AbbVie Inc (NYSE:ABBV) Inks $21 Billion Deal To Acquire Pharmacyclics (PCYC)

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AbbVie Inc (NYSE:ABBV) has inked a deal to buy cancer drug maker Pharmacyclics, Inc. (NASDAQ:PCYC) for $21 billion in a deal that involves cash and stock. The boards of the two companies have approved the transaction. The acquisition of Pharmacyclics comes after AbbVie failed to close an inversion deal last year.

AbbVie Inc (NYSE:ABBV) agreed to purchase Pharmacyclics for $261.25 per share, a price that pushes the value of the company to $21 billion. The deal requires AbbVie to pay 58% of the acquisition price in cash and 42% through stock. AbbVie will use its available cash and take a debt to fund the cash component of the transaction.

Shares of both AbbVie and Pharmacyclics edged up following the announcement of the deal.

Surprise winner

AbbVie Inc (NYSE:ABBV) emerged as the winner in what was shaping up to be a hot contest for Pharmacyclics. Johnson & Johnson (NYSE:JNJ) was also vying to acquire Pharmacyclics and was at one point reported to be close to a deal.

Pharmacyclics is the maker of the FDA approved blood cancer treatment known as Imbruvica. According to AbbVie’s CEO, Richard A. Gonzalez, their acquisition of Pharmacyclics presents a compelling strategic opportunity. He cited that Pharmacyclics not only has a complementary product in Imbruvica, but the product has also shown promise for label expansion.

$5 billion in peak revenue

Imbruvica carries FDA approval for two blood cancer conditions. The drug generated $548 million in global net sales last year for its first full-year sales. Pharmacyclics projects $1 billion Imbruvica sales this year. Analysts believe that drug could bring in as much as $5 billion in annual sales in the future.

The team at Pharmacyclics also cheered the opportunity to join forces with AbbVie Inc (NYSE:ABBV). According to Pharmacyclics’ CEO, Bob Duggan, their focus will be on creating better care for patients around the world.

The acquisition of Pharmacyclics is expected to close later this year if there are no adverse regulatory issues to slow down the transaction process.

Inversion fails to happen

AbbVie Inc (NYSE:ABBV) last year discarded a $55 billion acquisition deal with Shire PLC (ADR) (NASDAQ:SHPG) after the U.S. regulators increased hurdles for tax inversion transactions. The regulators required U.S. companies to relocate their tax address to take more debt to fund acquisitions of foreign companies instead of using their cash in offshore accounts. The move made inversions less profitable.

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