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Craig Brockie
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Craig Brockie is a contrarian investment advisor in Beverly Hills, who provides wealth management services to high net worth clients. He prefers to bill his clients solely based on performance, getting paid only for results.
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  • Has Bob Duggan's Biotech Bubble Burst? 2 comments
    Jun 11, 2014 6:45 PM | about stocks: PCYC

    Last summer I wrote my first article about Bob Duggan and the biotech company he heads, Pharmacyclics, Inc. (NASDAQ:PCYC). It's been almost a year now and what a year it has been. Pharmacyclics has earned multiple Breakthrough Therapy Designations from the Food and Drug Administration as well as two FDA approvals for its new cancer drug.

    Pharmacyclics' stock has also had a great year, increasing 73% to its February high of $154.89. Currently this stock is selling for $96 and many investors are wondering what the future holds.

    Bob Duggan and his team are experiencing major success in treating patients with Mantle Cell Lymphoma (MCL) and Chronic Lymphocytic Leukemia (CLL), two types of blood cancer, with their new drug, ibrutinib (brand name Imbruvica).

    Imbruvica is now approved for the treatment of MCL and CLL for patients who have received at least one prior therapy. Now patients suffering from either of these rare but deadly forms of cancer have a promising new treatment option.

    Bob Duggan is in his sixth year as Chairman and CEO of Pharmacyclics. Under his leadership, the company has grown immensely in both its repute and capitalization, earning him a spot on Forbes billionaire list the past two years.

    After hitting highs in February, the biotech sector sold off sharply into April, dropping 22%. PCYC was even more volatile, dropping 55% over that same period.

    It's no secret that I believe we have begun to transition into another financial bear market. I believe investors who failed to sell stocks at previous all-time highs in 2007 and 2000 will experience major losses once again before 2016 comes to an close. That said, during the transition from bull to bear markets there is a tendency for investors to abandon the overwhelming majority of stocks that are already in decline and pile into the few assets that continue to climb. As you may remember, commodities and emerging markets went almost vertical in early 2008, several months after the S&P 500 index had already entered the last bear market.

    Last fall, I predicted that the bubble in Tesla Motors (NASDAQ:TSLA) was about to burst. About two months later, I thought I'd nailed that call as TSLA dropped over 37%. Just a few months later though, Tesla made a breathtaking comeback, rallying over 100% higher!

    If there's a stock that has the potential to repeat Tesla's performance and recover from what appears to be a bursting bubble and set new highs this year, I think Bob Duggan and his team at Pharmacyclics could pull it off. Why? Because they have proven me wrong again and again. PCYC has looked toppy to me since I first set eyes on it in early 2012. Since then, this stock has increased nearly 7x to its March high.

    Recently, PCYC has dropped as low as $86 and currently sits at $96. A return to it's previous high would provide a return of 61% and if it overshoots its previous high as much at Tesla did, a 120% return would result.

    Pharmacyclics's revenues and profits continue to increase and they continue to apply for more FDA approvals for Imbruvica. In fact, just this week Bob Duggan's team announced that it has another FDA approval for Imbruvica under priority review. There are many reasons to expect profits to continue to rise for this company. They're partnership with Janssen (a Johnson & Johnson (JNJ) company) is a strong alliance that ensures a continued successful roll out and expansion of Imbruvica sales.

    So, has Bob Duggan's biotech bubble burst or is Pharmacyclics about to experience another bull run? I'll leave that call up to you. Type your comment below saying which way you think it will go and why.

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Comments (2)
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  • James Sands
    , contributor
    Comments (2114) | Send Message
     
    I think the stock will remain in the $90-110 range as product revenues replace license and milestone revenue. If the company gets further FDA approval and/or beats expectations on product revenue significantly, it breaks through the $110 level.

     

    Aren't there European approvals that will be pending soon? I forget if applications have been submitted.

     

    Thanks,
    James
    11 Jun, 08:37 PM Reply Like
  • Craig Brockie
    , contributor
    Comments (156) | Send Message
     
    Author’s reply » Hi James,
    Thanks for your comment. Sorry for the delayed response. I just saw your comment now. I don't follow the company closely enough to know all the applications they have pending. I expect the company will continue to expand, but will be affected along with every other stock when the bear market intensifies.
    13 Sep, 12:11 AM Reply Like
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