AbbVie snatches Pharmacyclics from under J&J's nose

A last-minute, $21bn offer secures the pharma firm for Shire's one-time suitor, leaving Johnson & Johnson all alone.

by Adam Gale
Last Updated: 14 May 2015

Big pharma firm AbbVie has apparently got over last year’s failed courtship with Dublin-based Shire. In a bold and romantic move last night, it stole the heart of drug maker Pharmacyclics from neighbourhood big boy Johnson and Johnson (J&J), with a $21bn (£13.7bn) takeover offer.

The American media had reported yesterday that a deal between J&J and Pharmacyclics was imminent, after weeks of fierce competition between different suitors for the Californian firm. AbbVie, however, has announced that both its board and Pharmacyclics have approved a takeover deal at $261.25 a share, to be paid both in cash and equity.

That’s a hefty 13% premium on Pharmacyclics’ current valuation on the Nasdaq ($230.5 a share at last night’s close) and a clear sign of how ardently AbbVie wanted this deal. It’s also great news for anyone who’s been holding onto Pharmacyclics’ shares. Four months ago, they were trading at $131; four years ago they were worth $5.

The reason Pharmacyclics is getting all this attention is its wonder drug, Imbruvica. It’s recently been approved by the US Food and Drug Administration for use against different types of blood cancer, having already been given the green light in over 40 countries, though not yet the UK. Phamacyclics estimates Imbruvica to bring in $1bn in the US alone this year, and it’s expected to be worth billions of dollars to the firm before 2020.

‘The acquisition of Pharmacyclics is a strategically compelling opportunity’, AbbVie boss Richard Gonzalez admitted in a statement. ‘Imbruvica is not only complementary to AbbVie's oncology pipeline, it has demonstrated strong clinical efficacy across a broad range of hematologic malignancies.’ And who said romance was dead?

AbbVie is willing to pay billions over the going rate for Pharmacyclics because it needs a drug like Imbruvica to replace its own, aging cash cow Humira. This arthritis-fighting drug generates most of AbbVie’s revenues, but profits are going to take a big hit once it goes off-patent next year and cheaper ‘biosimilar’ copies flood the market.

It’s M&A madness in the pharmaceutical sector right now, as big firms pair off with smaller ones with attractive ‘pipelines’. AbbVie’s latest purchase follows the Pfizer’s acquisition of Hospira last month and Salix’s sale to Valeant for $10bn. AbbVie itself pulled out of a deal to buy Shire last year after the US changed its rules on ‘tax inversion’.

Given that it has been involved in the development of Imbruvica, you might expect spurned suitor J&J to be upset that Pharmacyclics was taken from under its nose, but the healthcare giant appeared magnanimous in defeat.

‘We’re looking forward to continuing our collaboration with the team at AbbVie to further develop and commercialise this important therapy for patients and their health care teams,’ it said in a statement. No more tears, eh?

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