Pharmacyclics Management Discusses Q4 2012 Results - Earnings Call Transcript

| About: Pharmacyclics, Inc. (PCYC)
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Pharmacyclics (NASDAQ:PCYC) Q4 2012 Earnings Call September 6, 2012 4:30 PM ET

Executives

Rainer M. Erdtmann - Principal Accounting Officer, Vice President of Finance & Administration and Secretary

Robert W. Duggan - Chairman and Chief Executive Officer

Mahkam Zanganeh - Chief Operating Officer

Jesse Seton McGreivy - Vice President of Clinical Science

Joseph J. Buggy - Vice President of Research

Analysts

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

Brian Skorney - Brean Murray, Carret & Co., LLC, Research Division

Alan Carr - Needham & Company, LLC, Research Division

Michael G. King - Rodman & Renshaw, LLC, Research Division

Howard Liang - Leerink Swann LLC, Research Division

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

Joshua Schimmer - Lazard Capital Markets LLC, Research Division

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Operator

Greetings, and welcome to the Pharmacyclics Fourth Quarter and Fiscal Year End 2012 Conference Call. [Operator Instructions] A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ramses Erdtmann, Vice President, Finance for Pharmacyclics. Thank you. Mr. Erdmann, you may begin.

Rainer M. Erdtmann

Yes. Thank you, Robin. Good afternoon, and thank you for joining us for our conference call today. With me on the call today and available to answer questions are our CEO and Chairman of the Board, Bob Duggan; our Chief Operating Officer, Dr. Maky Zanganeh; our Executive Vice President, Paula Boultbee; our Executive Vice President of Finance, Josh Brumm; Dr. Jesse McGreivy, our Vice President of Clinical Science; Dr. Maria Fardis, our Vice President of Alliance and Global Project Management; and our Vice President of Research, Dr. Joe Buggy.

Unfortunately, our Chief Medical Officer, Dr. Lori Kunkel, cannot join us today due to a family vacation, which she has unfortunately no phone access so Dr. Jesse McGreivy will jump in and will provide the clinical update.

Our agenda for today's call will focus on the accomplishments we have achieved organizationally, the team we have built up here at the company and accomplishments within our partnership with Janssen. We will summarize the clinical initiations and achievements, and we will also provide a clinical outlook of what to expect by year end.

Let me start with a summary of our financial results. Revenue for the fiscal year ended June 30, 2012, was $82 million compared to $8.2 million for the fiscal year ended June 30, 2011, an increase of $73.8 million.

The non-GAAP net income reported for the fiscal year ended June 30, 2012, was $21.9 million or $0.32 per basic and $0.30 per diluted share. This compares with the non-GAAP not less -- net loss of $28 million or $0.47 loss per share for the fiscal year ended June 30, 2011.

For the quarter ended June 30, 2012, the non-GAAP net loss was $15.1 million or $0.22 per share, which compares with a non-GAAP net loss of $9.1 million or $0.15 per share for 2011 -- for the 2011 quarter.

The GAAP net income for the fiscal year ended June 30, 2012, was $12 million or $0.17 per basic and diluted share. This compares with a GAAP net loss of $35.2 million or $0.59 per share for the year ended June 30, 2011. For the quarter ended June 30, 2012, the GAAP net loss was $16.9 million or $0.24 loss per share. This compares with a GAAP net loss of $11 million or $0.18 loss per share for the fiscal quarter ended June 30, 2011.

As of June 30, 2012, we had cash, cash equivalents and marketable securities of $203.6 million, which compares with $112.3 million at June 30, 2011. Additionally, the company had $5.8 million due from Janssen Biotech Inc. at June 30, 2012, in connection with its cost-sharing arrangement. And as announced in August, additionally, we accomplished the triggering of 2 milestone payments totaling $100 million.

Before we start, let me remind you that this non confidential presentation contains forward-looking statements about the business prospects of Pharmacyclics, including expectations regarding Pharmacyclics' financial performance, commercial product and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of Pharmacyclics' product program, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market and developments by competitors and those factors detailed in Pharmacyclics' filings with the SEC, such as 10-Q, K and 8-K reports.

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

Robert W. Duggan

Thank you, Ramses, and welcome to all on the call. Since partnering with Janssen in December last year, we have made good progress clinically and organizationally. We continue to broadly and quickly develop ibrutinib across a variety of B-cell malignancies. Importantly, we continue to attract and hire highly competent professionals with excellent track records in the disciplines of science and administration from within the health care field.

The team we have assembled to date will be capable of building out the organization to complete the development of ibrutinib and introducing the compound commercially. We now have highly capable scientists and administrators overseeing the key functional areas of our company.

I will summarize here our most recent hires and organizational changes. If you'd like to read up more on our executives, you can find their resumes on our website.

Let me start with Dr. Maky Zanganeh. We promoted her to Chief Operating Officer. Just a bit of a background on Maky. She was hired at Pharmacyclics as Vice President, Business Development in August 2008. Within the first 9 months, she established the collaboration with Les Laboratoires Servier, the leading French independent pharmaceutical company, which provided Pharmacyclics immediate, upfront, milestone and yearly R&D payments. Since December 2010, she served as the company's Chief of Staff and Vice President, Business Development.

In that role, she led the negotiations with our partner, Janssen, valued at up to $975 million. She also spearheaded the hiring of many of our key corporate executives and was responsible for expanding our employees from 50 to over 180 today.

During our last conference call, I introduced you to Paula Boultbee. We hired Paula as our Executive VP for Sales and Marketing. She is now taking control of our commercialization strategy. Paula has more than 20 years of experience on oncology commercialization, including extensive global and U.S.A. launch experience gained from large international brands, most notably, Gleevec. Paula is now building her team.

And one early hire is Jeff Kmetz, our Senior Director of Marketing. Jeff comes to us with over 30 years of pharmaceutical and biotech experience. He has sold, trained and marketed 3 CLL, NHL products, has over 10 years of marketing experience with orphan and rare hematologic drugs and biologics and has managed multiple line extensions. He has extensive U.S. and global launch experience within the CLL market. Jeff has successfully managed both U.S. and global teams and knows how to drive both growth and value for brands, franchises and organizations.

Heow Tan is serving as our Executive Vice President of Global Manufacturing, Technical Operations and Education. Heow has over 25 years of experience in the pharmaceutical industry and has a very solid track record of taking clinical size production to commercial scale. Heow has successfully led the filing of several U.S. NDAs, ANDAs and European MAAs. Heow has now assumed full responsibly for the manufacturing of ibrutinib to ensure we have sufficient product for our clinical trials and are compliant with all manufacturing-related regulations as we work on commercialization batches.

I would also like to introduce Joshua Brumm, our new Executive Vice President of Finance. Josh has previously been the Chief Financial Officer at ZELTIQ Aesthetics Inc. At ZELTIQ, he also gained valuable experience in building up a sales force, launching the company's first commercial product in all markets outside the United States and Canada. Josh will lead the finance team and all finance-related matters. He has important planning and forecasting capabilities to our team and has strong operational experience. Josh already has rolled up his sleeves and he is a great team member to have on board.

I'm also pleased to announce the addition of Dr. Scott Shearer, who has joined us overseeing all quality aspects of the company, serving as Vice President, Global Quality. Scott comes with 17 years of pharmaceutical industry experience. Most recently, Scott served as Senior Director of Quality at Teikoku Pharma USA, where we he oversaw all components of quality. Scott is also quite familiar with the J&J procedures and practices as he has held positions of increasing responsibility with various J&J pharmaceutical companies for the past -- for 8 years.

Another key member to the clinical team is Dr. Jesse McGreivy, he is our Vice President of Clinical Science. Jesse is a board-certified oncologist and has expertise in both solid tumors as well as malignant hematology. He worked as a clinical scientist at Hoffmann-La Roche and as a clinical Research Medical Director at Amgen, developing novel oncology therapeutics in Phase Ib through Phase III clinical trials. Jesse has been the clinical lead in biomarker development programs as well as in clinical pharmacology studies.

It is also my pleasure to introduce our newest executive team member, Dr. Urte Gayko. She recently joined Pharmacyclics as Vice President of Regulatory Affairs. Urte is a seasoned regulatory professional, developing novel biologics, small molecules and in vitro diagnostics for various oncology and hematology indications. She has experience working in small and large biotech companies developing regulatory and registration strategies and their implementation, including IND filing, mid-stage development, approval, label extension, post-market phase in the global setting, U.S., Canada, Europe and Asia.

Lastly, I would like to introduce Rick Love. He is our Vice President, Legal. Rick has over 19 years of experience working as in-house counsel in the biotech pharma industry. His specialty is patent law. Rick has most recently worked for the Ipsen Group as their Head of Patents in the U.S. He practiced in the areas of intellectual property and corporate law at Tercica and InterMune, and served for 8 years at Genentech as Patent Counsel. These are just a few of our most recent hires.

During the past 12 months, Pharmacyclics overall has grown tremendously. We now have more than 180 dedicated employees working here, and I'd like now to turn the call over to Dr. Maky Zanganeh. She can provide some background on the Janssen accomplishments and '13. Maky?

Mahkam Zanganeh

Yes. Thank you, Bob. The partnership with Janssen is progressing quite well, thanks to our retail alliance, Dr. Maria Fardis. Since signing the agreement in December 2011, both companies have established 19 working groups, each with a defined area of responsibility in the overall development plan for ibrutinib.

Guaranteed, there are over several hundred dedicated employees engaged in this working group, forwarding the clinical progress of ibrutinib and ensuring the execution of the global development plan for this compound.

This global development plan was set up in aggregate upon signing the agreement last December. Both companies are committed to its timely execution. The partnership also established a Joint Development and Joint Steering Committee to oversee and guide the working groups. As of today, we can see a total of 6 Phase II and III have been newly initiated. They are also continuing to follow all other ongoing trials and have initiated through CTEP, selected investigator-sponsored trials.

Overall, the relationship between the 2 companies has been productive and focused. Most recently, with the dosing of the fifth patient in our chronic lymphatic leukemia trial, the RESONATE Study and the mantle cell lymphoma trial, 2 milestone payments of $50 million each have been earned. Together with the upfront payment, we have now earned $250 million, and with continued clinical and regulatory progress may receive up to an additional $725 million in milestone payments, for total potential upfront and milestone payments of $975 million.

I would now turn the call over to Jesse. He will update you on our clinical progress and the partnership. Jesse?

Jesse Seton McGreivy

Thank you, Maky. As Ramses mentioned, I'm filling in here for Lori Kunkel today. I'm pleased to speak with you. Thank you all for your interest in ibrutinib program.

Pharmacyclics and Janssen initiated the following Phase II and III clinical trials since establishing the partnership. First Phase III trial, which has been initiated as part of the partnership is the RESONATE trial, or PCYC study 1112. This pivotal trial evaluates ibrutinib versus ofatumumab in patients with relapsed or refractory chronic lymphocytic leukemia, CLL, or small lymphocytic lymphoma, SLL.

The trial is a randomized open label Phase III registration trial of ibrutinib as a monotherapy. The primary endpoint of the study is to demonstrate clinically significant improvement in progression-free survival in relapsed or refractory CLL or SLL patients as compared to that achieved with ofatumumab therapy.

The key secondary endpoints include overall response rate, overall survival and other measures of clinical benefit. This global study is conducted by Pharmacyclics and currently open, and we plan to enroll 350 patients worldwide.

Our partner, Janssen, is initiating the Phase III Helios study, or CLL 3001. This is Phase III study of ibrutinib in combination with bendamustine/rituximab in patients with relapsed or refractory CLL or SLL. This is a randomized, multicenter Phase III, double-blinded, placebo-controlled registration trial of ibrutinib in combination with bendamustine and rituximab in relapsed or refractory CLL or SLL. Patients who have received at least one line in prior systemic therapy.

The primary endpoint of the study is to demonstrate a clinically significant improvement in progression-free survival versus bendamustine and rituximab therapy alone. The key secondary endpoints include overall response rate, overall survival, other measures and clinical benefit. This global study is not open yet, and Janssen plans to enroll 580 patients worldwide.

The third Phase III study, which is being initiated is the RAY trial or MCL3001. This is a Phase III study outside of the U.S. of ibrutinib versus temsirolimus in patients with relapsed or refractory mantle cell lymphoma who have received one prior line of therapy. This is a randomized, multicenter Phase III registration trial of ibrutinib in relapsed or refractory MCL patients who have received at least one prior rituximab-containing chemotherapy regimen.

The primary endpoint of the study is progression-free survival when compared to temsirolimus. The key secondary endpoints include overall response rate, overall survival and other measures of clinical benefit. This study is initiated by Janssen. It's not open yet. It will be conducted outside the U.S., and Janssen plans to enroll 280 patients.

Our partner, Janssen, has also initiated a Phase II study of ibrutinib in patients with mantle cell lymphoma who progressed after bortezomib therapy, the SPARK trial or MCL2001. This is a single-arm, multicenter Phase II trial of ibrutinib in relapsed/refractory MCL patients who have received at least one prior rituximab-containing chemotherapy regimen and who progressed after bortezomib therapy.

The primary endpoint of the study is overall response rate. The key secondary endpoints include duration of response, progression-free survival rate, other measures of clinical benefit. This global study conducted by Janssen is open, and Janssen plans to enroll 110 patients worldwide.

Also, a Phase II study dose escalation of ibrutinib in combination with R-CHOP in patients with newly diagnosed diffuse large B-cell lymphoma. The purpose of this study is to identify if and what dose of ibrutinib may be administered with R-CHOP and to conduct responses of these combinations in patients with newly diagnosed diffuse large B-cell lymphoma. This multicenter global study conducted by Janssen is open, and Janssen plans to enroll up to 42 patients.

Pharmacyclics is expanding enrollment in the Phase II study of ibrutinib in subjects with relapsed or refractory multiple myeloma. PCYC study 1111 is a Phase II, open-label nonrandomized designed trial to assess the safety and efficacy of ibrutinib in subjects with relapsed or refractory multiple myeloma. This multicenter study conducted by PCYC is open in the U.S., and we plan to enroll up to 35 subjects.

Let me now give you an overview of the clinical updates planned for the end of the 2012 year. PCYC-1104 is our Phase II study of single-agent ibrutinib in patients with relapsed or refractory mantle cell lymphoma, includes 2 cohorts of subjects either previously treated with bortezomib or naïve to bortezomib treatment.

PCYC-1102, our Phase Ib2 study of single-agent ibrutinib in patients with relapsed or refractory CLL or SLL.

PCYC-04753 is our Phase I study of single-agent ibrutinib in patients with recurring B-cell malignancies. The update will focus on cohorts with evaluable patients with follicular lymphoma.

PCYC-1106, our Phase II study of ibrutinib subjects with relapsed or refractory diffuse large B-cell lymphoma. Here, patients were enrolled with 2 genetically distinct subtypes. The activated B-cell, ABC subtype, or the germinal center, GC, subtype.

Lastly, PCYC-1111, our Phase II study of ibrutinib in subjects with relapsed/refractory myeloma. We'll have an update at the end of the year.

By midyear 2013, we believe that ongoing Phase II studies with ibrutinib in diffuse large B-cell lymphoma and multiple myeloma are expected to mature with continued enrollment over the next 12 months. We intend to provide in midyear 2013 meaningful update of the clinical development plans in non-Hodgkin's lymphoma and multiple myeloma.

Can we please open the floor to questions now.

Question-and-Answer Session

Operator

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

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

A question on frontline CLL. First question there is if you look at the data that's been presented, it's phenomenal overall response rate, particularly partial responses. But when you look at the CR numbers and then you look at that compared to chemo, is there something there that we're thinking about as to why those numbers may be lower versus chemo on CR rather than PR? And if you look at the IWC criteria, which is I think what you were looking at there, are there specific parameters that they didn't need to hit the CR? Or is that just an artifact of the definition on how you define it? Maybe you could help me understand that. And then in addition, in front line, how are you thinking about the first strategy there in terms of where you're going to be going after? Is that against chlorambucil? Are you thinking about going against FCR? How should we think about that?

Jesse Seton McGreivy

Thank you very much. Those are very good questions. To address the question in relation to the CR rate, overall, we're very encouraged by our monotherapy CR activity. There -- certainly, if you compare to other regimens, there may be differences comparing across trials. But as a single agent, ibrutinib is showing tremendous single-agent activity, both in the CR rates that are being achieved as well as the overall response rates and as you know, particularly in the afferent setting. In addition, the progression-free survival data is, which is a key clinical endpoint for overall benefit to patients, is tremendously robust. So across -- looking across the activity, we're very encouraged by that. So on the last update at ASCO, we have a meeting and follow-up of 14.4 months, 96% of patients are still progression free, which is really phenomenal. And it's just stopping the disease down in its track. So with regard to your other questions in relation to chlorambucil upfront therapy, we are very much interested in upfront clinical setting. We are initiating -- we're going to be initiating single-agent upfront trials in the elderly. Versus the competitor, I'm not going to comment on a particular competitor today. We'll be providing update on this later this year on the more specifics of that trial.

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

Okay. And then last question then on myeloma, when we get to ASH, I know you said you'd have an update there. Obviously, you submitted an abstract there so you know some data there. Is there enough follow-up by the time we get to ASH that we'll have response rates? Or it's really going to just be proteins, autocrine data, things like that?

Jesse Seton McGreivy

That's a very good question. If you look across all of our clinical trials for myeloma, it's the most immature data that we'll be submitting. And we have -- what I can say is we've completed enrollment in the first cohort of 13 patients. We're moving forward in myeloma, and we're expanding to look at myeloma in monotherapy and additional cohort, as well as in combination with dexamethasone in the 1111 study. But the specifics of the data that we'll be presenting, obviously, I can't get to that today.

Operator

Our next question comes from line of Brian Skorney with Brean Murray.

Brian Skorney - Brean Murray, Carret & Co., LLC, Research Division

Just a couple of quick ones. On the first one, I was just wondering if you could give us any update on the enrollment status of RESONATE? I know it's just about a month after you announced the fifth patient in, but I think previously you've said that it would take about 18 months to complete enrollment. I'm just wondering if -- what you're seeing in terms of new sites opening and new patients coming in? And then, kind of a little bit of a follow-up on Mike's question about what we can expect at ASH. I guess, the flip side is in terms of diffuse large B-cell lymphoma, what sort of data kind of makes the decision -- obviously, you've said middle of next year, you'll make more -- will be more of a decision point for follicular, DLBCL. But the data for DLBCL should be pretty mature at the point we're at ASH. What sort of response rates would give you comfort in terms of potentially moving forward with a larger study in 2013?

Robert W. Duggan

Brian, this is Bob, and I'll refer to Jesse on your question as well. But with regard to the RESONATE trial and enrollment, we still remain very comfortable with our 18-month target and as a practical matter, we'll not be updating unless there's a meaningful change in enrollment in between now and the conclusion of that period of time. Or Jesse, would you handle the DLBCL?

Jesse Seton McGreivy

Sure, yes. So the Phase II study, 1106 trial, has completed enrollment, and we're submitting that data to ASCO, as far as what would -- sorry to ASH. As far as what would be a meaningful response rate that would trigger, I think that really would depend on the durability of the responses. And you have to look at the overall clinical picture. You can't just pick a number and then say, "Well, that's meaningful or not." You have to look at the overall risk benefit profile and assess based on that overall equation.

Robert W. Duggan

Brian, we will be giving more color on that post ASH.

Operator

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

Alan Carr - Needham & Company, LLC, Research Division

I guess, if you could clarify on a couple of trials haven't opened yet, Helios and RAY, is that something that's, I mean, very imminent in terms of September? And then also, can you give us some guidance on fiscal -- spending for fiscal year, the upcoming fiscal year, in terms of spending and then also guidance in terms of milestones and that sort of thing?

Jesse Seton McGreivy

Yes. So with regard to the Helios and RAY trials, we're very excited about those studies and the syndication. For particular questions on the specifics of that, I would refer you to Janssen, and we would -- they'll address questions on those trials. And then someone else...

Robert W. Duggan

Ramses, on the fiscal year spending.

Rainer M. Erdtmann

For the coming year, one, that's an elaborate question because if you go into the K, there is a mechanism described in there that allows us to -- basically you see funds back or have changed a spend after a certain cap rate. It's defined on Page 17. And it basically is in a calendar year, if we exceed $50 million in direct expenses for our 40% share, J&J, it says here that amounts that are in excess of $50 million shall be borne by Janssen. So strictly, our expense for BTK is capped at $50 million. And then the company expense, we haven't given guidance on how far the company will expand, but you can look at our P&L and see the increase that we've had this year, the increase in employees and extrapolate from there.

Alan Carr - Needham & Company, LLC, Research Division

So have that trend, I guess, continued going forward?

Rainer M. Erdtmann

Exactly.

Alan Carr - Needham & Company, LLC, Research Division

Okay. And then last one, actually, I mean, can you give us -- do you have an update on strategy around patients with 17p mutation in terms of trials there?

Jesse Seton McGreivy

Yes. So we're very encouraged by our 17p data that we shared at ASCO. We're showing activity that is unprecedented, and it's very difficult to treat population simply as a single agent. We're investigating and looking at other -- potential pathways forward on this. Beyond that, we will provide additional update on this towards the end of this year.

Robert W. Duggan

And, Alan, you in inquired regarding milestones. Per our policy, as milestones are generated, we will report them on milestones. It's also -- I would encourage you to read the 10-K regarding the arrangement with Janssen. There's a little more color on it in that section. So I think it's an important piece for all analysts and stakeholders to understand. It's real -- a valuable piece of the document. We're pleased that we're able to negotiate it. But for further color, I refer you back to that document.

Operator

Our next question comes from line of Michael King with Rodman & Renshaw.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Just a couple of quick ones. With regard to data at ASH, can you give us an approximate update time, I would -- a follow-up, I'm sorry, months of follow-up in 1102? What will it -- I can't remember what it was at last year's ASH, I'm just wondering what we'd expect for it with ASH 2012?

Jesse Seton McGreivy

Yes, I think I don't want to comment on the specifics of that too much. It will obviously be a number of additional months. My understanding is the last update was 18 months of follow-up. And this will be a number of months beyond that, obviously.

Michael G. King - Rodman & Renshaw, LLC, Research Division

It was a little hard to hear. Did you say 18 months?

Jesse Seton McGreivy

So that was -- the last follow-up was 18 months follow-up. But the ASH abstract will obviously have -- you can do the math on top of that, it'll be -- we'll provide an update on the 1102 study for the key endpoints of progression-free survival and others.

Michael G. King - Rodman & Renshaw, LLC, Research Division

Okay. And then also, with respect to the myeloma study, according to clinicaltrials.gov, the trial is fully enrolled at 35 patients. So were your comments on that protocol meant to go to a higher number than 35?

Jesse Seton McGreivy

So that's a good question. I will have to go back and look at that. We've enrolled the first cohort of patients in the monotherapy setting at the initial dose. So we're expanding in other cohorts, and as I mentioned previously. So we have not enrolled 35 patients, we've enrolled 13 patients.

Michael G. King - Rodman & Renshaw, LLC, Research Division

13, okay. And then, a question that a lot of people have been asking me about lately, I don't know if you can comment, Bob or anybody, about the BTK inhibitor for autoimmune indications?

Robert W. Duggan

We continue to make inexorable progress. It still remains a speculative part of our portfolio. But we will -- as we get to a meaningful point, we are pre-IND. If we stop it or continue it, we'll let you know at that time. At this point, we are making progress.

Operator

Our next question comes from line of Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann LLC, Research Division

You mentioned the multiple myeloma trials has moved on to additional cohorts. Was there an efficacy threshold to move forward from the first cohort?

Jesse Seton McGreivy

So I guess, let me correct that, as I was understanding, what we have done is we are moving to additional cohorts. They have not been enrolled as of yet. We are -- we expect those to begin enrollment. The additional cohorts in multiple myeloma by end of this year. And there is an efficacy threshold in the protocol, and we have looked at that. The specifics of that data, I can't get into because that would -- that is not published as of yet.

Howard Liang - Leerink Swann LLC, Research Division

Okay. But you've passed -- I can assume that you've passed that threshold?

Jesse Seton McGreivy

We have passed the initial threshold for the current first cohort.

Howard Liang - Leerink Swann LLC, Research Division

Okay. And can you give us some or general thoughts on the follicular lymphoma opportunity? How interested are you? Is something that you would likely pursue into Phase II?

Jesse Seton McGreivy

Yes. So one of the updates we're going to be providing at ASH this year will be long-term follow-up data on the follicular patients from the 04753 first in human study. There are 16 patients with follicular lymphoma that have been followed for some time at this point. And we have a nice long-term data set on them. We're encouraged by what we see, and we are moving forward in follicular. And whether it's Phase II or Phase III, I'm not going to comment on that currently. But we are very much encouraged by the data we have and we're going to be moving forward in additional follicular trials.

Operator

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

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

A couple of quick questions. One, I'm not sure if you'll addressed it too now. But could you tell us whether there's been any update on your preclinical analysis of the targeting for ibrutinib and the degree of specificity or activity on targets other than BTK? I'm sure you're doing a lot of work with your partner on that. And secondly, just a question for Ramses on the credit facility that you have with J&J. Presumably, that's a loan, which will appear on your balance sheet to the extent you exercised that. I'd just like to know whether there are any other provisions or rights associated with that credit facility from J&J of any kind, whether it's convertibility or anything else?

Robert W. Duggan

Jeffrey, this is Bob Duggan, I'll handle the loan issue. That -- whether it's negotiated, the cap of $50 million align of up to, including potential interest payments, to $225 million. The interest would be LIBOR plus 2% or 5% maximum cap. And the repayment is when as and if we can generate profits. That's the sole responsibility in terms of payment. So that gives you the full picture that no convertibility -- there's no payback unless and until as and if we generate profits. It also requires us to be profitable for 3 quarters prior to initiating any repayment, and the repayment will be not due at profitability, but due from profits beyond those first 3 quarters of profit.

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

Okay, that's very helpful. And then on the targeting for ibrutinib?

Robert W. Duggan

I'll turn it over to Dr. Joe Buggy.

Joseph J. Buggy

Yes. This is Joe Buggy. The addition of BTK is an important -- we know the addition of BTK is an important component of the mechanism of action of ibrutinib, whether or not other kinases are involved, remains an active area of research. And I don't have any comment on it right now.

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

Joe, is that something you might present at -- there might be something on that at ASH or any other meeting that we should anticipate?

Joseph J. Buggy

It will not be presented at ASH. It may be presented in the future.

Operator

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

Joshua Schimmer - Lazard Capital Markets LLC, Research Division

Just a quick one. Of the Phase III studies that have begun or yet to begin for ibrutinib, which do you expect will be the first to support a filing?

Robert W. Duggan

We don't respond to that, it's an important question. It's a horserace, I'll tell you that, but we don't speculate on which one will roll in first.

Operator

Our next question comes from line of Brian Lian with SunTrust.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

I guess, similar to the prior question. Can you just tell us how you're thinking about the time lines for SPARK versus RESONATE? I mean, assuming both move along according to plan, which one do you think could move more quickly toward the final analysis?

Robert W. Duggan

That's very similar to Josh's question. Our answer is exactly the same. It's a horserace, we don't speculate on the winner.

Brian Lian - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And a question for Joe. What solid tumor indications could be candidates for ibrutinib?

Joseph J. Buggy

Could be? I mean, there's -- that's another active area of research, and we are looking into that in the research group. But I don't have anything that is definitive or I'm going to talk about now.

Operator

[Operator Instructions] Our next question is a follow-up question from the line of Michael King with Rodman & Renshaw.

Michael G. King - Rodman & Renshaw, LLC, Research Division

I was wondering if we might get a little color on some of the underlying assumptions in RESONATE? I don't know how much detail you would be willing to share with us in terms of powering assumptions or performance of the bendamustine/rituximab arm in terms of PFS in this setting.

Jesse Seton McGreivy

Yes. I mean, that's -- it's obviously a good question. It's one we asked ourselves internally. What I can discuss is what you can expect from ofatumumab, it's in a range of 6 to 8 months in the control arm. What we would do in the treatment arm, our median in PFS has not been breached by any of the published data, either in the relapsed, refractory and obviously, in the front-line setting. So we -- it's even a speculation on our side to comment on what our median would be. So we expect -- you can model the effect over time at those sort of assumptions.

Operator

Our next question is a follow-up question from the line of Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann LLC, Research Division

On your R-CHOP combination study in diffuse large B-cell lymphoma, is that an ABC only or all comers study?

Jesse Seton McGreivy

That's a very good question. That trial is being run by our Janssen partners. It is in all comers study, it's not just on ABC subtype. It is a safety trial with the primary goal to establish safety doses for the combination. I think that addresses the question.

Howard Liang - Leerink Swann LLC, Research Division

Is there a reason not -- I thought the biology is that this BTK is active or most active in ABC only? What's the rationale in doing all comers?

Jesse Seton McGreivy

So looking at the for example, the published data in diffuse large B-cell from [indiscernible] to ACR, there were responders outside of the ABC subtype. So I don't know that based on the public literature, it's 100% clear that there's only activity in ABC subtype. So given that it is a safety study and those patients have limited treatment options, the combinations are certainly reasonable to explore across multiple subtypes.

Operator

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

Robert W. Duggan

Thank you, operator. With each passing month and quarter, we're becoming a stronger team, pushing ibrutinib into multiple Phase III trials with speed, yet under control and disciplined.

For the next 12 months, our development plan will broadly unfold, allowing us to fully explore the potential of ibrutinib in B-cell malignancies. While this noteworthy progress is being generated through the intelligent efforts of hundreds of people, my #1 obligation to our stakeholders is to establish a culture that endures through time.

As a group, we postulate, flourishing beyond ibrutinib commercialization and ibrutinib patent expiry, thus, well into the future.

Therefore, it is essential that as a group, we continue to focus our attention on making a significant difference for the betterment of oncology patients in need of effective and highly tolerable medicine. We are grateful for the opportunity, and we look forward to the challenge.

These are value-creating times at Pharmacyclics, and we are also very encouraged about our progress, and we look forward to updating you on our clinical advancement in December this upcoming ASH. Thank you very much for your time.

Operator

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

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