UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 
 xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended September 30, 2010
 
 or
 
 oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from  to
 
 Commission File Number:  000-26658
 
 Pharmacyclics, Inc.(Exact name of registrant as specified in its charter)
 
 Delaware
94-3148201(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 995 E. Arques Avenue

Sunnyvale, CA
94085-4521(Address of principal executive offices)
(Zip Code)
 
 (408) 774-0330(Registrant’s telephone number, including area code)(Former name, former address and former fiscal year, if changed since last report)
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x  No  ̈
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes o     No o
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
 Large accelerated filer  ̈
Accelerated filer xNon-accelerated filer  ̈ (Do not check if a smaller reporting company)
Smaller reporting company o
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o    No x
 
 As of November 3, 2010 there were 59,743,258  shares of the registrant's Common Stock, par value $0.0001 per share, outstanding.




PHARMACYCLICS, INC.
 Form 10-Q
 Table of Contents
  PART I.
Financial Information
Page No.Item 1.
Financial Statements (unaudited):
1Condensed Balance Sheets
1Condensed Statements of Operations
2Condensed Statements of Cash Flows
3Notes to Condensed Financial Statements
4Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
11Item 3.
Quantitative and Qualitative Disclosures About Market Risk
19Item 4.
Controls and Procedures
19PART II.
Other Information
19Item 1.
Legal Proceedings
19Item 1A.
Risk Factors
20Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
20Item 3.
Defaults Upon Senior Securities
20Item 4.
(Removed and Reserved)
20Item 5.
Other Information
20Item 6.
Exhibits
20Signatures
21Exhibits Index
  Table of Contents
  PART  I  -  FINANCIAL INFORMATION
 
 Item 1.              Financial Statements
  PHARMACYCLICS, INC.
 (a development stage enterprise)
 CONDENSED BALANCE SHEETS
 (unaudited; in thousands)
 
 September 30,

2010


June 30,

2010ASSETSCurrent assets:Cash and cash equivalents

$
14,022


$
51,199Marketable securities


53,749



22,950Accounts receivable


38



194Prepaid expenses and other current assets


1,865



1,702Total current assets


69,674



76,045Property and equipment, net


504



459Other assets


315



316Total assets

$
70,493


$
76,820LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:Accounts payable

$
3,029


$
2,856Accrued liabilities


988



1,054Deferred revenue


4,166



6,099Total current liabilities


8,183



10,009Deferred rent


43



50Total liabilities


8,226



10,059Stockholders’ equity:Preferred stock


-



-Common stock


6



6Additional paid-in capital


447,705



444,683Accumulated other comprehensive income (loss)


1



(6
)Deficit accumulated during development stage


(385,445
)


(377,922
)Total stockholders’ equity


62,267



66,761Total liabilities and stockholders’ equity

$
70,493


$
76,820
  The accompanying notes are an integral part of these condensed financial statements.
  1
 Table of Contents
  PHARMACYCLICS, INC.
 (a development stage enterprise)
 CONDENSED STATEMENTS OF OPERATIONS
 (unaudited; in thousands, except per share data)
 
 Three Months Ended

September 30,


Period from

Inception

(April 19,

1991)

Through

September30,2010


2009


2010Revenues:License and milestone revenues

$
1,964


$
-


$
19,126Contract and grant revenues


-



-



6,154Total revenues


1,964



-



25,280Operating expenses:Research and development*


7,702



3,288



350,936General and administrative*


1,834



1,533



94,010Purchased in-process researchand development


-



-



6,647Total operating expenses


9,536



4,821



451,593Loss from operations


(7,572
)


(4,821
)


(426,313
)Interest and other income (expense), net


49



(24
)


40,868Net loss

$
(7,523
)

$
(4,845
)

$
(385,445
)Basic and diluted net loss per share

$
(0.13
)

$
(0.12
)Weighted average shares used to computebasic and diluted net loss per share


59,278



40,993*includes non-cash share based compensationof the following:Research and development

$
1,694


$
158


$
10,406General and administrative


478



90



10,772
  The accompanying notes are an integral part of these condensed financial statements.
  2
 Table of Contents
  PHARMACYCLICS, INC.
 (a development stage enterprise)
 CONDENSED STATEMENTS OF CASH FLOWS
 (unaudited; in thousands)
 
 Three Months Ended

September 30,


Period

From

Inception

(April 19,

1991)

through

September 302010


2009


2010Cash flows from operating activities:Net loss

$
(7,523
)

$
(4,845
)

$
(385,445
)Adjustments to reconcile net loss to net cash used in operatingactivities:Depreciation and amortization


65



63



15,584Amortization of premium/discount on marketable securities, net


236



25



631Amortization of debt discount


-



21



570Gain on sale of marketable securities


-



-



50Purchased in-process research and development


-



-



4,500Share-based compensation expense


2,172



248



21,178Common stock issued in exchange for services provided


-



-



15Write-down of fixed assets


-



-



370Changes in assets and liabilities:Accounts receivable


156



629



(38
)Prepaid expenses and other assets


26



(249
)


(1,992
)Accounts payable


173



447



3,029Accrued liabilities


(66
)


(171
)


988Deferred revenue


(1,933
)


-



4,166Deferred rent


(7
)


(5
)


43Net cash used in operating activities


(6,701
)


(3,837
)


(336,351
)Cash flows from investing activities:Purchase of property and equipment


(110
)


(6
)


(12,700
)Proceeds from sale of property and equipment


-



-



123Purchases of marketable securities


(39,258
)


(10,379
)


(610,370
)Proceeds from sales of marketable securities


-



-



85,934Proceeds from maturities of marketable securities


8,230



-



470,007Net cash used in investing activities


(31,138
)


(10,385
)


(67,006
)Cash flows from financing activities:Issuance of common stock, net of issuance costs


3



21,720



382,915Exercise of stock options


659



12



8,745Proceeds from related party notes payable


-



-



6,400Proceeds from note payable


-



-



3,000Issuance of convertible preferred stock, net of issuance costs


-



-



20,514Payments under capital lease obligations


-



-



(3,881
)Repayment of notes payable


-



(314
)


(314
)Net cash provided by financing activities


662



21,418



417,379(Decrease)/Increase in cash and cash equivalents


(37,177
)


7,196



14,022Cash and cash equivalents at beginning of period


51,199



14,534



-Cash and cash equivalents at end of period

$
14,022


$
21,730


$
14,022Supplemental disclosure of non-cash investing and financing activities:Settlement of related party notes payable by issuance of common stock

$
-


$
6,086


$
6,086Property and equipment acquired under capital lease obligations


-



-



3,881Warrants issued


-



-



49Conversion of notes payable and accrued interest into convertible preferred stock


-



-



3,051
  The accompanying notes are an integral part of these condensed financial statements.
  3
 Table of Contents
  PHARMACYCLICS, INC.
 (a development stage enterprise)
 NOTES TO CONDENSED FINANCIAL STATEMENTS
  Note 1 – The Company and Significant Accounting Policies
  Description of the Company
  We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer and immune mediated diseases.  Our mission and goal is to build a viable biopharmaceutical company that designs, develops and commercializes novel therapies intended to improve quality of life, increase duration of life and resolve serious unmet medical healthcare needs; and to identify promising product candidates based on exceptional scientific development expertise, develop our products in a rapid, cost-efficient manner and pursue commercialization and/or development partners when and where appropriate. We exist to make a difference for the better and these are important times to do just that.
  Presently, we have four product candidates in clinical development, a clinical development candidate in late-stage preclinical evaluation and several preclinical molecules in lead optimization.  To date, substantially all of our resources have been dedicated to the research and development of our products, and we have not generated any commercial revenues from the sale of our products.  We do not anticipate the generation of any product commercial revenues until we receive the necessary regulatory and marketing approvals to launch one of our products.
  We have incurred significant operating losses since our inception in 1991, and as of September 30, 2010, had an accumulated deficit of approximately $­­­­­­­­­385.4 million.  The process of developing and commercializing our products requires significant research and development, preclinical testing and clinical trials, manufacturing arrangements as well as regulatory and marketing approvals.  These activities, together with our general and administrative expenses, are expected to result in significant operating losses until the commercialization of our products, or partner collaborations, generate sufficient revenues to cover our expenses.  We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial.  Our achieving profitability depends upon our ability to successfully complete the development of our products, obtain required regulatory approvals and successfully manufacture and market our products.
  Basis of Presentation
  The accompanying interim condensed financial statements have been prepared by us, without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair statement of its financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States. The balance sheet at June 30, 2010 is derived from the audited balance sheet at that date which is not presented herein.
  In the opinion of management, the unaudited financial information for the interim periods presented reflects all normal and recurring adjustments necessary for a fair statement of results of operations, financial position and cash flows. These condensed financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.
  4
 Table of Contents
  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in our financial statements and the accompanying notes. Actual results could differ from those estimates.
  Note 2 – Basic and Diluted Net Loss Per Share
  Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common and potential common shares outstanding during the period. Potential common shares consist of shares issuable upon the exercise of stock options (using the treasury stock method). Options to purchase 8,009,130 and 8,513,587 shares of common stock were outstanding at September 30, 2010 and 2009, respectively, but have been excluded from the computation of diluted net loss per share because their effect was anti-dilutive.
  Note 3 – Share-Based Compensation
  We grant options to purchase our common stock pursuant to our 2004 Equity Incentive Award Plan.
  The components of share-based compensation recognized in our statements of operations for the three months ended September 30, 2010 and 2009 and since inception are as follows:
 
 Three Months Ended

September 30,


Period From Inception (April 19, 1991) Through

September 30,2010


2009


2010Research and development

$
1,694,000


$
158,000


$
10,406,000General and administrative


478,000



90,000



10,772,000Total  share-based compensation

$
2,172,000


$
248,000


$
21,178,000
 
 During the three months ended September 30, 2009, we reversed $126,000 of previously recognized expense as a result of a change in our assessment of probability associated with the likelihood of achieving performance measures associated with certain outstanding performance-based options during the quarter.
  5
 Table of Contents
  The following table summarizes our stock option activity for the three months ended September 30, 2010:
 
 Number

of

Shares

Weighted

Average

Exercise

PriceBalance of June 30, 2010

7,521,144
$
5.05Options granted

115,430

1.82Options exercised

(291,139)

2.91Options forfeited

(210,555)

7.69Balance at September 30, 2010

7,134,880

5.00
 
 The accounting grant date for employee stock options with performance obligations is the date on which the performance goals have been defined and a mutual understanding of the terms has been reached. Generally options with performance obligations vest over a four year period, with the goals set and agreed upon each year.  Therefore, the table above does not include 303,750 and 475,500 performance options granted in fiscal 2010 and 2009, respectively, for which the performance criteria had not been established as of September 30, 2010.  Options granted include 95,000 performance options granted in prior periods which were converted to time-based vesting during the three months ended September 30, 2010. Excluding these converted options, the weighted average exercise price of options granted in the quarter was $6.77.
  Employee Stock Purchase Plan. There were no sales under the Employee Stock Purchase Plan (“Purchase Plan”) in the three month periods ended September 30, 2010 and 2009.  Shares available for future purchase under the Purchase Plan were 417,546 at September 30, 2010.
  Note 4 – Comprehensive Loss
  Comprehensive loss includes net loss and unrealized gains (losses) on marketable securities that are excluded from the results of operations. Our comprehensive losses were as follows:
 
 Three Months Ended

September 30,2010


2009Net loss

$
(7,523,000
)

$
(4,845,000
)Change in net unrealized gains(losses)on available-for-sale securities


7,000



(2,000
)Comprehensive loss

$
(7,516,000
)

$
(4,847,000
)
 
 Note 5 – Fair Value Measurements and Marketable Securities
  Our marketable securities are classified as “available-for-sale”. We include these investments in current assets and carry them at fair value.  Unrealized gains and losses on available-for-sale securities are included in accumulated other income (loss).  The amortized cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity.  Such amortization is included in interest income.  Gains and losses on securities sold are recorded based on the specific identification method and are included in interest expense and other income (expense), net in the statement of operations.
  6
 Table of Contents
  Management assesses whether declines in the fair value of marketable securities are other than temporary.  If the decline is judged to be other than temporary, the cost basis of the individual security is written down to fair value and the amount of the write down is included in the statement of operations.  In determining whether a decline is other than temporary, management considers various factors including the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value. To date we have not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.
  The fair value of our financial assets and liabilities is determined by using three levels of input which are defined as follows:
  Level 1- Quoted prices in active markets for identical assets or liabilities.
  Level 2- Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our short-term investments primarily utilize broker quotes in markets with infrequent transactions for valuation of these securities.
  Level 3- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
  We utilize the market approach to measure fair value for our financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
  7
 Table of Contents
  The following table sets forth our financial assets (cash equivalents and marketable securities) at fair value on a recurring basis as of September 30, 2010 and June 30, 2010 (in thousands).
  Estimated Fair Value


Basis of Fair Value Measurementsas of

September 30, 2010


Level 1


Level 2


Level 3Money market funds

$
5,177


$
5,177


$
-


$
-Corporate bonds


25,502



-



25,502



-Government agency securities


36,757



-



36,757



-Total cash equivalents and marketable securities

$
67,436


$
5,177


$
62,259


$
-
  Estimated Fair Value


Basis of Fair Value Measurementsas of June 30, 2010


Level 1


Level 2


Level 3Money market funds

$
50,432


$
50,432


$
-


$
-Corporate bonds


8,003



-



8,003



-Government agency securities


14,947



-



14,947



-Total cash equivalents and marketable securities

$
73,382


$
50,432


$
22,950


$
-
 
 The following is a summary of our available-for-sale securities at September 30, 2010 and June 30, 2010 (in thousands).
 
 As of September 30, 2010

Cost Basis


Unrealized

Gain


Unrealized

Loss


Estimated

Fair

ValueMoney market funds

$
5,177


$
-


$
-


$
5,177Corporate bonds


25,506



4



(8
)


25,502Government agency securities


36,752



11



(6
)


36,75767,435



15



(14
)


67,436Less cash equivalents


(13,687
)


-



-



(13,687
)Total marketable securities

$
53,748


$
15


$
(14
)

$
53,749As of June 30, 2010

Cost Basis


Unrealized

Gain


Unrealized

Loss


Estimated

Fair

ValueMoney market  funds

$
50,432


$
-


$
-


$
50,432Corporate bonds


8,019



-



(16
)


8,003Government agency securities


14,937



10



-



14,94773,388



10



(16
)


73,382Less cash equivalents


(50,432
)


-



-



(50,432
)Total marketable securities

$
22,956


$
10


$
(16
)

$
22,950
  8
 Table of Contents
 
 At September 30, 2010, our marketable securities had the following contractual maturities (in thousands):
 
 Amortized

Cost


Estimated

Fair ValueLess than one year

$
52,445


$
52,446One year to two years


1,303



1,303Total

$
53,748


$
53,749
 
 Note 6 – Agreements
  Collaboration and License Agreement with Les Laboratoires Servier.We are a party to a collaboration and license agreement with Les Laboratoires Servier ("Servier") to research, develop and commercialize PCI-24781, an orally active, novel, small molecule inhibitor of Pan HDAC enzymes.  Under the terms of the agreement, Servier acquired the exclusive right to develop and commercialize the Pan HDAC inhibitor product worldwide except for the United States and will pay a royalty to Pharmacyclics on sales outside of the United States. Pharmacyclics will continue to own all rights within the United States. In May 2009, Pharmacyclics received an upfront payment of $11,000,000 from Servier, less applicable withholding taxes of $550,000, for a net receipt of $10,450,000.
  Under the agreement Pharmacyclics will also receive $4,000,000 from Servier for research collaboration over a twenty-four month period, paid in equal increments every six months, of which $2,000,000 has been received through September 30, 2010 and an additional $1,000,000 was received in November, 2010. Servier is solely responsible for conducting and paying for all development activities outside the United States.  In addition, Pharmacyclics could also receive from Servier up to approximately $24,500,000 upon the achievement of certain future milestones up to and including commercialization, as well as royalty payments.
  The collaboration and license agreement required us to enter into an agreement to supply drug product for Servier’s use in clinical trials.  During the quarter ending December 31, 2009, the supply agreement, which is considered part of the arrangement, was completed and executed.  Prior to the execution of the supply agreement, we did not meet the “evidence of an arrangement” criterion required for revenue recognition and therefore had deferred revenue recognition until the execution of the supply agreement.  Accordingly upon the execution of the drug supply agreement with Servier, we began recognizing revenue from our collaboration and license agreement.  Total revenue recognized in the three months ended September 30, 2010 was $1,964,000.
  Celera Corporation.In April 2006, we acquired multiple small molecule drug candidates for the treatment of cancer and other diseases from Celera Genomics, an Applera Corporation (now Celera Corporation) business.  Future milestone payments under the agreement, as amended, could total as much as $97 million, although we currently cannot predict if or when any of the milestones will be achieved.  Approximately two-thirds of the milestone payments relate to our HDAC Inhibitor program and approximately one-third relates to our Factor VIIa program. Approximately 90% of the potential future milestone payments would be paid to Celera after obtaining regulatory approval in various countries.    There are no milestone payments related to our Btk program.  In addition to the milestone payments, Celera will be entitled to royalty payments based on annual sales of drugs commercialized from our HDAC Inhibitor, Factor VIIa and certain Btk Inhibitor programs.
  9
 Table of Contents
  Note 7 – Income Taxes
  We may from time to time be assessed interest or penalties by major tax jurisdictions, although there have been no such assessments historically.  In the event we receive an assessment for interest and/or penalties, it would be classified in the financial statements as income tax expense.  We currently have open tax years in major jurisdictions that remain open due to the taxing authorities’ ability to adjust operating loss carry forwards.  We do not expect any material changes to our unrecognized tax benefits during the next twelve months.
  Note 8 – Recent Accounting Pronouncements
  In October 2009, the FASB issued two updates relating to revenue recognition. The first update eliminates the requirement that all undelivered elements in an arrangement with multiple deliverables have objective and reliable evidence of fair value before revenue can be recognized for items that have been delivered. The update also no longer allows use of the residual method when allocating consideration to deliverables. Instead, arrangement consideration is to be allocated to deliverables using the relative selling price method, applying a selling price hierarchy. Vendor specific objective evidence (VSOE) of selling price should be used if it exists. Otherwise, third party evidence (TPE) of selling price should be used. If neither VSOE nor TPE is available, the company’s best estimate of selling price should be used. The second update eliminates tangible products from the scope of software revenue recognition guidance when the tangible products contain software components and non-software components that function together to deliver the tangible products’ essential functionality. Both updates require expanded qualitative and quantitative disclosures and are effective for fiscal years beginning on or after June 15, 2010, with prospective application for new or materially modified arrangements or retrospective application permitted. Early adoption is permitted. The same transition method and period of adoption must be used for both updates. The adoption of these updates had no effect on our financial statements.
  In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (ASC 820): Improving Disclosures about Fair Value Measurements.”  This update will require (1) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (2) information about purchases, sales, issuances and settlements to be presented separately (i.e., present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs).  This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs.  The new disclosures and clarifications under this ASU are effective over a period of two fiscal years, for interim and annual reporting periods beginning after December 15, 2009 and after December 15, 2010.  The updates for the first adoption date under ASU 2010-06 did not have a material impact on our financial statements.  The adoption of the updates for the second date is not expected to have a material impact on our financial statements.
  In March 2010, the FASB issued new guidance on the use of the milestone method of recognizing revenue for research and development arrangements under which consideration to be received by the vendor is contingent upon the achievement of certain milestones. The update provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. Additional disclosures describing the consideration arrangement and the entity’s accounting policy for recognition of such milestone payments are also required. The new guidance is effective for fiscal years, and interim periods within such fiscal years, beginning on or after June 15, 2010, with early adoption permitted. The guidance may be applied prospectively to milestones achieved during the period of adoption or retrospectively for all prior periods. The adoption of this guidance had no effect on our financial statements.
  10
 Table of Contents
  Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
  You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and the related notes appearing at the beginning of this report. The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended June 30, 2010 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 13, 2010.
  The following discussion contains forward-looking statements that involve risks and uncertainties. These statements relate to future events, such as our future clinical and product development, financial performance and regulatory review of our product candidates. Our actual results could differ materially from any future performance suggested in this report as a result of various factors, including those discussed  elsewhere in this report, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010 and in our other Securities and Exchange Commission reports and filings. All forward-looking statements are based on information currently available to Pharmacyclics; and we assume no obligation to update such forward-looking statements. Stockholders are cautioned not to place undue reliance on such statements.
  Company Overview
  We are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer and immune mediated diseases.  Our mission and goal is to build a viable biopharmaceutical company that designs, develops and commercializes novel therapies intended to improve quality of life, increase duration of life and resolve serious unmet medical healthcare needs; and to identify promising product candidates based on exceptional scientific development expertise, develop our products in a rapid, cost-efficient manner and pursue commercialization and/or development partners when and where appropriate. We exist to make a difference for the better and these are important times to do just that.
  Presently, we have four product candidates in clinical development, a clinical development candidate in late-stage preclinical evaluation and several preclinical molecules in lead optimization.  To date, substantially all of our resources have been dedicated to the research and development of our products, and we have not generated any commercial revenues from the sale of our products.  We do not anticipate the generation of any product commercial revenues until we receive the necessary regulatory and marketing approvals to launch one of our products.
  We have incurred significant operating losses since our inception in 1991, and as of September 30, 2010, had an accumulated deficit of $385,445,000. The process of developing and commercializing our products requires significant research and development, preclinical testing and clinical trials, manufacturing arrangements as well as regulatory and marketing approvals. These activities, together with our general and administrative expenses, are expected to result in significant operating losses until the commercialization of our products, or partner collaborations, generate sufficient revenues to cover our expenses.  We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. Our achieving profitability depends upon our ability to successfully complete the development of our products, obtain required regulatory approvals and successfully manufacture and market our products.
  11
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  Bruton’s Tyrosine Kinase (Btk) Inhibitor for oncology, PCI-32765  is an orally active small molecule inhibitor of Bruton’s tyrosine kinase (Btk) that is being developed by Pharmacyclics for the treatment of patients with B-cell lymphoma or leukemia (B-cells are white blood cells and are an important part of our immune system, B-cell lymphoma and leukemia are types of blood cancers).  Btk plays a prominent role in the development as well as the survival of white blood cells, in particular B-cells. B-cell lymphocyte maturation is mediated by B-cell receptor (BCR) signal transduction and Btk is part of the BCR signaling pathway. Recent studies indicate that some large B-cell lymphomas have proteins that are activated and lie downstream of the BCR and that Btk inhibition can induce apoptosis (i.e. cell death) in these B-cells. BCR signaling is also thought to promote cancer cell expansion and survival in chronic lymphocytic leukemia, a prevalent blood cancer. In preclinical models, inhibition of Btk by PCI-32765 led to apoptosis in multiple malignant B-cell lines, and inhibited B-cell lymphoma progression in vivo.
  A multicenter U.S. Phase I trial in B-cell lymphoma is currently enrolling patients. This Phase I trial is designed to determine the safety and tolerability of our Btk Inhibitor PCI-32765, and to evaluate effects of Btk inhibition (using pharmacodynamic assays) and tumor response.
  We reported interim results of the trial as an oral presentation at the American Society for Clinical Oncology (ASCO) Annual Meeting on June 4-8, 2010 in Chicago, IL. Our abstract was selected among the few to be presented in an oral Session (Abstract Control Number: 54096, Permanent Abstract ID:  8012, Abstract Title: Btk inhibitor PCI-32765 monotherapy induces objective responses in patients with relapsed aggressive NHL: Evidence of antitumor activity from a phase I study).
  Trial Results as of August 31, 2010: A total of 47 relapsed/refractory and progressing patients with a variety of B cell malignancies were enrolled in 6 dose groups (1.25, 2.5, 5.0, 8.3, 12.5 mg/kg/day of standard dosing [4 weeks on / 1 week off] and 8.3 mg/kg/day continuous dosing). Forty-one of the enrolled patients had an on-treatment tumor assessment after completing two cycles of therapy and are evaluable for efficacy as of August 31, 2010. Twenty-one of these evaluable patients had a complete or partial response as their best response and eleven patients had stable diseases. This equates to a response rate of 51% in the evaluable patients (69% in CLL, 75% in Mantle, 42% in Follicular, 33% in Marginal and 38% in DLBCL). On an intent-to-treat (ITT) basis the overall response rate (ORR) was 45%.
  Ongoing research continues to expand clinical indications for our Btk inhibitor PCI-32765 beyond blood cancers (i.e. hematologic tumors) and to support our ongoing clinical trials in lymphoma and CLL. PCI-32765 is a potent inhibitor of histamine release (also known as degranulation) from mast cells and basophils, which are specific immune cells. Largely based on the work of Dr. Gerard Evan and others at UCSF, mast cells have emerged as an important component of the proinflammatory microenvironment, which is crucial for the physical expansion and maintenance of tumor growth (Nature Medicine 13 (10), p. 1211-18). Dr. Evan’s lab tested our Btk Inhibitor PCI-32765 in his mouse pancreatic model. In the model, PCI-32765 completely blocked mast cell degranulation which led to tumor regression and vascular collapse. This work was presented at the 2010 American Association for Cancer Research (AACR) Annual Meeting as an oral presentation on April 20, 2010. With respect to research in lymphoma the NCI has made valuable discoveries indicating that many types of lymphoma are driven by chronic active B-cell receptor signaling, a process dependent upon Btk activity. These findings, which included experiments with PCI-32765, were published in the journal Nature (Davis et al. (2010) Vol. 463, p88-94).
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  Bruton’s Tyrosine Kinase (Btk) Inhibitor, PCI-45292is an orally-active small molecule inhibitor of Bruton’s tyrosine kinase that is being developed by Pharmacyclics for the treatment of patients with autoimmune diseases. Most recently we have started IND-enabling preclinical safety studies.  Pharmacyclics is intending to complete the in-life phase of these studies by the end of 2010 and is planning to file an IND (Investigational New Drug Application) in the late second quarter of 2011. Compared to PCI-32765, PCI-45292 was shown to have increased selectivity for Btk inhibition, a reduced potential for off-target protein binding, and improved metabolic stability. PCI-45292 ameliorated inflammation in collagen-induced arthritis models. Therefore we believe that PCI-45292 has the qualities to become a new oral disease modifying anti-rheumatic drug (DMARD).
  Factor VIIa Inhibitor, PCI-27483is a potent and highly selective small molecule inhibitor of coagulation (clotting) Factor VIIa.  This drug targets Factor VIIa, the active form of Factor VII that arises from interaction with the cell surface membrane protein known as tissue factor (TF).  In cancer, the Factor VIIa:TF complex is found in abundance in pancreatic, gastric, colon and other tumors, and triggers a host of patho-physiologic processes that facilitate tumor blood vessel formation (angiogenesis), growth and metastases. The Factor VIIa:TF complex is thought to be the cause of the increased propensity of cancer patients to develop thromboses, also known as blood clots. Laboratory studies and animal models indicate that our inhibitor of Factor VIIa blocks the growth of tumors that express TF.
  We have completed a Phase I testing of Factor VIIa Inhibitor PCI-27483 in healthy volunteers. The primary objective of the ascending dose Phase I study was to assess the pharmacodynamic and pharmacokinetic profiles (i.e. the relationship between drug level and pharmacological response) of Factor VIIa Inhibitor PCI-27483 following a single, subcutaneous injection.  In addition, the safety and tolerability of our Factor VIIa Inhibitor was evaluated. The drug was well tolerated and no adverse event was observed at any dose level.  The International Normalized Ratio (INR) of prothrombin time, a simple laboratory test for coagulation, was used to measure pharmacodynamic effect at dose levels of 0.05, 0.20, 0.80 and 2.0 mg/kg.  A mean peak INR of 2.7 was achieved without adverse effects at the highest dose level administered. The target INR range for oral anti-coagulants i.e. Coumadin, is between 2 and 3.
  A multicenter Phase I/II study began with Factor VIIa Inhibitor PCI-27483 in the fourth quarter of calendar 2009. The study is enrolling patients with locally advanced or metastatic pancreatic cancer that are either receiving or are planned to receive gemcitabine therapy.  In the Phase I portion of the study, ascending repeated doses of PCI-27483 were evaluated in 8 patients receiving concomitant gemcitabine therapy.  PCI-27483 was administered twice daily by subcutaneous injection at dosages ranging from 0.8 to 1.5 mg/kg.  The Phase II portion of the study has now started and patients are being randomized into two groups to receive either gemcitabine alone or gemcitabine plus PCI-27483.  For both phases of the study, the planned duration of treatment with PCI-27483 is 12 weeks.  Patients with stable disease at the end of 12 weeks have the option to continue PCI-27483 treatment until disease progression. The objectives of the study are to: a) assess the safety of Pharmacyclics Factor VIIa Inhibitor PCI-27483 at pharmacologically active dose levels; b) to assess potential inhibition of tumor progression and c) obtain initial information of the effects on the incidence of thromboembolic events.
  Histone Deacetylase (HDAC) Inhibitor, PCI-24781is an orally-bioavailable histone deacetylase inhibitor that is currently in multiple clinical trials, including a Phase I trial in patients with advanced solid tumors, a Phase I/II trial in patients with recurrent lymphomas and a Phase I/II trial in sarcoma patients (in combination with doxorubicin, an anti tumor agent).  Histone Deacetylases are enzymes in a cell responsible for turning off and on genes. PCI-24781 targets histone deacetylase (HDAC) enzymes and inhibits their function.  We have shown that PCI-24781 impacts the cell by multiple mechanisms including a re-expression of tumor suppressors, disruption of DNA repair mechanisms, cell cycle inhibition and by generating an increase in reactive oxygen species, all of which may contribute to tumor cell toxicity.  Previous clinical trials have demonstrated that our HDAC Inhibitor PCI-24781 has favorable systemic elimination properties when dosed orally, and inhibits the target enzymes.  Clinical response or control of tumor growth has been recorded in the three single-agent clinical trials to date.
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  We announced the Phase I trial results of our HDAC Inhibitor PCI 24781, tested in heavily pretreated relapsed lymphoma patients (those who had a response but the cancer reoccurred) and/or refractory lymphoma patients (those who had an earlier treatment that did not have an effect on the cancer). The results of this trial were published at the 51st Annual Meeting of the American Society for Hematology in December of 2009. In a review of the clinical data at the end of the Phase I dose-escalation portion of the current lymphoma trial, we found that PCI-24781 produced encouraging efficacy results with minimal toxicity when administered as a single agent. Among 16 lymphoma patients evaluated for disease control after the completion of at least 2 treatment cycles, we observed 1 complete response (follicular lymphoma), 4 partial responses (2 follicular lymphoma, 1 diffuse large B-cell lymphoma, 1 mantle cell lymphoma) and 7 patients with stable disease.  Of the 4 follicular lymphoma patients evaluated in this trial, 3 had objective response and one manifested stable disease. The HDAC Inhibitor PCI-24781 has demonstrated a good safety profile in approximately 90 patients treated so far, with the main dose-limiting toxicity observed being a rapidly reversible thrombocytopenia (a decrease in platelets, which are blood cells necessary for clotting). This effect is common among HDAC inhibitors and is considered a class effect, related to the pharmacologic mechanism of action. The duration and severity of the thrombocytopenia is being successfully managed using novel dose scheduling strategies that we have developed and tested in the clinic.
  In preclinical models, we have identified synergy of the Pharmacyclics HDAC inhibitor PCI-24781 with several approved cancer therapeutics, and some of these combinations are being or will be tested in the clinic, including a trial testing PCI-24781 with doxorubicin to treat sarcoma patients (sarcoma is a cancer of soft tissues).  This trial is co-sponsored by investigators at Massachusetts General Hospital and Dana-Farber / Harvard Cancer Center. During this trial we will also test the novel biomarker RAD51 that we have developed in collaboration with scientists at Stanford University (Adimoolam et al., Proc Natl Acad Sci USA 2007; 104:19482-7), which may be useful as predictive biomarker in clinical testing by improving patient selection.
  In April 2009, we entered into a collaboration agreement with Les Laboratoires Servier ("Servier")  pursuant to which Pharmacyclics granted to Servier an exclusive license for its pan-HDAC inhibitors, including PCI-24781, for territories throughout the world excluding the United States. Under the terms of the agreement, Servier acquired the exclusive right to develop and commercialize the pan-HDAC inhibitor product worldwide except for the United States and will pay a royalty to Pharmacyclics on sales outside of the United States. Pharmacyclics will continue to own all rights to develop and commercialize within the United States.  Servier is committing resources to the clinical development of Pharmacyclics HDAC Inhibitor PCI-24781. During our fiscal year 2010 we signed a supply agreement and delivered to Servier 10 kg of PCI-24781 drug substance, to support their Phase I and Phase II clinical development program.
  Histone Deacetylase-8 (HDAC8) Isoform-specific Inhibitor Programis at the preclinical lead optimization stage.  A poster presentation describing the lead optimization and preclinical development of our HDAC8 isoform-specific inhibitors, including their efficacy in certain cancer subtypes like T-cell leukemia and lymphoma and neuroblastoma, as well as their potential utility in autoimmune disease was presented on April 21, 2010 during the 101st Annual Meeting of the American Association for Cancer Research (AACR), in Washington, D.C.
  Motexafin Gadolinium (MGd, PCI-0120)is a radiation and chemotherapy sensitizing agent with a novel mechanism of action.  MGd is designed to accumulate selectively in cancer cells. Once inside cancer cells, MGd in combination with radiation induces apoptosis (cell death) by disrupting the oxygen dependent pathways in a cell. MGd is also detectable by magnetic resonance imaging (MRI) and may allow for more precise tumor detection.  The National Cancer Institute (NCI) is currently sponsoring a Phase I/II multi-center study in newly diagnosed patients with glioblastoma multiform (a type of primary brain cancer).  In this study, which completed enrollment in July 2009, MGd is being administered in combination with radiation therapy and temozolomide, a chemotherapy for brain cancers.  Previous studies in malignant brain cancers have shown that the combination of MGd and temozolomide have no overlapping toxicities when used in combination.
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  We are subject to risks common to pharmaceutical companies developing products, including risks inherent in our research, development and commercialization efforts, preclinical testing, clinical trials, uncertainty of regulatory and marketing approvals, uncertainty of market acceptance of our products, history of and expectation of future operating losses, reliance on collaborative partners, enforcement of patent and proprietary rights, and the need for future capital.  In order for a product to be commercialized, we must conduct preclinical tests and clinical trials, demonstrate efficacy and safety of our product candidates to the satisfaction of regulatory authorities, obtain marketing approval, enter into manufacturing, distribution and marketing arrangements, build a U.S. commercial capability, obtain market acceptance and, in many cases, obtain adequate coverage of and reimbursement for our products from government and private insurers.  We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.
  Results of Operations
  Revenue
  Three Month Ended

September 30,2010


2009License and milestone revenue

$
1,964,000


$
-
 
 We recorded $1,964,000 in revenue for the three months ended September 30, 2010 associated with our collaboration and license agreement with Servier which was entered into in April 2009. Given that the deliverables under the collaboration agreement with Servier did not meet criteria in the accounting rules for separation (e.g., no separately identifiable fair value), the arrangement is being treated as a single unit-of-accounting for purposes of revenue recognition. We recognize the combined unit of accounting over the estimated period required to complete the research activities (two years), which coincides with the delivery period for all substantive obligations or “deliverables” associated with this agreement.  Of the total revenue for the three months ended September 30, 2010, $1,387,000 represents the amortization of the $11,000,000 upfront payment from Servier received in April 2009 and the remainder represents the pro-rata completion of services associated with research payments, our supply commitment and reimbursement of patent expenses.
  The collaboration and license agreement required us to enter into an agreement to supply drug product for Servier’s use in clinical trials. As the supply agreement is considered part of the arrangement we deferred recognition of all revenue under the Servier collaboration agreement until the supply agreement was completed and executed. We completed the drug supply agreement with Servier and began recognizing revenue in the second quarter ended December 31, 2009 and therefore had no revenue in the three months ended September 30, 2009.
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  Research and Development
  Three Month Ended

September 30,


Percent2010


2009


ChangeResearch and development

$
7,702,000


$
3,288,000



134
%
  The increase of 134% or $4,414,000 in research and development expenses for the three months ended September 30, 2010 compared with the three months ended September 30, 2009 was primarily due to a $1,536,000 increase in stock compensation expense, a $753,000 increase in third-party clinical trial costs, a $675,000 increase in drug manufacturing charges related to our Btk, HDAC and Factor VIIa programs, a $496,000 increase in toxicology and pharmacology charges related to our Btk program, a $352,000 increase in payroll and payroll-related costs due to increased personnel, a $425,000 increase in consulting and other outside research costs and a $162,000 increase in lab supply costs.
  Research and development costs are identified as either directly attributed to one of our research and development programs or as an indirect cost, with only direct costs being tracked by specific program. Direct costs consist of personnel costs directly associated with a program, preclinical study costs, clinical trial costs, and related clinical drug and device development and manufacturing costs, drug formulation costs, contract services and other research expenditures. Indirect costs consist of personnel costs not directly associated with a program, overhead and facility costs and other support service expenses. The following table summarizes our principal product development initiatives, including the related stages of development for each product, the direct costs attributable to each product and total indirect costs for each respective period. For a discussion of the risks and uncertainties associated with the timing and cost of completing a product development phase, see the Risk Factors discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010.
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  Direct costs by program and indirect costs are as follows:
  Related R&D Expenses

Three Months Ended

September 30,Program

Description

Phase of Development

2010


2009Btk Inhibitors

Cancer/autoimmune

Phase Ia/Ib

$
3,980,000


$
1,004,000HDAC Inhibitors

Cancer/autoimmune

Phase I/II


661,000



632,000Factor VIIa

Cancer

Phase II


740,000



526,000MGd

Cancer

Phase II


9,000



32,000Total direct costs






5,390,000



2,194,000Indirect costs






2,312,000



1,094,000Total research anddevelopment expenses





$
7,702,000


$
3,288,000
  General and Administrative
 
 Three Months Ended

September 30,


Percent2010


2009


ChangeGeneral and administrative expenses

$
1,834,000


$
1,533,000



20
%
 
 General and administrative expenses increased by 20% or $301,000 in the three months ended September 30, 2010 compared with the three months ended September 30, 2009.  This was primarily due to a $388,000 increase in stock compensation expense in the 2010 quarter that was partially offset by lower consulting fees.
  Interest and Other, Net
 
 Three Months Ended

September 30,


Percent2010


2009


ChangeInterest income

$
49,000


$
19,000



158
%Interest expense


-



(43,000
)


-Interest and other income (expense), net

$
49,000


$
(24,000
)


304
%
 
 The increase of 304% or $73,000 in interest and other income (expense), net for the three months ended September 30, 2010 compared with the three months ended September 30, 2009 was primarily due to higher average invested balances and the absence of $43,000 of interest expense associated with $6,400,000 in related party loans which were outstanding for part of the first quarter of fiscal 2010.
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  Liquidity and Capital Resources
  Our principal sources of working capital have been private and public equity financings and also proceeds from collaborative research and development agreements, as well as interest income.
  As of September 30, 2010, we had approximately $67,771,000 in cash, cash equivalents and marketable securities. Net cash used in operating activities of $6,701,000 during the three months ended September 30, 2010 was $2,864,000, or 75% higher than the net cash used in operating activities during the three months ended September 30, 2009.  This increase is primarily due to a higher net loss after adjusting for share-based compensation expense and changes in deferred revenue in the 2010 period.
  Net cash used in investing activities of $31,138,000 and $10,385,000 in the three months ended September 30, 2010 and 2009, respectively, consisted primarily of net purchases of marketable securities.
  Net cash provided by financing activities of $662,000 for the three months ended September 30, 2010 resulted from the exercise of stock options.  Net cash provided by financing activities of $21,418,000 for the three months ended September 30, 2009 was primarily due to $27,800,000 in net proceeds from the sale of approximately 22.5 million shares of common stock in a Rights Offering completed in July 2009.
  In April 2006, we acquired multiple small molecule drug candidates for the treatment of cancer and other diseases from Celera Genomics, an Applera Corporation (now Celera Corporation) business.  Future milestone payments under the agreement, as amended, could total as much as $97 million, although we currently cannot predict if or when any of the milestones will be achieved.  Approximately two-thirds of the milestone payments relate to our HDAC Inhibitor program and approximately one-third relates to our Factor VIIa program. Approximately 90% of the potential future milestone payments would be paid to Celera after obtaining regulatory approval in various countries.  There are no milestone payments related to our Btk program.  In addition to the milestone payments, Celera will be entitled to royalty payments based on annual sales of drugs commercialized from our HDAC Inhibitor, Factor VIIa and certain Btk Inhibitor programs.
  Based upon the current status of our product development plans, we believe that our existing cash, cash equivalents and marketable securities will be adequate to satisfy our capital needs through at least the next twelve months. We expect research and development expenses, as a result of on-going and future clinical trials, to consume a large portion of our existing cash resources. Changes in our research and development plans or other changes affecting our operating expenses may affect actual future consumption of existing cash resources as well. In any event, due to our extensive drug programs we will need to raise substantial additional capital to fund our operations in the future. We may seek partnership collaborations to help fund the development of our product candidates.  We also expect to raise additional funds through the public or private sale of securities, bank debt, partnership collaboration or otherwise.  If we are unable to secure additional funds, whether through partnership collaborations or sale of our securities, we will have to delay, reduce the scope of or discontinue one or more of our product development programs. Our actual capital requirements will depend on many factors, including the following:
  ·
our ability to establish and the scope of any new collaborations;·
the progress and success of clinical trials of our product candidates; and·
the costs and timing of obtaining regulatory approvals.
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  Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. The factors described above will impact our future capital requirements and the adequacy of our available funds. If we are required to raise additional funds, we cannot be certain that such additional funding will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be highly dilutive, or otherwise disadvantageous, to existing stockholders and debt financing, if available, may involve restrictive covenants. Collaborative arrangements, if necessary to raise additional funds, may require us to relinquish rights to certain of our technologies, products or marketing territories. Our failure to raise capital when needed and on acceptable terms, would require us to reduce our operating expenses and would limit our ability to respond to competitive pressures or unanticipated requirements to develop our product candidates and to continue operations, any of which would have a material adverse effect on our business, financial condition and results of operation.
  Off-Balance Sheet Arrangements
  None
  Critical Accounting Policies, Estimates and Judgments
  There have been no material changes in our critical accounting policies, estimates and judgments during the three months ended September 30, 2010, compared with the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended June 30, 2010.
  Item 3. Quantitative and Qualitative Disclosures about Market Risk
  There was no significant change in our exposure to market risk since June 30, 2010.
  Item 4. Controls and Procedures
  (a) Evaluation of disclosure controls and procedures:As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the first fiscal quarter of 2011, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Vice President, Finance and Administration. Based upon that evaluation, our Chief Executive Officer and our Vice President, Finance and Administration have concluded that our disclosure controls and procedures are adequate and effective to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Vice President, Finance and Administration, as appropriate to allow timely decisions regarding required disclosure.
  (b) Changes in internal controlsoverfinancial reporting: There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
  PART        II.             OTHER INFORMATION
  Item           1.              Legal Proceedings
  Not Applicable.
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  Item           1A.              Risk Factors
  There have been no material changes in the risk factors previously disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2010.
  Item           2.              Unregistered Sales of Equity Securities and Use of Proceeds
  Not Applicable.
  Item           3.              Defaults Upon Senior Securities
  Not Applicable.
  Item           4.              (Removed and Reserved)
  
  Item           5.              Other Information
  Not Applicable.
  Item           6.              Exhibits
  31.1         Rule 13a-14(a)/15d-14(a) Certification of CEO.
  31.2         Rule 13a-14(a)/15d-14(a) Certification of VP Finance & Administration.
  32.1         Section 1350 Certifications of CEO and VP Finance & Administration.
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  Signatures
  Pursuant to the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  Pharmacyclics, Inc.(Registrant)Dated:
November 5, 2010

By:
/s/ ROBERT W. DUGGANRobert W. DugganChairman of the Board and Chief Executive Officer
 
 Dated:
November 5, 2010

By:
/s/ RAINER M. ERDTMANNRainer M. ErdtmannVice President, Finance & Administration and Secretary (Principal Financial and Accounting Officer)
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 EXHIBITS INDEX
 
 Exhibit

Number
Description31.1
Rule 13a-14(a)/15d-14(a) Certification of CEO.31.2
Rule 13a-14(a)/15d-14(a) Certification of CFO.32.1
Section 1350 Certifications of CEO and CFO.