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 Pharmacyclics (NASDAQ: PCYC), a clinical-stage biopharmaceutical company researching therapies for cancer and immune-related treatments, soared 14% after the company and its licensing partner Johnson & Johnson (JNJ 0.44%) announced that they had filed a new drug application for ibrutinib.
So what: Ibrutinib, which is targeted as a treatment for mantle cell lymphoma and chronic lymphocytic leukemia, received the new but rare breakthrough therapy designation from the Food and Drug Administration in April. Today's filing by Pharmacyclics and J&J is seeking an expedited review process, which would shorten a decision on their compound from 10 months to just six -- and given its breakthrough designation, I don't see that being much of a problem. Ibrutinib was particularly effective in treating mantle cell lymphoma, delivering a complete or partial response in 71% of treatment-naive patients in trials.
Now what: This is a big step for Pharmacyclics, as an approval could trigger a cascade of milestone payments from J&J that will sustain its research for years to come. In addition, it could go a long way to helping validate what I currently see as a ludicrous $7.3 billion market valuation for a wholly clinical company. Ibrutinib peak sales estimates do range as high as $5 billion, so ultimately Pharmacyclics' valuation may actually prove to be cheap. Then again, there's a lot riding on ibrutinib -- and everything from the FDA panel's thoughts, to the FDA's decision, all the way to marketing (assuming it gets approved) would have to go picture perfect if it hopes to maintain this valuation. As of now, I'm a perfectly happy sideline observer.
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