1 Biotech Refusing to Stick Its Neck Out

Pharmacyclics (NASDAQ: PCYC  ) confused the market earlier this month with some shockingly conservative Imbruvica guidance. Sales of the breakthrough leukemia therapy have rocketed upwards since its launch late last year, so the suggestion that it will level off soon is a big concern. Let's take a closer look at the company's statement, Imbruvica's growth opportunities, and potential threats. This way you can decide for yourself if the conservatism is justified or overly cautious. 

The declaration
Sales of Imbruvica began the year slowly with approval for the relatively rare indication to treat mantle cell lymphoma. The FDA then granted approval for chronic lymphocytic leukemia, or CLL in mid-February. With just six weeks of access to the larger CLL population, total Imbruvica sales reached $56.2 million. Based on these figures, Pharmacyclics estimated next quarter sales of about $80 million, which seems like some reasonable sequential growth.

It was the full-year estimate that caused a panic. At just $295 million, it implies flat growth from the second quarter through the end of the year.

Reason to expect an upwards revision
Imbruvica's expansion to CLL was based on overall response rates from a mid-stage trial with just 48 patients. The FDA was willing to grant the approval in February, but required a longer trial to evaluate survival benefit.

The trial intended to provide the required survival data reached its endpoint early. In head-to-head comparison with GlaxoSmithKline's (NYSE: GSK  ) Arzerra, Imbruvica patients showed significantly better progression-free and overall survival.

Year-to-year first quarter sales of Arzerra fell about 25%, and I expect there's more to come. Results from the trial will be discussed in further detail at the annual meeting of the American Society of Clinical Oncology, which begins at the end of this month. Depending on how well the presentations are received, even more clinical oncologists may be willing to treat their patients with this therapy.

Beyond the U.S. borders, there's also a chance that sales from the EU might boost Imbruvica sales before the end of the year. Pharmacyclics' partner Johnson & Johnson (NYSE: JNJ  ) submitted a marketing application to the European Medicines Agency last October. Assuming approval by the EMA, the companies will still have to negotiate reimbursement rates in each European country -- which can slow things down. Still, I wouldn't entirely rule out the possibility of recording some sales from the EU before the end of the year.

Competition ahead
Imbruvica is having an incredible run, but it's not the only exciting new oral leukemia therapy. Late-stage development of Gilead's (NASDAQ: GILD  ) idelalisib has several parallels with Imbruvica. The PI3K inhibitor exploits a different mechanism, but like Imbruvica it received a Breakthrough Therapy designation for CLL.

During a late-stage trial, patients receiving idelalisib in combination with rituximab showed significant improvement in progression free survival over patients receiving rituximab alone. Like Imbruvica's outcome trial, idelalisib's also finished early. Gilead submitted applications for the treatment of CLL last December, and non-Hodgkin's lymphoma this January.

Final thoughts
Given the size of the CLL patient population, I really don't think that a fast idelalisib approval could pose a serious threat to Imbruvica in 2014. Further ahead it might be a critical factor, but it's certainly not this year.

Add ABT-199 from partners AbbVie and Roche and IPI-145 from Infinity Pharmaceuticals to the picture, and the competitive landscape becomes a little more complicated. As the market gets more crowded, Imbruvica could feel some pressure. That hypothetical is years away, so upward revisions from Pharmacyclics for the rest of 2014 seem likely.

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