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PCYC > SEC Filings for PCYC > Form 10-Q on 8-May-2014All Recent SEC Filings

Show all filings for PHARMACYCLICS INC

Form 10-Q for PHARMACYCLICS INC


8-May-2014

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 December 31, 2013 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Form 10-K filed with the Securities and Exchange Commission on February 26, 2014.
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 Form 10-K for the year ended December 31, 2013 and in our other Securities and Exchange Commission reports and filings. All forward-looking statements are based on


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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 focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer and immune mediated diseases. Our mission and goal is: 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 unmet medical healthcare needs. To identify and control promising product candidates based on scientific development and administrational 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 just that.
On February 12, 2014, the U.S. Food and Drug Administration (FDA) approved IMBRUVICATM (ibrutinib, PCI-32765) under accelerated approval as a single agent for the treatment of patients with CLL who have received at least one prior therapy, the second indication for IMBRUVICATM. IMBRUVICATM first came to market on November 13, 2013, when the FDA approved IMBRUVICATM under accelerated approval as a single agent for the treatment of patients with mantle cell lymphoma (MCL) who have received at least one prior therapy. The FDA approval for these indications was based on overall response rate (ORR). Improvements in survival or disease-related symptoms has not been established. IMBRUVICATM is the first once-daily, single-agent, oral kinase inhibitor for patients with MCL and patients with CLL who in each case have received one prior therapy and is being jointly developed and commercialized by Pharmacyclics and Janssen Biotech, Inc. and its affiliates ("Janssen"), one of the Janssen Pharmaceutical companies of Johnson & Johnson.
In addition to IMBRUVICATM, Pharmacyclics has three other product candidates in clinical development and several preclinical molecules in lead optimization. We are committed to high standards of ethics, scientific rigor, and operational efficiency as we move each of these programs toward potential commercialization. In December 2011, we entered into a worldwide collaboration and license agreement ("Agreement") with Janssen, for the development and commercialization of ibrutinib, a novel, orally active, first-in-class BTK inhibitor which has been and continues to be developed for the treatment of hematological malignancies, including non-Hodgkin lymphoma (NHL), CLL and multiple myeloma (MM). Under the Agreement, we received our first significant revenue in the form of milestone payments during the year ended June 30, 2012. Together with our partner Janssen, Pharmacyclics is commercializing IMBRUVICATM in the United States.
In 2006, we acquired multiple small molecule drug candidates for the treatment of cancer and other diseases from Celera Genomics, an Applera Corporation business (now Celera Corporation - a subsidiary of Quest Diagnostics Incorporated), including technology and intellectual property relating to drugs that target histone deacetylase ("HDAC") enzymes (specific and multiple isoforms), a Factor VIIa inhibitor targeting a tumor signaling pathway involved in angiogenesis, tumor growth and metastases and B-cell associated tyrosine kinase inhibitors potentially useful for the treatment of lymphomas/leukemias, anti-inflammatory and autoimmune diseases.
Status of Products Currently in Pre-Clinical and Clinical Development The table below summarizes our pre-clinical programs and clinical product candidates and their stage of development:


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Product Candidates         Disease Indication                Development Status(1)
IMBRUVICA BTK Inhibitor    B-cell lymphomas:                 Multiple trials (Phase
                                                             I, II, III) in treatment
                                                             naive and in
                                                             relapsed/refractory
                                                             patients
                           • Chronic lymphocytic leukemia
                           • Small lymphocytic lymphoma
                           • Mantle cell lymphoma
                           • Diffuse large B-cell lymphoma
                           • Follicular lymphoma
                           • Multiple myeloma
                           • Waldenstrom's
                           macroglobulinemia
                           • Marginal zone lymphoma
BTK Inhibitor              Autoimmune and                    Preclinical testing,
                           anti-inflammatory disease         Phase I initiation
Abexinostat HDAC           Relapsed/refractory lymphomas     Multiple trials (Phase
Inhibitor (PCI-24781)      and solid tumors                  I, II)
Factor VIIa Inhibitor      Cancer                            Multiple trials (Phase
(PCI-27483)                                                  I, II)

(1) "Phase I" means initial human clinical trials designed to establish the safety, dose tolerance, pharmacokinetics (i.e., absorption, metabolism, excretion) and pharmacodynamics (i.e. biological markers for activity) of a compound. "Phase II" means human clinical trials designed to establish safety, optimal dosage and preliminary activity of a compound in a patient population. "Phase III" means human clinical trials designed to establish the safety and efficacy of a compound. These are the most important trials required by the Food and Drug Administration ("FDA") and are done to rigorously establish the clinical benefit and safety profile of a drug in a particular patient population. "Preclinical" means the stage of drug development prior to human clinical trials in which a molecule is optimized for "drug like" properties and evaluated for efficacy, pharmacokinetics, pharmacodynamics and safety. Marketed Product - IMBRUVICATM (ibrutinib) IMBRUVICATM is approved by the U.S. Food and Drug Administration as a single agent for the treatment of patients with MCL and patients with CLL who in each case have received at least one prior therapy. The FDA approval for these indications was based on ORR. An improvement in survival or disease-related symptoms has not been established. IMBRUVICATM is a new agent that inhibits the function of Bruton's tyrosine kinase (BTK). BTK is a key signaling molecule of the B-cell receptor signaling complex that plays an important role in the survival of malignant B-cells. IMBRUVICATM blocks signals that stimulate malignant B-cells to grow and divide uncontrollably.
The following information can be found on the prescribing information for
IMBRUVICATM:
The approval in MCL was based on the results of a multi-center, international, single-arm trial of 111 patients with previously treated mantle cell lymphoma. Tumor response was assessed according to the revised International Working Group (IWG) for NHL criteria. The efficacy results demonstrated a 65.8% overall response rate (95% Confidence Interval (CI): 56.2, 74.5); 17% of patients achieved a complete response and 49% of patients achieved a partial response. The median duration of response was 17.5 months (95% CI: 15.8, not reached). The approval in CLL was based on the results of a Phase Ib/II, open-label, multi-center, international, single-arm trial of 48 patients with relapsed or refractory CLL who received 420 mg of IMBRUVICATM daily. The primary endpoint was safety and a secondary endpoint was ORR, which was assessed by a modified version of the International Working Group on CLL (IWCLL) criteria by an Independent Review Committee. The efficacy results demonstrated a 58.3 percent ORR (95% confidence interval (CI) (%), 43.2, 72.4), all partial responses. The duration of response (DOR) ranged from 5.6 to 24.2+ months. The median DOR was not reached.
IMBRUVICATM (ibrutinib) - Selected Clinical Trial Updates Chronic Lymphocytic Leukemia/ Small Lymphocytic Lymphoma (CLL/SLL)
• RESONATE™ (PCYC-1112): Phase III study of IMBRUVICATM 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


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Phase III trial of IMBRUVICATM as a monotherapy. This 391 patient study met its primary end point of PFS as well as a key secondary endpoint of overall survival at the pre-planned interim analysis in January 2014. We have filed the study data with the FDA in April 2014.
• RESONATE™-17 (PCYC-1117): Open label, single arm, Phase II study of IMBRUVICATM 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 the third quarter 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 IMBRUVICATM 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 IMBRUVICATM 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 completed enrollment of 273 patients worldwide in February 2014, approximately 9 months ahead of the original schedule.

• HELIOS (CLL3001): Phase III study of IMBRUVICATM 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 IMBRUVICATM 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 during the first quarter of 2014.

• BRILLIANCE (CLL3002): Phase III study of IMBRUVICATM 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 chemoimmunotherapy. 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 IMBRUVICATM versus IMBRUVICATM + 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 IMBRUVICATM 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, enrollment initiated during the first quarter of 2014.

• Third party sponsored: Phase III study in treatment naive, young fit patients with CLL, comparing the combination of IMBRUVICATM 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 IMBRUVICATM with rituximab vs FCR. Secondary outcome measures include overall survival and adverse events. The enrollment target of this multi-center study is 519 patients.

• Third party sponsored: Phase III study in untreated, intermediate and high-risk patients with CLL, comparing monotherapy IMBRUVICATM to placebo or no therapy, (CLL12), was initiated by the German Study Group in the first quarter of 2014. This is a randomized study designed to evaluate the improvement in event-free survival (EFS) of IMBRUVICATM vs. watch and waiting. Secondary outcome measures include ORR and PFS. The enrollment target of this multi-center study is 302 patients.

Mantle Cell Lymphoma (MCL)
• RAY (MCL3001): Phase III study of IMBRUVICATM 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 IMBRUVICATM 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.


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• SHINE (MCL3002): Phase III study of IMBRUVICATM 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 IMBRUVICATM 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)
• PHOENIX (DBL3001): Phase III study of IMBRUVICATM 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 IMBRUVICATM 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 IMBRUVICATM, 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.

• DAWN (FLR2002): Phase II study of IMBRUVICATM 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 IMBRUVICATM 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 IMBRUVICATM 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 RCHOP 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 IMBRUVICATM in patients with R/R marginal zone lymphoma was initiated in the fourth quarter of 2013. This is a multicenter, open-label, monotherapy study to evaluate the safety and efficacy of IMBRUVICATM 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 IMBRUVICATM 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 IMBRUVICATM 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 IMBRUVICATM 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 IMBRUVICATM 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 IMBRUVICATM as a single agent and in combination with dexamethasone in patients with R/R MM. At this time, an expansion of cohorts 1, 2 and 3 (420mg, 560mg with dexamethasone, and 840mg) is not planned due to the fact that the protocol-defined response rate was not achieved. The Company is expanding the fourth dosing cohorts (840mg with dexamethasone) as it crossed a minimum pre-defined boundary of efficacy. The clinical development focus of IMBRUVICATM in this indication will be in combination therapies.

• PCYC-1119: Phase I/IIb study of IMBRUVICATM 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 IMBRUVICATM and carfilzomib. The Phase IIb portion will be a


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randomized, double-blind, placebo controlled study to evaluate the efficacy of IMBRUVICATM 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. IMBRUVICATM (ibrutinib) - Regulatory Update On October 30, 2013, Janssen-Cilag International NV (Janssen) announced it has submitted a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for ibrutinib for the treatment of adult patients with relapsed or refractory chronic lymphocytic leukemia (CLL)/small lymphocytic leukemia (SLL) or relapsed or refractory mantle cell lymphoma (MCL).
On November 13, 2013, the Food and Drug Administration (FDA) approved IMBRUVICATM (ibrutinib, PCI-32765) monotherapy for the treatment of patients with mantle cell lymphoma (MCL) who have received at least one prior therapy. This indication is based on overall response rate (ORR). An improvement in survival or disease-related symptoms has not been established.
On February 12, 2014 the FDA approved IMBRUVICATM as a single agent for the treatment of patients with chronic lymphocytic leukemia (CLL) who have received at least one prior therapy. This indication is based on overall response rate (ORR). An improvement in survival or disease-related symptoms has not been established.
IMBRUVICATM (ibrutinib) - Breakthrough, Fast Track and Orphan Drug Designations In the U.S., the FDA granted orphan drug designation to IMBRUVICATM for the following orphan diseases: CLL on April 6, 2012, MCL on December 3, 2012, MM on May 16, 2013, SLL on May 30, 2013, WM on October 15, 2013 and DLBCL on October 23, 2013. A U.S. orphan drug designation provides the drug developer with several benefits and incentives related to the orphan drug, including a 7-year period of U.S. marketing exclusivity if the drug is the first of its type approved for the specified indication.
The FDA also granted Pharmacyclics with a Fast Track designation for IMBRUVICATM for the treatment of CLL/SLL on October 29, 2012 and for the treatment of MCL on December 18, 2012. Fast Track is a process designed to facilitate the development, and expedite the review of drugs to treat serious and life-threatening conditions and address unmet medical needs for the condition. The European Commission ("EU") adopted the decision that IMBRUVICATM is designated as an orphan medicinal product for the following diseases, CLL on April 26, 2012, MCL on March 12, 2013, and DLBCL on November 13, 2013. An EU orphan drug designation provides the drug developer with several benefits and incentives related to the orphan drug, including market exclusivity for 10 years after approval if the drug is the first of its type approved for the specified indication.
On February 8, 2013, the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy Designation to the investigational oral agent IMBRUVICATM monotherapy for the treatment of patients with relapsed or refractory MCL and to IMBRUVICATM monotherapy for the treatment of patients with WM, both of which are B-cell malignancies. On March 18, 2013, Pharmacyclics announced that the FDA granted an additional Breakthrough Therapy Designation for the investigational oral agent IMBRUVICATM as monotherapy for the treatment of CLL/SLL patients with deletion of the short arm of chromosome 17 (deletion 17p). Patients harboring a deletion within chromosome 17 are poor responders to chemoimmunotherapy and have limited treatment options. The presence of deletion 17p is one of the worst prognostic factors in patients with CLL.
The Breakthrough Therapy Designation is intended to expedite the development and review of a potential new drug for serious or life-threatening diseases where "preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development." The designation of a drug as a Breakthrough Therapy was enacted as part of the 2012 Food and Drug Administration Safety and Innovation Act.
Collaboration and License Agreement with Janssen Biotech, Inc. In December 2011, we entered into the Agreement with Janssen for the development and commercialization of IMBRUVICATM, and certain compounds structurally related to IMBRUVICATM, for oncology and other indications, excluding all immune mediated diseases and inflammatory or conditions and all psychiatric or psychological diseases or conditions, in the U.S. and outside the U.S. Each company is leading development for specific indications as stipulated in a global development plan.


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The collaboration provides Janssen with an exclusive license to exploit the underlying technology outside of the U.S. (the "License Territory") and co-exclusively with Pharmacyclics in the U.S.
The collaboration has no fixed duration or expiration date and provided for payments by Janssen to us of a $150,000,000 non-refundable upfront payment upon execution, as well as potential future milestone payments of up to $825,000,000 based upon continued development progress ($250,000,000), regulatory progress ($225,000,000) and approval of the product in both the U.S. and the License Territory ($350,000,000). As of March 31, 2014, $445,000,000 in milestone payments had been earned by us under the Agreement and we may receive up to an additional $380,000,000 in development, regulatory and approval milestone payments.
During the three months ended March 31, 2014, we announced that the FDA approved IMBRUVICATM as a single agent for the treatment of patients with CLL who have received at least one prior therapy. This approval of IMBRUVICATM in CLL triggered a $60,000,000 milestone payment to us under the Agreement. The Agreement includes a cost sharing arrangement for associated collaboration activities. Except in certain cases, in general Janssen is responsible for approximately 60% of collaboration development costs and we are responsible for the remaining 40% of collaboration development costs. In general, costs associated with commercialization will be included in determining pre-tax profit or pre-tax loss, which are to be shared 50% by us and 50% by Janssen. The collaboration with Janssen provides us with an annual cap of our share of collaboration costs and pre-tax commercialization losses for each calendar year until the third profitable calendar quarter for the product, as determined in the Agreement. In the event that our share of aggregate development costs in any given calendar year, together with any other amounts that become due from us, plus our share of pre-tax loss (if any) for any calendar quarter in such calendar year, less our share of pre-tax profit (if any) for any calendar quarter in such calendar year, exceeds $50,000,000, then amounts that are in excess of $50,000,000 (the "Excess Amounts") are funded by Janssen. The total Excess Amounts plus interest may not exceed $225,000,000. Interest shall be accrued on the outstanding balance with interest calculated at the average annual European Interbank Offered Rate ("EURIBOR") for the EURO or average annual London Interbank Offered Rate ("LIBOR") for U.S. Dollars as reported in the Wall Street Journal, plus 2%, calculated on the number of days from the date on which our payment would be due to Janssen. The interest rate on outstanding Excess Amounts shall not exceed 5% per annum, and the cumulative interest on Excess Amounts shall not in the aggregate exceed $25,000,000.
In the event the Excess Amounts reach a maximum of $225,000,000, we shall be responsible for our share of development costs, together with any other amounts that become due from us, plus our share of any pre-tax loss beyond such maximum. For all calendar quarters following the third profitable calendar quarter for the product, as determined in the Agreement, we can no longer add to Excess Amounts and shall be responsible for our own share of development costs along . . .

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