Pharmacyclics, Inc. (NASDAQ:PCYC) has announced it is being purchased by AbbVie for $21 billion. The deal was struck after a bidding war that involved three companies is a heated match for the pharmaceutical giant. AbbVie will pay $261.25 per share to purchase the cancer-drug maker that is based in Sunnyvale, Calif. The company has developed a breakthrough drug that treats three types of blood cancer and that made them an attractive acquisition target that elicited the bidding war. The final bid by AbbVie beat out a bid of $250 per share offered by Johnson & Johnson. J & J was expected to win the battle of the bids but AbbVie came through with the $265 per share offer at the last minute and J & J did not offer a rebuttal bid.
The competition went several rounds before ending Wednesday night. Johnson & Johnson was seen as the leader since it is already co-marketing the company’s marquee cancer fighter. The bids will be disclosed in the company’s public filings so investors can analyze them and determine their value. AbbVie is looking forward to using the new addition as a strong revenue generating addition to its current portfolio. It should also solidify their cash holdings allowing for M&A opportunity. AbbVie shareholders may not be as enthusiastic as the management as the stock dipped by over 10% when the deal was announced.
AbbVie already has a solid portfolio of drug offerings that include popular products such as Humira, which treats rheumatoid arthritis, Chron’s disease and other ailments. Pharmacyclics, Inc. (NASDAQ:PCYC) is also continuing to develop Imbruvica which treats blood cancers by itself of as part of a combination of drugs. Imbruvica is in clinical stage testing but is showing promise and the company hopes to gain FDA approval in the near future.
As long as the stock stays below the final bid price of $265 it remains efficient and a good value for AbbVie. Anything above that creates a premium price for the buyer and causes the deal to lose perceived value.