Pharmacyclics' CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Pharmacyclics, Inc. (PCYC)

Pharmacyclics, Inc. (NASDAQ:PCYC)

Q3 2013 Earnings Conference Call

November 7, 2013 4:30 PM ET

Executives

Rainer Erdtmann – Senior Vice President, Investor Relations & Administration

Robert W. Duggan – Chairman and Chief Executive Officer

Manmeet Soni – Senior Vice President, Finance

Jesse McGreivy – Chief Medical Officer

Betty Y Chang – Vice President of Clinical Medicine and Early Development

Urte Gayko – Senior Vice President of Regulatory

Analysts

Brian P. Skorney – Robert Baird

Whitney G. Ijem – JPMorgan Securities LLC

Rohit Padebettu – Deutsche Bank Securities, Inc.

Alan Carr – Needham & Co. LLC

Jason Kantor – Credit Suisse

Katherine Xu – William Blair & Co. LLC

Geoffrey Porges – Sanford C. Bernstein

Michael J. Yee – RBC Capital Markets LLC

Navdeep Singh – Goldman Sachs & Co.

Joel Sendek – Stifel Nicolaus

Mike King – JMP Securities

Howard Link – Leerink Swann

Matthew Andrews – Wells Fargo Securities LLC

Operator

Good day, ladies and gentlemen, and welcome to the Pharmacyclics Third Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today’s conference is being recorded. I would now like to turn the call over to Ramses Erdtmann.

Ramses Erdtmann

Thank you operator and welcome to our third quarter 2013 earnings conference call. We had experienced technical difficulties with actually press releasing our earnings announcement earlier today we filed our 8-K in the mean time you may have seen across the wire I apologize for this delay, the press release will come out momentarily. I will start the call eventually. We’ll just go ahead with the call.

With me on the call is our entire execute team. You will hear prepared remarks from our CEO, Bob Duggan; our Executive Vice President of Finance, Manmeet Soni; our CMO, Dr. Jesse McGreivy and our Vice President of Research Biology, Dr. Betty Chang. Before we start, let me remind you that, this non-confidential presentation contains forward-looking statements about the business prospects of Pharmacyclics including exceptions regarding Pharmacyclic’s 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 Pharmacyclic’s product program, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical markets 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 our CEO, Bob Duggan. Bob?

Robert W. Duggan

Thank you Ramses and thank you all for joining us today; driven by continued excellent performance in clinical and regulatory activities all of which are inline or ahead of Pharmacyclics public guidance, we have reported today yet another profitable quarter. Further we are predicting to be profitable for both the current fourth quarter and our fiscal year end 2013 in December.

This positive financial condition is impart maybe possible the well thought out, well planned and well executed Pharmacyclics Janssen Biotech agreement signed on December 8, 2011.

Partnership with Janssen has strengthened over the past two years. Together we have started a very broad clinical development program with nine Phase III studies initiated as of today. Our development plan for ibrutinib to date covers most of the B-cell malignancies. Most recently on October 30, announced Janset announced the submission of a marketing authorization application to the European authorities seeking approval to market ibrutinib in Europe for using relapsed or refractory CLL and MCL patients.

We believe the acceptance of this filing could occur before year end leading to another milestone payment by our collaboration partner.

During the third quarter our filing with the FDA was accepted and it was granted priority review which is reserved for medicines which could provide a significant improvement in the safety or effectiveness of the treatment diagnosis or prevention of serious conditions when compared to standard applications. The FDA set the final review completion date otherwise known as PDUFA date through February 28, 2014. We are working well together with the agency during this review period. The Breakthrough Therapy Designation is providing for quick turnaround of information and ongoing interactions.

I have personally great respect for the FDA and their diligence through this revenue of the clinical data we have presented. At this time we have no further update as to the status of the review of ibrutinib outstanding drug application. We’re hopeful. We can provide you an update prior to year-end.

As of yesterday, an in line with our internal projections, our 391 patients are ibrutinib versus ofatumumab randomized resinate trial has recorded a 117 patient event. This in turn calls for a protocol required interim analysis. As the findings of this readout of material importance to all Pharmacyclics stakeholders, we will publically announce the result of this analysis on a timely basis.

Currently and subject to change, we expect this to occur no later than the end of January 2014. These past three months were not only very productive for our regulatory activities, but also we advance greatly with our research and development programs.

We have enrolled over 2,300 patients in Company sponsor studies with ibrutinib over 800 principal investigators have been involve and we are conducting trials in 37 countries around the globe. For those of you who have not yet read about or other wise been informed of the ibrutinib performance data released as of this morning and to be presented at the upcoming ASH meeting occurring in December of this year, I highly recommend, you do so.

We have filed the ibrutinib related abstracts, Oral’s and Poster’s with the SEC in and Form 8-K to the investment community can review the progress that has been achieved. According to the investigator reports, ibrutinib continues to perform both absolutely and relatively well in terms of response rates, duration, tolerability and decline in SAEs over time. We are quite pleased about this.

I will now turn the call over to our Executive Vice President of Finance, Manmeet Soni. Manmeet?

Manmeet Soni

Thank you, Bob. Good afternoon everyone. Thanks for joining us today. Let’s jump right into the details of Pharmacyclics’ financial performance for the third quarter of 2013. As you have seen in the press release we announced non-GAAP net income of $52.5 million for the quarter ended September 30, 2013, as compared to non-GAAP net income of $19.2 million for the quarter ended June 30, 2013.

During the three months ended September 30, 2013, we recognized $75 million of revenue from regulatory milestones own from Janssen. These milestones were figured upon the FDA’s acceptance of a new drug application for our business. For the nine months ended September 30, 2013, we ended with $43 million non-GAAP net income compared to $54.4 million for the nine months ended September 30, 2012.

As you may recall, we previously guided that our non-GAAP net income will be near break-even for the calendar year 2013. Net progress achievements made during this quarter are nine months non-GAAP net income as $43 million and GAAP net income as $2.8 million. As Bob mentioned, we now expect to be profitable on a GAAP basis for the quarter and year ending December 31, 2013.

We continue to have a strong cash position, $560 million as of September 30, 2013, compared to $505 million as of June 30, 2013. In addition, we had $52.2 million and receivable due from Janssen as of September 30, 2013, out of which $45.5 million was for expenses related to excess amounts and approximately $6.7 million was related to cost rating expenses under our collaboration agreement.

We expect to receive these payments from Janssen, during the fourth quarter of 2013. In summary Pharmacyclics is in a strong financial position to support the launch of ibrutinib and further expansion of our research and clinical development programs.

Let’s now review our operating expenses for the last quarter. As a reminder the Janssen agreement provides $50 million annual cap of the company share of direct ibrutinib related development and commercial losses for each calendar year. We refer to any amounts incurred in excess of this annual GAAP as excess amounts. These excess amounts are funded by Janssen up to a maximum of $200 million with an additional $25 million for interest charges.

Excess amount shall be reimbursable only from the company’s share of pretax profits after the third profitable calendar quarter for the products. To date a total of 84 million in excess amounts have been recorded as a reduction in operating expenses and we have an additional $116 million available in excess amounts. GAAP operating expenses for the three-months ended September 30, 2013 were $25.7 million. These expenses are inclusive of a reduction of 45.5 million related to excess amounts.

In comparison GAAP operating expenses were $42.7 million for the three months ended June 30, 2013 and included a 20.4 million reduction due to the use of excess amounts. As we exceeded the annual cap of $50 million during our second quarter, the company’s share of all direct ibrutinib expenses during this quarter chargeable under the collaboration agreement were accounted for as excess amounts and therefore were borne by Janssen . Accordingly there was an increase in the usage of excess amounts in this quarter over our last quarter.

In an effort to further describe the corporate expense level we adjusted the GAAP operating expenses by excluding stock-based compensation expense and also the benefit from the use of excess amounts. Adjusting for these effects the company’s adjusted operating expenses were $61.1 million for the quarter ended September 30, 2013 as compared to $56.2 million for the quarter ended June 30, 2013. This is in quarterly adjusted operating expenses of $4.8 million was driven by a number of factors including eCommercial activities and building of our sales and marketing teams.

I would now like to turn the call over to our Chief Medical Officer, Dr. Jesse McGreivy. Jesse?

Jesse McGreivy

Thank you, Manmeet. The number and quality of ASH abstracts which were announced today provide a good overview of our clinical and pre-clinical productivity. As Bob indicated we announced a total of 21 abstracts, 10 of these were accepted as oral presentations and 11 as posters. I will provide brief overview of the clinical presentations and Dr. Betty Chang, our Vice President of Research Biology will provide an update on the pre-clinical presentations. At ASH there are seven ibrutinib clinical abstracts this year of which four were presented as oral presentations and three will be presented as posters.

Let me start with one of the posters by Dr. Susan O’Brien it all, which we find to be an important update. This poster contains a long-term follow of data of 148 CLL or SLL patients from our initial Phase I and Phase II monotherapy studies. Within the efficacy population of a 140 patients the overall response rate was 86.2% for the treatment naïve group and 88.3% for the relapse refractory group. With respect to adverse events determined to be related to study drug the number of grade three or higher adverse events declined from 24% as measured within the first year of treatments to 7% after the first year of treatment.

And the series adverse events declined from 8% to 0% respectively as adjudicated by investigators Dr. Fergie from the NIH submitted clinical data to ASH from the single agent ibrutinib study in CLL patients with and without deletion 17p. 26 deletion 17p and 21 non-deletion 17p valuable patients with CLL were followed up for 14 months.

The overall response rate was 66% in both groups and 94% when patients achieving a partial response with lymphocytosis were included. Overall estimated event free survival at 14 months was 93%. Importantly four patients who are baseline positive for deletion 17p had no evidence of deletion 17p after ibrutinib therapy as assessed by fish testing.

Dr. Jan Burger will be presenting an oral presentation of an update of ibrutinib in combination with Rituximab in high-risk CLL patients with the median follow up of 14 months 32 of 40 patients continue on ibrutinib therapy. 87% achieved the partial response and 8% achieved a complete remission accounting for an overall response rate of 95%.

Patient questioners revealed significantly improved overall health and quality of life after six months. Adverse events reported were in line with previous clinical updates.

Dr. Brown and Dr. Younes will give each an oral presentation of clinical results from trials that evaluate ibrutinib in combination chemoimmunotherapy. Dr. Brown concluded that ibrutinib in combination with bendamustine Rituxan was tolerable and highly active and compares very favorably with historical controls. Dr. Younes confirmed that acceptable safety profiles of ibrutinib when combined with R-CHOP with no new toxicity noted in patients with treatment naïve diffused large B-cell lymphoma.

Dr. Steven Treon from the Dana-Farber Cancer Institute will be presenting an update on 63 patients with relapsed or refractory Waldenstrom’s disease. Treated with single agent ibrutinib, this trial continues to show impressive and durable responses in this difficult to treat population.

Overall, I’m very pleased with all the progress reported today and in the ibrutinib clinical development program. Let me now turn this call over to Dr. Betty Chang who will cover some of the exciting preclinical ASH highlights.

Betty Y Chang

Thank you, Jesse. This past quarter was very productive for our research and development group. This morning when the ASH abstracts were released, you were able to see the level of productivity that resulted from our broad clinical and preclinical ibrutinib program.

Of the 21 total abstract, accepted at ASH on ibrutinib 14 are correlative or non-clinical studies that focus on the further understanding of the mechanisms of how ibrutinib is working in the various T-Cell malignancies. This is a true testament of our commitment to patients as we continue to implement our pre-clinical findings into our clinical development program in order to create increasingly safe efficacious and tolerable therapies, I now like to highlights some of these recent findings this afternoon.

Similar to our findings in mantle cell lymphoma patients in the recently published blood Article Dr. Wiestner and his team at the NCI was able to determine that ibrutinib inhibits B-cell adhesion to its microenvironment and causes the malignant B-cells to release from the tissue and travel into the peripheral blood in patients with chronic lymphocytic leukemia once in the periphery these cells are no longer able to actively proliferate this transient treatment induced lymphocytosis is visually confirmed by the dramatic reduction of the lymph nodes in ibrutinib treated patients.

An important observation was that ibrutinib compromised the adhesion of both IGVH mutated and non-mutated CLL able to see the level of productivity that resulted from our broad clinical and preclinical ibrutinib program.

Of the 21 total abstract, accepted at ASH on ibrutinib 14 are correlative or non-clinical studies that focus on the further understanding of the mechanisms of how ibrutinib is working in the various T-Cell This is a true testament of our commitment to patients as we continue to implement our pre-clinical findings into our clinical development program in order to create increasingly safe efficacious and tolerable therapies I now like to highlights some of these recent findings these afternoon.

Similar to our findings in mantle cell lymphoma patients in the recently publish blood Article Dr. Wiestner and his team at the NCI was able to determine that ibrutinib inhibits B-cell adhesion to its microenvironment and causes the malignant B-cells to release from the tissue and travel into the peripheral blood in patients with chronic lymphocytic leukemia once in the periphery these cells are no longer able to actively proliferate this transient treatment induced lymphocytosis is visually confirmed by the dramatic reduction of the lymph nodes in ibrutinib treated patients.

An important observation was that ibrutinib compromised the adhesion of both IGVH mutated and non-mutated CLL cells to its microenvironment. The second study also from the NCI was able to show that after one year of ibrutinib treatment the drug led to a significant increase in both IgA and IgM serum level while decreasing [indiscernible] in CLL patients.

The improvement in serum levels indicates that the patients are regaining normal levels of antibodies to fight infection. The improvement of the IgA and IgM serum levels with comparable for both treatment-naive and relapsed/refractory patients. These results suggest ibrutinib may be promoting the recovery of normal B cell development while targeting the malignant B-cells, further supporting ibrutinib’s safety and efficacy profile. The potential exist for improvement of patient wellness while on ibrutinib.

And finally I like to highlight a third correlative study by the NCI, again. This abstract shows how ibrutinib treatment changed the content of the chemoattractants in the bone marrow, which resulted in a reduced capacity to attract CLL cells.

Ibrutinib has been shown to inhibit cytokine and chemokine secretion from CLL cells and T-cells. Cytokines and chemokines play a key role in the development and function of the immune system. And in CLL they regulate the trafficking of malignant cells and are responsible for the recruitment homing of the cells into the blood, lymphoid tissues, and bone marrow. And for the first time we now assure that ibrutinib disrupts the microenvironment created by CLL in the bone marrow of patients. This is important, because bone marrow is the cyto productions of billions of normal healthy blood cells per day in the human body.

So by disrupting the tumor microenvironment in the bone marrow patients regain their ability to produce normal levels of both red and white blood cells. Once again demonstrating the potential of ibrutinib to have a positive impact on patient wellness. So these were just some of the highlights from the carotid and preclinical studies of ibrutinib published in the ASH abstracts today.

Now back to Ramses.

Rainer Erdtmann

Yes Thank you, Betty. Jenny, let’s open the floor for questions.

Question-and-Answer session

Operator

(Operator Instructions) The first question from Brian Skorney from Robert Baird.

Brian P. Skorney – Robert Baird

Hey, Good afternoon guys. Thanks for taking my question and congrats on all the progress that you’ve making. I guess the first question I have, did I hear you correctly Bob did you say the PFS events and resonate necessary freed up 117 events have now occurred?

Robert W. Duggan

Yes. Brian

Brian P. Skorney – Robert Baird

So I just, I mean I didn’t see that in the press release so it seems like it might really a new data point. Do you still think guidance for the outcome from that interim analysis is first quarter 2014, I mean it seems like you have enough time between now and to the year that we might see an update earlier?

Robert W. Duggan

Yeah, we said prior to the end of January. So I understand your viewpoint we’re being is conservatively realistic as we can there. It is there third-party evaluations that are required and therefore outside of our causation have been able to predict an earlier timeline.

Brian P. Skorney – Robert Baird

Gotcha. And then I think there has been a lot of in the market. The events around Iclusig may have impacted the FDA’s – between single-arm. I guess you don’t have comments but I wonder if you add any more color in terms of you think that there might be an ad com to discuss approval or have you seen any impact from the Iclusig events in your conversations with the FDA?

Unidentified Company Representative

We really are very comfortable with the FDA process, Breakthrough Therapy Designation, and we don’t as a matter of course comment or engage in conversations about how they are treating other molecules. We do find that they are very, very through and reflective in their activities there. So I would just stick with the comments that we’ve made regarding the FDA.

Brian P. Skorney – Robert Baird

Got you. And then just one last question, I noticed that your partner recently initiated Phase III study of ibrutinib on top of R-CHOP or BR in previously treated indolent non-Hodgkin’s lymphoma patients. Do you guys, can you characterize your latest thoughts on what kind a the U.S. EU populations were previously treated indolent non-Hodgkin’s lymphoma patients are and your thoughts about why you wouldn’t be in to pursue this in the frontline setting immediately if there is enough confidence within Phase III and Relapse/Refractory. Thanks.

Robert W. Duggan

I’ll turn that over to Jesse, Brian. Thank him for the question.

Jesse McGreivy

Yes, Brian thanks for the question, a very good one. So yes, our partners at Janssen have initiated a Phase III trial of ibrutinib with either Bendamustine Rituxan or R-CHOP versus those chemotherapies as the control, and this is a randomized trial Phase III. As you’ve indicated, the patient populations include follicular lymphoma and marginal zone lymphoma. These are both common treatment options for relapse follicular lymphoma. There really is no one standard of care for relapse follicular lymphoma.

There are many different treatment options globally, and it really, oncologists frequently select the treatment based on the patient they are treating. It’s an elderly frail treatment patient; they may go simply with single-agent Rituxan. If there’s a patient that’s been through priors and not previously had R-CHOP they may prefer to do that if they are young. So it really depends on the patient you’re treating, but there really is no standard in the Relapse setting. Then to address your question about, how are we going to look at frontline follicular, we’re looking closely at that space and there are a variety of options to evaluate ibrutinib in that space.

To do a registration trial, this would require really essentially a large trial and there are other trials in that space and the sample sizes typically are between 800 to 1000 patients with very long timelines because the progression-free survival interval for frontline follicular indolent lymphoma patients is very, very long with available therapies. So that being said, we do think ibrutinib has shown impressive activity in the initial Indolent Lymphoma patients we’ve treated and we are moving forward in multiple clinical trials across multiple settings for these patients.

Brian P. Skorney – Robert Baird

Great. Thanks guys.

Robert W. Duggan

You are welcome.

Operator

The next question comes from Cory Kasimov from JP Morgan.

Whitney G. Ijem – JPMorgan Securities LLC

Hi guys. This is actually Whitney on for Corey today. So I guess first question. Can you remind us if there is interim analysis built in to your other Phase III trials and then secondly, if you could maybe just give us an update kind of quantitative or qualitative on your pre-commercial activities.

Jesse McGreivy

Yes. So this is Jesse. Thanks Whitney for the question. Therefore, the Phase III trials which Pharmacyclics is currently running we have the resonate one and the resonate two. We have announced that there is an interim obviously for the resonate two we just have discussed that today. We have not previously announced any interim for the other Phase III trials that’s currently not clinically announced.

Robert W. Duggan

Whitney with regard to our pre-commercial activities, we made we announced the decision previously that we were hiring and training and moving our sales force into position of readiness as is our marketing team. So we are in that condition. Currently, there is no further update on that.

Whitney G. Ijem – JPMorgan Securities LLC

Got it. And if I can maybe just ask one follow-up; there was I guess two abstracts at ASH today. Regarding ibrutinib synergy with ABT-199, so I was just wondering if you could maybe talk a little bit about that in if there are other – any other sort of mechanisms of actions that might be particularly interesting in terms of synergy?

Robert W. Duggan

So those are based on preclinical studies. There is no clinical data evaluating BCR2 inhibitor with BTK inhibitor ibrutinib, so those are very early studies certainly, there is a lot of interest in evaluating these sort of combinations, novel combinations and as the data evolves, we’re obviously looking at that further, but I can’t comment in terms of clinical activity or any plans to indulge or to get involved in those trials currently.

Rainer Erdtmann

Thank you, Whitney. Next question, operator.

Operator

The next question comes from Robyn Karnauskas from Deutsche Bank.

Rohit Padebettu – Deutsche Bank Securities, Inc.

Hi guys. Thanks for taking my question. This is Rohit for Robyn and congratulations on the progress. My question is around the combination trial in multiple myeloma. Could you please provide more color on the design of the trial in terms of how long these patients will be dosed with Kyprolis and if the duration is gaped. And then do you plan to initiate studies in combination with Revlimid as well? Thank you.

Unidentified Company Representative

So, currently we’ve announced the PCYC-1119 study, this is the Phase I, II clinical trial . The trial has two components, the Phase I component and Phase II. The initial part of the trial up to 42 patients will be treated on a dose escalation safety finding portion of the trial depending on the results from that trial assuming if that’s favorable, we’ll move to the Phase 2 portion, which is a randomized trial looking at 144 patients, 72 per arm. Ibrutinib will be given until progression.

Unidentified Company Representative

Does that answer your question?

Rohit Padebettu – Deutsche Bank Securities, Inc.

Yes. My question was like are you planning to gap Kyprolis. And then do you planned to initiate similar studies in combination with that limit as well?

Unidentified Company Representative

We are currently planning to treat this as dosing for the label as my understanding.

Unidentified Company Representative

So for Carfilzomib thing, it is per label and the additional dose escalation has been considered as well. Does that address your question?

Rohit Padebettu – Deutsche Bank Securities, Inc.

Yeah, it does. Thank you.

Operator

The next question comes from Alan Carr from Needham.

Alan Carr – Needham & Co. LLC

Hi, thanks for taking my question. Wonder if you can comment a bit about, a bit more about so many details around the launch with J&J. How you are going to support responsibilities there in terms of sales forces and marketing strategy? Thanks.

Unidentified Company Representative

Yeah. So we’ve currently announced a really effectively 50 full time equivalents, but in terms of the field sales force and to that, I think that accurately responds to your question.

Alan Carr – Needham & Co. LLC

Can you provide any more details around are you going to have overlap in certain territories and that sort of thing, any information around that and how are…?

Unidentified Company Representative

There will be a de minimis amount of overlap as some territories are particularly small, but inhabited by sales personnel from Janssen, so we can conveniently take advantage of that. Yes.

Alan Carr – Needham & Co. LLC

And how is strategy developed for marketing in U.S. As to say is that a 50-50 effort as well or?

Unidentified Company Representative

We lead the strategy discussions but it’s not something that we really want to go into detail publicly. So I hope that gives you an accurate response, so we are the senior strategist but we only operate in close consultation and in full respect of Janssen ‘s success in launching new products and sell through on the products that currently have in market. Effectively we’ll have about 230 people into the market less than 70 will be our own but when you look at full time equivalents we’re really somewhere in the neighborhood of 125.

Alan Carr – Needham & Co. LLC

Okay. Thanks very much for taking questions and congratulations on your progress.

Unidentified Company Representative

Thank you. I appreciate it.

Operator

The next question comes from Jason Kantor from Credit Suisse.

Jason Kantor – Credit Suisse

Great. Thanks for taking my questions. Congrats on all the clinical progress. I just wanted to expand on one of the earlier questions about looking at novel, novel combinations and I guess do you have any plans now to more aggressively move your own HDAC inhibitor into variety of trials and combinations and what’s the status with the immunomodulatory BTK inhibitor that’s preclinical?

Unidentified Company Representative

So thanks Jason. Currently, we’re looking at a variety of novel, novel combinations as far as the H-DAC will continue to evaluate that program we’ve seen impressive results and Indolent Lymphomas particularly follicular lymphoma and we are looking at our options to move that forward whether would be in monotherapy or combination trials.

With regard to the preclinical program and that is the talk stage and we hope to have an announcement at the end of this year early next year on the status of that overall we have no new update that continues to move forward.

Jason Kantor – Credit Suisse

And if I could ask a follow up of Bob just kind of big picture strategic thinking sort of a year or two in the future when you’ve got all these clinical trials either well underway are done. What are you thinking in terms of expanding the footprint for PCYC are there things that you would look to bring in and to acquire now that you, you have a big currency?

Unidentified Company Representative

Jason thanks for the question. Yeah postulating the success of what you’ve just predicted. That would be a pretty strong certainty. We would look for additional things to enhance our growth platform.

I think the timing is pretty much as you’ve laid out. We have some thoughts in that direction but until we formalize them we won’t be discussing them publicly. But basically yeah we here to grow our business predictably, it will in time require additional molecules but at this time we’ve not fully explored the reach of ibrutinib either in solid tumors or on the autoimmune side. So much of this discussion will be activated post the realization of potential IND on 454 series as that would consume a lot of internal energy to make that happen.

Jason Kantor – Credit Suisse

Thank you.

Unidentified Company Representative

You are welcome.

Operator

The next question comes from Katherine Xu from William Blair.

Katherine Xu – William Blair & Co. LLC

Good evening. Just curious, could you just remind us the number of patients in those two NDAs and how long is the treatment duration in those patients and just again in the light of the Iclusig events these days and do you think you will need to provide more data outside of those two NDAs, so that’s the safety picture and the treatment duration would be more convincing and reassuring?

Urte Gayko

This is Urte Gayko, so in regards to what we submitted. We submitted Phase II data for each Relapse/Refractory MCL and Relapse/Refractory CLL. I am not going to go into the detailed numbers but in terms of referring to what we have is either ourselves or investigators you now presented, I refer you to previous presentations for – publications for the New England Journal of Medicine. And otherwise I have no other comments on the regulatory activities as soon as we do we will certainly share them with you.

Katherine Xu – William Blair & Co. LLC

Okay, so there is the pre-clinical abstract talking about potential antagonism between ibrutinib and Rituxan just curious about what the potential impact of that could be?

Jesse McGreivy

Yeah. Thank you, Katherine. This is interesting publication and we are certainly aware of it and follow the story. The story really is focused on the pre-clinical data.

When we move to the clinical data the story is less compelling. Certainly we don’t have large randomized trials to answer your question but when just looking at Phase III data which we have for example Jan Burger’s study which evaluated ibrutinib in combination with Rituximab and previously treated high risk CLL patients. The overall response rate is approximately 95%, so there does appear to be synergy when comparing to ibrutinib monotherapy where typically the response rates are between 70% and 80% now these are comparing Phase II across studies.

So it’s difficult to generalize but there does appear to be a synergy in terms of response and increased complete responses appear to be somewhat higher when you add in a CD20 monoclonal antibody. Really we need larger randomized data to fully answer this question and those trials will be going or ongoing.

Katherine Xu – William Blair & Co. LLC

Does it make makes sense to move most of the studies to GA101 or do you want to – those or expanding on those Rituxan containing study?

Jesse McGreivy

Yeah it’s another good question. GA101 has shown impressive activity in terms of progression free survival in front line elderly or front line patients. I should say with combination with chlorambucil and outside of that clinical setting there is really there is no other randomized Phase III data. So it’s really hard to know it’s the results that we’re seeing in this patient population translate to other aggressive or endo lymphomas.

And there are additional trials that I believe are going on that we’ll answer for the questions. So we follow this closely and GA101 appears to be an activation showing good activity. So invariably there is going to be an interest by physicians and patients in receiving the best patients

Jason Kantor – Credit Suisse

Thank you.

Operator

The next question comes from Geoff Porges from Bernstein.

Geoffrey Porges – Sanford C. Bernstein

Thank you very much for taking question. First a question on one of the abstracts that you highlighted at the meeting. In the monotherapy abstract it appears that some 58% of patients are still on treatment of 20 months. It’s so to suggest that the duration of therapy for the Relapsed/Refractory patients will be somewhere in the range of 24 to 26 months. First, I’m just wondering if that’s a reasonable influence, we’re thinking about.

And then secondly as you’re looking at all of these combinations and as you’re looking at the pre-clinical data. What are your thoughts about the possibility of discontinuation of ibrutinib in patients who’ve been on therapy and had a very deep response. Certainly some of your potential competitors in CLL are discussing such a concept and given what you know about the mechanism of the action of ibrutinib. Would that be a feasible approach to consider in future trials?

Unidentified Company Representative

Yes, two very good questions. I’ll try and address each of them. The first question in relation to duration therapy the data really is the data, currently available data we have not reached the median duration of treatment for patients with CLL on ibrutinib, speculating how long that’s going to be, it’s actually fairly difficult.

A curse like that can they can plateau and continue for a long period without reaching a duration if you reach a population where you’ve truly defined the clinical benefit or there maybe continued decrement to that curve over time. But we’re encouraged that we have not reached the median with quite a bit of follow up as you noted.

Looking at the second part of your question which is discontinuation of ibrutinib we currently have patients on ibrutinib out three years or beyond. I believe there is patients approaching four years now. So there are a number of patients who’ve been on ibrutinib many-many years and are doing well. We know from our insight into our clinical trial is that some patients who discontinue ibrutinib have progression in a relatively short period of time and this maybe a difficult proposition to study ibrutinib and given the mechanism of action certainly one would expect to discontinue ibrutinib, it would potentially put a patient at risk.

We don’t have good data to address this question fully but from the limited data we’ve internally and we have looked at in our trials and there certainly is potential risk to patients that progress upon discontinuation. There certainly maybe some patients who also discontinue ibrutinib after prolonged period where they have a continued response after discontinuation, but evaluating that in a clinical setting would be something down the road. Certainly right now we’re trying to establish that ibrutinib is effective and tolerated therapy over until progression and we need to establish that fully before we address discontinuation questions.

Geoffrey Porges – Sanford C. Bernstein

Thanks very much.

Unidentified Company Representative

And Jeff just to expand on that we are seeing as noted in a number of the papers being published an increase in patient wellness we are seeing a reduction in significant adverse events rate out seriousness of. So I doubt discontinuation unlike perhaps in some other therapies will be caused by lack of tolerability of this oral dose. So that’s one thing the factor.

Two, you know probably better than most online here that we are a signal inhibitor. So if you remove the signal inhibitor, the signal now gets sent and we know what the signal does when it’s not inhibited. So, those are factors that will have to be kept in mind and it would require some extensive studies to prove one point out over the other. But I think that these points are meaningful in taking that into consideration.

Geoffrey Craig Porges – Sanford C. Bernstein & Co. LLC

Thanks very much.

Unidentified Company Representative

You’re welcome.

Operator

The next question comes from Rachel McMinn from Bank of America. Rachel McMinn, your line is open. Please check your mute button. Rachel McMinn, your line is open. Please check your mute button, if you are using a speaker phone please lift the handset.

We’ll move on to the next question. The next question comes from Michael Yee from RBC Capital Markets.

Michael J. Yee – RBC Capital Markets LLC

Hey, thanks for the question. For Bob or for your commercial team, maybe you could talk about what the Street’s expectation should be for the launch of the drug. I know a lot of people are thinking about this like a Gleevec or Revlimid type launch. Is there anything that should caution us to that launch? Is there any differences in how this one should be versus any of the myeloma drugs? Maybe you could talk about the shape of the curve in the first year?

And then the second question, just really quickly, is you did say the Resonate I study is coming possibly by the end of January. Do you expect to file that back to FDA? Is it rational to assume that FDA would want to see that study, just to get that cleared before they approve the drug? How should we think about that getting to the FDA and whether that would lead to any delay or not?

Unidentified Company Representative

Well Michael, I appreciate the breadth of your questions and how much help it would provide if I could answer them accurately without pay of course, but the first thing’s first. We need an approval and a label so that’s what our attention is on. That’s the work that we’re now doing.

Labels impact drug in the promulgation of drugs, so allows to get that first and once we get that and then we see and characterize the market uptick we can be a little more expansive, we’re very willing to inform the owners of the business as to how we’re doing but I think it would be pre-mature to jump in and do it at this point.

Michael J. Yee – RBC Capital Markets LLC

Okay, and then maybe for Jesse just thinking about.

Unidentified Company Representative

With regard to RESONATE, I think any information that informs the clinicians, patients and the FDA as to the response rate duration, tolerability of the drug is important. So that I think hopefully that adds a little color to your questions with regard to RESONATE.

Michael J. Yee – RBC Capital Markets LLC

Thank you.

Unidentified Company Representative

You’re welcome.

Operator

The next question comes from Navdeep Singh from Goldman Sachs.

Navdeep Singh – Goldman Sachs & Co.

Hey, guys, and thanks for taking my questions. And I echo everyone by saying congrats on the progress during the quarter. A quick question on Gilead; do you believe Gilead has any edge by launching idelalisib with a label recommending use in combination with Rituxan, versus a monotherapy label that we’re all expecting for ibrutinib?

Unidentified Company Representative

What was that last clause on that sentence please? Not be...

Navdeep Singh – Goldman Sachs & Co.

Yeah so the question was you think Gilead has any edge by launching Odilicib with a label recommending using combination with Rituxan versus ibrutinib, which is expected to launch with a mild therapy label?

Unidentified Company Representative

Over to Jesse.

Jesse McGreivy

Yeah, thanks for the question. I think ultimately patients and oncologists are going to be looking for the treatment options, which provide the most efficacious outcomes. And over the longest period of times with the best tolerability profile, I don’t think certainly elderly patients with indolent lymphoma or patients with any lymphoma want to go get infusions or pills, they want to know what are the best treatments and when – as an oncologist when you see a patient for the first time that really –they are really looking for what is their best option, what is their best shot, because they know that the first treatment or whatever subsequent treatments, those are critical things for those patients to take on.

So really [indiscernible] in combination with Rituxan is an active regimen with reasonable durability and we’re very encouraged by our results by single agent ibrutinib and combination data that we have from Phase 2 trials and we have multiple Phase 3 trials ongoing in – that will bring that data in the future.

So we’re encouraged by the fact that ibrutinib can be given either as a monotherapy or in combination and so overall I think ultimately it really boils down to what are the best treatment options, and I think both represent options. What is not clear is as a monotherapy certainly in CLL is [indiscernible] going to come forward. There appear to be favoring in combination of CD20 antibodies and they have submitted monotherapy for indolent lymphomas.

Navdeep Singh – Goldman Sachs & Co.

Okay. Thanks, Jesse. A quick follow-up, yes.

Unidentified Company Representative

As we said a number of times, our view of drug value is very simple formula, its drug efficacity, durability, tolerability, ease of dosing over patient trauma/setbacks, short and immediate and long-term squared and that’s how we look at it. And I think that’s how patients will look at it. And that proved to be very reliable and predictable in the world of robotics and we see the same thing happen in the world of Biotech.

Navdeep Singh – Goldman Sachs & Co.

Okay got it. And then a quick follow up on I noticed that you initiated a Phase 2 trial of ibrutinib and Relapsed/Refractory and indolent non-Hodgkin lymphoma during the quarter. Just yet another competitive question based on the monotherapy data available how do you think ibrutinib stacks up against Odilicib and indolent non-Hodgkin lymphoma which is expected to as we know Odilicib is expected to receive approval in May 2014 for the double refractory setting.

Unidentified Company Representative

Yeah, I think it’s difficult to make comparative statements like this across small numbers. Odilicib in monotherapy the abstracts which I saw, published at ASH had a response rate of about 57% with some durability to that, so Odilicib does appear to be an active agent for patients who are as you say double refractory. Looking at ibrutinib, we are, we have treated a number of patients to date but we need to generate additional data for me to provide full color into addressing that question?

Navdeep Singh – Goldman Sachs & Co.

Okay thanks guys.

Unidentified Company Representative

You’re welcome.

Operator

The next question comes from Joel Sendek from Stifel.

Joel Sendek – Stifel Nicolaus

Hi, thanks a lot. I have two questions, just one, is there any way to gauge at all how long the European review will take and my second question is on another endpoint for ibrutinib if some people are looking at minimal residual disease negativity are you looking at that and if you’re studies or we have any data on that at ASH? Thank you.

Urte Gayko

So I can, this is Urte Gayko, I can comment on the first part of the question. So just to acknowledge all Pathogenesis announced a couple of days ago is that, we did submit the European market application for Relapsed/Refractory mantle cell CLL. We anticipate this review to be like more typical European review that is close somewhat in the range of a year time period.

Joel Sendek – Stifel Nicolaus

Thanks.

Unidentified Company Representative

Jesse, part two?

Jesse McGreivy

Yeah, thanks. To address the question on MRD negativity in our initial Phase II trials as we have indicated previously we did not fully capture end-market negativities status. And moving forward in our Phase III trials we are capturing this data and we do plan to share this when this is available at times of publication for those Phase III trials that are ongoing.

Joel Sendek – Stifel Nicolaus

Okay, but nothing at ASH you don’t think?

Jesse McGreivy

No that the Phase II trials that we have, we really are providing all the data which we have and as I’ve mentioned we did not capture in the single arm every patient MRD negativity.

There are patients who have achieved MRD negative status and you can review some of the outchecks to look at where those are occurring. So we have achieved MRD negativity in some patients, but it wouldn’t be reliable to report a percent of MRD negativity for the Phase II data and we are capturing that for the ongoing Phase III trials. So, we do expect to see MRD negativity, we just don’t have the full number to report.

Joel Sendek – Stifel Nicolaus

Understood, thanks a lot.

Jesse McGreivy

You’re welcome.

Operator

The next question comes from Mike King from JMP Securities.

Mike King – JMP Securities

Good afternoon guys. Thanks for taking my questions. Most of my questions have been answered. I thought I would ask a couple of regulatory questions and I know you would love to answer, but I’d rather put them out there anyway.

First, is with regard to some pushback that I’ve heard from investors kind of along the line of Catherine Sue’s question as well as Brian Skorney with respect to any thoughts about the potential for Blackbox warning I can’t conceive of anything in the ibrutinib dataset that would want such a thing. But is that something that is in the realm of possibility and if so what could that possibly be?

Urte Gayko

This is Urte Gayko. So, just if you started your questions, that this is really the responsibility of the FDA and there is nothing for us to comment on, I mean we are very much looking forward going through this review process and as soon as we have approved label we will carefully review it with all of you.

Mike King – JMP Securities

Okay, and then I just wanted to follow-up with regard to Bob’s opening comments regarding the relationship with FDA. I’m just curious what your thoughts are as a general comment for the industry about the value of breakthrough therapy designation because we’ve carefully accounted the time it took for the FDA to approve such breakthrough, two breakthrough therapies in the oncology like Xtandi or from Vertex and if I count correctly you guys surpassed that, well pass those timelines. And well ibrutinib is held up as sort of the poster child of BTD. So it seems like the FDA already had mechanisms in place to approve drugs on expedited basis if they wanted to.

So I’m just trying to understand or hoping you can help us understand what the value of BTD is in your mind?

Robert W. Duggan

Thank you Mike. Keep in mind we submitted over 500,000 pages of material. So that was a very complete submission, we had in addition in excess of 11 thorough onsite and offsite inspections that, that takes time to clock that data and review it. We’re very pleased with our progress. Achieving a label is multi-factorial, one is the quantity and quality of data submitted and two is the amount of time that the FDA has to spend on that data and the speed that they can respond.

We have found in our cases only – currently reported in our case that they’ve been very responsive, very consultative and very helpful in the entirety of the process. What else they do during that time, that they are spending I really don’t know, I imagine they are incredibly busy people. But I’ve been through the Phase IIIs in my previous company and I’ve heard about Phase IIIs at Pharmacyclics and I know some people felt that they do take quite a bit of time.

The response rates here have been phenomenal and I really applaud the FDA for their timelines even during the government layoffs these people were working, perhaps some even without pay to help make this happen. They are truly interested in bringing viable drugs to market as quickly as possible. So we’ve been impressed with our interactions.

Mike King – JMP Securities

Thanks for the clarification. I appreciate it.

Robert W. Duggan

You’re welcome.

Operator

The next question comes from Howard Link from Leerink Swann.

Howard Link – Leerink Swann

Hi, thanks very much. Was the initiation of the Phase III in indolent NHL as a result or informed by any interim result from the Phase II or was it pre-planned to move forward anyway?

Unidentified Company Representative

Jesse?

Jesse McGreivy

Yeah, thanks Howard. So, the overall we found that when we looked at our initial patients treated with follicular lymphoma in the first in human study that we were seeing very encouraging results. The response rates, the durability response, the progression free survival that we saw in those initial 16 patients of follicular for example and a few patients with marginal zone that we had encouraging results.

We published follicular results last year at ASH and those certainly were very positive and influenced our thinking. As far as the ongoing Janssen Phase II follicular trial, I’m going to different comments to that to our partner Janssen but we do evaluate all of our data when moving forward. But I couldn’t comment on was there any interim analysis or anything that I’ll defer to our partners Janssen.

Howard Link - Leerink Swann

Okay. Can you talk about your pre-commercial activities around ASH and would you be ready to launch ibrutinib if it is approved by then?

Robert W. Duggan

Howard, this is Bob. We have said we’re in a ready-to-go mode, so that captures the intend of your question and hopefully responds adequately.

Howard Link – Leerink Swann

Okay, great. Thanks very much.

Robert W. Duggan

You’re welcome Howard. Operator, we have time for one additional question.

Operator

The final question comes from Matthew Andrews from Wells Fargo Securities.

Matthew Andrews – Wells Fargo Securities LLC

Good afternoon. Thanks for fitting me in. Two quick ones, as follow-up to the impressive update on the Phase II Waldenstrom’s data in Europe, can you discuss what the strategy maybe in Waldenstrom’s, do you have any clarity from EMA whether you’ll need a randomized study?

And then second, just a follow up to Brian’s question at the beginning, could this new Phase III in Relapsed/Refractory NHL serve as a supportive study for approval of ibrutinib monotherapy and the dual refractory iNHL population? Thank you.

Robert W. Duggan

Jesse?

Jesse McGreivy MD

Thank you, Matthew. As far as the strategy in Europe for Waldenstrom’s, we’re currently evaluating that, where we don’t have a formal announcement on what is our registration plan in Europe, but we’re looking at all what data will it take. We’re engaging people we need to engage to address that question.

And with regard to the second question on the follicular, I would say that’s really a review issue. We look at the results of the data and then depending on the results of the data, we would then assess that this we’re filing or not is this the level of what we can stand in front of the FDA and say that we just think it deserves a label on it. So ultimately we review all data and then make that assessment, it’s hard to know without seeing the data if that’s a yes or no.

Matthew Andrews – Wells Fargo Securities LLC

Okay, thank you.

Robert W. Duggan

Operator, I’ll give a wrap up comment. Thank you very much for joining us on the call today. We do look forward to providing you with further updates of our clinical and regulatory activities in the months to come. At Pharmacyclics our star high mission and vision is to usher in a new era of patient friendly, oncology medicine.

Let me close with a wonderful patient experience we learned about from one of our many happy investigators just a few days ago. One of our patients who was literally dying three years ago, according to her report came unexpectedly into our office to visit and to give her a big thanks and a hello for all that she’s done for him, moving him forward on the ibrutinib protocol and the trial. The patient said that he was forever indebted. The Investigator indicated to us "this happens so often that it just makes she want to be a part of all this change, to see a deadly condition turn into something that patients can co-exist with is just humbling in their growth".

So thank you for your participation today. This ends our conference call, and we look forward to talking to you in the future. Thank you so much.

Operator

Ladies and gentlemen, that does conclude the conference for today. Again thank you for your participation. You may all disconnect. Have a good day.

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