013, the U.S. Food and Drug Administration ("FDA") approved IMBRUVICA™ as a single agent for the treatment of patients with mantle cell lymphoma ("MCL") who have received at least one prior therapy.

Subsequent to December 31, 2013, on February 12, 2014 we announced that the FDA approved IMBRUVICA™ as a single agent for the treatment of patients with chronic lymphocytic leukemia ("CLL") who have received at least one prior therapy. This approval of IMBRUVICA™ in CLL triggers a $60 million milestone payment to us under our collaboration agreement with Janssen, which will be recognized as revenue in the first quarter of 2014.

To date, in addition to upfront payment of $150 million, we have earned milestone payments of $445 million under the Agreement. We may receive up to an additional $380 million ($50 million for development progress, $100 million for regulatory progress and $230 million for approval) in development, regulatory and approval milestone payments, however, clinical development entails risks and we have no assurance as to whether or when the milestone targets might be achieved.

Non-GAAP and GAAP net income

Non-GAAP net income reported for the quarter ended December 31, 2013 was $73.9 million, or $1.00 and $0.95 net income per basic and diluted share, respectively, compared to non-GAAP net income of $46.2 million, or $0.66 and $0.62 net income per basic and diluted share, respectively for the quarter ended December 31, 2012.

Non-GAAP net income for the year ended December 31, 2013 was $117.2 million, or $1.61 and $1.52 net income per basic and diluted share, respectively. Non-GAAP net income reported for the year ended December 31, 2012 was $100.6 million, or $1.45 and $1.36 net income per basic and diluted share, respectively. See "Use of Non-GAAP Financial Measures" below for a description of our non-GAAP measures. Reconciliation between certain generally accepted accounting principles ("GAAP") and non-GAAP measures is provided at the end of this press release.

GAAP net income for the quarter ended December 31, 2013 was $64.2 million, or $0.87 and $0.82 net income per basic and diluted share, respectively, compared to GAAP net income of $41.9 million, or $0.60 and $0.56 net income per basic and diluted share, respectively, for the quarter ended December 31, 2012. Included in GAAP net income for the quarters ended December 31, 2013 and 2012 was stock-based compensation expense of $9.6 million and $4.3 million, respectively.

GAAP net income for the year ended December 31, 2013 was $67.0 million, or $0.92 and $0.87 net income per basic and diluted share respectively, compared to GAAP net income of $87.8 million, or $1.27 and $1.19 net income per basic and diluted share, respectively, for the year ended December 31, 2012. Included in GAAP net income for the years ended December 31, 2013 and 2012 was stock-based compensation expense of $50.2 million and $12.8 million, respectively.

Costs and expenses

The Agreement with Janssen includes a cost sharing arrangement for certain development activities. In general, Janssen is responsible for approximately 60% of development costs and we are responsible for 40% of development costs. The Agreement includes a 50/50 net profit sharing arrangement for the commercialization of any products resulting from the collaboration including IMBRUVICA™. The Agreement with Janssen also provides for a $50 million annual cap of our share of development costs and pre-tax commercialization losses for each calendar year.

GAAP costs and expenses were $38.1 million for the quarter ended December 31, 2013, compared to $16.7 million for the quarter ended December 31, 2012. As we exceeded the $50 million annual cap on our share of development costs under the Agreement, all of our share of development and commercial costs chargeable to the collaboration during the quarter ended December 31, 2013 represented amounts incurred in excess of the annual cap ("Excess Amounts"). We recognize Excess Amounts as a reduction to costs and expenses. For the quarter ended December 31, 2013, we recognized $50.2 million of Excess Amounts as a reduction to costs and expenses, compared to $18.1 million for the quarter ended December 31, 2012. Of the Excess Amounts recognized for the quarter ended December 31, 2013, $34.2 million was recorded as a reduction to research and development expenses and $16.0 million was recorded as a reduction to general and administrative expenses.

GAAP costs and expenses were $162.2 million for the year ended December 31, 2013, compared to $80.1 million for the year ended December 31, 2012. During the year ended December 31, 2013, we recognized $116.1 million of Excess Amounts as a reduction to costs and expenses, compared to $18.1 million for the year ended December 31, 2012. Of the Excess Amounts recognized for the year ended December 31, 2013, $85.7 million was recorded as a reduction to research and development expenses and $30.4 million was recorded as a reduction to general and administrative expenses.

Under the Agreement, Janssen will fund maximum Excess Amounts of $200 million and $25 million of interest thereon. To date, we have recorded Excess Amounts amounting to $134.3 million. We recognize Excess Amounts as a reduction to costs and expenses since our repayment of Excess Amounts to Janssen is contingent and would become payable only after the third profitable calendar quarter for the product. Further, Excess Amounts shall be reimbursable only from our share of pre-tax profits (if any) after the third profitable calendar quarter for the product.  

Cash and Investments Position

As of December 31, 2013, we had cash, cash equivalents and marketable securities of $635.6 million, compared with $317.1 million as of December 31, 2012. The Company now expects to end calendar year 2014 in excess of $600 million in cash, cash equivalents and marketable securities.

"Today, we are reporting on the first commercial sales in the history of Pharmacyclics. After our first approval at the end of last year, we had a strong commercial start and reported $13.6 million of IMBRUVICA^™ net product revenue in our first six weeks of sales," said Bob Duggan, CEO and Chairman of Pharmacyclics. "Our company's goal is to lead the creation of a new era of patient-friendly, body-harmonious medicinal solutions. The commercialization of IMBRUVICA^™ in the therapeutic areas of MCL and most recently in CLL is a big step forward in support of patients. We have built a new commercial organization and are now educating healthcare professionals about the safety and efficacy of IMBRUVICA™ as a new alternative for patients struggling with these diseases. We are looking ahead to a very productive 2014, a year where we intend to make a significant difference for the betterment of patients."

Regulatory Update

IMBRUVICA™ is the first FDA approved, once-daily, single-agent, oral kinase inhibitor for patients with MCL or CLL who have received at least one prior therapy. IMBRUVICA™ is being jointly developed and commercialized by Pharmacyclics and Janssen Biotech, Inc.

On November 7, 2013, we announced that 117 events had occurred in the randomized, multicenter, open-label Phase III RESONATE study, PCYC-1112-CA, a head-to-head comparison of IMBRUVICA™ versus ofatumumab, and that an interim analysis would be performed.  On January 7, 2014, we announced that the Independent Data Monitoring Committee unanimously recommended that the study be stopped early because the study demonstrated that patients receiving IMBRUVICA™ showed a statistically significant improvement in progression-free survival and overall survival over those receiving ofatumumab. We anticipate providing a comprehensive RESONATE study report to the regulatory authorities within the coming months and look forward to presenting the data at an upcoming medical congress.

On February 12, 2014, after a priority review of our New Drug Application, the U.S. Food and Drug Administration (FDA) approved IMBRUVICA™ under the FDA's accelerated approval program as a single agent for the treatment of patients with chronic lymphocytic leukemia (CLL) who have received at least one prior therapy. This second indication follows the approval of IMBRUVICA™ on November 13, 2013, for the treatment of patients with mantle cell lymphoma (MCL) who have received at least one prior therapy, granted under the agency's Breakthrough Therapy Designation. Both approvals were based on data from Phase II studies and are based on overall response rate (ORR). An improvement in survival or disease-related symptoms has not been established.

Most recently IMBRUVICA™ was also included in the National Comprehensive Cancer Network (NCCN) Clinical Practice Guidelines in Oncology (NCCN Guidelines^® Non-Hodgkin's Lymphomas, Version 1.2014) for relapsed/refractory (R/R) MCL, (R/R) CLL and two other histologies.

Commercial Update

Together with our collaboration partner Janssen we built a hematology-focused commercial team with a national footprint, reaching across all US regions. After the MCL approval on November 13, 2013, IMBRUVICA™ became commercially available in the United States. On February 12, 2014 IMBRUVICA™ was also approved for patients with CLL who have received at least one prior therapy. IMBRUVICA™ is being sold today in both indications by over 120 full-time equivalent sales professionals in conjunction with our commercial partner Janssen and supported by National Account Directors, Medical Science Liaisons, as well as Pharmacyclics' teams of Medical Affairs, Market Access, Marketing, Business Intelligence and Public Relations professionals.

Clinical Update

To date, over 2,800 patients have been treated in company sponsored trials, conducted in over 35 countries around the globe and involving more than 800 principal investigators. IMBRUVICA™ clinical trials are active in all regions including US, Europe, Asia Pacific, Asia, and Latin America. Currently there are 10 Phase III clinical trials initiated with IMBRUVICA™ and a total of 41 trials are registered on www.clinicaltrials.gov. As all these studies complete enrollment we will have approximately 7,500 patients participating in IMBRUVICA™ trials. In the past months we initiated one company sponsored Phase III study and two medical research center sponsored Phase III studies. As of today there are 6 Phase III studies focused on patients with CLL, two designed for patients with MCL, one for patients with diffuse large B-cell lymphoma and one for patients with follicular lymphoma. 

During our fourth quarter 2013, Pharmacyclics participated in the 55th Annual American Society of Hematology (ASH) Meeting in New Orleans. During the conference 40 clinical, non-clinical and pre-clinical presentations on IMBRUVICA^™ were provided. There were seven presentations of IMBRUVICA^™ clinical data, of which five were oral presentations, including one presentation on the use of IMBRUVICA^™ in Waldenstrom's Macroglobulinemia (WM) that was designated "Best of ASH". In total, 33 additional pre-clinical and non-clinical presentations provided new discoveries using IMBRUVICA™; seven of these were oral presentations. These presentations further elucidated the mechanism of action of IMBRUVICA^™ and its effect in the tumor microenvironment and provided data on quality of life changes. Results covered various B-cell malignancies: chronic lymphocytic leukemia (CLL) and small lymphocytic lymphoma (SLL), Waldenstrom's Macroglobulinemia (WM), and Non-Hodgkin's Lymphoma (NHL).

In December of 2013, Dr. Susan O'Brien of MD Anderson Cancer Center published in The Lancet data from a cohort of 31 elderly, treatment naive CLL patients treated with single agent IMBRUVICA™. The data showed an acceptable safety profile of IMBRUVICA™ with most common side effects being Grade 1 diarrhea, nausea and fatigue. After a median follow up of 22 months, one patient progressed, and the progression free survival (PFS) at approximately 2 years in that population was 96%.

An Investigational New Drug (IND) Application was filed for a BTK inhibitor developed by Pharmacyclics and designed for autoimmune diseases. The FDA reviewed the IND and considered it safe to proceed. This compound will now enter the dose escalation stage of a Phase I trial, administered first to healthy volunteers and then to autoimmune patients with Rheumatoid Arthritis.

IMBRUVICA™ (ibrutinib) – Selected Clinical Trial Updates

Chronic Lymphocytic Leukemia/ Small Lymphocytic Lymphoma (CLL/SLL)

• RESONATE™ (PCYC-1112): Phase III study of IMBRUVICA™ versus ofatumumab in patients with relapsed/refractory (R/R) CLL/SLL was initiated in the second quarter of 2012. This is a randomized, multi-center, open-label Phase III trial of IMBRUVICA™ as a monotherapy. The enrollment of 391 patients was completed more than two quarters ahead of schedule in April 2013. The primary endpoint of this study is to demonstrate a statistically significant improvement in progression-free survival (PFS) when compared to ofatumumab. The study met its primary end point of PFS as well as a key secondary endpoint of overall survival at the interim analysis in January 2014. We anticipate to file the study data with the FDA within the first half of 2014 and expect a review by the agency to be completed within the first half of 2015.
• RESONATE™-17 (PCYC-1117): Open label, single arm, Phase II study of IMBRUVICA™ as a mono-therapy in patients with CLL who have deletion of chromosome 17p and who did not respond to or relapsed after at least one prior treatment (a high unmet need population) was initiated in the first quarter of 2013. The primary endpoint of the study is overall response rate (ORR). This global study completed its enrollment of 145 patients in Q3 of 2013, more than two quarters ahead of schedule. Patients will be followed for 12 months after the enrollment of the last patient for an assessment of ORR.
• RESONATE™-2 (PCYC-1115): Phase III study of IMBRUVICA™ versus chlorambucil in newly diagnosed elderly CLL/SLL patients was initiated in the first quarter of 2013. This is a randomized, multicenter, open-label trial of IMBRUVICA^™ as a monotherapy versus chlorambucil in patients 65 years or older with treatment naïve CLL/SLL. The study design was agreed upon with the FDA under a Special Protocol Assessment (SPA). The primary objective of the study is to demonstrate a clinically significant improvement in PFS when compared to chlorambucil. Pharmacyclics has just completed enrollment of 273 patients worldwide, approximately 9 months ahead of the original schedule. A data read out is anticipated in the second half of 2015.
• HELIOS (CLL3001): Phase III study of IMBRUVICA™ in combination with bendamustine and rituximab in patients with R/R CLL/SLL was initiated in the third quarter of 2012. This is a randomized, multi-center, double-blinded, placebo-controlled trial of IMBRUVICA™ in combination with bendamustine and rituximab versus placebo in combination with bendamustine and rituximab (BR) in R/R CLL/SLL patients who have received at least one line of prior therapy. The primary objective of the study is to demonstrate a clinically significant improvement in PFS when compared to bendamustine and rituximab. This study completed enrollment of 578 patients worldwide in Q1, 2014.
• CLL3002: Phase III study of IMBRUVICA™ versus rituximab in patients with R/R CLL/SLL was initiated in the fourth quarter of 2013. This is a randomized, open-label, multi-center study to evaluate the efficacy and safety of versus rituximab in adult Chinese patients with R/R CLL or SLL with active disease requiring treatment, who have failed at least 1 prior line of therapy and are not considered appropriate candidates for treatment or retreatment with purine analog-based therapy or combination chemo-immunotherapy. The primary objective of the study is to demonstrate a clinically significant improvement in PFS. The enrollment target of this study is 150 patients.
• Third party sponsored: Phase III study of IMBRUVICA™ versus IMBRUVICA™ + rituximab versus bendamustine + rituximab in frontline newly diagnosed elderly (≥ 65 Years of Age) CLL/SLL patients (Alliance A041202) was initiated by the National Cancer Institute in the fourth quarter of 2013. This is a randomized, multi-center study designed to evaluate the improvement in PFS of IMBRUVICA™ with or without rituximab vs bendamustine and rituximab. Secondary outcome measures include overall survival and duration of response. The enrollment target of this multi-center study is 523 patients.
• Third party sponsored: Phase III study in treatment naive, young fit patients with CLL, comparing the combination of IMBRUVICA^™ and Rituxan to chemo immunotherapy of FCR (fludarabine, cyclophosphamide, and rituximab), (ECOG1912), was initiated by the Eastern Cooperative Oncology Group in the first quarter of 2014. This is a randomized study designed to evaluate the improvement in PFS of IMBRUVICA™ with rituximab vs FCR. Secondary outcome measures include overall survival and adverse events. The enrollment target of this multi-center study is 519 patients.

Mantle Cell Lymphoma (MCL)

• RAY (MCL3001): Phase III study of IMBRUVICA™ versus temsirolimus in R/R MCL patients was initiated in the fourth quarter of 2012. This is a randomized, multi-center, open-label trial of IMBRUVICA™ as a monotherapy versus temsirolimus in R/R MCL patients who received at least one prior rituximab-containing chemotherapy regimen. The primary endpoint of the study is PFS. The enrollment target of this global study was 280 patients. This trial completed enrollment in Q4 of 2013.
• SHINE (MCL3002): Phase III study of IMBRUVICA™ in combination with BR in elderly patients with newly diagnosed MCL was initiated in the second quarter of 2013. This is a randomized, multi-center, double-blinded, placebo-controlled trial of IMBRUVICA™ plus BR versus placebo plus BR in patients 65 years or older with newly diagnosed MCL. The primary endpoint of the study is PFS. The enrollment target of this global study is 520 patients.

Diffuse Large B-cell Lymphoma (DLBCL)

• PCYC-1106: Phase II study of IMBRUVICA™ in patients with R/R DLBCL was initiated in the second quarter of 2011. This multicenter, open-label trial, dosing patients with single agent IMBRUVICA™ at 560mg, was designed to assess the activity of IMBRUVICA™ in two genetically distinct subtypes of DLBCL, the activated B-cell (ABC) subtype and the germinal center B-cell (GCB) subtype. This trial is active in several U.S. sites and Pharmacyclics has enrolled 70 patients. In July of 2013 a new cohort with IMBRUVICA™ dosed at 840mg in patients with non-GCB subtype DLBCL was initiated. This second cohort exploring 840mg has been closed after the first 8 patients were enrolled, given that this higher dose did not show improved ORR or DOR.
• PHOENIX (DBL3001): Phase III study of IMBRUVICA™ in combination with R-CHOP (rituximab, cyclophosphamide, doxorubicin, vincristine, and prednisone) in patients with newly diagnosed non-GCB subtype of DLBCL was initiated in the third quarter of 2013. This is a randomized, multi-center, double-blinded, controlled trial of IMBRUVICA™ plus rituximab, cyclophosphamide, doxorubicin, vincristine, and prednisone (R-CHOP) versus R-CHOP in patients with newly diagnosed non-GCB subtype DLBCL. The primary endpoint of the study is to demonstrate a clinically significant improvement in event-free survival when compared to R-CHOP. The enrollment target of this global study is 800 patients.

Follicular Lymphoma (FL)

• PCYC 1125: Phase II multicenter, open-label, study of IMBRUVICA™, in combination with Rituximab in previously untreated subjects with follicular lymphoma was initiated in the fourth quarter of 2013. The primary endpoint of this study is overall response rate. The enrollment target of this study is 80 patients.
• FLR2002: Phase II study of IMBRUVICA^™ in patients with R/R FL was initiated in the second quarter of 2013. This is a multi-center, open-label, single-arm, global trial of IMBRUVICA™ in patients with chemoimmunotherapy-resistant FL, whose disease has relapsed from at least 2 prior lines of therapy, including at least 1 rituximab combination chemotherapy regimen. The primary endpoint of this study is overall response rate. The enrollment target of this global study is 110 patients.
• SELENE (FLR3001): Phase III study of IMBRUVICA™ in patients with R/R indolent Non-Hodgkin's Lymphoma (iNHL) was initiated in the first quarter of 2014. This is a randomized, multi-center, placebo-controlled Phase III trial of in combination with either BR or R-CHOP in patients with previously treated indolent Non-Hodgkin Lymphoma (iNHL). The primary endpoint of this study is progression free survival. The enrollment target of this global study is 400 patients.

Marginal Zone Lymphoma (MZL)

• PCYC-1121: Phase II study of IMBRUVICA™ in patients with R/R marginal zone lymphoma was initiated in the fourth quarter of 2013. This is a multi center, open-label, monotherapy study to evaluate the safety and efficacy of IMBRUVICA^™ in patients with R/R marginal zone lymphoma. The primary endpoint of this study is overall response rate and the enrollment target of this study is 60 patients.

Waldenstrom's Macroglobulinemia (WM)

• Third party sponsored: Phase II study of IMBRUVICA™ in patients with R/R Waldenstrom's Macroglobulinemia was initiated in the second quarter of 2012. This is a multicenter, open label study of monotherapy IMBRUVICA™ in patients with WM who failed at least one prior therapy. The primary endpoint of this study is ORR.  The study will also assess the safety and tolerability of IMBRUVICA^™ as well as progression-free survival. This study is sponsored by the Dana-Farber Cancer Institute and completed enrollment of 63 patients with data recently presented at ASH 2013 and included in the "Best of ASH".

Multiple Myeloma (MM)

• PCYC-1111: Phase II study of IMBRUVICA™ in patients with R/R multiple myeloma was initiated in the first quarter of 2012. This is a Phase II, multi-center, open-label trial designed to assess the safety and efficacy of IMBRUVICA™ as a single agent and in combination with dexamethasone in patients with R/R MM. At this time, an expansion of cohorts 1 and 2 (420mg and 560mg with dexamethasone) is not planned due to the fact that the protocol-defined response rate was not achieved. The company is currently reviewing the results of patients treated in cohorts 3 and 4 (840mg and 840mg with dexamethasone).
• PCYC-1119: Phase I/IIb study of IMBRUVICA^™ in combination with carfilzomib in patients with R/R MM was initiated in the third quarter of 2013. The Phase I portion of this study is a dose escalation study designed to assess the safety and recommended Phase IIb dose of IMBRUVICA™ and carfilzomib. The Phase IIb portion will be a randomized, double-blind, placebo controlled study to evaluate the efficacy of IMBRUVICA^™ and carfilzomib versus carfilzomib and placebo. The primary endpoint of the Phase IIb portion of the study is progression-free survival. The enrollment target of this study is 176 patients.