Pharmacyclics: A Biotech Meltdown

Pharmacyclics, Inc. (PCYC-NASDAQ) is trading down over 40% pre-market after receiving a ‘refuse to file’ letter from the FDA for its new drug application for Xcytrin® Injection for the treatment of non-small cell lung cancer patients with brain metastases.  FDA stated that the company’s application is not sufficiently complete to permit a substantive review based on clinical studies that failed to demonstrate statistically significant differences between treatment arms in the primary endpoints.

Richard Miller, CEO: "We will be evaluating our options with Xcytrin for the brain metastases indication and determine the best path forward. Beyond this indication, the clinical development program with Xcytrin continues on multiple fronts. Several ongoing trials are evaluating Xcytrin in non-small cell lung cancer and other cancers. We are also moving forward with several other novel compounds, which are in clinical and preclinical development."

PCYC is one of these biotech zombies that has no products on the market and no revenues.  As of last quarter it had $50.3 million in cash and short-term securities and had only $2.77 million in total liabilities.  The market cap was $130 million before this pre-market beheading, but unfortunately this was the company’s lead candidate that had completed Phase III trials.  So they are going to be trading much closer to their net cash levels based on this.

Shares are down 41% at $2.97 pre-market on more than the average daily volume.  The 52-week trading range was $3.48 to $6.29.  Back before 2002 this was a $20.00 and higher stock.  The good rule of thumb is to not blow phase 3 trials on your lead candidate.

Jon C. Ogg
February 21, 2007