Please ensure Javascript is enabled for purposes of website accessibility

Can Pharmacyclics, Inc.'s Imbruvica Stay Ahead of Gilead Sciences, Inc.'s Idelalisib?

By Cory Renauer – Feb 27, 2014 at 6:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Competition from both Gilead and AbbVie could mean trouble for Pharmacyclics.

Things are looking pretty good lately for Pharmacyclics (NASDAQ: PCYC). Its Imbruvica partnership, with Johnson & Johnson (JNJ 1.08%) subsidiary Janssen, is racking up approvals. Analysts are predicting some impressive sales, and the market has noticed. The company's stock price has risen over 40% this year, while the broad market remained somewhat flat.

But, there's trouble on the horizon. Both Gilead Sciences (GILD 2.41%), and Abbott Labs' pharmaceutical spin off, AbbVie (ABBV 1.88%) are positioned to compete in the near future. Let's take a look at all three therapies, and see just how concerned Pharmacyclics investors should be.

Gaining steam
Pharmacyclics' agreement with Johnson & Johnson's subsidiary Janssen over the development and commercialization of Imbruvica triggered some substantial milestones recently. During the fourth quarter of 2013, Pharmacyclics recorded $123.6 million in revenue. Milestone payments from Janssen totaled $110.0 million for the quarter.

Royalties this year should quickly outpace the $13.6 million recorded during fourth quarter 2013. Pharmacyclics is entitled to 50% of Imbruvica's net sales. Imbruvica was approved about halfway through November last year, for the relatively uncommon indication of mantle cell lymphoma (MCL). On February 12, 2014, the FDA approved Imbruvica as a second line therapy for the far more common indication, chronic lymphocytic leukemia (CLL).

Destination blockbuster
In order to reach blockbuster status, or $1 billion in annual sales, Imbruvica might need another label expansion. MCL comprises about 5% of all non-Hodgkin's lymphomas, or roughly 3,500 new patients diagnosed annually in the US. The label expansion to CLL increased the drug's market more than fourfold with about 16,000 new cases per year.

At about $90 per pill, CLL treatment with Imbruvica is expected to run about $98,400 per year. MCL should cost a bit more, about $130,000 because it requires more pills. At these prices, Imbruvica would need to serve about 1,700 MCL and 8,000 CLL patients annually to achieve blockbuster status.

High expectations
The reason I'm so hung up on Imbruvica's chances of becoming a blockbuster is because the market has already priced it into Pharmacyclics' share price, and then some. Adding $500 million directly to the company's bottom line, on top of the $67 million it recorded in 2013 gives you a recent price-to-earnings ratio of around 20.

Imbruvica is approved as a single agent oral therapy, so patients unable to undergo chemotherapy will likely use it in the months ahead. Also, the number of existing patients that did not respond to previously available therapies should be large enough to support $1 billion annually in sales, for the near term. Going forward, the drug needs to expand into other markets and indications.

Trouble ahead
Unfortunately for Pharmacyclics, it isn't alone in this field. Gilead Sciences' idelalisib could begin putting pressure on Imbruvica before the end of the year. Like Pharmacyclics' therapy, Gilead's idelalisib inhibits the proliferation of B-cells, but through a different mechanism. It's currently under review for treatment of both refractory indolent non-Hodgkin's lymphoma (iNHL), and CLL. The FDA accepted the applications in September and December of last year, respectively. Idelalisib also won a breakthrough designation for CLL, which means it may compete with Imbruvica sooner rather than later.

So far, the chances of that approval look pretty good. Like Imbruvica, Gilead's therapy also resulted in the early halt of a late stage trial. Last October, an independent data monitoring committee recommended stopping a phase 3 study evaluating idelalisib in refractory CLL patients. Interim data showed that progression free survival was significantly higher for patients receiving idelalisib.

A third CLL treatment
While I think the prospect of idelalisib entering the market is enough reason to be concerned about Pharmacyclics' ability to maintain its valuation, AbbVie might have a candidate that could split the CLL market even further. This January the company began a phase 3 CLL study with next-generation Bcl-2 inhibitor ABT-199. Results from the trial should be ready early next year.

Too effective?
AbbVie's therapy might be too effective at destroying cancerous cells. During phase 2 trials, the death of a patient receiving ABT-199 due to tumor lysis syndrome (TLS) resulted in a temporary voluntary suspension of trials.

The condition, TLS, that resulted in a patient's death is not uncommon in some types of blood cancer treatments, and can even occur without treatment. The condition, associated with the breakdown of too many cells, results in a sudden elevation of calcium, uric acid, and various cellular components in the blood stream that can overload the kidneys and liver.

While any death in a clinical trial is taken very seriously, TLS should be preventable. If anything, this suggests the drug is highly effective. At the time of writing, the trials are back online, and I expect them to continue through completion.

Final Thoughts
Blood cancers in general are highly heterogeneous conditions, CLL included. I wouldn't be surprised if both of Imbruvica's competitors eventually win approval for the indication. And I wouldn't be surprised if a majority of patients are eventually treated with more than one of the above therapies, as they operate with different mechanisms. While I wouldn't be a buyer of Pharmacyclics at this price, I wouldn't let go in fear of competition either.

Cory Renauer owns shares of Abbott Laboratories. The Motley Fool recommends Gilead Sciences and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$178.00 (1.08%) $1.91
Gilead Sciences Stock Quote
Gilead Sciences
$87.83 (2.41%) $2.07
AbbVie Stock Quote
$161.18 (1.88%) $2.98

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.