Pharmacyclics, Inc. (NSDQ: PCYC), a Sunnyvale, CA biopharma with four drugs in clinical development, may be developing a business model that involves China. However, at this stage, the evidence for such a move is sketchy, at best. The following is what we know, and you can decide for yourself whether the company's business plan will soon include a China component.
At some point over the past few months, Pharmacyclics took on Glen Rice, PhD, as its President and COO. Rice has a strong China connection. He established Bridge Labs a few years ago, a US-headquartered CRO whose only laboratory (at the time) was established in Beijing in 2004. The point of the organization was to establish a fully FDA compliant pre-clinical lab that could offer more cost-effective services.
Rice, who was an “early adopter” in the China CRO boom, left his post as Vice President of Biosciences at SRI International in Palo Alto to found Bridge. He has deep experience as both a research and a biopharma company exec. Three years later, in 2007, after Bridge spent $15 million to buy Gene Logic’s pre-clinical lab facility in Gaithersburg, Maryland, Dr. Rice was no longer part of Bridge. Now, he has surfaced as COO of Pharmacyclics.
Friday, Pharmacyclics announced that principals of Pacific Biopharma Group, Ltd. (PBG) have made a $1.4 million investment in Pharmacyclics. PBG is located in San Bruno California and Taizhou, Jiangsu Province, People's Republic of China, where it is building a single-use biomanufacturing facility in the China Medical City complex. The company calls its China facility a research site, so perhaps its mission has expanded since the original announcement. PBG is developing drugs to treat pediatric cancer, small cell lung cancer and melanoma.
Could some of Pharmacyclics’ development work be on the way to China?
It may be significant that the investment in Pharmacyclics was made by principals of PBG, not the company itself, because that fact creates a greater distance between the two companies.
These two developments may seem fairly skimpy as evidence of a China tilt in Pharmacyclics’ business plan. However, both of them involve a person or a company with intimate knowledge of the China biopharma scene.
There is one more consideration. The $1.4 million investment is, by itself, a fairly small contribution to Pharmacyclics. The company burns about $5 million a quarter. At the moment, it has more than $12 million in cash in hand, helped in large measure by a $5 million loan (on favorable terms) from Robert Duggan, the company’s new CEO. Another $1.4 million, while helpful, does not change Pharmacyclics’ situation dramatically.
The investment was made at a price of $.93 per share, which is a considerable 50% premium to Thursday’s closing price of $.61. It would seem that the principals of PBG were not interested in a spectacular deal – surely they could have finagled better terms – but in taking a position in the company. We are raising the possibility, based on these factors, that there is a mutual interest between the two companies, still unannounced, that will be made explicit in the future.