Pharmacyclics is an emerging, small molecule pharmaceutical company located in the environs of Silicon Valley in California. The company had been public for almost fifteen years and has enjoyed both good and bad times. It’s currently recovering from a failed attempt to have a potentially potent anti-cancer drug approved by the FDA.

Pharmacyclics has been around for many years.  It’s had a difficult time with its lead drug, Motexafin gadolinium (MGd) which it tried to get approved by the FDA: no dice.  The drug itself has a novel and interesting mode of action against cancer cells—specifically brain cancer.  MGd differentially accumulates in the cells and enhances the effects of ionizing radiation on the cells causing apoptosis or cell death.  Clinical trial showed an extension of life of many months for patients suffering from this fatal disease.  The drug is back in the clinic undergoing two Phase II trials sponsored by the NCI (National Cancer Institute).
 
Pharmacyclics filed an NDA for Motexafin gadolinium, trade name Xcytrin, on December 22, 06 for the treatment of non-small cell lung cancer patients with brain metastases.  If you’re a chemist by trading, check out Motexafin gadolinium on Wikipedia and imagine the synthetic route to that beast.  The company received a refusal-to-file letter (see glossary) on February 21, 2007.  The FDA refused to file citing failure to demonstrate statistically significant differences between treatment arms in the primary endpoint of the pivotal study to support approval.  The company refiled on April 23 using a mechanism called “over protest,” which means that it disagreed with the initial screening and requested that the entire NDA be judged on its merits—a very risky approach!  In the meantime, the company continued to announce other successful phase 2 trials for Xcytrin.
 
On December 21, 2007, a year after it filed the NDA, Pharmacyclics received its non-approvable letter from the FDA.  What was interesting if you follow these things is that the stock didn’t drop dramatically when Pharmacyclics tried to essentially overrule the FDA the first time, it cratered after December 21.  April 23 was a good time to be purchase PUTs or sell short—a very good time.
 
On September 11, 2008, good news: there was a major shakeup on the board and the CEO resigned.  The CEO had been engaged in public criticism of the FDA; it was time for him to go.  The stock hovered around $1.
 
Under normal circumstances with its lead drug in critical care and running short of cash, the company would fold; however, Pharmacyclics in-licensed some novel, small molecules, which it is currently developing.  The stock has done well too, increasing form a low of $1 to a respectable $7 today.
 
The company is in relatively good shape: it has three active programs; it’s not flush with cash, but it has sufficient to ride out the next six months—with a stock price on the rise, it could go back and raise more funds.  In fact, it needs more funds: it secured financing when the stock was at a low; trading at $7 today, the company could raise more cash without serious dilution.
 
There is still risk, much risk associated with this company; however, its lead programs, PCI-32765 is in phase I for oncology; PCI-27483 targets tumor growth and metastases.  All is not lost for Motexafin gadolinium.  I have been following this molecule since 1997: it is a drug; it just needs a successful trial.
 
I have Pharmacyclics in my wait-and-see pile.  I believe it will go out and raise more cash in the short term.  I also believe it will publish at least one successful clinical trial result.  I want to wait until the stock moves back into the $3 to $5 range.  I am hoping all this happens before news on MGd takes off.  If I can purchase this company in the $3 to $4 range, I expect it to move into the high teens ($15 to $17) when MGd successfully completes its current phase II trials and moves into two phase III trials.  I have a twelve to eighteen month time horizon on his company.