Pharmacyclics Management Discusses Q1 2013 Results - Earnings Call Transcript

May. 1.13 | About: Pharmacyclics, Inc. (PCYC)

Pharmacyclics (NASDAQ:PCYC)

Q1 2013 Earnings Call

May 01, 2013 4:30 pm ET

Executives

Rainer M. Erdtmann - Senior Vice President of Investor Relations and Administration

Joshua T. Brumm - Principal Financial Officer, Principal Accounting Officer and Executive Vice President of Finance

Robert W. Duggan - Chairman and Chief Executive Officer

Lori Anne Kunkel - Chief Medical Officer

Joseph J. Buggy - Vice President of Research

Maria Fardis - Chief of Oncology Operations and Alliances

Urte Gayko - Senior Vice President of Regulatory

Analysts

Michael J. Yee - RBC Capital Markets, LLC, Research Division

Mark Monane - Needham & Company, LLC, Research Division

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

Marshall Urist - Morgan Stanley, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Michael G. King - JMP Securities LLC, Research Division

Joshua Schimmer - Lazard Capital Markets LLC, Research Division

Jay Silverman

Operator

Greetings, and welcome to the Pharmacyclics First Quarter 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ramses Erdtmann, Senior VP of Investor Relations for Pharmacyclics. Thank you, Mr. Erdtmann, you may begin.

Rainer M. Erdtmann

Thank you, Bob. Good afternoon, and thank you for joining us on 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, Dr. Maky Zanganeh; our Chief Medical Officer, Dr. Lori Kunkel; our Chief of Oncology Operations and Alliances, Dr. Maria Fardis; our Executive Vice President, Sales and Marketing, Paula Boultbee; our Executive Vice President of Finance, Josh Brumm; our Senior Vice President of Global Regulatory Affairs, Dr. Urte Gayko; our Vice President of Clinical Science, Dr. Jesse McGreivy; our Vice President of Research, Dr. Joe Buggy; and our Vice President Of Legal, Rick Love.

Our agenda for today's call will include the review of our financials, brief comments on the quarter by our CEO, an update of the upcoming scientific data releases this summer and those that have just occurred, information on R&D efforts and an update on our trials and their progress.

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 the call over to Josh Brumm, our Executive Vice President of Finance. Josh?

Joshua T. Brumm

Thank you, Ramses, and good afternoon to everyone on the call. On this call, I will provide operating results for the 3 months ended March 31, 2013, which represents our first quarter of fiscal year 2013.

For the 3 months ended March 31, 2013, the company's non-GAAP net loss, adjusting for stock-based compensation, was $28.3 million or a $0.40 loss per share. This is compared to non-GAAP net loss of $9.3 million or a $0.14 loss per share for the quarter ended March 31, 2012.

As reported on April 11, 2013, the company earned a $50 million milestone payment obligation under our collaboration and license agreement with Janssen Biotech as a result of the enrollment of a fifth patient in a study using ibrutinib as a monotherapy versus chlorambucil in elderly patients with newly diagnosed chronic lymphocytic lymphoma, CLL, and small lymphocytic lymphoma, SLL. The $20.3 million non-GAAP net loss for the quarter ended March 31, 2013, did not include the $50 million milestone earned on April 11 of this year. The company will record the $50 million milestone as revenue in the second quarter of 2013.

Looking forward, the company expects non-GAAP net income, net loss to be near breakeven for the second quarter of 2013 and also for the full year ending December 31, 2013. This expectation includes the assumption of costs by Janssen in excess of the $50 million annual cap per calendar year under our agreement.

Moving to GAAP. The company's GAAP net loss for the quarter ended March 31, 2013, was $51.9 million or a $0.73 loss per share, inclusive of stock-based compensation expense of $23.6 million. This is compared to GAAP net loss of $12.8 million or a $0.19 loss per share for the quarter ended March 31, 2012, inclusive of stock-based compensation expense of $3.5 million.

The increase of the stock-based compensation expense in the first quarter of 2013 to $23.6 million was primarily related to the timing and accounting of grants for performance-based stock options, share price appreciation and the growth in the company's employee base. For the remainder of 2013, the company expects stock-based compensation expense to average $18 million to $22 million per quarter.

As we look at operating expenses, GAAP operating expenses were $55.8 million for the quarter ended March 31, 2013, compared to $19.9 million for the prior year's quarter. The increase in operating expenses over the quarter ended March 31, 2012, was primarily due to higher stock-based compensation expense, higher clinical development cost and higher personnel related costs as we have significantly increased headcount over the prior year.

Additionally, the company did not incur costs in excess of the $50 million annual cap for calendar year in either of the quarter ended March 31, 2013, or 2012. Thus, no excess amounts were recognized as a reduction in operating expenses in these periods.

As of March 31, 2013, the company had cash, cash equivalents and marketable securities of $511.2 million compared with $317.1 million as of December 31, 2012.

As previously announced, during the 3 months ended March 31, 2013, the company sold 2.2 million shares of its common stock in an underwritten public offering for net proceeds of $201 million. The offering provides strategic funds for other opportunities, which may include new clinical development with ibrutinib in tumors for non-hematology applications. The net proceeds from the public offering were received during the first quarter of 2013.

Additionally, the company had $17.1 million due from Janssen at March 31, 2013, related to cautionary expenses under the collaboration, which we expect to collect during the second year -- second quarter of this year.

As you know, from the recent receipt of 3 Breakthrough Therapy Designations and the completion of enrollment in key CLL and MCL registration studies, Pharmacyclics continues to advance and expand its clinical program for ibrutinib. In addition to supporting the various activities of our development program, we are also continuing to accelerate our efforts to support a broad range of early marketing, sales and commercialization activities.

As discussed during our previous earnings call, the company expected to end the calendar year 2013 with cash, cash equivalents and marketable securities of more than $225 million. However, with the $201 million in net proceeds from our recent stock offering, as well as additional milestones expected to be earned during the calendar year, we believe the company is in a strong position to end 2013 with approximately $500 million in cash, cash equivalents, marketable securities and receivables due from our collaboration partner, Janssen.

I would now like to turn the call over to our Chairman and CEO, Bob Duggan. Bob?

Robert W. Duggan

Thank you, Josh. This past quarter has been noteworthy for our company. We completed the enrollment of our first Phase III trial and are well on track with our clinical programs.

We also received the third Breakthrough Therapy Designation from the FDA. Last month, at the Americanization of Clinical Research, we had 8 poster presentations and 1 oral presentation. There are 5 additional oral and 6 poster presentations, with clinical and pre-clinical updates planned for the upcoming scientific conferences this summer: The American Society of Clinical Oncology, The European Hematology Association and the International Conference on Malignant Lymphoma. Last month, we earned a milestone payment of $50 million from our collaboration partner, Janssen, for the start of our frontline trial in CLL. And on March 8, we concluded a successful equity offering, netting us $201 million.

Pharmacyclics remains resolute in its goal to lead the creation of a new era of patient-friendly, body-harmonious medicinal solutions, which are intended to improve the quality of life, increase duration of life and address serious, unmet medical health care needs for patients.

To that very point, we press released this month that we completed enrollment of our first Phase III clinical trial. I'm particularly proud of this achievement and would like to congratulate and thank our clinical staff here at the company and also our collaborators, the medical centers and of course, the patients for their commitment to the program and their assistance in achieving this major milestone.

Dr. Maria Fardis, our Chief of Oncology Operations and Alliances, will give you some background as to why we ended up so much ahead of schedule, and will cover other enrollment timelines. Most importantly, at this time, we are targeting to submit the MCL filing before the end of the third quarter 2013. In addition, our enrollment in RESONATE-17 is also accelerating, and we plan to complete enrollment of that study before year end 2013.

There are now a total of 28 ibrutinib clinical trials registered with the National Institute of Health. These trials will be significantly advanced throughout this year as we are continuing to explore the potential of ibrutinib in B-cell malignancies.

I would now like to turn the time over to Dr. Lori Kunkel. Lori?

Lori Anne Kunkel

Thank you, Bob. We are continuing to make great strides on the clinical program. It is also shaping up to be an exciting summer for ibrutinib in [indiscernible] release perspective. I will now review the abstracts that have been accepted for presentation at the 3 yet upcoming scientific conferences in June.

The first major conference we are presenting at this summer is the American Society of Clinical Oncology, or ASCO, at the annual meeting in Chicago. At ASCO, ibrutinib will be the topic of 1 oral and 3 posters. And in addition, 3 posters will be summarized in our trials in progress in upfront CLL, upfront mantle cell lymphoma and follicular lymphoma.

The oral presentation discusses the Phase I study of ibrutinib, combined with R-CHOP in patients with CD20-positive B-cells frontline non-Hodgkin's lymphoma. This dose escalation -- the dose escalation phase of this study included 3 different histology: B-cell, mantle cell and follicular, with the primary endpoint of establishing safety and the Phase II dose.

From our Clinical Pharmacology team, we will also present a poster on pharmacokinetics of dose ranging of ibrutinib in CLL and another poster on describing safety data, with the evaluation of electrocardiograms in CLL patients receiving ibrutinib.

Reaching from the bench to bedside and back again, we are excited to present the first poster discussing -- first poster discussion on tumor genomic profiling, revealing mechanisms of resistance to ibrutinib that Dr. Joe Buggy's group worked on. Even though these are small numbers of patients relapsing, it is very exciting to move and learn so early on about the mechanism in actual patient-derived tissues.

Additionally, there is an abstract on the Phase II Factor VII inhibitor data in combination with gemcitabine that will be part of the 2013 ASCO publication. This study confirms the safety profile and further development indications are under review.

In June, we will also be presenting at the European Hematology Association, also known as EHA, at their Annual Congress in Stockholm. At EHA, there will be oral presentations from the clinical trial PCYC-1106, Pharmacyclics' Phase II study using ibrutinib as monotherapy in relapsed/refractory diffused large B-cell lymphoma and also a presentation on the clinical trial PCYC-1104, Pharmacyclics' Phase II study using ibrutinib as monotherapy in relapsed/refractory mantle cell lymphoma patients.

Pharmacyclics will also present nonclinical data and poster presentation on BTK expression in multiple myeloma. The International Conference on Malignant Lymphoma in Lugano, also in June, is another landmark scientific meeting. In Lugano, there will be 3 oral presentations and 3 poster presentations on ibrutinib.

For the first time, the trial results in a collaboration led by Dana Farber using ibrutinib as a monotherapy in relapsed/refractory, Waldenstrom's macroglobulinemia patients will be presented. Also, building on the Phase II ibrutinib data in CLL, there will be an oral presentation in the plenary session, summarizing the data of the relapsed/refractory CLL patients with deletion 17p, which Bob referenced earlier.

The mantle cell data, which supported the Breakthrough Designation, will be presented at Lugano, as well as a poster of trials in progress for the upfront Phase III randomized mantle cell study. An additional oral presentation at Lugano will show updated trial data using our HDAC inhibitor, abexinostat, in patients with relapsed/refractory follicular lymphoma.

I should mention, we also have a trial in progress poster abexinostat in combination with bortezomib as part of ASCO.

I now want to briefly touch upon the recent oral presentation that Dr. Adrian Wiestner of NIH gave at the American Association of Cancer Research this past month in Washington. The results were from the Phase II trial of ibrutinib, which was used as monotherapy in untreated and also in relapsed/refractory elderly and high-risk CLL patients. This study is sponsored by the National Heart Lung and Blood Institute, investigated multiple subsets of patients who are at high risk for poor outcomes with standard chemotherapy and included analysis of CLL patient cohorts, elderly patients or deletion 17p patients, either relapsed or treatment-naïve.

Many elderly patients with CLL are unable to tolerate aggressive therapy and patients with the deletion of chromosome 17p typically are poor responders to chemoimmunotherapy and have limited treatment options with no standard of care defined.

The majority of patients in this study were at an advanced stage, a high-risk patient population. Ibrutinib, as a single agent, demonstrated high overall responses and durable responses, irrespective of the deletion chromosome 17p. Dr. Wiestner demonstrated by serial lymph node and bone marrow biopsies rapid disease control in all sites. Responses are ongoing, and the medium progression-free survival probability for all of these patients was estimated to be 94% at 12 months.

Most of the adverse events were mild and manageable and included diarrhea, fatigue and rash. Severe events occurred in less than 13% of patients. This data confirmed and supports the Phase II data that led to ibrutinib as a monotherapy receiving a third FDA Breakthrough Designation in deletion 17p.

In addition to Dr. Wiestner's presentations, there were 8 other ibrutinib presentations at the 2013 AACR. I would now like to turn the call over to Joe Buggy, our Head of Research, to discuss some of these presentations and to provide an update on our research efforts.

Joseph J. Buggy

Thank you, Lori. This year's AACR highlighted some of the current research into the mechanism of action of ibrutinib in non-Hodgkin lymphoma and in other diseases.

A recent trend in these research studies has been that we are focusing more on the role of the tumors' interaction with the surrounding immune cells, what is often called the micro environment, and how these interactions may be important to the efficacy of ibrutinib.

At AACR, we presented new preclinical disease models of mantle cell and follicular lymphoma. And these have allowed for a more detailed picture of the effective ibrutinib on the tumor micro environment, including interactions with infiltrating immune cells and how ibrutinib blocks the ability of the lymphoma cells to adhere tightly to lymph nodes.

What we first reported in CLL turns out to be true for non-Hodgkin lymphoma as well, namely that inhibiting BTK blocks cell adhesion, and this forces the malignant cells out of their comfortable microenvironment and into the circulation of peripheral blood. Once the malignant cells are forced into peripheral blood, ibrutinib then blocks key signaling pathways involved in migration and homing and, thereby, blocks the malignant cells' ability to find their way back to the nodes.

Withholding these key survival and growth signals is an important step leading to the death of the malignant tells. At AACR, we also saw the continuation of earlier preclinical work first presented at ASH in 2012 on the potentially important role of blocking the T-cell kinase, ITK, and how this may contribute to a more favorable balance of Th1 versus Th2 cells that has been observed in CLL patients treated with ibrutinib.

More robust Th1 immunity is generally associated with better hosting immunity response. Following on the microenvironment theme, one of this year's AACR presentations focused on the ability of ibrutinib to block mast cell degranulation, which is a process controlled by BTK signaling downstream of the IgE receptor. Blocking mast cell degranulation has many different effects, including disrupting the formation of new blood vessels through the process known as angiogenesis. This is obviously a great -- an area of great interest that will require more research.

Two presentations described screening efforts to identify synergistic combinations of ibrutinib with other anti-cancer agents. The goal here is to understand the most effective way to combine ibrutinib, and this may translate into better response rates and duration of response in diseases such as DLBCL.

These sorts of open collaboration and scientific exchange with academic institutions have been very important to the success of Pharmacyclics over the years, and will be into the future as well. Over the past 3 years, we established and maintained 47 collaborations with academic investigators at universities or clinical centers. This broad-reaching collaborative effort has resulted in 40 preclinical abstracts presented at scientific congresses, and 15 original peer-reviewed scientific manuscripts in leading scientific journals, plus 17 review articles and commentaries in the literature over that timeframe.

Thanks to this scientific exchange, we understand a lot more today about how ibrutinib works. And this has helped us to define and shape our clinical programs and explore new opportunities. Speaking of clinical programs, I will now turn the call over to Maria, who will update us on clinical trial progress. Maria?

Maria Fardis

Thank you, Joe. Good afternoon. I will be providing information regarding the clinical development activities regarding ibrutinib at Pharmacyclics. As of today, we have enrolled over 1,300 patients in company-sponsored ibrutinib trials. There are over 28 studies registered at clinicaltrials.gov using ibrutinib, and 5 of these studies are Phase III trials. Each of them are enrolling approximately 300 to 600 patients. 13 of these studies are Phase II trials and approximately 1/4 of all of our trials are sponsored by investigators or medical centers through NCI.

The rest of the trials are sponsored by Pharmacyclics and our collaborators, partners, Janssen. As a team, we are working with over 250 clinical sites in CLL alone and over 100 additional sites are participating and investigating ibrutinib in MCL. The number of sites continue to grow as new studies are being initiated within the overall clinical development program.

To date, ibrutinib is being investigated in clinical trials in over 25 countries, including in regions such as U.S., Europe, Asia Pacific and Latin America. This clearly requires a large amount of organizational talent and cooperation within our joint teams. Janssen has been a tremendous partner for us, and I thoroughly enjoyed working together with their development team to create our joint success. We both achieved major milestones in our clinical programs recently. Pharmacyclics completed the enrollment of 391 patients in our first Phase III study in CLL, the RESONATE trial. This study is active in 9 countries and in 76 centers.

We were able to exceed our own enrollment expectations for this study due to unpredicted and unprecedented upsurge in patient accrual over the last 3 months of the study. Janssen's team completed enrollment of 110 patients in their first NCL trial, SPARK. Most recently, we initiated our first frontline study in CLL, PCYC-1115, or called RESONATE-2. This study is now active in 11 countries and 46 centers, and is currently enrolling patients. We are anticipating complete accrual of 272 patients for this study by the end of third quarter 2014.

Our first CLL study in high-risk patients, RESONATE-17, is rapidly enrolling as well. We have shortened the timeline for that study by 3 months and are now anticipating completion of enrollment of 111 patients before year end.

You can see our updates about our clinical programs in our current quarterly press release. This concludes our prepared remarks. I would like to ask the operator to open the floor for questions now.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Michael Yee with RBC Capital Markets.

Michael J. Yee - RBC Capital Markets, LLC, Research Division

On the mantle cell filing, can you be a little bit more specific about what you're going to include in that package -- how that's going to work? And similarly, in CLL, I assume you're going to file on the first Phase III studies at the expectation. And then in the Early Access Program, are you enrolling mantle cell and CLL? Can you give a little more color there?

Robert W. Duggan

Michael, this is Bob, and I'll turn it over to Urte. We do not comment on the specifics of our package. That is our obligation to work that out with the FDA in collaboration with the Janssen. So there won't be any comments on MCL or CLL. Once they're filed, it'll be very transparent. On the EAP program, I'll turn it over to Urte. She may have additional comments on your question as well. Urte?

Urte Gayko

Thank you. So yes, we are very actively working and as Bob has just updated our expectations on the first filing before the end of Q1. For mantle cell, we are in very active discussions. We have also always had very strong collaborative effort with the FDA ibrutinib, and these interactions have increased [indiscernible] Breakthrough Designations. As it relates to any further details, we will share those as they are finalized and confirmed with FDA. We have now associated the -- and this is sponsored via our partners, Janssen, the Early Access Program, and that program is for patients with relapsed/refractory mantle cell lymphoma.

Michael J. Yee - RBC Capital Markets, LLC, Research Division

But no CLL?

Lori Anne Kunkel

Yes. This is Lori. We do have open trials that CLL patients are eligible for, including several randomized control trials, both in the U.S. and Europe, and some open label trials. So there is a difference in availability to access. There's still clinical trials open that patients may receive ibrutinib on.

Michael J. Yee - RBC Capital Markets, LLC, Research Division

Okay. Last question is for Joe or for Lori, on the tumor resistance poster data at ASCO. Can you just give us a little bit better understanding about what you're guys expect there? What did you guys actually do, what did you see?

Joseph J. Buggy

The abstract is still -- hasn't been released. I can say, it's [indiscernible]. The acquisition of resistance has been described for all major tyrosine kinase inhibitors in oncology, including Gleevac, EGFR inhibitors and so on. We're very happy that this, so far has been uncommon with ibrutinib treatment in CLL. As we presented at ASH 2012, progression-free survival at 26 months is 96% in treatment-naïve patients and 75% in relapsed/refractory patients. There will always be some patients who progress due to resistance building up, and the data in ASCO will reveal what we have learned about the molecular mechanism that drives the resistance in the few patients that have come off the study over the past year or so.

Operator

Our next question comes from the line of Alan Carr with Needham & Company.

Mark Monane - Needham & Company, LLC, Research Division

This is actually Mark, on the line for Alan. I was wondering if you guys could comment at all about the next steps we might see in multiple myeloma? I know we were expecting a strategy update at some point this year.

Robert W. Duggan

So we will remain on that, Mark. There will be a strategy update prior to year end on MM. And I think to comment any further than that would be very speculative. So if you could just hold on until that period of time.

Mark Monane - Needham & Company, LLC, Research Division

Okay. And then if I could just try one more. Do you guys have any comments on the competitive landscape? Obviously, there's been some higher profile moves and companies targeting CLL. I was wondering if you guys had any updated insights on competitive landscape at CLL?

Robert W. Duggan

Do you have anything in particular or specific you're referring to?

Mark Monane - Needham & Company, LLC, Research Division

Yes, key kinase inhibitors maybe, data from Infinity maybe?

Robert W. Duggan

Yes, on balance, we let our studies -- our peer-reviewed reports speak most loudly. And I think we'll continue to do that. We're -- we are very fortunate to have Accelerated Approval and Early Access Program acknowledgment. We're pleased with our progress. Trials continue to enroll quite well. A couple of them were able to exceed expectation. Clinicians are quite happy. Patients are at least as happy as the clinicians. We're very pleased with it. And that's really where our focus is.

Operator

Our next question comes from the line of Geoffrey Porges with Bernstein.

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

First, on -- in the case of CLL, Lori, is it by now clear that RESONATE-17 is likely to be the basis for your initial approval in CLL? Or is that still somewhat uncertain? And then a second question, just on the application. Could you comment on where you are with your CMC section, with manufacturing and whether we should be expecting you to be able to launch them and meet pretty much whatever demand is out there and have a cost of goods consistent with our small molecule drugs?

Lori Anne Kunkel

Geoffrey, I'll comment on the first part of that. We do not weigh in on our anticipated labels. Those are a factor of negotiation, along with our partner and with the FDA. And I'll let Lori address the second half of your question.

Lori Anne Kunkel

So I fully expect that our manufacturing will meet our demand and we are very fortunate to have an excellent group here that is overseeing that process and has been working diligently to make sure that we can meet that. We have also -- and Urte can speak more to this -- had discussions with the FDA would be required to meet our first NDA filing.

Urte Gayko

The only thing I could add to it is that I'm confident that we will meet our current plans for the filing before the end of Q3. So I think they are in good shape and we're working actively to do that.

Geoffrey C. Porges - Sanford C. Bernstein & Co., LLC., Research Division

And then -- on the cost of goods expectation that we should have?

Robert W. Duggan

Well, Geoffrey, this is Bob Duggan again. We'll allow that to play out through time. But like many other small molecules, cost of goods is not a major factor, and it does allow us to be as aggressive as we choose to be in terms of building inventory, building supply. We've been very aggressive in our approach to bringing products online since, really, the summer of 2009, and we've not let up on that. We have well, well-oiled communication lines and supply lines vetted thoroughly by Janssen and the people at Johnson & Johnson. So we're real pleased with our quality of supply, the quantities we have access to, the cost of goods. We're in a very good shape there, and we appreciate the hard work that our team has put into that. There's no small task, not everyone is able to say that.

Operator

Our next question comes from line of Marshall Urist with Morgan Stanley.

Marshall Urist - Morgan Stanley, Research Division

First one, just on DLBCL, I was hoping if you could give us a sense of how much data, kind of -- and extent to the follow up we're likely to see from the -- first from the R-CHOP, from the R-CHOP combo, dose escalation trial at ASCO. And then second, it looks like there's some data at EHA as well, so I just wanted to get a sense of what would be there? And then related to that, when are we likely to get an update on the -- sort of the broader DLBCL strategy?

Lori Anne Kunkel

Sure. So the data at ASCO, the oral presentation, really is on the first stage of that study, which was the dose escalation, so establishing the Phase II dose and reporting on safety with a combination of CHOP-R (sic) [ R-CHOP ]. That study did expand out and you would -- and our plans would be to report that out with longer follow-up. I think that's the plan right now, and we're sticking to that. With respect with EHA, that presentation will be a bit of an update on our single-agent data in diffused large B-cell that was presented at ASH last year. So that's what you can expect for diffused large B-cell. And then I think we said in the past that we still are under discussions with regulatory authorities on our path forward in the diffused large B-cell. And when we are comfortable that we have our plan finalized, we will discuss it.

Marshall Urist - Morgan Stanley, Research Division

Okay. And then just related -- or I guess unrelated, would be, can you talk about what your current kind of strategy and thoughts are with respect to the ibrutinib combinations with IMiDs or other targeted agents, either through ISTs or some other mechanism? And when are we likely to start to see the first of that?

Lori Anne Kunkel

I certainly can comment on that. I think we've mentioned before that we have open cradle with CTEP and we have been entertaining several concepts. Those have been moving through the process. And I think in the next few months, you will begin to see some of those combinations emerging. And they will be posted on nci.gov if that happens. These are run through CTEP. We have some plans on our own for combinations, and we'll be able to further discuss those by the end of the year. I will say that ibrutinib has shown to be synergistic with almost every agent that we've tested with, to some degree. And that with its safety profile, I think that it will be able to go broadly in combination if necessary.

Operator

Our next question comes from the line of Joel Sendek with Stifel, Nicolaus.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

I have 2 questions. The first, just a quick one on the filing. I know you're not going to give us the details. So I'm just curious as to the sequence of the filings and why -- was it just where you had the data? Did the FDA request MCL first? Anything you can give us in that respect? And then I have a follow-on about the ASCO data.

Lori Anne Kunkel

Yes. I think we kind of talked about this before. We were -- it really was just a matter of where we are in the processes and meetings that had been scheduled. So we obviously were further along in the mantle cell with respect to getting the Phase II data ready in discussions for what would go into the filing. So a point for Breakthrough was a matter of timing on that one. At the same time, we received data from Waldenstrom's and filed that very quickly. The CLL, just literally came weeks afterwards and that was simply a matter of pulling the documentation together, and that we had a meeting already scheduled with the FDA to discuss some data around CLL. So there was no really particular, I would say, strategy with respect to filing them in any particular order. It was just a matter that the data emerged in the timing that meetings that were already set up.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Got it. Okay, understood. And then as far as the resistance, the mechanisms of resistance poster that we'll see. I'm wondering, after we see that data or given the fact that you have the data in hand, what are the implications for that with regard to where you move the program? Will you pre-screen? Or what are you going to do with the data, as far as the clinical implications?

Lori Anne Kunkel

Yes. Well, I think as Joe nicely summarized, fortunately, there are very few patients who are relapsing. So I do not foresee that there would be immediate changes to the program, as most of the patients remain on-drug and are still progression free. So that -- certainly, there's no need to change that right now. He also mentioned that this is very preliminary, and I think that we need to take that under consideration. We have already obviously identified populations that could be improved upon. There will be no screening required for these patients for mechanism of resistance. There's just too few of them. And to screen 100 patients, this appears to be acquired resistance over time. So you can't really screen for that.

Operator

Our next question comes from line of Steven Rice [ph].

Unknown Shareholder

Just curious -- as a large shareholder, we're a little disappointed the secondary offering. On the [indiscernible] stocks are on, obviously, lower point. Any thoughts on how -- your thoughts on where the stock currently stands and any disappointment you have related to that?

Robert W. Duggan

Yes, we really don't weigh in on the stock price. Our job, with close to 300 people, is strong here. We're focused day-to-day to make that significant difference for the better. We're very pleased with the progress. I've been with the company now for 54 months. I've never been more enthusiastic, optimistic or encouraged. As I sit here in front of you today, we had a 3.1% dilution, raised $201 million with a nice investment banker, JPMorgan. We're pleased we were able to do that. Obviously, like you, we like higher stock prices, not lower. But that's really not the business we're in. We're very specific about what we do, and you and your fellow shareholders really drive the price. So that's small, for someone else to weigh in on. As far as the company goes, we're just -- we're extremely pleased with our progress, with the opportunities that we see. They're long-term in nature. So we're pretty satisfied with where we sit here today. I hope that answers your question, Steven.

Operator

Our next question comes from line of Mike King with JMP Securities.

Michael G. King - JMP Securities LLC, Research Division

I had a -- I don't know, Joe, if I could bug you a little bit more about the resistance paper at ASCO. I just wonder, can you say anything about it just in general, whether this is a second mutation or a shift in the growth pathway? Can we get any kind of sense from you about that?

Joseph J. Buggy

No, I can't talk about the molecular mechanisms. But I will reiterate again that the poster doesn't reveal -- or the presentation does not reveal any new resistance. It's only an exploration of the mechanisms of resistance in patients we already knew progressed, right? So the patients that we've already reported progress, we've gone back and looked at the mechanisms, and just because of the timing of this call relative to when ASCO releases it, I can't talk about what those findings were.

Michael G. King - JMP Securities LLC, Research Division

Okay. No problem. And then just a quick follow-up, again, a certain molecular question. Can you help us calibrate, both with respect to DLBCL relative to follicular lymphoma, and sort of the dependence on BTK signaling in each of those settings?

Joseph J. Buggy

So if I understand the question correctly, it's DLBCL in follicular, you're asking, are they both dependent on the BTK pathway, is that correct?

Michael G. King - JMP Securities LLC, Research Division

Yes, just the relative level of dependence compared to, let's say, a CLL.

Joseph J. Buggy

Well, there's been a lot of work done, in particular, in DLBCL, showing that BTK is a key kinase in so-called, chronic active BCR signaling in DLBCL. That's been very clearly laid out over the several years, mostly by Louis Staudt's group. But that doesn't mean it's not important elsewhere. That's just Lou, his group focuses on DLBCL and some really nice science has been done to reveal those pathways, where BTK is important. BTK is obviously important, and I mean, I would argue it's important to CLL based on the clinical results. And we believe it's important in follicular lymphoma as well. Just that, research wise, I would say not as much has been done in folliculars as DLBCL to elucidate the precise pathways with DLCBL. But it doesn't mean BTK is not important in these other diseases. In fact, we saw on our Phase I when published, there's a 43% response rate in the patients with 40%.

Lori Anne Kunkel

Over 50%.

Joseph J. Buggy

50-ish percent response rate in patients with follicular, so that would argue, there's signs of activity there.

Operator

Our next question comes from the line of Josh Schimmer with Lazard Capital Markets.

Joshua Schimmer - Lazard Capital Markets LLC, Research Division

I was hoping you can provide a little bit of color as to what the activities are that are going on in the G&A line that led to the bump in expenses and stock-based expenses? Does that even go towards the $50 million cap under the partnership agreement?

Joshua T. Brumm

Josh, let me take that one. So most of the jump in the operating expenses are related to the increase in stock-based comp of $23.6 million versus the prior year's quarter at $2.5 million. If you look at on a quarter-to-quarter basis, the true operating expenses, if you take out the stock-based compensation and cut back the excess amounts in Q4 of last year, you'll see that is about $30.5 million operating expense as compared to a $32.5 million operating expense in the first quarter of 2013. And so the expenses are ramping slightly. But anything over $50 million and the cost share expenses would go to the cap -- against the cap of the $50 million cap on the annual basis. We do not reach that in the first quarter of this year.

Operator

[Operator Instructions] Our next question comes from line of Mike King with JMP Securities.

Michael G. King - JMP Securities LLC, Research Division

I wonder, in myeloma, if you're contemplating enrichment strategies with regard to either the planned trials or future trials. Just trying to see if you can give yourselves an edge in some kind of subpopulation within myeloma that might enhance the activity of ibrutinib in that setting.

Lori Anne Kunkel

Yes, I think that's a great question, Mike. We are certainly looking at the standard prognostic factors that would not predict response to chemo. We already know these patients have failed proteasome inhibitors, as well as image. In fact, they failed them multiple times by the time they've been enrolled on this study. I think one of the most interesting things we're looking at is some of the cytogenetics on these patients that we simply -- this program is simply very early in development and we don't have the body of data that we do in either CLL or mantle cell, or even diffused large B-cell. So it's a matter of enrolling the patients and getting them treated and following them up right now. But yes, we're pursuing, looking at things that help -- may help enrich them.

Operator

Our next question comes from line of Jay Silverman with BioInvest.

Jay Silverman

Going back, Joe Buggy, to the ACR, just looking at ibrutinib. I know you're busy in all the chemo stuff and some -- there was a solid tumor abstract of the preclinical study in pancreatic cancer. And I just want to know have you learned anything from there? I know you're going to go towards the solid tumor in combination with ibrutinib.

Joseph J. Buggy

Sure. I mean, in that abstract, the main take-home message is that there are some tumors -- some tumor types that appear to be dependent on a certain type of microenvironment, especially ones containing mast cells. And that mast cell degranulation is important in the progression of these tumors, and in particular, in forming new blood vessels through angiogenesis. That work was done by Gerard Evan a couple of years ago from when he was at UCSF, now he's at Cambridge. But the implication is that if you could block mast cell degranulation, that might -- yes, the case is on the knees, preclinical animal models that's what we saw. Ibrutinib can block mast cell degranulation and that leads to vascular collapse and regression of the tumor.

Jay Silverman

So are you going to go in solid tumor combination studies with ibrutinib?

Lori Anne Kunkel

I think it's an interesting area of research, and it will be something that we'll be looking at whether or not there's enough preclinical data at this time to support moving our development forward. Right now, as you've heard, we're really focusing on getting not only our first NDA in, but about 3 or 4 supplementals over the next year to really generate a large market in B-cell malignancies. But there are lots of interesting areas we could pursue outside of the B-cell malignancies and we have news that we'll be planning to look out over the next year or so.

Jay Silverman

And Lori, last question -- actually, for Bob. Any update in future of the BTK [indiscernible] compound?

Robert W. Duggan

We're not prepared yet, Jay, to weigh in on that, but we will. I would hope we'd be able to do that sometime late in the third quarter. Suffice it to say, we have high interest in exploring all opportunities with ibrutinib, whether it be solid or blood-borne. We have reasonable efforts. We'd be very disciplined in that approach. But our interest remains high.

Operator

There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Robert W. Duggan

Thank you. So I'd like to close our call by quoting the introductory comments that were made at the American Association of Clinical Research Annual Meeting in Dr. Wiestner's oral presentation, in which he showed ibrutinib's response as a monotherapy in the elderly and high-risk CLL patients. It was said, I quote, "Ibrutinib is one of the best investigational drugs to come along in B-cell malignancies in a decade or so." We are very proud of this recognition and excited about the opportunity ahead. Together with our partner, Janssen, we remain very focused to explore all clinical relevant pathways in B-cell malignancies with ibrutinib. We could not be happier with the support we're getting in this endeavor from the FDA, our investigators, our clinical sites, our collaboration partner, Janssen, and our fellow employees. The clinical development of ibrutinib, which started only in 2009, has been a very rewarding process for all stakeholders, most importantly for those patients that are giving benefits from our investigational compound. This concludes our conference call. Thank you for joining, have a good rest of your day.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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