California-based drug maker Pharmacyclics (PCYC, Financial) posted its first-quarter numbers on May 1, and the earnings beat estimates while the revenue failed to impress the Street as it fell short of their expectations. The strong earnings growth was attributed to its potential blockbuster drug Imbruvica which has gained its fourth approval from the U.S. FDA. However, the research and developmental expenses raked up as the company is hoping to win more approvals for this drug for treatment of some other diseases. The stock has doubled in value year to date, however, as the revenue missed to pacify the Street it plunged 0.7% to $254.4 on last Friday. Let’s take a peek into the major quarter highlights that portrays a mixed picture for the first quarter of the fiscal year 2015.
The quarter’s recap
The drug maker reported net income of $4.1 million in this quarter, from $18.3 million reported a year earlier. Earnings per share were reported at $0.13 a share, a decline of 77% year-over-year when compared to the prior year’s first quarter when the EPS stood at $0.23 a share. However, the earnings did significantly beat the Zacks’ consensus estimates of $0.05 a share for the first quarter. In fact, the quarter’s earnings were hurt by higher expenses. Total expenses for the quarter were around 98.16% of the quarterly revenues, up from 84.73% for the first quarter of the prior year. This led to contraction of operating margin by a whopping 1,343 basis points to 1.84%.
Revenue in the quarter also surged to $205.8 million, from $119.4 million in the year-ago quarter. The improvement of revenue was majorly contributed by the increase in sales of Imbruvica in the U.S. However, the top line fell below the consensus estimate of $226.27 million.
Imbruvica remain the key driver
Pharmacyclics’ Imbruvica is presently approved by the FDA for treatment of three major indications of blood cancer – mantle cell lymphoma, lymphocytic leukemia and Waldenstrom's macroglobulinemia. As Imbruvica is the drug maker’s sole marketed product, its sales graph is important for driving the net product sales of the drug maker. Presently, this drug is prescribed to treat blood cancers in 47 countries across the globe. It is expected to report sales of $1 billion this year, and reach sales of about $3.56 billion by 2018.
Driven by the sales of Imbruvica, the net product sales in the U.S. rose to $189.2 million from $56.2 million reported in the year-ago quarter. Global sales of Imbruvica stood at $247 million for the quarter.
Parting thoughts
As has been stated earlier, the merger of Pharmacyclics with AbbVie (ABBV, Financial) is on the cards and would witness the completion phase by the later part of 2015. Pharmacyclics’ Imbruvica remains its trumpcard for improving both its top and bottom line, and later after being acquired by AbbVie this drug would showcase in the latter’s drug portfolio and thereby enhance its cancer drugs portfolio to a considerable extent. The first quarter numbers were pretty mixed and its best to wait and watch for the upcoming quarter’s results which would provide better insight on the performance of the drug maker in this fiscal year.
