Although Infinity Pharmaceuticals’ (INFI) post-ASCO selloff, which we discussed on Monday, was perhaps the most prominent ASCO demolition, it wasn’t the only unwarranted decline. Shares of segment-leading Pharmacyclics (PCYC) have also fallen in the wake of the company’s ASCO presentations, from nearly $92 to $83. Shares have since rebounded to almost $88, but we’re expecting PCYC to continue meaningfully higher this year, as the company’s ASCO presentations reiterated Ibrutinib’s leading position in hematology. Ahead of two additional presentations this month regarding Ibrutinib, we believe that shares of Pharmacyclics are a buy as the company heads into an important 2nd half
ASCO Wrap-up: Strengthening Confidence in Ibrutinib
Pharmacyclics’ ASCO presentations contained little in the way of groundbreaking new data, other than results regarding pre-clinical synergistic efficacy (more on this later). But they still served an important purpose, namely the reiteration of Ibrutinib’s leading position across multiple indications. Within B-cell non-Hodgkin’s lymphoma, Pharmacyclics once again reported a 100% response rate (67% complete response, 33% partial response) within a trial of 15 patients in combination with R-CHOP therapy (the current standard of care for the treatment of non-Hodgkin’s lymphoma, consisting of rituximab, cyclophosphamide, hydroxydanorubicin, oncovin, and prednisone). The study evaluated Ibrutinib in combination with R-CHOP therapy at a daily dose of 560 mg. Ibrutinib’s safety profile within this trial was acceptable, with nausea (present in 60% of patients) and neutropenia (present in 46.7%) of patients being the most common side effects. Within Ibrutinib’s CLL Phase III trials, updated resistance data once again confirmed that resistance to Ibrutinib is rare, and even when it is present, is clearly understood. Out of 246 patients in Pharmacyclics’ Phase III CLL trial, just 5 patients (2.03%) experienced resistance to Ibrutinib. 4 of those patients had the C481S BTK mutation, which inhibits Ibrutinib binding capability, while the 5th patient had an R665 PLC2 mutation, inhibiting BTK’s downstream target. Ibrutinib’s low resistance rate in CLL is one aspect of the compound’s market leading position, and as a reminder, Ibrutinib has secured breakthrough therapy designation for the treatment of CLL patients with deletion 17p [one of three breakthrough designations received to date; the other two are for mantle cell lymphoma (MCL) and Watson’s macroglobulinemia (WM)].
Pharmacyclics also provided a glimpse into its longer-term corporate development strategies. The company presented early preclinical data related to Ibrutinib’s synergistic properties with a myriad of other oncology therapies, including PI3K inhibitors and chemotherapy regimens. As Ibrutinib moves further along the clinical development process within its existing indications, we expect focus to shift towards earlier stage indications. In addition, Pharmacyclics’ management team noted that an interest in expanding into other rare indications beyond WM (which Pharmacyclics’ notes has just 6,000 cases in the company’s 7 largest target markets, the United States, “Big 5” E.U. countries, and Japan) and MCL (just 5,400 cases in these target markets). Management suggested that new targets might include marginal B-cell lymphoma and mucosa-associated tissue lymphoma (MALT).
Moving Ibrutinib & Pharmacyclics to the Next Level
The 2nd half of 2013 will feature a number of value driving events for Pharmacyclics. The first two occur this month, with new updates regarding Ibrutinib at two oncology conferences: the annual meeting of the European Hematology Association (EHA), from June 13-16, and the meeting of the International Conference on Malignant Lymphoma (ICML) from June 19 to 22. At EHA, the company will present interim Phase II data regarding Ibrutinib in diffuse large B-cell lymphoma (DLCBL), and Pharmacyclics has specifically noted that new Phase II data regarding Ibrutinib in treating WM will be presented at ICML (this Phase II trial is a 30-patient study of relapsed/refractory WM patients receiving 560 mg doses of Ibrutinib).
In the 2nd half of the year, Pharmacyclics will present initial data from the company’s SPARK trial, a 110-patient Phase II trial of Ibrutinib as a monotherapy in treating relapsed/refractory CLL patients, with overall response rate serving as the primary endpoint (secondary endpoints include progression-free survival and overall survival). Pharmacyclics has also laid out a goal of submitting its NDA for Ibrutinib in MCL before the end of Q3 2013. Depending on the timing of the filing, Ibrutinib may receive its first FDA approval before the end of Q1 2014. In December, focus is likely to shift slightly to the company’s Phase II programs, particularly at ASH 2013, where Pharmacyclics will discuss both its iNHL program as well as its multiple myeloma (MM) program (which will also receive a separate and more in-depth review and update before the end of the year). And in 1H2014, Pharmacyclics will likely release data from its Phase III RESONATE trial of Ibrutinib in CLL (the trial began in mid-2012 and is set to continue for 12-18 months, putting its completion around in Q1 2014). This 350 patient trial is a head-to-head trial of Ibrutinib versus GlaxoSmithKline’s (GSK) Arzerra (ofatumumab), with progression-free survival serving as the primary endpoint. Secondary endpoints include overall survival and symptom improvement.
With a catalyst-rich second half of the year, as well as a busy early 2014, we believe that investors should maintain exposure to Pharmacyclics. Pharmacyclics’ options chain contains some favorable pricing at the moment. Pharmacyclics’ January 2015 LEAPS offer exposure to all of the above mentioned catalysts, as well as continued exposure through the remainder of 2014, encompassing the company’s transition into a commercial-stage company. Pharmacyclics’ January 2015 $35 call is currently priced at $58 per contract, giving investors an entry point of $93. While that may be well above the company’s $88.13 closing price on June 12, it can be paired with the $135 call, which can be sold for $10.80 per contract. This creates a fig leaf position with an entry point of $82.20, providing investors with a cushion of nearly 7% relative to the company’s closing price as of June 12, and upside to $135, or 64.23%.
You can read PropThink’s previous coverage of Pharmacyclics by clicking here.