Drew Armstrong and Ed Hammond New York
ABBVIE agreed to buy Pharmacyclics in a $21 billion (R247bn) deal after beating out Johnson & Johnson for control of a blockbuster blood cancer therapy that will help it expand in the lucrative area of oncology.
Under the terms of the transaction, AbbVie would pay $261.25 per share comprised of a mix of cash and AbbVie equity, the two companies said yesterday. The price is 39 percent higher than Pharmacyclics’s closing price on February 24, the day before it was reported that the company was considering a deal.
The purchase would help AbbVie reduce its reliance on Humira, its best-selling rheumatoid arthritis treatment while expanding into cancer therapy, one of the most promising areas of drug development.
It would gain control of Imbruvica, an easy-to-use pill that costs about $100 000 a year that avoids certain serious side effects of chemotherapy and is already approved for four different blood cancer uses.
Pharmacyclics was nearing an agreement to be acquired by Johnson & Johnson, which was discussing a price of about $250 per share, before AbbVie topped the offer at the last minute, a person with knowledge of the matter said. The person asked not to be identified as the details were private.
Pharmacyclics had net income last year of $86 million, according to data. However, sales of Imbruvica are expected to grow to $3.56bn in 2018 from $492m last year, according to an average of estimates by analysts, as it is used in more types of cancer.
While Imbruvica would overlap with one of AbbVie’s top pipeline products, ABT-199 there should be room for both, Asthika Goonewardene, an analyst with Bloomberg Intelligence, said.
It may take until 2016 for ABT-199 to be approved, and while Imbruvica has shown itself to be the preferred drug for many patients, others may benefit from a different therapy. “Given all this, having two dogs in the race may not be a bad thing,” Goonewardene said.
AbbVie said it expected about 58 percent of the deal to be paid in cash, and 42 percent in stock, and to close midyear. Its shares closed 1.1 percent higher at $60.27 in New York. Since splitting off from parent Abbott Laboratories in 2013, AbbVie has not completed one of the megadeals that have tempted the rest of the industry.
It has tried, though. AbbVie and Shire in October agreed to terminate a planned $52bn acquisition by AbbVie that would have redomiciled the drugmaker abroad and given it a lower tax rate. AbbVie pulled its support for the transaction after proposed changes to US rules.
In January, AbbVie gave a forecast for adjusted 2015 earnings near the low end of analysts’ estimates as competition from generic drugs ate into profits. Pharmacyclics shareholders will get to choose whether to take cash, stock or a combination. – Bloomberg