Take a bow, Johnson & Johnson (NYSE:JNJ).
It certainly appears the company knew what it was doing last week when it made a deal for a Pharmacyclics‘ (NASDAQ:PCYC) experimental cancer drug. The compound – the first of its type in a class known as oral Btk inhibitors – received high praise at the recent American Society of Hematology, or ASH, meeting in San Diego.
“In the 15 years I’ve been practicing as a CLL-specific specialist, this is by far the most phenomenally active drug for refractory CLL patients in terms of response and durability and tolerability,” said John C. Byrd, MD, director of the hematologic malignancies program at the Ohio State University Comprehensive Cancer Center and a co-author of a study of the compound. He emphasized that 86% of the patients receiving the drug were progression-free at one year. Byrd added that it appears patients can stay on therapy for an extended period of time without adverse events.
CLL is a type of cancer of the blood and bone marrow – the spongy tissue inside bones where blood cells are made, according to the Mayo Clinic. It typically progresses more slowly than other types of leukemia. The term “lymphocytic” comes from the cells affected by the disease – a group of white blood cells called lymphocytes, which help the body fight infection. According to the National Cancer Institute, about 15,000 people will be diagnosed with the disease this year and more than 4,000 will die from it.
Sunnyvale, Calif.-based Pharmacyclics is receiving $150 million up front from J&J and stands to earn $850 million more in milestone payments. Founded in 1991, Pharmacyclics certainly can use the cash. The company doesn’t have any products on the market, and the FDA gave a thumbs-down to its injectable cancer drug xcytrin four years ago.
Little wonder, then, that Pharmacyclics CEO Robert Duggan called the subject of the deal with J&J a “gift from God” during a conference call, according to Seeking Alpha. Duggan added that the timing and value of the milestones means the company might even be able to maintain a cash balance above $100 million throughout the program without diluting shareholders. The company’s bank statement at the end of September showed a balance of $108 million in cash.
Initially cool to the deal, Pharmacyclic investors have warmed to it during the past week, bidding the company’s shares up to $14.26 at Thursday’s close. The stock closed at $12.39 the day after the agreement was announced.
Pharmacyclics now is testing the compound, known as PCI-32765, in non-Hodgkin’s lymphoma, CLL and multiple myeloma, according to Bloomberg. The company is responsible for 40% of the drug’s development cost, with J&J covering the rest. The firms will split worldwide profits on sales from the drug 50-50.
Two private companies, Avila Therapeutics and Pharmascience of Canada, have drugs in the same class in early testing. More good news about PCI-32765 could spur other members of Big Pharma to try to strike deals with these firms.
As of this writing, Barry cohen was long JNJ.