February 10, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of drug developer Pharmacyclics (Nasdaq: PCYC ) are soaring 15% after the company blew Wall Street's second-quarter estimates.
So what: In December, Pharmacyclics entered into a collaborative deal with Jaansen Pharmaceuticals, a subsidiary of Johnson & Johnson, which resulted in an upfront payment of $150 million and potential royalties of up to $1 billion. This payment resulted in Pharmacyclics recording $77.9 million in revenue and a profit of $0.82, excluding one-time items. Now compare this to Wall Street's expectations for just $2.9 million in revenue and a loss of $0.19, and you'll understand why the company is surging so much today.
Now what: Up until now, I have been brutally wrong with my underperform call on Pharmacyclics. The company has set up some very lucrative partnerships and has ample cash to conduct the 11 clinical trials currently under way. Still, with no trials past phase 2, I can't help but be skeptical of Pharmacyclics' $1.6 billion valuation. Until Pharmacyclics has an approved drug, there's simply no value left in the stock price.
Craving more input? Start by adding Pharmacyclics to your free and personalized watchlist so you can keep up on the latest news with the company.
More Expert Advice from The Motley Fool
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013
." I invite you to take a copy, free for a limited time. Just click here
to access the report and find out the name of this under-the-radar company.