Advertisement

SKIP ADVERTISEMENT

AbbVie to Pay $21 Billion for Pharmacyclics, Maker of a Promising Cancer Drug

A researcher at Pharmacyclics in Sunnyvale, Calif.Credit...Jim Wilson/The New York Times

AbbVie announced late Wednesday that it had agreed to buy Pharmacyclics, maker of a cancer drug that some analysts predict will eventually become one of the best-selling treatments for the disease, for about $21 billion.

The deal is the latest in the health care industry, which has been rife with transactions as drug makers seek to refill their product pipelines with new treatments. For the past week, the lead bidder for Pharmacyclics was considered to be Johnson & Johnson.

A deal between AbbVie and Pharmacyclics would be a remarkable turnaround for Pharmacyclics and its chief executive, Robert W. Duggan.

Under the terms of the deal, AbbVie will pay $261.25 per share in cash and stock. That represents a 13 percent premium to Wednesday’s closing price.

Based in Sunnyvale, Calif., Pharmacyclics focuses on anticancer drugs. Its product is Imbruvica, a pill used to treat certain blood cancers. A one-month treatment can cost $9,000 or more.

Pharmacyclics’ revenue was $730 million in 2014, compared with $260 million the previous year.

The acquisition cements a huge financial windfall for Mr. Duggan, the Pharmacyclics chief, who had no experience in pharmaceuticals when he took over the company in 2008, a year in which the stock dipped below $1 a share. It closed on Wednesday at $230.48; Mr. Duggan’s stake is worth about $3.2 billion.

Mr. Duggan had made fortunes investing in and helping run companies as varied as a maker of children’s embroidery sets, a cookie bakery and Computer Motion, a pioneer in robotic surgery, which became part of Intuitive Surgical.

He became an investor in Pharmacyclics in 2004 because he had a son with a brain tumor. The company was developing a drug for brain cancer that eventually failed to win approval from the Food and Drug Administration. Most of the company’s board resigned to allow Mr. Duggan and a slate of directors he proposed to take over.

Mr. Duggan thought about trying to revive the brain cancer drug, but the company instead concentrated on starting clinical trials for a compound it had acquired a few years earlier for only $6.6 million.

That compound became Imbruvica, known generically as ibrutinib, which was approved late in 2013. It is used to treat chronic lymphocytic leukemia and some other rarer blood cancers.

Net sales of Imbruvica in 2014 were $548 million, with $492 million of that in the United States, Pharmacyclics said. Mr. Duggan predicted that sales in the United States would reach $1 billion this year. And some analysts predict that the drug will eventually reach $3 billion or more in annual sales.

The deal is the first by AbbVie since its aborted attempt last year to buy Shire, an Ireland-based drug maker. That transaction — a so-called inversion, in which AbbVie would have moved its corporate residence abroad — was driven in large part by a desire to lower its taxes.

Those deals largely stopped after the Treasury Department changed tax rules. Nonetheless, the pace of health care deals has continued to be brisk.

AbbVie needs to diversify because it now gets almost two-thirds of its sales from the drug Humira, which is used to treat various autoimmune diseases and is the world’s best-selling medicine. But Humira will lose patent protection and is expected to face competition from near-generic copies known as biosimilars in the next few years.

The company right now is not strong in cancer treatment offerings, but it is trying to create a bigger presence in that area. It is developing a drug called ABT-199 with Genentech that would treat the same types of blood cancers as Imbruvica, making it a potential competitor. However, there is some early evidence that the drugs could be used together.

Still, there are likely to be questions raised about whether AbbVie is paying too much for what is essentially half ownership of a single drug.

Johnson & Johnson has codeveloped Imbruvica with Pharmacyclics and co-markets it in the United States and sells it abroad.

In a statement late on Wednesday, Johnson & Johnson said: “We’re looking forward to continuing our collaboration with the team at AbbVie to further develop and commercialize this important therapy for patients and their health care teams.”

Morgan Stanley and the law firm Wachtell, Liton, Rosen & Katz advised AbbVie. Centerview Partners, JPMorgan Chase and the law firm Wilson Sonsini Goodrich & Rosati advised Pharmacyclics.

David Gelles contributed reporting.

A version of this article appears in print on  , Section B, Page 2 of the New York edition with the headline: AbbVie to Pay $21 Billion for Pharmacyclics, Maker of a Best-Selling Cancer Treatment. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT