Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Francis Irvine

Josh Brumm - EVP, Finance

Bob Duggan - Chairman and CEO

Urte Gayko, Ph.D. – Vice President, Global Regulatory Affairs

Dr. Lori Kunkel - Chief Medical Officer

Dr. Maky Zanganeh – COO

Paula Boultbee - EVP, Sales and Marketing

Dr. Maria Fardis – EVP, Operations and Alliances

Dr. Jesse McGreivy - VP, Clinical Science

Dr. Joe Buggy - VP, Research

Rich Love - VP, Legal

Rainer (Ramses) Erdtmann - Vice President, Finance & Administration

Jesse McGreivy - Vice President, Clinical Science

Analysts

Michael J. Yee – RBC Capital Markets

Geoffrey Porges (Yon) - Sanford Bernstein

Joel Sendek - Stifel Nicolaus

Jason Cantor – Credit Suisse

Mike King – JMP Securities

Alan Carr (Mark) – Needham & Company

Jason Cantor – Credit Suisse

Greg Wade – Wedbush Securities

(Jay Sotherman – Kohls Capital)

Pharmacyclics, Inc. (PCYC) Q2 2013 Earnings Call February 14, 2013 4:30 PM ET

Operator

Operator

Greetings and welcome to the Pharmacyclics' quarterly conference call. (Operator Instructions)

It is now my pleasure to introduce your host, Ramses Erdtmann. Thank you Mr. Erdtmann, you may now begin.

Ramses Erdtmann

Thank you, Sharon and good afternoon and thank you for joining us for our conference call today.

With me on the call and available to answer questions are our CEO and Chairman of the Board, Bob Duggan, our Chief Operating Officer, D&R. Maky Zanganeh, our Chief Medical Officer, D&R. Lori Kunkel, our Executive Vice President, Sales and Marketing, Paula Boultbee, our Executive Vice President of Finance, Josh Brumm, our Executive Vice President of Operations an Alliances, Dr. Maia Fardis, our Vice President of Clinical Science, D&R. Jesse McGreivy, our Vice President of Global Regulatory Affairs, Dr. Urte Gayko, our Vice President of Research, Dr. Joe Buggy, and our Vice President of Legal, Rick Love.

Our genre for today's call will include a review of our financials, brief comments on the quarter by our CEO, an update of our most recent regulatory success, and a summary of our clinical progress as well as an outlook of what to expect in 2013.

Before we start, let me remind you that this non-confidential presentation contains forward-looking statements about the business, prospects of Pharmacyclics including expectations regarding Pharmacyclics' financial performance, commercial products, and potential future products in different areas of therapeutic research and development.

Results may differ materially depending on the progress of Pharmacyclics' product program, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors, and those factors detailed in Pharmacyclics' filings with the SEC such as the 10-Q, 10-K, and 8-K reports.

I would now like to turn this call over to Josh Brumm, our Executive Vice President of Finance. Josh.

Josh Brumm

Thank you, Ramses, and good afternoon to everybody on the call.

I would like to begin by mentioning that Pharmacyclics announced on November 14th, 2012, that the company has changed its fiscal year end from June 30 to September 31.

Effective September 31, 2012, as a result of the six months ended December 31st, 2012, represents a transition period. And the company's net fiscal year will cover the period from January 1, 2013 to December 31, 2013.

On this call, I will provide operating results for the six and three months ended December 31, 2012.

The company's GAAP net income for the six months ended December 31, 2012, was $117.5 million or $1.69 basic and $1.58 diluted earnings per share. Compared to the six months ended December 31, 2011, GAAP net income of $41.7 million or $0.61 basic and $0.58 diluted earnings per share.

With respect to non-GAAP adjusted for stock based compensation for the six months ended December 31, 2012, net income was $125 million or $1.79 basic and $1.68 diluted earnings per share compared to non-GAAP net income of $46.3 million or $0.68 basic and $0.65 diluted earnings per share for the same period of the prior year.

The increase in net income from the year-over-year primarily relates to higher collaboration revenue earned as we achieved three milestones of $50 million each aggregating to $150 million for the six months ended December 31st, 2012 as compared to $70.6 million in licensed revenue recognized from the upfront payment received from Janssen during the six months ended December 31st, 2011.

In regards to the company's three month period ended December 31st, 2012, GAAP net income was $41.9 million or $0.60 basic and $0.56 diluted earnings per share compared to GAAP net income of $56.3 million or $0.82 basic and $0.78 diluted earnings per share for the quarter ended December 31st, 2011.

On a non-GAAP basis, net income reported for the quarter ended December 31st, 2012, was $46.2 million or $0.66 basic and $0.62 diluted earnings per share compared to non-GAAP net income of $58.6 million or $0.85 basic and $0.82 diluted earnings per share for the same period of the prior year.

The decrease in net income for the quarter ended December 31st, 2012 as compared to the quarter ended December 31st, 2011 primarily relates to lower license and milestone revenue earned during the quarter and higher general and administrative expenses.

Revenue for the six months ended December 31st, 2012 was a $160.7 million compared to $77.9 million for the six months ended December 31st, 2011.

Revenue for the quarter ended December 31, 2012 was $58 million compared to $77.9 million for the quarter ended December 31st, 2011. And revenues for the quarter ended December 31, 2012 includes $50 million of milestones revenue due to the company's achievement of one clinical milestone in connection with the collaboration agreement with Janssen as well as a $5 million license revenue related to our license agreement with Novo.

As you know, Novo acquired worldwide rights for the company's small module factor 7A inhibitor and the restricted disease indication outside of oncology.

Related to operating expenses, our GAAP operating expenses were $40.6 million for the six months ended December 31st, 2012 compared to $30.6 million for the six months ended December 31st, 2011. Again, included in operating expenses for the six months ended December 31, 2012 is an $18.1 million reduction to operating expenses through excess amounts.

The increase in operating expenses from the previous year is primarily due to the acceleration of our clinical program and increasing R&D expense, which is offset by the reduction to operating expenses for excess amounts.

Our GAAP operating expenses were $16.7 million for the quarter ended December 31st, 2012 compared to $23.9 million for the quarter ended September 30th, 2012 and $16 million for the same period of the prior year. The decrease in the operating expenses from quarter-to-quarter is primarily driven by a reduction of operating expenses amounting to $18.1 million related to excess amounts as noted above.

I would like to add a bit more color in the term excess amounts. As we previously disclosed, the collaboration and license agreement with Janssen includes a cost sharing arrangement for certain development and commercial activities.

Additionally, Pharmacyclics' share of development and pre-tax commercialization losses under the collaboration for each calendar year is subject to an annual cap of $50 million. Thus amounts in excess of the $50 million annual cap are funded by Janssen up to a maximum of $225 million, which includes interest up to and capped at $25 million.

Potential interest on the excess amounts will be calculated using the annual Libor rate plus 2%.

Going forward, we will refer to any amounts funded by Janssen in excess of $50 million annual cap as excess amount.

During the three months ended December 31st, 2012, we exceeded the $50 million annual cap by $18.1 million. And recorded the excess amounts of $18.1 million as a $17.3 million reduction to R&D expense and a $0.8 million reduction to G&A expense.

We have recognized the excess amounts as a reduction to operating expenses in the current year as the company's payment of the excess amounts to Janssen is contingent and will become payable only after the third profitable calendar quarter for the product under the collaboration.

Further, the excess amount shall be only reimbursable from the company's share of future full-calendar quarter pre-tax profits after the third profitable calendar quarter for the product under

the collaboration.

As of December 31st, 2012, we had cash, cash equivalents, and marketable securities of $317.1 million, which compares to $203.6 million as of June 30th, 2012. The increase in the company's cash position over the period was driven by the achievement and receipt of $150 million in clinical milestones.

Additionally, the company has a $26.6 million receivable from Janssen as of December 31st, 2012 resulting from $8.5 million in cost sharing activities and $18.1 million for excess amounts. We expect the $26.6 million in receivables to be collected during the quarter ending March 31st, 2013.

As you know, the Pharmacyclics' clinical program for our group net is expanding rapidly. Currently, there are 27 in clinical trials registered with the NIH. Five of these trials are Phase II studies with large enrollment requirements and in some cases, comparative drugs. This increase in clinical development activity will also lead to an increase in our related R&D expenses.

With the recent designation of breakthrough therapy by the FDA and NCO in Waldenstrom's, we are also not accelerating our efforts to support a broad range of commercialization activities. As such, we anticipate a significant increase in the company's operating expenses for the fiscal year of 2013.

As we look at Pharmacyclics' cash position, we believe the company is in a strong position to end 2013 with cash, cash equivalents, and marketable securities in excess of $225 million.

I would now like to turn the call over to our Chairman and CEO, Bob Duggan for some brief comments. Bob.

Bob Duggan

Thank you, Josh.

These are truly exciting times at Pharmacyclics. Let me provide you an overview of our most recent ibrutinib events. We ended last year with a broad clinical update at the American Society of Hematology. This is one of two events where through the peer review process, meaningful clinical and pre-clinical updates are provided to our programs. At past 2012, we had in total 16 ibrutinib related presentations of which eight were oral and eight were posters.

Two of the oral presentations made it into a distinguished category called Best of ASH. Just to put it in perspective, of the 5,000 submitted presentations to ASH, a total of 25 made this Best of ASH category. Ibrutinib blended it twice with two CLL presentations on by Investigator Dr. John Berg of the Howe State University and the other by Investigator Dr. Jan Burger from MD Anderson. I would like to thank all of our investigators, the clinicians, and also the patients for all their support. Without them, we could not have made such meaningful scientific progress.

As announced Tuesday, the FDA has reviewed our clinical and pre-clinical data in patients with mantle-cell lymphoma and also in patients with Waldenstrom's disease and came to the conclusion that ibrutinib for the treatment of these patients meets the criteria for "breakthrough therapy designation." The breakthrough therapy designation is described in the 2012 (UB) Drug Administration's Safety and Innovation Act. It was established to help expedite the development of new drugs that offer substantial improvement over existing therapies for serious of life-threatening diseases. During this call, our Vice President of Global Regulatory Affairs will provide a bit more background data on this new category.

This is a historic moment in oncology and also for our company. And something we are proud of and honored to participate in. The FDA has been very supportive and is currently working with us to expedite the fulfillment of the regulatory requirements necessary for the filing of an MDA and mantle-cell lymphoma and also in Waldenstrom's disease. We anticipate the mantle-cell filing will occur prior to year-end.

With regard to Waldenstrom's, we are working with the FDA to further define the requirements for an MDA submission. And we'll update you as we learn more in the coming months.

There are now a total of 27 ibrutinib clinical trials registered with the National Institute of Health. These trials will be significantly advanced throughout this year as we are broadly exploring the potential of ibrutinib in D cell malignancies.

I would now like to turn the call over to Dr. Urte Gayko, our Head of Global Regulatory Affairs to provide a bit more color on the breakthrough therapy designation. She will then pass on to Dr. Lori Kunkel, our Chief Medical Officer to review the clinical program and provide a clinical outlook for 2013. Urte.

Urte Gayko

Thank you, Bob.

Yes, I agree with you. These are very exciting times. Let me start by providing some background to the current regulatory approaches prior to breakthrough so we can put this new category in perspective.

An investigation of [inaudible] may be eligible for any combination of three designations the FDA uses to expedite development of promising new agents. Number one, [inaudible] approval, number two, priority review, or three, fast track designation. These three approaches are distinct, but complimentary roles in accelerating the pace of track development and approval. Their use in oncology has contributed to the speed with which the FDA has reviewed new oncology medicines.

However, with each of these regulatory approaches, investigational drugs still goes with the traditional three phases of clinical testing including controlled Phase III trials.

The accelerated approval is a pathway for expediting access to new therapies and diseases in which the effect on the target end point can be shown much sooner than the effect on the standard efficacy end-point that typically would [inaudible] make a better benefit.

Accelerated approval is conditional in that drugs approved via this pathway might undergo further clinical studies to confirm the predicted clinical benefit with the confirmatory trial.

The fast track program provides for early and frequent communication between the FDA and the sponsor throughout the development and review process. And at this program, a sponsor may submit sections of the new drug's application in a rolling review. This is a process designed to facilitate the development and expedite the review of drugs that treat serious diseases and address unmet medical needs.

With the priority review, the FDA will provide a shorter review period of approximately eight months. This available to drugs that provide a significant improvement in the treatment prevention or diagnosis of a disease when compared to standard of care.

The [inaudible] mechanism is to help expedite development of new agents. This is the advent of breakthrough therapy designations as designed by FDA officials. The development of therapies that treat serious diseases with a strong unmet need can now be shortened. And the time needed to conduct the various risk [inaudible] time is reduced.

This designation should also minimize the number of study participants placed on a comparative ineffective control regimen.

Another agent with a breakthrough designation often will also qualify for fast track and priority review and possibly for accelerate approval dependent on the efficacy and point used.

We understand that the designation of a new drug as a potential breakthrough therapy will be determined on a case-by-case basis by FDA staff. It is our understanding that the diseases should be serious, either debilitating, or less threatening, and know established standard of care exists for the current accepted standard of care use prudent clinical outcome such as low response rates, lack of durability, limited survival, inadequate system control, severe acute or chronic effects, reduced quality of life, et cetera.

Breakthrough designations will also be based on our compelling early clinical evidence in the defined [inaudible] setting which includes safety and efficacy of [inaudible].

Together with our collaboration partner Janssen, we are currently working with the FDA to determine the implications of the [inaudible] breakthrough therapy designation for the ongoing and planned development of ibrutinib.

We are also reviewing the potential MDA findings plan for the use of ibrutinib in patients with mantle-cell lymphoma and Waldenstrom's. As we learn more about these requirements and receive further information by the FDA staff including the Secretary of Health and Human Services, we will provide regular updates on all programs and their progress.

I would now turn the call over to Lori for the clinical update. Lori.

Lori Kunkel

Thank you. A quick context around our excitement. Let's recall that ibrutinib as a compound entered the clinic in 2009. And during 2013, we have begun to demonstrate the breadth and the depth of the clinical program's potential.

Today as Bob mentioned, a total of five Phase III trials have been announced or initiated since the partnership started 14 months ago.

I will briefly highlight these [inaudible] from anticipated enrollment timelines on studies Pharmacyclics is conducting. Any updates related to the Janssen studies will be provided by our collaboration partner at their discretion.

First, we started enrolling our first PYCY basic III trial in July of last year. This study is a global trial of ibrutinib as a mono-therapy versus Ofatumumab in patients with [inaudible] refractory CLL or SLL, called resonate. We plan to enroll about 350 patients worldwide and intend to have completed enrollment prior to the fourth quarter of 2013.

Eight months into the trial, we are meeting our enrollment projections and anticipate to complete enrollment on time. The primary endpoint is PSS, which is event driven.

We initiated a second Phase III study in January, a frontline study with ibrutinib in newly diagnosed elderly CLL SLL patients called Resonate II. It is a global study of ibrutinib at mono-therapy versus [inaudible] cells in patients 65 years or older with treatment [inaudible] CLL SLL. The study design was granted under a special protocol assessment. We plan to enroll 272 patients. Enrollment will take approximately 18 months to complete. And the primary end point is PSS, which is event driven.

I am delighted to say based on compelling data presented at ASH by Dr. Berg and Dr. Burger that ibrutinib will be further tested as a single agent in the highest unmet need population in

CLL. Resonate 17 is an open-label trial using ibrutinib as mono-therapy in relapse deletion 17P patients who have acquired resistance to commonly used agents. And have a poor outcome with an expected survival of less than a year. At ASH, 2012, Dr. Burger and Dr. Berg presented data in treating these high unmet needs patients. Dr. Berg reported 23 relapse of refractory dilutions 17 patients with a estimated progression pre survival at 26 months of 57%.

We are now planning to enroll 111 patients worldwide and have just enrolled our first patient. We estimate enrollment for this study will take approximately 12 months to complete.

Our collaboration partner, Janssen, initiated a Phase III study by ibrutinib in combination with [inaudible] Rituximab in patients with relapse and refractory CLL SLL who received at least one prior systemic therapy. This global study is called Helios. And Janssen plans to enroll 580 patients worldwide.

And now onto Mantle Cell. Dr. Michael Wong of MD Anderson presented the PCYC led Phase II study of ibrutinib mono-therapy and relapse mantle cells at ASH. With data demonstrating an overall response rate of nearly 70% and importantly, the achievement of complete responses. Prior treatment with participants had no impact on activity.

This data led to opening a multi-center Phase II trial of ibrutinib as mono-therapy and relapse refractory and mantle cell patients who have progressed after chemotherapy called Spark. Janssen plans to enroll 110 patients worldwide.

Another Janssen led study is a Phase III randomized multi-center registration trial of ibrutinib as mono-therapy versus [inaudible] in replace and refractory mantle cell lymphoma patients who received at least one prior Rituximab containing chemotherapy regimen. This study is called RAY. And Jansssen plans to enroll 280 patients.

Most recently, our partner Janssen also announced the initiation of a Phase III study in frontline mantle cell lymphoma. This study is called Shine, is a randomized double-blind placebo control Phase III study of ibrutinib plus [inaudible] and Rituximab versus placebo plus [inaudible] and Rituximab in subjects with newly diagnosed mantle cell lymphoma.

The primary input of this study will be progression free survival. Janssen plans to enroll 520 patients in this study.

Also I would like to remind you that we have ongoing Phase I and II trials in the large B cell lymphoma, multiple myeloma, and [inaudible] lymphoma.

All of these studies will advance as our knowledge in each disease settings continues during the course of 2013.

Last year we announced the company received orphan drug designation for ibrutinib treatment of chronic lymphocytic leukemia. In addition to mantle monocell lymphoma. And with the announcement on Tuesday, we have now received the designation of breakthrough therapy in mantle and Waldenstrom’s The monocell lymphoma breakthrough designation in mantle cell is supported by the data presented at ASH.

Let me add a bit more color to the Waldenstrom’s indication. Waldenstrom’s is a subtype of lymphocytic lymphoma and it’s considered an indolent B-cell malignancy. We did enroll Waldenstrom’s indications in our Phase I study and saw responses in three or four patients. This lead to a collaboration with Dr. [inaudible] at the Dana Faber Institute to further investigate ibrutinib in patients who have relapsed Waldenstrom’s disease.

A preliminary assay demonstrated early on a set of activities and it appears that BTK is a key driver in the pathophysiology of Waldenstrom’s disease. This has led to submission of supportive data for the breakthrough designation.

Finally, I would like to provide an outlook for 2013. 2013 is probably the most important year clinically for Pharmacyclics. We will significantly advance our CLL and mantle cell programs across treatment settings. 2013 will provide meaningful data points on our path to fully develop ibrutinib in non-Hodgkin’s lymphoma. We are actively advancing the ibrutinib franchise over the full spectrum of B-cell malignancies and are developing pathways also in multiple myeloma patients. During the first half of 2013, we will also have discussions with the regulatory authorities regarding future development of ibrutinib in patients with large B-cell and we expect to be able to provide further updates in this disease in the third quarter of this year as well.

We often get asked which indication do we think will finish first and we get invited to speculate on our regulatory and clinical success. As you can imagine, we keep all regulatory conversations confidential and do not speculate on any regulatory filings success or outcomes.

During this call, however, we did make comments on the speed of enrollment for each of our initiated studies. We also commented on the filings we’re anticipating in mantle cell before the end of the year. We do not provide further guidance or speculate about any drug approval timeline.

We also get asked about presentations we plan for ASH and ASCO. Our focus today is clearly on advancing clinical programs and bringing them over the finish line.

ASH and ASCO this year in general will not address our Phase III programs much further than discussing trial design.

This concludes our prepared remarks. Operator, please open the floor for questions now.

Question-and-Answer Session

Operator

(Operator instructions). Our first question comes from the line of Michael Yee from RBC Capital Markets.

Michael J. Yee – RBC Capital Markets

Hi, thanks. Congratulations on the work during the last 12 months. I have two questions. One on the RESONATE Study. I know that you said you plan to complete enrollment this year. Can you confirm that there isn’t a planned determined analysis? How does that work? Obviously the control arm has a very short [inaudible], so help us understand how to think about that.

And the second question was on [inaudible], I know you’ll have some planning sessions with the FDA, so what are various scenarios that we should think about going forward? Maybe you could lay some scenarios out for us.

Dr. Lori Kunkel

Certainly. So on the first question on RESONATE, which is the randomized study of ibrutinib versus ofatumumab, there is a plan in [inaudible]. Our primary endpoint is TSF and these are event-driven analysis. At the time that this analysis is done, we do have a DMC that reviews this. However, we will not stop this study without further discussions with regulatory authorities and we have taken this position all along and we will continue to honor that. The ability to use this data will obviously depend on the magnitude and duration of response at the time that that analysis is done.

With respect to the B-cell, the B-cell lymphoma, our data at ASH was in a relapse and refractory setting where we saw remarkable activity in the activated B-cell type of lymphoma, which is the more aggressive form. At the same time, as we’ve noted, we have an ongoing study for dose escalation using ibrutinib in combination with CHOP-R. We have not had our discussions with the regulatory authorities yet and until our plans are finalized, we will not be releasing our development plans.

Michael J. Yee – RBC Capital Markets

Okay. Thank you.

Operator

Thank you, our next question comes from Geoffrey Porges from Bernstein Research

Geoffrey Porges (Yon) - Sanford Bernstein

Hi, this is (Yon) in for Goeff. My question is, when do you think you can get manufacturing, packaging and distribution ready to support launch?

Bob Duggan

We will be prepared on those – on CMC when the timing is appropriate. As a – in the investment thesis, we’ve given out the dates by which we expect to file, so that’s – that’s as much as we – additional data as we really feel comfortable or is appropriate to provide at this time. But we’re very proud of our CMC team and we’re very confident that they will be not a gating item.

Geoffrey Porges (Yon) - Sanford Bernstein

Okay, thanks,

Operator

Thank you. Our next question comes from Joel Sendek from Stiefl Nicolaus.

Joel Sendek - Stifel Nicolaus

Hi, thanks a lot. I just had a couple questions on the breakthrough delegation and trying to understand that. I’m kind of confused on that front, not only from you but from how the FDA describes it. So it is my understanding that it’s more designed for drugs at the earlier stage and would that explain why you didn’t get it for CLL? I guess that’s my first question.

Bob Duggan

Let me just make a comment on that. This is being promulgated by the FDA so if you’re confused about it, that really needs to be sorted out with the FDA. We’re not an intermediary between what they say and any opinions or judgements concerning that. So it’s really not something that we’re comfortable to comment on. We’re very pleased with our interaction and working relationship with the FDA, that we can say.

Joel Sendek - Stifel Nicolaus

All right, great. And obviously it’s a big accomplishment. I guess one other thing in just kind of backing out of your guidance with regards to MCL filing at the end of the year and the sparks study that’s ongoing yet getting enough data in for the filing, can you help us maybe with whether you would need data from that study or even have it in time for the filing?

Dr. Lori Kunkel

So we are under discussions with the FDA on the body of [inaudible] that will be required for this filing. So at this time, those discussions are still ongoing.

Joel Sendek - Stifel Nicolaus

Okay, great. Thank you very much.

Operator

Thank you. Our next question comes from Jason Cantor from Credit Suisse.

Jason Cantor – Credit Suisse

Thanks for taking the questions and congratulations on all the progress. Along the same lines with the questions on the breakthrough designation, you’ve already got your [inaudible] program pretty well laid out. So what are some methods that, you know, by which this new designation could either accelerate things or broaden your labor faster or you know, what are some of the potential advantages in that setting where you’ve already got the trials planned out?

And then also since you’re just not beginning to talk about Waldenstrom’ s , when are we going to see the data from that trial and could you give us some sense of what the market opportunity might be for a drug in that setting?

Dr. Lori Kunkel

So, Jason, when we look at the breakthrough, that does provide us an opportunity to even have more frequent communication with the FCA. And I think that is a big advantage, so your ability to have priority meetings and to increase the conversation is one of the benefits of that. And that can certainly help accelerate getting approval because you’re working very, very closely on a daily basis almost. Not daily, but close.

The – so that is really a benefit and that goes across not only clinical but the manufacturing and our clinical pharmacology.

With regards to Waldenstrom’ s, we did, as I mentioned, enroll Waldenstroms in our Phase I and when we went back and looked at that data, three or four of those patients had remarkable responses and most importantly, their side effects were – it showed it was very well tolerable in a heavily treated patient group. That prompted us to start a collaboration with [Inaudible] who is a world-renown physician in Waldendstrom’s and within the first few months it became evident that there would be some reproducibility in what we saw with those few patients. This is an indolent disease patients. There is no approved therapy currently for Waldenstrom’s so we thought it was a high unmet need.

We will be presenting the data at ASCO. It has been submitted, let’s put it that way. I can’t guarantee it will be presented, but it has been submitted at ASCO, so that will be when you will see it. We have not had our formal development discussions yet with the FCA and we should be able to update you certainly by ASCO.

Jason Cantor – Credit Suisse

Thank you.

Operator

(Operator Instructions). Our next question comes from Mike King from JMP Securities.

Mike King – JMP Securities

Thanks for taking my questions, and congratulations to everybody for all the progress. I had several related questions to MCL and it’s, again, based on the less-than-full understanding of the breakthrough therapy designation. So will the basis of the approval be Study 1104? Will it be SPARK or some combination of the two? And then when approval is granted, assuming it’s granted, will that be full approval, no additional studies will have to be conducted in order to convert that from breakthrough to full approval? Thanks.

Dr. Lori Kunkel

So we are still under discussion with the FDA on the body of data that will be required to achieve our first approval and until those discussions occur, we are not, obviously, going to be able to fill out the picture. I will remind you that we have two Phase III randomized control Phase IIIs ongoing with Janssen, the Head-to-Head with ibrutinib [inaudible] and the more recently we announced an upfront study with [inaudible]/rituximab plus or minus ibrutinib. So those are both planned as registration studies.

Mike King – JMP Securities

[Inaudible] just about the registration, will that be if it’s approve for full registration, full approval?

Dr. Lori Kunkel

At this time, until the studies are completed and we filed them with the FCA, I don’t think we can comment on that.

Mike King – JMP Securities

Okay, thank you.

Operator

Our next question comes from Alan Carr from Needham & Co.

Alan Carr (Mark) – Needham & Company

Hi. This is actually Mark on for Alan. Thanks for taking my question. I’m just going through what’s already been asked. I guess I have two questions, one more general and then one specifically clerical. I was wondering if you guys could talk about milestones coming in 2013. We assume there’s a milestone associated with FDA submission and possibly one associated with approval. How do these play out with what you guys expect to happen in 2013?

Bob Duggan

We would anticipate a milestone in the first half of the year and I think you understand the potential for any further milestone submittal of Phase III, our NDA, and granting of that approval both generate milestones.

Alan Carr (Mark) – Needham & Company

Okay, great. And I had just, I guess a clerical question. We’re just going through the press release here and we’re looking at the studies that have you have announced and this C20 newly diagnosed positive non-Hodgkin’s lymphoma study enrolling patients, is this what you guys refer to as DDL1002 in the past?

Dr. Lori Kunkel

Yes, that is the same study, the dose escalation part actually allows any pathology to be enrolled once we establish it’s safe. It specifically expanded out into the [inaudible] population.

Alan Carr (Mark) – Needham & Company

Is there a code for [inaudible] on the trial [inaudible]? Do we have a code for that yet, a title for that yet?

Dr. Lori Kunkel

We don’t have a name for that yet. If I had to guess, it would be probably molecular 2001, FHL 2001.

Alan Carr (Mark) – Needham & Company

The numbers are very helpful for us to keep track of things.

Dr. Lori Kunkel

Yeah, that study will be initiated by Janssen and usually their numbers are the histology followed by what phase and what study of that phase. So probably it will be FHL2001. But we can follow up on that with you.

Alan Carr (Mark) – Needham & Company

All right. Thanks very much, guys.

Operator

Thank you. Our next question is a follow-up from Jason Cantor from Credit Suisse.

Jason Cantor – Credit Suisse

Great, thanks for taking the follow ups. Bob, this one is for you. I know you guys have your hands full with this drug and everyone’s very excited about it, but as you kind of look forward with this company, are you guys considering bringing in additional drugs to get in to invest with the drugs that partners with [inaudible]? I think you retained some rights so is there a longer-term plan to build the company beyond ibrutinib?

Bob Duggan

That’s a good question, I appreciate your bringing it up, Jason. Clearly, with ibrutinib, we have the potential, give or take 20 labels. So you say drug, then I say 20 labels, some drugs get one or two labels, so you can look at this from that perspective. It’s a very prolific drug and that’s what we know today in blood borne tumors. So we continue to look at the hedges of where ibrutinib and it’s B-cell receptors signaling pathway in addition take us. We don’t think we – we certainly don’t know that we’ve achieved the limit on that. So we’re very busy on the research side in that particular molecule. Leveraging that molecule, we have the four series and I’m happy to say we have a couple of drugs that have evolved out of that and we’re looking – we’ll know by mid-year the higher – how high the probabilities are to take those into IND. So far, so good on that score. Clearly we’ve had some very nice success with [inaudible]. We think that they’re excited about the results as are we. We expect to hear more from them regarding where they want to take that drug.

So this company is focused today on establishing a culture that allows us to effectively and profitably bring the molecules in hand to market. We’re building our team. We’re very pleased with the way our team is growing and coming together and as such, we expect to be able to be in this business for a long, long period of time and that will, of course, include, overtime, other drugs. If we establish the proper culture here, that will exist beyond ibrutinib and beyond those of us at the table today and that’s our intention.

Jason Cantor – Credit Suisse

Okay. Lori, can you give us a little bit better understanding of what type of data flow we might get in multiple myeloma over the course of the year? You know, how many patients over different doses and what do you think the data flow is going to look like on that program?

Dr. Lori Kunkel

So the myeloma trial is enrolling very nicely. We would anticipate an update on our 560 [inaudible] dose probably the end of the year and potentially with additional data coming out, additional [inaudible]. So it should be by the end of the year we hope to have something to present at a major meeting.

Jason Cantor – Credit Suisse

Thank you.

Operator

Our next question comes from Greg Wade from Wedbush Securities.

Greg Wade – Wedbush Securities

Good afternoon. Thanks for taking my questions. Let me add my congratulations to a pretty spectacular last year. My question is for Joe Buggy. Joe, what will you be working on this year that might potentially expand the use of ibrutinib beyond hepatologically? Thanks.

Dr. Joe Buggy

Thanks, Greg, for asking me a question. I appreciate that. You know, well, you know as well as I do, we’re working a lot of things in research and as Bob just said, we’re working on expanding indications beyond B-cell malignancies. I don’t want to talk too much about that on this call because it’s early research-y type stuff but you know, we have a significant amount of resources focused on trying to figure out if precisely, you know, the boarders of where ibrutinib can be useful in cancer.

Greg Wade – Wedbush Securities

And Bob, you know, based up on some of the success Joe’s probably having in the lab with the animals, is there any change that you could see some pilot work in some of the more immunology addressable solid tumors? I mean, maybe not this year because you guys have your hands full, but does 2014 look promising?

Bob Duggan

Well, Greg, basically we feel, at this point, Pharmacyclics is on the leading edge of introducing what we call a coming new era of patient friendly body harmonious therapy so we’re very dedicated to that. We’re very confident in the approach that we’re taking that will yield some positive results. We would like to maintain our philosophy of not putting our futures on the table, but to announcing meaningful events as they occur, so just stayed tuned.

Greg Wade – Wedbush Securities

Okay, thanks and great luck this year.

Operator

Thank you. Our last question is a follow up from Mike King from JMP Securities.

Mike King – JMP Securities

Thanks for taking the follow up. Two financial-related questions. Number one, could you just remind us about the approval milestone that’s payable to you? I seem to recall that that’s payable irrespective of the – the approval – the indication that the approval is granted for, number one. And number two, when we think about spending this year, I would imagine that it’s going to have to see some ramp up in SG&A to get ready for commercialization? Thanks,

Bob Duggan

Yeah, the milestone that we’re referring to would be [inaudible] on a Phase III start. So that will occur on the timeline that I mentioned to you. And the range of expenditures, keep in mind that we have the 50 million cap as it reflects our expenses on ibrutinib and that provides a real nice financial backdrop for us. On admin, I’m sure you’re referring there to sales and marketing, in that area and preparation for that. What we’ve achieved in the past is by planning and looking to the future quite carefully to get a detailed architecture of how we think things map out. We seem to put that kind of order into our forward progress and it’s working out quite well, so we’ll do the same thing in sales and marketing. We’ll bring very capable, experienced experts on the table as we have done in marketing in the area of commercialization and that will – we will accrue additional expenditures and depending on the breakthrough therapy and our trial results we’ll be in a position to move with appropriate [inaudible].

Mike King – JMP Securities

Thank you.

Operator

Thank you. We do have another question from the line of Jay Sotherman from Kohls Captial.

(Jay Sotherman – Kohls Capital)

Hi. I just wanted to know if anyone has asked about the autoimmune program?

Bob Duggan

Yes. Others have asked about it. Do you have further curiosity?

(Jay Sotherman – Kohls Capital)

I’m sorry. On the last call you mentioned having some sort of announcement regarding that program around mid-year. That was my question.

Bob Duggan

That’s a good question. Will by mid-year provide further color. We are progressing, we will provide further color around mid-year. I appreciate your question.

(Jay Sotherman – Kohls Capital)

Thank you.

Operator

Thank you. At this time there are no further questions. I’d like to turn the call back over to Bob Duggan for closing comments.

Bob Duggan

Thank you, operator. And thank you all for joining our call today. Over the past four years the development of ibrutinib has been a journey of ever-improving data points. It has been a very rewarding process for all stakeholders. Most importantly, for those patient that are achieving benefits from our investigational compound. We cannot be happier with the support we are getting from our investigational clinics, the FDA and also from our partner Janssen. This cooperation is being driven by a common purpose to create a significant difference for the betterment of patient in need. Ibrutinib has helped us do that and we will continue to explore it’s potential and benefits as we move forward.

Let me close by quoting an email which I received a few days ago and which still resonates with me and creates a true feeling of fulfillment for all of us at Pharmacyclics and I’m sure our partners at Janssen. In the email, a Waldenstrom’s advocate is quoting a patient experience on ibrutinib. He described his experiences with the disease, his appreciation for the care he receives and also describes his use of ibrutinib. I will quote from a portion of that email. “Ibrutinib, a pill I take once a day with a tall glass of water. The other 23 hours and 58 minutes of my day I’m not longer thinking much about my Waldenstrom’s. That’s all there is to it. No all-day infusions, no hospital visits and between checkups it could hardly be easier or less invasive.”

This concludes our conference call. Have a great rest of the day. We look forward to updating you as we make further progress. Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Pharmacyclics' CEO Discusses Q2 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts