Analyst Calls AbbVie (ABBV) Takeover of Pharmacyclics (PCYC) 'Desperate'

AbbVie (NYSE: ABBV) shares weakened Thursday after it announced a surprise deal to acquire Pharmacyclics (NASDAQ: PCYC) for $21 billion, or $261.25 per share. Previous rumors suggested Johnson & Johnson (NYSE: JNJ) would acquire the company.

In the view of many, including Bernstein's Geoffrey C. Porges, the amount paid by AbbVie raises eyebrows, and is a sign of desperation.

"Doubling down in hematology/oncology makes some sense for AbbVie, and they are clearly in a hurry to deploy their (temporary) cash flows from HCV and Humira to secure early cycle growth assets to offset the potential erosion of much of their existing portfolio in the future. AbbVie now have two halves of two of the most promising drugs in the hematology category, in Imbruvica and ABT199," said Porges.

"What doesn't really make sense to us is AbbVie prevailing over PCYC's partner and natural buyer, JNJ to secure PCYC, and paying the price that they did for the asset. We believed that JNJ were the only buyer able to secure the operational advantage of full control by buying out their partner, and JNJ, more than any other buyer, would have been able to maximize the synergies by reducing the product's support to a single commercial organization," continued the analyst.

Porges added, "Our analysis suggests that the real value of PCYC in the hands of an acquirer without significant product combination synergies was is in the $220-230 range; the premium here may be explained by AbbVie's desperation, or their view of the potential of controlling, studying, developing and commercializing Imbruvica alongside ABT199 and/or duvelisib."

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