Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
PCYC > SEC Filings for PCYC > Form 10-Q on 7-Nov-2012All Recent SEC Filings

Show all filings for PHARMACYCLICS INC

Form 10-Q for PHARMACYCLICS INC


7-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and the related notes appearing at the beginning of this report. The interim financial statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended June 30, 2012 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 5, 2012.

The following discussion contains forward-looking statements that involve risks and uncertainties. These statements relate to future events, such as our future clinical and product development, financial performance and regulatory review of our product candidates. Our actual results could differ materially from any future performance suggested in this report as a result of various factors, including those discussed elsewhere in this report, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012 and in our other Securities and Exchange Commission reports and filings. All forward-looking statements are based on information currently available to Pharmacyclics; and we assume no obligation to update such forward-looking statements. Stockholders are cautioned not to place undue reliance on such statements. Company Overview
We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer and immune mediated diseases. Our corporate mission statement reads as follows: To build a viable biopharmaceutical company that designs, develops and commercializes novel therapies intended to improve quality of life, increase duration of life and resolve serious medical healthcare needs; to identify promising product candidates based on exceptional scientific development expertise, develop our products in a rapid, cost-efficient manner and to pursue commercialization and/or development partners when and where appropriate. We exist to make a difference for the better and these are important times to do that.
Presently, we have three product candidates in clinical development and several preclinical molecules in lead optimization or pre-clinical development. We are committed to high standards of ethics, scientific rigor, and operational efficiency as we move each of these programs toward potential commercialization. To date, nearly all of our resources have been dedicated to the research and development of our products, and we have not generated any commercial revenues from the sale of our products. We do not anticipate the generation of any product commercial revenue until we receive the necessary regulatory and marketing approvals to launch one of our products.


Table of Contents

We were in the development stage at June 30, 2011, as defined in Financial Accounting Standards Board Accounting Standards Codification Topic 915, "Development Stage Entities." During the fiscal year ended June 30, 2012, we exited the development stage with the signing of our first significant collaboration with Janssen Biotech, Inc. ("Janssen") (See Note 4 to the condensed consolidated financial statements), from which we received our first significant revenue from principal operations, reflective that we are no longer in the development stage.
The process of developing and commercializing our products requires significant research and development, preclinical testing and clinical trials, manufacturing arrangements as well as regulatory and marketing approvals. These activities, together with our general and administrative expenses, are expected to result in significant operating losses until the commercialization of our products, or partner collaborations, generate sufficient revenue to cover our expenses. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. Our sustaining profitability depends upon our ability to successfully complete the development of our products, obtain required regulatory approvals and successfully manufacture and commercialize our products.
Ibrutinib (also known as PCI-32765) - Bruton's Tyrosine Kinase ("BTK") Inhibitor for Oncology
Ibrutinib is an orally active selective irreversible inhibitor of BTK that we are developing for the treatment of patients with B-cell malignancies (lymphoma or leukemias). B-cell maturation is mediated by B-cell receptor ("BCR") signal transduction and BTK is an essential part of the BCR signaling pathway. Recently, BTK has been demonstrated to affect a number of vital growth and survival processes in cancerous B-cells. Ibrutinib Clinical Development Update
During fiscal year 2012 we provided updates on several of our clinical programs at major scientific conferences. The following is a summary of the clinical updates provided:
At the 2011 American Society of Hematology ("ASH") Annual meeting in December 2011, we presented interim results of our Phase II study in mantle cell lymphoma ("MCL") patients. In the Phase II study PCYC-1104, ibrutinib was administered orally at 560 mg daily until disease progression. Efficacy data was reported on 51 patients (31 patients had bortezomib-naive disease, 20 patients had previously received bortezomib) who had post-baseline tumor assessments and were thus evaluable for response. The objective response rate ("ORR"), according to the 2007 Non-Hodgkin's Lymphoma ("NHL") International Working Group criteria, was 69% (35/51 patients). ORR was similar in bortezomib-naive and bortezomib-exposed patients (71% and 65%, respectively). At the time of the analysis 31 of 35 (89%) responding patients had ongoing responses at the median follow-up of 3.7 months. Consistent with previous trials of ibrutinib, the most common adverse events reported in this trial were Grade 1 (mild) or 2 (moderate) fatigue, diarrhea and nausea. Three patients discontinued the study at that time due to adverse events regardless of causality.
At the 2012 Annual Meeting of the American Society of Clinical Oncology ("ASCO") in June 2012, we presented for the first time data of our single agent Phase Ib/II study in the treatment-naive cohort in Chronic Lymphocytic Leukemia/Small Lymphocytic Lymphoma ("CLL/SLL") patients. The Phase II study PCYC-1102 included a total of 31 treatment-naive elderly (? 65 years) patients with CLL/SLL enrolled at two daily dose levels of ibrutinib, 420 mg (n=26) and 840 mg (n=5), respectively. At the median follow-up of 14.4 months in the 420 mg cohort, the overall response rate, including complete and partial responses, was 81% as measured by the 2008 International Workshop on Chronic Lymphocytic Leukemia ("IWCLL") criteria. Notably, complete response (no evidence of disease as measured by radiographic, blood and bone marrow) was achieved in 12% (n=3 patients) with ibrutinib as a single agent. The clinical responses (complete and partial) have been independent of high-risk clinical or genetic features. At the median follow-up of 14.4 months, the probability of progression free survival ("PFS") was 96% in the 420 mg cohort. The study safety profile of ibrutinib was particularly notable for minimal off target toxicities, consistent with earlier trials. The most common adverse events were Grade 1/2 diarrhea, nausea and fatigue. Grade 3 and Grade 4 hematologic events potentially related to ibrutinib occurred in 12% of patients. Of the 31 patients on the trial at the time of the analysis, there was only 1 patient that had discontinued due to disease progression.
The first results of Phase II study PCYC-1109 were also presented at ASCO in June 2012 and included a total of 27 patients with Chronic Lymphocytic Leukemia/Small Lymphocytic Lymphoma/Prolymphocytic Leukemia ("CLL/SLL/PLL") (n=24) and Richter's transformation (n=3) that were treated in cohort one, in which ibrutinib (420 mg) was followed by concomitant ofatumumab with continued ibrutinib until progression. The combination was well tolerated, as indicated by reports that the majority of adverse events were Grades 1/2. No new safety signals were identified. At the time of the analysis for the CLL/SLL/PLL patients, the overall response rate, as measured by IWCLL criteria, and the progression free survival probability were both 100% at the median follow-up of 9.8 months. Also at the time of the analysis, 89% of CLL/SLL/PLL patients remained on study and only 1 patient had discontinued treatment by proceeding to stem cell transplant. The results of this Phase II study, as presented at ASCO in June 2012, also included rapid onset of response, low relapse rate and a favorable safety profile which make this combination worthy of further study. Cohorts evaluating other therapeutic sequences with ofatumumab and ibrutinib are currently underway.


Table of Contents

The Phase II study PCYC-1108 was also presented at ASCO in June 2012 and enrolled a total of 30 patients treated with a combination of bendamustine and rituximab; 37% were considered refractory (treatment free interval ? 12 months) to a purine analog (e.g. fludarabine) containing regimen and 13% refractory to bendamustine. Patients received ibrutinib in combination with bendamustine/rituximab. The combination therapy was well tolerated and there were no discontinuations due to adverse events. At the median follow-up of 8.1 months, the progression free survival probability was 90%. The overall response rate was 93%. Only 2 patients had reported progressive disease at the time of the analysis, an additional 5 patients had proceeded to stem cell transplant and
23 (77%) patients remained on study. The Phase II study PCYC-1102 was also presented at the 17th Congress of the European Hematology Association ("EHA") in June 2012. This single agent study included a total of 92 patients with CLL/SLL (61 relapsed/refractory patients and 31 treatment-naive patients) enrolled at two daily dose levels of ibrutinib (420 mg and 840 mg). In addition to the data reported June 6, 2012 at ASCO on the treatment-naive patients, this oral presentation provided updated PFS data in the relapsed/refractory patient population. At the median follow-up of 17.5 months, the progression free survival probability in the 420 mg cohort was 87.7%. High risk relapsed/refractory patients with 17p deletion (N=20) and immunoglobulin variable heavy chain (IgVH) unmutated status (N=42), had an estimated 18-month PFS of >70% and >80%, respectively at the time of the analysis. The Phase II study PCYC-1108 was further updated during EHA in June of 2012. In addition to the ibrutinib plus BR data reported at ASCO the FCR combination study cohort (N=3) was presented. It required patients to be fludarabine naive and due to poor enrollment the cohort was suspended. At the median follow-up of 8.5 months all three patients had achieved an objective response, with two patients achieving minimal residual disease negative ("MRD-Negative") complete responses and at the time of analysis all patients remained progression free. The other ongoing Phase Ib/II programs for ibrutinib also include the following clinical studies in lymphoma and multiple myeloma:
The Phase II Study PCYC-1106 using ibrutinib in patients with relapsed or refractory Diffuse Large B-Cell Lymphoma ("DLBCL") completed enrollment in calendar Q2 2012 with 70 patients. This study is designed to assess the activity of ibrutinib in two genetically distinct subtypes of DLBCL, the activated B-cell ("ABC") subtype and the germinal center ("GC") subtype. The Company will evaluate over the next 12 months the data generated by this ongoing Phase II study to prepare a clinical development plan for ibrutinib in DLBCL. We are encouraged by preliminary signals from our Phase I single agent trial, PCYC-04753, in follicular lymphoma and are currently moving forward with clinical development in this histology.
The Phase II Study PCYC-1111 using ibrutinib in patients with relapsed or refractory multiple myeloma ("MM") started enrollment in calendar Q1 2012. The Company will evaluate over the next 12 months the data generated by this ongoing Phase II study to prepare a clinical development plan for ibrutinib in MM. This multi-center Phase II study, conducted by Pharmacyclics, is open in the U.S. and we plan to enroll up to 164 patients.
We have also initiated the first pivotal Phase III study in CLL/SLL. The Phase III randomized controlled study, RESONATE™ is designed to demonstrate superiority of single agent ibrutinib to ofatumamab in relapsed or refractory CLL/SLL. The primary endpoint of the study is to demonstrate a clinically significant improvement in progression-free survival in relapsed or refractory CLL/SLL patients as compared to that achieved with ofatumumab therapy. The key secondary endpoints include overall response rate, overall survival and other measures of clinical benefit. This global study, conducted by Pharmacyclics, is currently enrolling CLL/SLL patients with a projected enrollment of 350 patients worldwide.
Additionally, the investigation of ibrutinib (PCI-32765) for the treatment of patients with CLL/SLL who have relapsed or have refractory disease and have previously received at least one prior therapy was designated as a Fast Track development program by the Division of Hematology Products, Office of Hematology and Oncology Products, a department of the FDA. Our partner, Janssen, has initiated the following studies:
• Phase III study of ibrutinib in combination with bendamustine and rituximab in patients with relapsed/refractory CLL/SLL: A randomized, multi-center Phase III, double blinded, placebo controlled, registration trial of ibrutinib in combination with bendamustine and rituximab in relapsed/refractory CLL/SLL patients who received at least one line of prior systemic therapy. The primary endpoint of the study is to demonstrate a clinically significant improvement in progression-free survival versus bendamustine and rituximab therapy alone. The key secondary endpoints include overall response rate, overall survival and other measures of clinical benefit. This global study is open and Janssen plans to enroll 580 patients worldwide.

• Phase III study (outside the US) of ibrutinib versus temsirolimus in patients with relapsed or refractory mantle cell lymphoma who have received one prior therapy: A randomized, multi-center Phase III registration trial of ibrutinib in relapsed/refractory MCL patients who received at least one prior rituximab-containing chemotherapy regimen. The


Table of Contents

primary endpoint of the study is progression free survival when compared to temsirolimus. The key secondary endpoints include overall response rate, overall survival rate and other measures of clinical benefit. This study, initiated by Janssen, will be conducted outside the US and Janssen plans to enroll 280 patients.
• Phase II study of ibrutinib in patients with mantle cell lymphoma who progress after bortezomib therapy: A single-arm, multi-center Phase II trial of ibrutinib in relapsed/refractory MCL patients who received at least one prior rituximab-containing chemotherapy regimen and who progressed after bortezomib therapy.The primary endpoint of the study is overall response rate. The key secondary endpoints include duration of response, progression-free survival rate, and other measures of clinical benefit. This global study, conducted by Janssen, is open and Janssen plans to enroll 110 patients worldwide.

• Phase II dose escalating study of ibrutinib in combination with R-CHOP in patients with newly diagnosed NHL: The purpose of this study is to identify if, and at what dose, ibrutinib may be administered with R-CHOP and to document responses of this combination in patients with newly diagnosed diffused large B-cell lymphoma. This multi-center global study, conducted by Janssen, is open and Janssen plans to enroll up to 42 patients.

PCI-27483 - Factor VIIa Inhibitor
Our Factor VIIa inhibitor PCI-27483 is a novel first-in-human small molecule inhibitor that selectively targets FVIIa. As an inhibitor of FVIIa, PCI-27483 has two potential mechanisms of action: 1) inhibition of intracellular signaling involved in tumor growth and metastases and 2) inhibition of early coagulation processes associated with thromboembolism. Factor VIIa PCI-27483 Clinical Development Update A multicenter Phase I/II of PCI-27483 in patients with locally advanced or metastatic pancreatic cancer that are either receiving or are planned to receive gemcitabine therapy has completed enrollment. The Phase II portion of the study randomized patients to receive either gemcitabine alone or gemcitabine plus PCI-27483 (1.2 mg/kg twice daily). The objectives are to assess the safety of Factor VIIa Inhibitor PCI-27483 at pharmacologically active dose levels, to assess potential inhibition of tumor progression and to obtain initial information of the effects on the incidence of thromboembolic events. Data from initial efficacy analysis is expected to report out late 2012. We expect to submit the analysis to a scientific conference for presentation in mid-2013. Due to a paradigm shift away from the use of gemcitabine alone for the treatment of pancreatic cancer, enrolling patients in this randomized study has been challenging. Pharmacyclics is evaluating other alternatives for development of this agent.
Abexinostat (formerly PCI-24781) - Histone Deacetylase ("HDAC") Inhibitor Abexinostat is an orally dosed, broad spectrum, hydroxamic acid-based small molecule HDAC inhibitor that is under evaluation in phase I and II clinical trials for refractory solid tumors and lymphoma by Pharmacyclics and its ex-U.S. partner, Les Laboratoires Servier of Paris, France ("Servier"). Abexinostat has shown promising anti-tumor activity in vitro and in vivo (Buggy et al, Mol Cancer Ther 2006; 5: 1309-17).
Abexinostat has been tested in several clinical trials in the U.S. by Pharmacyclics and ex-U.S. by our partner Servier. In the U.S., Pharmacyclics has completed two Phase I studies using abexinostat as a single agent in patients with advanced solid tumors, and has completed enrollment in a Phase I trial in sarcoma patients (in combination with doxorubicin, an anti-tumor agent), in which the maximum tolerated dose and recommended Phase II dose were established. A Phase I/II trial testing abexinostat single agent in patients with relapsed or refractory NHL (PCYC-0403) has also completed enrollment. In the sarcoma trial, co-sponsored by the Massachusetts General Hospital and Dana-Farber Cancer Institute, the Phase I dose escalation has been completed and the maximum tolerated dose in combination with doxorubicin has been established. Preliminary results from this study will be presented at the Connective Tissue Oncology Society ("CTOS") Annual Meeting to be held in November 2012. The single agent NHL trial (PCYC-0403) has also completed enrollment in the Phase II arm with 16 patients in multiple relapsed follicular lymphoma and 14 patients in relapsed mantle cell lymphoma. The results of this study will be presented in an oral presentation at the 2012 ASH Annual Meeting. A Phase I Investigator-sponsored trial of abexinostat in combination with the multi-targeted tyrosine kinase inhibitor pazopanib has recently been initiated at University of California, San Francisco, and the first dose cohort is enrolling patients with advanced solid tumors. Our collaboration partner for ex-U.S. markets, Servier, has initiated seven Phase I/II trials in Europe and Asia in lymphomas and solid tumors with abexinostat as single agent and in combination with other chemotherapeutic agents including cisplatin, liposomal doxorubicin and FOLFOX. The Phase II portion of Servier's single agent lymphoma trial was opened in Q4 of calendar 2011. Further analysis of these trials and any updates may be released by Servier.
We are subject to risks common to pharmaceutical companies developing products, including risks inherent in our research, development and commercialization efforts, preclinical testing, clinical trials, uncertainty of regulatory and marketing approvals, uncertainty of market acceptance of our products, history of and expectation of future operating losses, reliance on


Table of Contents

collaborative partners, enforcement of patent and proprietary rights and the need for future capital. In order for a product to be commercialized, we must conduct preclinical tests and clinical trials, demonstrate efficacy and safety of our product candidates to the satisfaction of regulatory authorities, obtain marketing approval, enter into manufacturing, distribution and marketing arrangements, build a U.S. commercial capability, obtain market acceptance and, in many cases, obtain adequate coverage of and reimbursement for our products from government and private insurers. We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.

Results of Operations
Revenue (in thousands):
                                       Three Months Ended
                                         September 30,
                                         2012             2011
License and milestone revenue    $      100,000          $   -
Collaboration services revenue            2,695             37
Total revenue                    $      102,695          $  37

In December 2011, we entered into a worldwide collaboration and license agreement with Janssen which provided for a $150,000,000 non-refundable upfront payment upon execution (see Note 4 to the condensed consolidated financial statements). The revenue related to the upfront payment was allocated $70,605,000 to the licenses, $14,982,000 to the committee services and $64,413,000 to the development services.
For the three months ended September 30, 2012, total revenue related to the Janssen agreement was $102,595,000, compared to zero for the three months ended September 30, 2011. Revenue for the three months ended September 30, 2012 consisted of $100,000,000 of license and milestone revenue due to our achievement of two clinical milestones during the period and $2,695,000 of collaboration services revenue related to amortization of deferred revenue. For the three months ended September 30, 2012, the collaboration services revenue was primarily related to the Janssen agreement and was comprised of $220,000 amortization of committee services and $2,375,000 of amortization of development services. As of September 30, 2012, approximately $72,782,000 was included in deferred revenue related to the committee and development services, of which $64,804,000 was included in deferred revenue non-current. At inception, the $14,982,000 and $64,413,000 allocated to committee and development services, respectively, is being recognized as revenue as the related services are provided over the estimated service periods of 17 years and 9 years, which are equivalent to the estimated remaining life of the underlying technology and the estimated remaining development period, respectively. Research and Development (in thousands):

Three Months Ended Percent
September 30, Change
2012 2011
Research and development expenses $ 19,072 $ 11,248 69.6 %

The increase of 69.6% or $7,824,000 in research and development costs for the three months ended September 30, 2012, as compared with the three months ended September 30, 2011, is primarily due to a $8,868,000 increase in third party clinical trial costs largely attributable to purchases of comparator drugs and other supplies, fees related to increased enrollment and other costs associated with expansion of our Btk program and a $3,361,000 increase in payroll and related expenses due to increased personnel. Additionally, there was a $862,000 increase in consulting and other outside services, a $1,865,000 increase in drug manufacturing charges primarily related to our BTK program, a $1,052,000 increase in stock compensation expense, a $729,000 increase in travel related expenses and a $150,000 increase in facility and IT related expenses. Partially offsetting these increases was a $8,817,000 reduction to research and development costs attributable to the Janssen development cost share for the quarter ended September 30, 2012 (see Note 4 to the condensed consolidated financial statements).
Average research and development headcount increased from 73 to 133 in the three months ended September 30, 2011 and 2012, respectively. We expect the growth in research and development spending to continue through the end of fiscal year 2013.
Research and development costs are identified as either directly attributed to one of our research and development programs or as an indirect cost, with only direct costs being tracked by specific program. Direct costs consist of personnel costs


Table of Contents

directly associated with a program, preclinical study costs, clinical trial costs, and related clinical drug and device development and manufacturing costs, drug formulation costs, contract services and other research expenditures. Indirect costs consist of personnel costs not directly associated with a program, overhead and facility costs and other support service expenses. The following table summarizes our principal product development initiatives, including the related stages of development for each product, the direct costs attributable to each product and total indirect costs for each respective period. For a discussion of the risks and uncertainties associated with the timing and cost of completing a product development phase, see Item 1A, Risk Factors and the Risk Factors discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012.
Direct costs by program and indirect costs are as follows (in thousands):

                                                                                     Related R&D Expenses
                                                                               Three Months Ended September 30,
                                                              Estimated
                                              Phase of      Completion of
       Product             Description      Development         Phase                2012               2011
                                               Phase
BTK Inhibitors          Cancer/autoimmune     I/II/III         Unknown        $         13,642      $    7,212
HDAC Inhibitors         Cancer/autoimmune    Phase I/II        Unknown                     523             305
Factor VIIa Inhibitor   Cancer                Phase II         Unknown                     344             611
                        Total direct
                        costs                                                           14,509           8,128
                        Indirect costs                                                   4,563           3,120
                        Total research
                        and development
                        costs                                                 $         19,072      $   11,248

General and Administrative (in thousands):

Three Months Ended Percent
September 30, Change
2012 2011
General and administrative expenses $ 4,868 $ 3,350 45.3 %

General and administrative costs increased by 45.3% or $1,518,000 in the three months ended September 30, 2012, compared to the three months ended . . .

  Add PCYC to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for PCYC - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.