Pharmacyclics, Inc.’s (PCYC) fourth quarter 2013 earnings (including stock-based compensation expenses) of 82 cents per share beat the Zacks Consensus Estimate of 77 cents per share. Moreover, earnings in the final quarter of 2013 were 46% above the year-ago figure. The year-over-year increase in earnings was primarily due to higher revenues. We expect investors to react favorably to the strong earnings report.
Total revenue in the fourth quarter of 2013 jumped 113% to $123.6 million and was well above the Zacks Consensus Estimate of $84 million. The massive year-over-year increase was primarily attributable to a 90% jump in collaboration and license agreement revenue to $110 million. Revenues in the final quarter of 2013 were also boosted by the Nov 2013 approval of Imbruvica (ibrutinib) by the U.S. Food Drug Administration (FDA). The oncology drug recorded sales of $13.6 million in the final quarter of 2013.
Full year 2013 revenues increased 58% to $260.2 million, topping the Zacks Consensus Estimate of $218 million. Full year 2013 earnings declined to 87 cents per share from $1.19 a year ago. The Zacks Consensus Estimate was 81 cents per share.
The Fourth Quarter in Details
The final quarter of 2013 was a significant one for Pharmacyclics as the company recorded product sales for the first time in this quarter following the FDA approval of Imbruvica. The U.S. regulatory body cleared the drug as a monotherapy for treating patients suffering from mantle cell lymphoma (MCL). The patients were treated at least once previously for the disease. Following the U.S. approval of Imbruvica for MCL, Pharmacyclics had earned $60 million in the form of milestone payment from partner Janssen (a Johnson & Johnson (JNJ) company).
During the quarter, Pharmacyclics earned a further $50 million from Janssen (bringing the total milestone payment earned by Pharmacyclics to $110 million in the final quarter of 2013) following the confirmation of the validity of the marketing application on Imbruvica by the European Medicines Agency.
Pharmacyclics’ net operating expenses (including research and development and selling, general and administrative costs) for the fourth quarter of 2013 climbed to $34.6 million from $16.7 million a year ago.
Imbruvica’s Bright Future
Imbruvica is expected drive long-term growth at Pharmacyclics. The drug received approval for its second indication when the FDA approved the drug as a monotherapy for patients suffering from chronic lymphocytic leukemia (CLL) with a history of receiving at least one prior therapy earlier in the month. The label expansion in the CLL indication has triggered a $60 million milestone payment to Pharmacyclics from Johnson & Johnson. The payment is expected to be received by Mar 31, 2014. The approval for the CLL indication, which is more lucrative than the first approved indication – MCL – will boost Pharmacyclics’ top line significantly.
Pharmacyclics is evaluating Imbruvica for other oncology indications. Approval of Imbruvica for additional indications would increase the drug’s sales potential. Other interesting pipeline candidates at Pharmacyclics include PCI-27483 (pancreatic cancer) and abexinostat (refractory solid tumors and lymphoma). Successful development and subsequent commercialization of these candidates would not only boost Pharmacyclics’ top line but also reduce its dependence on a single drug for growth.
Pharmacyclics currently carries a Zacks Rank #3 (Hold). Better-ranked stocks include Alexion Pharmaceuticals, Inc. (ALXN) and Emergent BioSolutions, Inc. (EBS). Both stocks carry a Zacks Rank #1 (Strong Buy).
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