Late on March 4, 2015, AbbVie (NYSE: ABBV) announced its acquisition of Pharmacyclics (NASDAQ: PCYC), the maker of a cancer-treatment drug called Imbruvica, for approximately 21 billion dollars.
The deal comprises of about 58% cash and 42% AbbVie common stock. AbbVie will pay for each share at $261.25, which represents a 13 percent premium to the trade price of Pharmacyclics on March, 4, 2015. Pharmacyclics shareholders may have the option to elect 100% cash, 100% stock or a mix of the two. AbbVie would pay a breakup fee of 3% of the deal value in case the transaction fails to proceed to finalization. Although AbbVie’s CEO stated that he was “happy with the value,” investors showed concern about AbbVie overbuying Pharmacyclics. The trade price of AbbVie dropped 3% on March 5, 2015, a day after the news release.
This deal is the latest and largest pharma deal of the year. Early in February, Pfizer reached an acquisition deal with Hospira Inc., which specializes in injectable drugs and infusion technologies, at 17 billion dollars. And Valeant Pharmaceuticals International, Inc. entered into an acquisition agreement with Salix Pharmaceuticals, a widely recognized gastrointestinal market leader, for about 14.5 billion dollars.
AbbVie’s rheumatoid arthritis drug Humira accounts for almost two thirds of its revenue. However, the patent for Humira will expire in the next few years and AbbVie may need to add diversity to its pipeline. AbbVie attempted to acquire Irish pharmaceutical company Shire last year, but abandoned the deal in October because of the Obama administration’s new regulation to prevent tax inversion.
Imbruvica is considered by some analysts to be one of the best-selling cancer treatments and may reach sales at $5 billion per year. The strong competition to acquire Pharmacyclics (e.g. Johnson & Johnson offered $250 per share and Novartis AG also showed interested) may reflect Imbruvica’s potential. AbbVie has partnered with Roche Holding AG to develop ABT-199 for chronic lymphocytic leukemia treatments, which is considered a potential competitor of Imbruvica. Depending on the clinical result AbbVie may file for FDA approval for ABT-199 this year. AbbVie says ABT-199 and Imbruvica may be used together. As the co-developer of Imbruvica with Pharmacyclics, Johnson & Johnson said in a statement that it is “looking forward to continuing collaboration with the team at AbbVie.”
AbbVie to Acquire Cancer Drug Maker Pharmacyclics for $21 Billion (PDF)