Is Gilead About to Crush Pharmacyclics Stock?

Pharmacyclics' (NASDAQ: PCYC  ) and Johnson & Johnson's (NYSE: JNJ  ) Imbruvica may be one loser following the FDA's approval of Gilead's (NASDAQ: GILD  ) Zydelig, or so the story went.

However, before investors begin abandoning Pharmacyclics shares thinking that Zydelig will regulate Imbruvica to the back-burner in chronic lymphocytic leukemia, or CLL, they should recognize that Imbruvica may do very well on its own despite the threat.

Source: Pharmacyclics

Treating blood cancer
CLL is a white blood cancer that starts in the bone marrow and can spread over time to other parts of the body. There are two forms of CLL, one which develops slowly and one that develops quickly.

Overall, there are about 15,700 new cases of CLL diagnosed annually in the U.S. and roughly 4,600 people die from the disease every year.

The prevalence of CLL is likely to grow over the coming years given that 10,000 baby boomers turn 65 every day and the average age of diagnosis for CLL is age 72.

Source: Pharmacyclics

Imbruvica gets the nod
Hopes have run high for Imbruvica following its approval in mantle cell leukemia last November. The FDA followed up with an approval in CLL in February following a mid stage study showing that half of treated CLL patients saw their tumors shrink.

The recent approvals, combined with potential future label expansions, have market watchers projecting that Imbruvica's peak sales could total more than $6 billion.

Imbruvica will need to differentiate itself against long standing CLL treatments including Roche's Rituxan, Gazyva, a CLL drug that notched the FDA's green-light last November, and Zydelig to hit those lofty targets.

Zydelig wins over regulators
Gilead's Zydelig notched FDA approval this week after demonstrating in phase 3 studies that patients receiving Zydelig alongside Rituxan enjoyed far better progression free survival than those receiving Rituxan alone.

In a study of 220 CLL patients, patients receiving Zydelig and Rituxan didn't see their disease progress for 10.7 months, while those in the control group saw their disease progress after just 5.5 months.

That's an imperssive showing, but before investors extrapolate that to mean it will displace Imbruvica they need to keep a few things in mind.

Black box warning and stiffer pricing
While Imbruvica doesn't carry a black box warning, Zydelig does. The warning includes risk of severe liver toxicity, diarrhea, and lung inflammation, among other risks. The drug is also being approved with a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that doctors and patients fully understand the drug's risk.

Additionally, while Gilead will charge roughly $7,200 monthly for Zydelig, which is lower than Imbruvica's $8,200, the total cost of using Zydelig alongside Rituxan (which is how Zydelig is approved) brings the treatment cost to around $12,000, or nearly $4,000 more than Imbruvica.

Expanding label
Imbruvica is approved as a second line treatment for CLL patients whose disease has progressed, but it could see the FDA expand its use both to previously untreated patients and in combination with other therapies.

In April, Pharmacyclics filed a supplemental new drug application showing that Imbruvica outperformed GlaxoSmithKline's Arzerra in patients that had previously had at least one other prior treatment.That trial was halted early after interim analysis determined that Imbruvica patients had significantly better progression free survival and overall survival than Arzerra patients.

In another trial, Imbruvica demonstrated significant benefit in pre-treated patients when use alongside Arzerra. In three groups treated with various combinations of Imbruvica and Arzerra, progression free survival after a year was 89%, 85%, and 75%, respectively. Those studies could clear the way for Imbruvica being used both before and in combination with Arzerra, which had $20 million in sales during the second quarter.

But those aren't the only trials under way for Imbruvica. Pharmacyclics and Johnson are also studying Imbruvica as an adjunct to Rituxan too. A phase 3 study comparing the combination versus Rituxan alone in previously untreated patients got under way in December and if that trial goes well it could conceivably trump Zydelig's advantage as an adjunctive to Rituxan someday.

Fool-worthy final thoughts
When it comes to cancer drugs, investors need to take their time before coming to conclusions. Cancer is notoriously tough to treat and patients who relapse often migrate from therapy to therapy. Given that backdrop, until Imbruvica shows that it can't improve disease progression, investors should be hesitant to exit shares. 

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