Pharmaceutical research-based company AbbVie Inc (NYSE:ABBV) has decided to purchase US-based biopharmaceutical company Pharmacyclics, Inc. (NASDAQ:PCYC). This comes on the heels of Pharmacyclics’ cancer drug Imbruvica being approved. This purchase is reported to be a massive sum of $21 billion. This is the equivalent of $261.25 per share. This figure only represents half to the valuation of Pharmacyclics, as the other 50% is owned by Johnson and Johnson. This can now be seen as a shrewd move by J&J as its investment came before Pharmacyclics the cancer drug, Imbruvica was approved. When put together, it puts the value of Pharmacyclics at $40 billion.
The $21 billion deal by Pharmacyclics-AbbVie in now the ninth-largest in healthcare history as far as M&A transaction is concerned. This eclipsed the acquisition of Warner-Lambert in 2000 worth $90 billion by Pfizer Inc. (NYSE:PFE). To put this deal into context, in terms of biotech, the only deal that was larger than this deal was the $47 billion purchasing of Genentech by Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY).
Michael Lee, biotech analyst at RBC Capital, reasons that ABBVie is forking out well in excess of the projected sales for Imbrivica. This projected sale currently puts Imbruvica’s peak sale at 6 billion. Recent trends in the market such as Amgen (AMGN) purchasing Onyx Pharma for $10 billion acquisition. This purchase led to a loss of up to 5 times the sale forecast of Kyprolis’ peak. Another example that suggested this maybe a not so wise move was the purchasing of Genzyme by Sanofi (SNY) for $20 bn. This also was approximately five times more than what was achieved in peak sales.
It is for these reasons that it can said AbbVie panicked by pushing the button, with this acquisition. This in an effort to combat the ominous expiration of its patent for Humira. To put this into context, Humira accounted for 60% of AbbVie Inc (NYSE:ABBV)’s overall revenue last year.
Only time will determine the true cost of this deal.