Pharmacyclics Management Discusses Q4 2013 Results - Earnings Call Transcript

Feb.20.14 | About: Pharmacyclics, Inc. (PCYC)

Pharmacyclics (NASDAQ:PCYC)

Q4 2013 Earnings Call

February 20, 2014 4:30 pm ET

Executives

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

Manmeet Singh Soni - Chief Financial Officer

Robert W. Duggan - Chairman and Chief Executive Officer

Jesse Seton McGreivy - Chief Medical Officer

Paula S. Sjovall Boultbee - Executive Vice President of Sales and Marketing

Urte Gayko - Senior Vice President of Regulatory

Analysts

Morgan Haller

Lisa Zhang - Goldman Sachs Group Inc., Research Division

M. Ian Somaiya - Nomura Securities Co. Ltd., Research Division

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

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

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Filippo Petti - William Blair & Company L.L.C., Research Division

Michael G. King - Direct Markets Holdings Corp.

Michael G. King - JMP Securities LLC, Research Division

Joel D. Sendek - Stifel, Nicolaus & Company, Incorporated, Research Division

Howard Liang - Leerink Swann LLC, Research Division

Matthew J. Andrews - Wells Fargo Securities, LLC, Research Division

Jason Kantor - Crédit Suisse AG, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Pharmacyclics' Fourth Quarter and Year End Financial Results Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to [indiscernible] the conference call to Mr. Ramses Erdtmann. You may begin.

Rainer M. Erdtmann

Thank you, Kevin. Welcome to the Pharmacyclics' 2013 Fourth Quarter Earnings and Year End Conference Call. With me on the call is our entire executive team. We will hear prepared remarks by our CFO, Manmeet Soni; our CEO, Bob Duggan; and our CMO, Dr. Jesse McGreivy.

Before we begin, let me remind you that this nonconfidential 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 programs, 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 our CFO, Manmeet Soni. Manmeet?

Manmeet Singh Soni

Thank you, Ramses. Good afternoon, everyone. Thanks for joining us today. It has been an historic and eventful quarter for Pharmacyclics. Today, I will discuss our financial highlights for the fourth quarter and year ended December 2013. We closed 2013 in a strong financial position with $636 million in cash and investments, as compared to $317 million as of December 2012. This was driven by record high revenues, including milestone revenues and improved record net product revenues.

In summary, Pharmacyclics is in a strong financial position to support the commercialization of IMBRUVICA and to further expand our research and clinical programs for our pipeline. In addition to our strong cash position, we had net receivables of $48.6 million due from Janssen as of December 2013 inherent to the company's expenses under the collaboration during the quarter ended December 2013.

As you all know, last week, we also received FDA approval for the treatment of patients with CLL, who have received at least 1 prior therapy. This approval of CLL has triggered a $60 million milestone payment to us. We expect to receive these payments from Janssen during the first quarter of 2014.

Today, we announced non-GAAP net income of $73.9 million for the quarter ended December 2013 as compared to non-GAAP net income of $52.5 million for the quarter ended September 2013, and $46.2 million for the quarter ended December 2012. For the year 2013, we ended with $117.2 million of non-GAAP net income compared to $100.6 million for the year 2012.

We recorded IMBRUVICA net product revenues of $13.6 million from our launch date of November 13, 2013 through December 31, 2013. We recorded revenue from IMBRUVICA product sales once title and [indiscernible] loss transfers to our specialty distributors and specialty pharmacies based on the selling model of revenue recognition. Out of the $13.6 million of net product revenue recognized, inventory held in channel was approximately $3.6 million as of December 31, 2013.

At this time, we are not providing guidance for IMBRUVICA's quarterly or yearly revenues. As we build up our business analytics and gain a solid understanding of the market dynamics, we will be in a better position to anticipate future revenue potentials and comment upon. Suffice to say, we are enthusiastic concerning our revenue prospects for the first quarter of 2014 and beyond.

IMBRUVICA is available in 2 bottle sizes: 90- and 120-count bottles. From November, after we gained approval to the end of December 2013, we shipped 584 bottles of the 90-count and 931 bottles of the 120-count to our specialty distributors and pharmacies in the United States.

Based on the FDA approval for CLL last week, and the much larger CLL patient population compared to MCL, we anticipate that the 90-count bottles will be subscribed significantly more in the quarters to come. We are currently analyzing the patient compliance and refill rates, and we'll provide updates as this data matures and becomes meaningful.

During the quarter ended December 2013, we recognized $50 million of revenue related to milestones earned from Janssen for the acceptance of IMBRUVICA's marketing authorization application with the European Medicine Agency. In addition to the approval of IMBRUVICA from the U.S. FDA, a $60 million milestone payment on November 13, 2013, bringing the total milestones earned during the quarter ended December 2013 to $110 million.

Let's now view our cost and expenses for the year 2013. During the quarter ended December 2013, we had $3.5 million of cost of goods sold. In relation to our product revenues, this implies a cost of good percentage of 25.8%. This percentage will be significantly improved over time to high-single digits as we increase in sales volume and reach optimum productivity levels.

As a reminder, the Janssen agreements provide a $50 million annual cap of the company's share of direct IMBRUVICA-related development expenses and commercial losses for each calendar year. We refer to any amounts incurred in excess of this annual cap 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 amounts shall be reimbursable only from the company's share of pretax commercial profits after the third profitable calendar quarter.

During our second quarter of 2013, we exceeded the annual cap of $50 million. Since that time, all additional IMBRUVICA-related expenses incurred by Pharmacyclics during the third and fourth quarter of 2013 were accounted for as excess amounts and are borne by Janssen. To date, a total of $134.3 million in excess amounts have been recorded as a reduction in cost and expenses.

During the quarter ended December 2013, we recorded $50.2 million of excess amounts. As of December 31, 2013, we had an additional $65.7 million available in excess amounts.

Looking at our operating expenses, including R&D and SG&A only, we ended the fourth quarter of 2013 with non-GAAP operating expenses of $25.4 million which included the benefit of excess amounts. During the quarter, $50.2 million in excess amounts were recorded by the company and reduced our non-GAAP reported expenses. Excluding this benefit of $50.2 million, our operating expenses were $75.6 million for the quarter, which equates to an annual run rate of approximately $300 million.

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

Robert W. Duggan

Thank you, Manmeet. Good afternoon, and thank all of you for joining us today. I want to take this opportunity to walk you through some of the highlights of the past few months and our fourth quarter 2013.

Most importantly, on November 13, 2013, we received our first approval, and since that time, we have been selling IMBRUVICA to patients with mantle cell lymphoma who have had 1 prior therapy. This event was a major corporate milestone for Pharmacyclics and allowed us to establish ourself as a commercial organization. This is an essential step in achieving our mission of becoming a viable biopharmaceutical organization.

In December, at the 55th Annual Meeting of the American Society of Hematology, or ASH, we presented 40 clinical, nonclinical and preclinical presentations on IMBRUVICA. There were 7 presentations of clinical data, of which 5 were oral presentations including one "Best of ASH" presentation. These data showed the impressive clinical progress we have made with IMBRUVICA, its impact on duration and its effect on quality-of-life over time. Making a significant difference for the betterment of patients is essential to achieving our mission.

Also in December, Dr. Susan O'Brien presented data on single agent IMBRUVICA in previously untreated elderly patients with CLL/SLL in the Lancet article. She reported on a cohort of 31 treatment naïve CLL patients treated with IMBRUVICA. That data showed an acceptable safety profile of IMBRUVICA with most common side effects being Grade 1 mild diarrhea, nausea and fatigue. After a medium follow-up of 22 months, only one patient had progressed. At approximately 2 years, the progression-free survival was 96%. Outcomes such as these are source of great joy, pride and energy for team Pharmacyclics. We also received recognition by the National Comprehensive Cancer Network, NCCN. They included IMBRUVICA in their clinical practice guidelines in oncology for 2014. The NCCN covers 98% of all cancer treatments and is a reference for practicing oncologists. IMBRUVICA is now recommended by the NCCN for the treatment of 4 histologies, including CLL, SLL, MCL and Waldenstrom's. We consider this a tremendous acknowledgment and a wonderful validation.

In January, an Independent Data Monitoring Committee unanimously recommended that the Phase III RESONATE study, a head-to-head comparison of IMBRUVICA versus ofatumumab, be stopped early. The study demonstrated at the planned interim analysis a statistically significant improvement in progression-free survival in patients with relapsed or refractory CLL and also showed a statistically significant improvement in overall survival. Yet another spectacular outcome for all involved.

Later, also in January, after several years of research, we finalized the preclinical work with our lead candidate and filed our first IND with a BTK inhibitor in autoimmune disease. We have since received FDA clearance to start the first in human study with this BTK inhibitor in autoimmune patients. This is the result of our talented R&D team here at Pharmacyclics, and over time, we expect many to follow and support of human health care betterment. By the way, patent expiry for this internally designed, wholly owned medicine is expected to be 2035.

Last week, IMBRUVICA gained an additional approval and is now available for CLL patients who have had 1 prior therapy. This was another major achievement for us and was well covered in the press with numerous comments coming from key opinion leaders. IMBRUVICA was hailed as a new treatment option, having a wide label and exceptional disease control and for its potential to contribute to the making of chemotherapy-free treatments. In both MCL and CLL, we can provide IMBRUVICA today for patients who have received 1 prior therapy. We estimate that this broad label will grant us access to more than 5,000 CLL patients in the United States and more than 40,000 U.S. CLL patients over time.

In anticipation of the market introduction of IMBRUVICA, we have built a commercial team over the past 24 months. Let me add a bit more color on the team we have in place today. Including JBI, there are over 120 highly trained FTEs selling IMBRUVICA to patients in need. IMBRUVICA has been embraced and accepted across all treatment domains, including academic centers, community physicians and hospitals. Pharmacyclics' market access team, consisting of 17 professionals, has set up these relationships and oversees the general distribution of IMBRUVICA. The market access group also works with payers to establish a reimbursement for IMBRUVICA. Payers have responded to the MCL approval with fast reviews of prescription requests. To date, IMBRUVICA has broad coverage across the payer landscape for mantle cell lymphoma, and we see similar trends for CLL.

The market access group has also been responsible for the creation of access and affordability programs for patients. With the help of these programs, most MCL and we believe CLL patients, independent of their financial or insurance status, will be able to access IMBRUVICA for the duration of their therapy. One of our access programs consists of a free 30-day supply for all eligible patients experiencing insurance coverage delays greater than 5 business days. A second program offers a maximum monthly out-of-pocket expense of $25 for commercially insured patients who are having financial difficulties. Finally, we established foundation support for patients who are deemed uninsured and who make less than 600% of the federal poverty limit. With a few months of sales now under our belt, we've seen a great reception of the access programs by both patients and physicians.

Another important corporate function we have created is our Medical Affairs Group. Their purpose is to provide accurate scientific and medical information about IMBRUVICA and its proper use for patients, doctors and the general public. The Medical Affairs Group is in charge of this education and also plays an integral role in the support of the commercialization of IMBRUVICA. We have established a team of approximately 30 medical affair professionals grouped in 4 distinct functions. The Medical Information team handles all inquiries that arrive in our call center and provides medical expertise to the legal and regulatory review. The medical communications team organizes publications, advisory boards and coordinates congresses. The Medical Sciences team focuses on supporting our investigator-sponsored trials, Expanded Access Program and post-marketing studies. Lastly, we also established a strong team of Medical Science Liaisons. These are highly trained professionals situated all over the U.S. who are engaged in scientific exchange with investigators and other healthcare professionals, providing disease and product information in response to unsolicited request is a key activity for this team.

With the approval of MCL, we had the opportunity to build and streamline our support systems. We're now prepared to launch IMBRUVICA in a much larger patient population of CLL.

So right now, I'll turn the call over to Jesse.

Jesse Seton McGreivy

Thank you, Bob. I covered quite a bit of ground a week ago. I gave a summary of our CLL program during our CLL Approval Conference Call. You will also find in our quarterly earnings press release a detailed update on each of our key programs.

IMBRUVICA is a once-a-day oral single agent treatment option for MCL and CLL patients who have received at least 1 prior therapy. The recommended dose for IMBRUVICA in MCL is 560 milligrams, 4 capsules per day. And in CLL, it's 420 milligrams, which amounts to 3 capsules per day.

Last week, we received our accelerated approval in CLL. It was based on durable responses we achieved in a multi-center, single-arm trial of patients with previously treated CLL, the PCYC-1102 trial. The FDA approved IMBRUVICA based on the 48 CLL patients treated at 420 milligrams in this trial. The median age of these patients was 67 years, the median time since diagnosis was 6.7 years, and the median number of prior treatments was 4. The efficacy results of these patients demonstrated a 58.3% overall response rate as assessed in an independent radiologic and oncologic review assessment. The duration of follow-up was 15.6 months. The response duration of these patients ranged from 5.6 to 24.2-plus months. And the median was not reached. At the time of the analysis, 12.5% had progressed and 85.4% were alive without disease progression.

We often get asked how long a CLL patient will stay on IMBRUVICA. The answer at this point is unknown. As in all our Phase II or Phase III studies, at the time of our most recent analyses, more than half of the CLL patients treated with IMBRUVICA are still on drug, and we, therefore, have not reached a median treatment duration for patients with CLL. As a further reference, Dr. O'Brien, from MD Anderson presented at ASH in December, a longer-term follow-up of IMBRUVICA in CLL/SLL patients. This publication includes relapse/refractory CLL and SLL patients from our initial Phase I study, PCI-04753 (sic) [PCYC-04753] which started in February 2009; our Phase II study, PCYC-1102, which started in May 2010; and our rollover PCYC-1103 study we initiated in June 2010. Her review included a total of 148 CLL/SLL patients, all treated with single agent IMBRUVICA. After a median of 3 or more prior therapies, her presentation concluded that at 30 months, approximately 70% of patients were alive without progression. The data showed an acceptable safety profile for IMBRUVICA but also showed that the percentage of patients with a serious adverse event of Grade 3 or higher declined over time, from 43% within the first year of treatment to 32% after the first year of treatment. And adverse events leading to discontinuation occurred in 8% of patients in the first year and declined as well to 6% of patients in the second year of treatment.

We have broadened our hematology pipeline and are exploring potential of IMBRUVICA in most of the key B-cell malignancies as a single agent and in combinations. We are currently studying IMBRUVICA in a total of 41 company and investigator-sponsored clinical trials. As of today, 10 of these trials are Phase III clinical studies. After all these trials are completed, we will have enrolled approximately 7,500 patients.

Looking ahead, there are many opportunities which we are evaluating with IMBRUVICA. Among them is the potential to combine IMBRUVICA with our HDAC inhibitor, indolent NHL. We reported at the International Conference on Malignant Lymphomas in Lugano in 2013 the results of the Phase II trial with our Pan-HDAC inhibitor, abexinostat. The compound was noted to be clinically active and overall well tolerated in relapsed/refractory B-cell lymphomas. Moreover, there was significant clinical activity noted in follicular lymphoma with an overall response rate of 64%, which included a number of durable responses in this multiple relapse patient population. Learning as well from pre-clinical research work, we observed that once-daily oral administration of our proprietary BTK inhibitor leads to regression of established rheumatoid arthritis disease. This was first reported at the 2010 Annual Meeting of American College of Rheumatology. At that time, we reported that our BTK inhibitors reduced cytokine releases in human monocytes and cell cultures and also reduced inflammatory symptoms in mice with collagen-induced arthritis. This work was diligently continued over the past years, and we have now filed an IND with our new BTK inhibitor which Pharmacyclics developed in-house and designed specifically for autoimmune diseases. This compound is owned by Pharmacyclics independently. The FDA reviewed our IND in January and considered it safe to proceed last week. Over the coming months, this compound will enter the dose escalation stage of a Phase I trial administered first to healthy volunteers, and then to patients with rheumatoid arthritis. We believe, with all these and numerous other clinical studies in CLL, mantle cell lymphoma, diffuse large b-cell lymphoma, follicular lymphoma and multiple myeloma, Waldenstrom's and marginal zone lymphoma, we're building a foundation of data that will provide strong overall guidance in the treatment of diseases in the coming years. We're very excited with the opportunities ahead, and now, I'll turn the call back to Bob.

Robert W. Duggan

Thank you, Jesse. Operator, I'd like to open the floor for questions at this time.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Brian Skorney with Robert W. Baird.

Morgan Haller

This is Morgan Haller in for Brian. I was just wondering if you could provide any color on the breakout of MCL versus CLL versus other in current usage.

Robert W. Duggan

I think the PLL count is as close as we'll get to providing more color. Factually, we don't have 100% certainty. We do know what we've given you is accurate and at this point, we'll hold it at that.

Morgan Haller

Okay. And I just had one other question. Why is the expected readout of the RESONATE 2 not until the second half of next year when the protocol calls for the readout after all patients having completed 12 months after treatment?

Jesse Seton McGreivy

Yes. This is Jesse. It's a good question, I'll address that for you. The protocol actually says that the primary analysis -- or it's really a final analysis because there is no interim analysis -- will occur between 12 to 15 months after the last patient's enrolled. So the trigger will occur in that window, and also, we need time to review, clean and assess the data internally so we provide that guidance as a conservative guidance.

Operator

Our next question comes from Navdeep Singh from Goldman Sachs.

Lisa Zhang - Goldman Sachs Group Inc., Research Division

This is Lisa in for Navdeep. Maybe just to word it a little differently, how is IMBRUVICA being used? I understand your label indicates monotherapy, but what are you and your sales force seeing in the field? Are physicians prescribing it as monotherapy or in combo with other regimens? And I have a follow-up.

Paula S. Sjovall Boultbee

Yes. So this is Paula Boultbee. So what we do, we do promote the label and the majority of the usage as we get our field force provide their feedback is according to the label, is the 1 prior label in both mantle cell and CLL and as the data matures to different sources we're buying, we will keep you posted on if there's any other usage or in a combination. But the direct feedback is that it's used as the label is indicating.

Lisa Zhang - Goldman Sachs Group Inc., Research Division

Okay. And then a follow-up, now that IMBRUVICA's been on the market for about 1.5 months for MCL, are there any learnings I can apply to the CLL launch? Or anything that you would do differently? Like, are there any differences in prescribing habits or patterns seen so far for MCL versus CLL?

Paula S. Sjovall Boultbee

This is Paula again. So we were very pleased with the mantle cell launch. I think that we executed the launch really well, and we created a really good map moving forward. In particular, with our partner with Janssen. So we have really applied the same kind of logic to the CLL launch which we -- Jeff kicked off here very recently. The label is the one prior therapy and as the physicians [indiscernible] understand what that label means in these both diseases, I think that the CLL launch will be equally successful as the mantle cell launch. So there is no red flag for us in any means, and the market access programs we have in place which will support the patients to get the drug and sustain their drug supply over a longer time has also really worked very nicely as we have reported before. So I hope that answers your question.

Lisa Zhang - Goldman Sachs Group Inc., Research Division

Yes. And then lastly, I promise. Can you just remind us where the IP for IMBRUVICA is located? Based on that, where is your tax rate? And are you taking any measures to improve that in the long term?

Manmeet Singh Soni

This is Manmeet. And yes, I think the global landscape regarding income taxes is an evolving state right now. And I think we expect, under current conditions, the long-term tax rate will be around 25%. However, our cash taxes for the year ended 2013 was less than 5% due to use of our NOLs and R&D credits. Does that answer your question?

Lisa Zhang - Goldman Sachs Group Inc., Research Division

Yes.

Operator

The next question comes from Ian Somaiya with Nomura.

M. Ian Somaiya - Nomura Securities Co. Ltd., Research Division

Hi, it's from Nomura Securities. Just a question on diffuse large B-cell, or maybe lymphoma broadly. Can you just share with us your development strategy there? I guess we're seeing one study in combination with Rituxan or several early stage trials in combination with Revlimid; can you just talk about longer term how you see IMBRUVICA being used or developed? And then when can we get a sense for maybe novel-novel combinations in that setting?

Jesse Seton McGreivy

Yes. This is Jesse. I'll take that. So we published data dating back a bit over a year ago at ASH 2012 of single agent ibrutinib in diffuse large B-cell lymphoma and based on gene expression profiling in ABC subtype, we showed 40% response rates with about half of those being complete responses. Our current strategy is focused on evaluating IMBRUVICA in combinations. So we -- Janssen has initiated the upfront trial of DLB1002 and the Phase III DBL3001. These trials are ibrutinib in combination with R-CHOP. Then in the relapse setting, we have Phase II exploratory trials. One is the 1123 study, which looks at ibrutinib in combination with Rituxan and lenalidomide versus ibrutinib plus lenalidomide. That's being initiated this quarter. And we also have ibrutinib in combination with chemoimmunotherapy with dose-adjusted EPOCH-R, lenalidomide and ibrutinib, the 1124 study. We are looking at additional novel-novel combinations. Moving forward, these are our initial trials which we've announced and then in the future, we hope to share additional trials.

M. Ian Somaiya - Nomura Securities Co. Ltd., Research Division

And if I could just follow-up on that. So the novel-novel combo, is it subject to a collaboration agreement or some sort of data sharing agreement? Is that sort of the rate-limiting step? I just wanted to get a sense for timing of those trials.

Jesse Seton McGreivy

Yes. So invariably, we want to look for drugs which are active in diffuse large B-cell lymphoma. One of the issues is even in the novel space, there are a limited number of agents which have significant activity in diffuse large B-cell lymphoma. So we are looking and we do discuss with a number of people in this space that are developing novel agents. But the real issue is finding drugs which have a significant probability of approval or a clear registration path in diffuse large B-cell lymphoma. And that's really a challenge for all developers in this space. But we certainly are looking at the best novel-novel combinations.

Operator

Our next question comes from Geoff Porges with Bernstein.

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

Just a sort of mundane question on expenses. Manmeet, could you perhaps -- I don't think you gave us any guidance on the outlook for expenses. I certainly understand withholding revenue guidance, but could you talk about the trajectory of your R&D and SG&A spending -- your cash spending and then we'll make the allowances for the J&J reimbursement. And I presume we should be anticipating that you're actually going to be reporting your full expenses from about the middle of the year going forward, having exhausted that $200 million cap for the J&J credit.

Manmeet Singh Soni

Yes. So you're right. If you see -- in the current quarter, we used $50.2 million of excess amounts, which reduced our expenses. If you look at the run rate, we are at cash expenses of $78 million, approximately. And as we expand our clinical pipeline and our activities, yes, R&D expenses I would expect to go up, but that's very much needed for my investment to make my huge pipeline with my revenue. And coming back to your question of my full expenses, yes. After once we reach -- once we consume our excess amounts, yes, we'll show you full expenses and then after full 3 quarters of profitability, we'll have to start repaying [indiscernible] loan [indiscernible] fixes amounts.

Robert W. Duggan

Geoff, your assumption on the $67 million note is not our projection nor do I think it's accurate.

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

Okay. Could you comment on the outlook for the underlying expenses in terms of SG&A through the year?

Manmeet Singh Soni

Yes, it should go...

Robert W. Duggan

Just say they will expand, they're going forward. The -- really, it's the opportunity, the revenue opportunity here is, as you can see, is massive. And just the recent insights we've had on HDAC contribute to that. The opportunity in autoimmune contributes to that. Having said that, we run a very cash-conscience [ph] business, and we're still projecting significant cash balances in this $600 million range. From what we know today, as we conclude the year, it's a strength of an unbelievably designed and well executed partnership with Janssen. And it's also now driven by approaching viability of selling IMBRUVICA into the marketplace, a drug that really, from our view, stands alone in terms of its efficacy, duration and tolerability. So the numbers will play out. We're reluctant to give forecast. We have our own internal projections, of course, for not only this year, but well into the future. But we'd rather just let the results speak for themselves. We'll be back online late April, and I give you the results for March. And that's pretty timely and the good news is, that will be 100% accurate. You see the numbers as they come in week to week on IMS data. So there's no lack of factors feeding into you and others to project our business pattern. We hope, for a while here, that's sufficient. But suffice to say, we're off to a good start. We're very enthusiastic. All is well. Cash is strong. And we have additional cash coming in. So we're in pretty good shape, Geoff.

Operator

Our next question comes from Michael Yee with RBC Capital Markets.

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

A couple of questions. The first was on the ECOG 1912 study, that's the front-line study, iR versus FCR. Can you give some details about that? I was just thinking that's a really big opportunity in front-line trying to replace FCR. But can you comment just on how you think about how you powered that study? I mean, this is, presumably, going to take years to read out. How do you think about that study and the feasibility of such a long duration, I guess? And then the second question was on a front-line study, perhaps, in higher risk cytogenetic front-line watch and wait patients, certainly there's a huge pullout there. So I was just trying to think about how you go after that opportunity and whether there's a study you can look at to try and evaluate the efficacy in those patients.

Jesse Seton McGreivy

Yes. Thanks, Mike. So just to start with the ECOG 1912 question. Certainly, it's always a challenge to show improved results when your competitor is FCR. That being said, if we use our Phase II data, we feel that there's certainly a good, a reasonable probability that we can beat FCR with ibrutinib and the combination in the trials ibrutinib, Rituxan versus FCR. To address your question around the design, 519 patients are going to be enrolled in the study and you can use historical controls of FCR, how does FCR perform over time. Typical estimates may be that the control may have a medium PFS of anywhere between 4, potentially, to 5 years. So the estimates are, with 519 patients, that we expect that we could beat that. It's a large trial, but the ECOG is certainly capable of doing these kind of multicenter studies. So those are really sort of the fundamentals in putting together a trial like that. And then to address your question on watch and wait. The German CLL study group, with Michael Holick and others, are looking at the CLL 12 study. And they're going to enroll 302 patients and randomize them which from ibrutinib as compared to placebo. These are high risk patients with 17p and other poor prognostic features who may benefit from earlier therapies. They don't meet the classical IWCLL criteria for treatment. But the estimates are they would have to screen somewhere around 3 patients to enroll 1. So this trial will take a certain amount of time to be done. And it is -- both these trials are external trials. So we do not run these studies. So really, the timelines for the trials are subject to the executions of these external groups.

Operator

Our next question comes from Cory Kasimov with JPMorgan.

Cory William Kasimov - JP Morgan Chase & Co, Research Division

I have 2 of them for you. First of all, and the first one is, I'm wondering if you're seeing any dose titrations or deviations from the label doses that could affect prescription data. In other words, is the 90-capsule bottle mainly being used for CLL? And the 120 for MCL? Are you seeing anything different? And then, secondly, I noticed in your press release that it states you're currently reviewing data from the third and fourth cohorts in your multiple myeloma study. Do you have a sense of when you may be able to share that? Is ASCO perhaps a possible venue?

Paula S. Sjovall Boultbee

So this is Paula. I can answer the -- those question related to the label and whether we have any excursions from those labels. It's -- all the feedback from any data sources we have just now, we feel that it's diluted to immature to make those determinations. So we are -- keep looking on that and obviously, a major look at all these data whether -- what dosages and which indications. Whether using the full dose or they're decreasing the dose over time, or questions as well as duration and adherence and compliance overtime. All on the plate to look at in the future but we feel that the data is immature yet to say then which way it's going.

Jesse Seton McGreivy

Yes. This is Jesse. I can address the question about multiple myeloma. We -- our guidance there really has not changed. We have enrolled cohorts 1, 2, 3 and 4. We're focusing on the efficacy results and analyzing the results for cohorts 3 and 4. With 1111 study, those cohorts are dosed with [indiscernible] 840, with or without dexamethasone. We -- our guidance is that we will have an update by the first half -- around the first half of this year. Whether or not that would be an actual publication, we haven't given guidance on that. We're not -- but we will have an update on the status of that trial by the first half of this year. And then in terms of publications for that, I think it's a little early in that it's very much an ongoing trial and we're trying to assess the data. But once we feel that the data is clean or fully vetted and we can share that, we will provide that. In terms of the 1119 study, the trial has been initiated. That is our Phase Ib/II study, looking at ibrutinib in combination with carfilzomib, so that trial has been initiated and started so we're very excited about that one as well.

Operator

Our next question comes from Katherine Xu with William Blair.

Filippo Petti - William Blair & Company L.L.C., Research Division

This is Fil in, calling for Katherine. I just wanted to get a sense, a little bit more color on the launch if possible in terms of how many prescribers the team is pursuing and the number of potential prescribers. And if you can give us a sense of a breakdown between academia and community for IMBRUVICA so far?

Paula S. Sjovall Boultbee

So this is Paula again. So our target is pretty much the broadest you can imagine in the United States of every single hemo. We have divided them into high accounts, which means that they have a lot of patients. They are potential high-risk drivers versus low-risk drivers. And we have organized a call list independent of [indiscernible] community and academia. And actually, most of you know our key opinion leaders are the ones we have seen first and who has been involved in a lot of opportunities to try this programs and those are also generating our speakers programs and our other peer-to-peer outreach activities, we do have. So at this time, we really are looking for the broadest potential reach. We have 120 FTEs out there in the field and they have done this tremendous job in getting the news out to the entire United States. And I would say that they most probably have, between us and JBI, I know what our reps have been thinking and then, they have done a really good reach on the target list and the JBI reps, equally so. So we most probably have reached all of them, at least once. If not many of them already twice. The CLL just launched, so we need to restart the clock again and start to see all of these physicians with the CLL message again, because the first one we gave them was a mantle cell, which has now been going on since 13th of November. So that's kind of the granular details we are providing today. And because it's really -- the first time period here is to get to the broadest reach to -- not only to the physicians but to the total office calls. So they are billing managers, and their office staff also knows how to get the drug, how the distribution work, where to send the script and also all the activities around our patient assistance program such as the YOU&i Start and the [indiscernible]

Filippo Petti - William Blair & Company L.L.C., Research Division

Great. And then one additional question. I know this is being run by Janssen, but any update on the European filing? Is there any way we would hear about potential accelerated assessment from the agency? Would that come before maybe the day-120 questions? Just wanted to get a sense of an update there.

Urte Gayko

So this is Urte Gayko. I can take the question on European filing. So as you mentioned, Janssen is formally responsible for doing the submissions and ultimate medical [ph] with x U.S. I think the review is ongoing. I think what I can say is that we do not necessarily anticipate an [indiscernible] review in Europe. However, we are very positive about our interactions with opportunities there. We actually went out last year to meet with arbiters. We had a very collaborative interaction with them. We had a very good discussion including both of the indication that are under review there. And I think you are asking this question because of general timelines and that is related to general timelines. I think we would anticipate something to come to conclusion towards the end of 2014 in Europe.

Operator

Our next question comes from Mike King with JMP Securities.

Michael G. King - Direct Markets Holdings Corp.

I have a bunch here but we'll see what we can get through and then I'll maybe talk to you offline. Just wondering, Paula, could you talk about -- you guys have consistently emphasized that the drug for MCL and CLL was approved for patients who have had 1 prior therapy. And I'm just wondering if you have any granularity on that as to, potentially, proportion of patients who've had 1 prior therapy because I think that's important as far as what we would expect for duration of therapy if they're less heavily pretreated than more heavily pretreated?

Paula S. Sjovall Boultbee

So if I do understand your question correctly, the way I would address it is that if you think about it from the physician's point of view, they have a patient in front of them who has received a therapy or is receiving a therapy, what are the reasons for that physician to switch out the therapy from the patients? Obviously, he's not going to switch his patients who is doing really well on the therapy. Meaning, that's well in terms of response rate; they do well in terms of toxicities. But any other patients, really, if there's a toxicity reason, if there's a poor response reason such as they have not obtained a complete remission or the patients' counts are not moving, that it's more like a stable disease. All those patients could qualify for prior therapy. But at this point in time, to say how many of each of the treatment segments like the first-line patients that would qualify for the one prior is something we really lead up to the number of database. Those are not just easy to -- going to a claims database because a claims database, it's not going to really tell you why patients are switching therapies. Those are more market research studies we need to perform and start to look at as what motivates physicians and patients to -- particularly, patients to be asked to come off a therapy, which is maybe a chemotherapy with all its side effects. So you can look at the markets in many different means. One is, given, is obviously, all the second-line patients. That is, they have received 1 prior therapy. But then, other than the first-line patients, we need to go in and then dig into the details. How many of them are really doing well on existing chemotherapies. So if you look at -- I don't know if you have our slide deck we have provided previously, we do have the second line patients in CLL. We have said there's slightly [ph] 9,300 patients there. So in reality, all those patients should be candidates for second-line chemotherapies. Then there could be many, many other patients from the third line and also some of the first-line patients. And one interesting area to explore, which we all are exploring, is, obviously, the reasons for patients to -- to have had patients on therapy. They have been on therapy before, now they're also on therapy for one or other reason. They could be off of therapy because they're recovering from side effects. Are those patients really candidates for drug supply as well? So you can skin the cat in many ways but the way we have skinned the cat is that we say that there's some 9,300 second line patients to some 6,000 third-line-plus patients. And then there's 25,000 or so patients who are between the therapy for one or other reasons. Why they are sitting in the bucket is, obviously, something we need to learn more about.

Michael G. King - JMP Securities LLC, Research Division

Okay. All right. This is probably a little too granular to continue on the call; maybe I'll follow-up on that afterwards. Because you're right, there a lot of ways to slice the pie. I just wanted to know if -- I don't know if you can give us any help on the reporting services whether -- either Symphony and/or IMS, but the numbers that we were looking for and some of the numbers I'd seen around the street as far as what expectations were for your -- for fourth quarter numbers were sort of in the single digit millions and you're coming in with a sort of demand of about -- just about 10. So I don't know if there's any way that you can help us track back from what we see in the script reporting services to what you guys have reported to us here today.

Robert W. Duggan

Mike, this is Bob. They are only off there by a few million and some analysts had us in high-single digits. In that first 6 weeks, it's almost impossible for anybody to get it right. The reporting schemes are still getting aligned and getting validated. But the next 6 months, this should all smooth out. But in an absolute sense, nobody was that far off. Percentage-wise, yes, but not in an absolute sense.

Michael G. King - JMP Securities LLC, Research Division

All right, fair enough. And then one other -- just a question about the YOU&i program. Listening to what you said today as well as the CLL program, I think I was -- been out visiting clients recently and talking about the Pharmacyclics story. I think there's some potential misperception that pretty much everybody is paying a $25 a month co-pay. Is that unrealistic to expect? And if so, who would be the most likely to pay that versus another -- patients on other types of insurance?

Robert W. Duggan

Yes. There's -- the commercial patients have the ability to participate in the YOU&i Instant Savings program, which is the $25 co-pay program. For Medicare patients, they would have to go to third-party foundations. And we do donate money to those foundations as well, but we don't have any control over foundations in terms of who they support and who they don't. But we do make donations to the foundations who have open silos for the disease states that were indicated. And then for commercial patients, that program is -- we've made that as easy as we could for commercial patients to use. And for those patients, if they have a co-pay greater than $25, they can participate in that program. So it's a very generous program for them.

Michael G. King - JMP Securities LLC, Research Division

And is that irrespective of income because I know you've said that one of them is capped at 600% of poverty?

Robert W. Duggan

Yes, you're correct. It's irrespective of income. There are couple of requirements but they're not income-based more than you're being treated by U.S. physicians. Sort of the standard things that are required, but we don't penalize anybody based on their income.

Urte Gayko

So the 600% poverty level is for indigent patients, who are deemed uninsured, fulfills that criteria. So it's a very different program and it's run by a third-party foundation which is called JJPAF.

Robert W. Duggan

Yes. There are 3 programs, and I think you're right. Sometimes it gets a little confusing. There's the YOU&i Instant Savings program, which is the $25 co-pay card for commercial patients, and then there's the JJPAF, which is for patients -- it's for indigent patients who make less than 600% of the federal poverty level and then the YOU&i Start, which is for patients who run into insurance issues -- any patient who runs into an insurance issue after 5 business days, they can get a free 30 days. So yes, we've been out making sure everybody explains the programs. We really tried to -- insurance landscape is complicated and what we've tried to do is section it out and look at each patient and try to determine how we can make sure that they have access to products. And those 3 programs are -- have been working well and that's our attempt to make sure those patients do have access.

Operator

Our next question comes from Robyn Karnauskas, Deutsche Bank.

Unknown Analyst

This is Mohib [ph] filling in for Robyn. Based on early trends, could you please help us understand the characteristics of the initial patients who are coming on the drug, are they really sick patients? And -- I mean, going into 2014, how do you think this mix is going to change?

Paula S. Sjovall Boultbee

So -- and this is Paula. If I do understand your question, you would like to know the initial characteristics of the patients treated?

Unknown Analyst

Yes.

Paula S. Sjovall Boultbee

And as we said before, that the data we obtained through the different data sources such as IMS claims databases, they don't really exactly tell you what the characteristics of the patients are. So usually when you have been out in the marketplace for a little bit, you do your own market research to figure out how the patients -- so you do some short reviews to understand a little bit more. But what we have as of today is our reps' feedback and the feedback from the reps are pretty much what you would consider being a mainstream, a mantle cell patient who's been on 1 prior therapy or one another kind. Obviously, in all disease settings and introductions of unused drug, there may -- are an overrepresentation of desperate patients who have exhausted all of their options and those will come in for some therapy. And I think that we potentially have seen both that in mantle cell, and we potentially have received those patients on treatment in the CLL as a spontaneous cell, even though they were not any label until last week. So that's kind of the details we can provide. So it's more or less that you need to go up and look at some kind of surrogate drug and see how those patients behave, and we will certainly be able to come back to you in the future with a little bit more detail on how a typical IMBRUVICA patient look like. But we are really staying on message with this is if the label is that 1 prior label because that provides the patient the best opportunity to get the drug which puts them into long-term remission for the longest time.

Unknown Analyst

All right, that's helpful. And then could we see definite data at ASCI this year?

Jesse Seton McGreivy

No. I wouldn't expect that we would show that data -- this is Jesse -- at ASCI this year.

Operator

Our next question comes from Joel Sendek with Stifel.

Joel D. Sendek - Stifel, Nicolaus & Company, Incorporated, Research Division

I'm wondering, on the duration of response, you're not going to reach a median for a while. Can we just assume when the PFS is at 85%, that all those patients are still on drug? And when will you get the labels updated for the RESONATE study?

Robert W. Duggan

So we have not provided any numbers with regard to PFS results or efficacy data. So I just want to be clear with that. There's been no guidance at all in terms of 85%. I'm not sure where that number...

Manmeet Singh Soni

From the script.

Robert W. Duggan

Okay. So but that was actually from our Phase II data, but not from the RESONATE trial. Just so that we're clear. The 85% was from the 1102 study, and that's the number of patients who were without progression at the time of the data analysis for the CLL label. So the -- and that's in those 48 patients. Being without disease progression doesn't always reflect to whether or not you're on drug or not. Just to clarify. And we do share the number of -- and when we do published data, we share how many patients are on steady drug and how many have discontinued at the time of the analysis. For the long-term follow-up data for Susan O'Brien that was at ASH 2013, we still -- slightly more than the majority of patients were on steady drug in the relapse setting. So the RESONATE data will be shared and the efficacy data from that will be shared, hopefully, at a congress in the near future, and we will have PFS data and patients on treatment at that time point. And so that's really all the data we have. I can't say -- as of today, the median has not been reached. But my statement, and I try to clarify that as of the analyses that were submitted for ASH 2013, the median was not reached as of those snapshots.

Operator

Our next question comes from Howard Liang with Leerink.

Howard Liang - Leerink Swann LLC, Research Division

Can you talk about the profile of the BTK inhibitor that you're bringing forward for autoimmune disease and RA, how is that different from that of IMBRUVICA with regard to selectivity PK profile for example? I think you've worked on this for some time, as you mentioned earlier. What was the target profile that you were trying to achieve?

Jesse Seton McGreivy

We're trying to, at this point, keep that close to the chest for competitive reasons. We see ourselves as global leaders in BTK inhibition. We've learned from working on BTK inhibitors over years what represents the best targets and what has not. And that's really our internal best of practices that we will share when we get to that point in the development -- if we get to that point in the development.

Howard Liang - Leerink Swann LLC, Research Division

And on the study 1125, this is the Phase II study for follicular lymphoma, front line study with iR. Can you talk about the selection of this -- the rationale behind this combination? So instead of iR, bendamustine or IR-CHOP, can we read something into this combination -- the selection of this combination in up front setting?

Jesse Seton McGreivy

Yes. I think this is a really good question, and we looked at -- what we wanted to do is run a trial where we have good historical data of what the background rate would be, for example, with Rituxan, and then by adding ibrutinib to that, we would have a very good sense of how much we're improving on those results. Certainly, bendamustine and Rituxan is a very common regimen use in front line follicular lymphoma. Other regimens, R-CHOP are used front-line, R-CVP. There's really no one standard of care in the treatment of naïve follicular lymphoma. And then also, somewhere around 20%, maybe even 30% of patients get single agent Rituxan. So there's good historical data on how those regimens work in the front line setting. When we add ibrutinib to Rituxan, we will be able to get a signal of how much is ibrutinib contributing to Rituxan. So it's very informative from a scientific perspective. Another trial you could look at would be REVLIMID/Rituxan and R-squared, in front line follicular, that was a very informative trial for lenalidomide in that particular space. And I think we're sort of taking a similar tack.

Howard Liang - Leerink Swann LLC, Research Division

Just one more question on ASCO data, what should we expect other than perhaps a RESONATE or maybe the multiple myeloma data.

Jesse Seton McGreivy

So there are a variety of things that we've submitted to ASCO this year, and I can't actually comment on what those are at this time. But those will be shared as soon as they become public on the abstract webpages.

Operator

Our next question comes from Matthew Andrews of Wells Fargo Securities.

Matthew J. Andrews - Wells Fargo Securities, LLC, Research Division

Manmeet, one for you, with all the large Phase III studies ongoing, can you give us a sense when we may see absolute R&D expense peak for ibrutinib in the blood cancers? Paula, if you could describe, of the 7,000 hematologists that you and Janssen had planned on targeting, roughly what proportion of those has an IMBRUVICA sales rep met with to date? And then Jesse, can you discuss the relative importance of the RESONATE-17 data in terms of fully promoting to the high risk CLL patients?

Paula S. Sjovall Boultbee

So maybe I can start with the -- with your coverage here. As I said before, we do pretty much don't have any whitespace in the country. We have 120 reps. And we do see -- have all of those hematologists, oncologists on our call list. And as you know, we have our partner, JBI, out there who is promoting other products than ibrutinib. And their call list maybe is even broader than our call list. So there's definitely no whitespace in the entire country, and I think that's the answer I would give today whether there is reps on it or not, but no whitespace. That's the message.

Jesse Seton McGreivy

Yes. And this is Jesse. I'll take the question on the PCYC-1117 study. So this trial is really an important study in that it's, today -- when it was initiated, it was the largest 17p trial that was prospectively designed to be ever conducted. It was done at a very high quality. So it does offer data which is important to these patients. I do want to add that it is, overall, supportive of a larger 17p clinical development plan and program we have in place. It is one of several data sets that's going to help and inform clinicians and patients on the activity of ibrutinib in 17p. The RESONATE trial had a significant number of patients which were 17p and that is a randomized data set. Obviously, randomized large Phase III trials are also extremely informative in terms of efficacy and safety results. So really, the overall data that we have from those trials, I would say, or the clinical initial sets for that will help support and inform patients and prescribers.

Manmeet Singh Soni

This is Manmeet. On R&D expenses question. If you see our earnings release, which we released this afternoon, you will see that the total R&D expense of $44.7 million before taking the benefit of excess amounts related to R&D. So if you do a run rate of $44.7 million, you come to $180 million analyzed R&D expense, which we are running right now. So we do show our full expense run rate, and as we expand our clinical programs, this may continue to grow.

Operator

Our next question comes from Jason Kantor with Crédit Suisse.

Jason Kantor - Crédit Suisse AG, Research Division

I just want to follow-up on the question on the inflammation, the IND that you filed. I'm just wondering if you have a view on what the best market opportunities or path to market might be for an oral BTK inhibitor for inflammatory diseases. Obviously, RA is a very crowded space. Are there other places that you're looking? Or is that -- can you give us some sense of how you see that program developing over time?

Jesse Seton McGreivy

Yes. It's a good question. The autoimmune space is vast. So I think, one, we have to establish the safety of our BTK RA molecule. We are in first in human study. So once we establish that, we do have a larger plan of where we're looking beyond what we've announced for rheumatoid arthritis. I can't give much color beyond that. But it is a very broad space and we're looking at many areas within that.

Robert W. Duggan

And then Jason, you were there in the very early days, really, prior to the IND for 32765, and we heard the same comments as we went into the CLL market that it was very crowded and be very difficult to make a significant difference for the betterment. But the truth is, we've all been pleasantly surprised by 32765. But the fundamental data in there is until you dosed it in humans that have the disease, one really doesn't know. And so we're excited by the potential and I will report in on the results. But if you should look for about a year out, we dosed our first patient in 32765 back in February 2009, and by December, that ASH -- 2009 ASH, we had reportable data progress we were making. So you'll probably see something similar to that but we'll certainly keep you apprised of it.

Jason Kantor - Crédit Suisse AG, Research Division

And is there any plans or thoughts of taking ibrutinib forward in any of the sort of more severe or acute inflammatory places where Rituxan is used, vasculitis and others, where the safety profile of ibrutinib would certainly be considered as sufficient and the pricing would be also not a barrier to use and you could potentially go there quicker than the drug that you're just putting into trials now?

Jesse Seton McGreivy

Yes. It's a very good question, Jason. We're -- we certainly look at all opportunities and it's certainly something that's been discussed internally. I can't give the exact color on where we would look, but this has been discussed. Currently, ibrutinib is only being investigated. Clinically, at this time it'll be some malignancies but we look at a variety of opportunities at any moment.

Operator

I'm not showing any further questions at this time. I'd like to turn the conference back over to our host for closing remarks.

Robert W. Duggan

Thank you, operator. We're very pleased to continue to report [indiscernible] today. In particular, the label we received for mantle cell lymphoma and CLL of 1 prior therapy is truly the first of these difficult disease states. We believe that over time, it will provide very valuable therapy for patients in need and for their caretakers. We're also very pleased that our IND filing has been reviewed by the FDA and we're allowed to proceed. As I just mentioned, it was very exciting, of course, back in 2008, to achieve the IND status in a "very crowded market" and we've done quite well in that area. So we're excited about it. Our corporate mission remains the same, which is to lead in the creation of patient friendly providing harmonious medicinal solutions which are making excellent progress, and we look forward to reporting on continued successes when we join you in our next call. Thank you very much for being part of this call today.

Operator

Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.

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