The Bull Case For Pharmacyclics (PCYC)

Dec.22.05 | About: Pharmacyclics, Inc. (PCYC)

The blogger at presents the bull case for Pharmacyclics (NASDAQ:PCYC), which is developing drugs for the treatment of cancer, atherosclerosis, and other diseases. PCYC is down huge this week -- to $3.60 from $9.20 last week.

• Reason for selloff: Phase 3 trials for the company’s Xcytrin drug (designed to treat certain lung cancer patients whose cancer has spread to the brain) lacked statistical significance. The primary endpoint of the study was to show that Xcytrin improves time to neurologic progression (how quickly the disease gets worse in the brain). In the intent-to-treat analysis the median time for patients receiving radiation + Xcytrin was 15.4 months, compared to 10.0 months for those receiving radiation alone—a difference of over 50%. The problem is that the difference compared to patients in the control arm did not reach statistical significance.

• Pharmacyclics is now trading at a tiny premium to the cash on its balance sheet—and has no debt. Cash per share: $3.25.

• Based on past burn rates (which may not be indicative), the company has enough cash to last at least 2 more years (in the conference call a burn rate update was promised for January).

• Management is not giving up on Xcytrin.

• Insiders are incentivized by owning over 10% of the stock.

• There is a potential short squeeze as about 30% of the float is short.

• The company is also developing a drug called Antrin which completed Phase 1 clinical trials. It is used for treating atherosclerosis, the leading cause of heart attacks

In other words, you are buying cash, getting two potential drugs thrown in for “free