J&J Loses Its Bid to Buy California-Based Cancer Drugmaker Pharmacyclics

NEW BRUNSWICK, NJ–Johnson & Johnson (J&J), the world’s largest maker of healthcare products, was close to buying Sunnyvale, California-based cancer drugmaker Pharmacyclics, but came up short in a highly competitive bidding war.

On March 4, AbbVie announced it had agreed to buy Pharmacyclics for about $21 billion.

According to the Financial Times, which did note that the talks with J&J "could still fall apart," the J&J offer was expected to value Pharmacyclics near its $17.5 billion market value or at a premium.

J&J’s interest in Pharmacyclics made sense – it already owns half the rights to Imbruvica and, in 2011, bought that 50 percent cheap, reportedly paying less than $1 billion with only 150 million up front.  

But surprisingly, it passed on buying the other half. 

“A deal would follow years of extensive collaboration between New Jersey-based J&J and California-based Pharmacyclics in developing a drug to treat blood cancer,” wrote the Financial Times.

In a partnership, J&J and Pharmacyclics scored expanded approval from U.S. health regulators in January for a breakthrough drug called Imbruvica, which helps fight a rare form of cancer that begins in the body's immune system.

The anticancer drug is a pill used to treat certain blood cancers. A one-month treatment can cost $9,000 or more, according to the New York Times.  It is co-marketed in the United States and abroad by J&J and Pharmcyclics.

AbbVie reportedly fought J&J, and one other not-yet-identified suitor, to the very end in hopes of picking up the hot-selling Imbruvica. The pharma merger and acquisition climate is a buyers market – only now AbbVie may have a difficult time convincing investors it’s worth $21 billion.

Pharmacyclics is a maker of biopharmaceuticals – products extracted from or semisynthesized from biological sources including: vaccines, blood, blood components, and allergenics.

In a conference call, AbbVie CEO Richard A. Gonzalez said Imbruvica will eventually bring the company $7 billion in annual sales – ahead of some Wall Street estimates – and boost a pipeline of experimental cancer drugs that AbbVie hopes will be worth more than $8 billion in combined sales each year.

AbbVie’s shares fell almost 6% by the end of trading on March 6.

"AbbVie is taking a hit today because of the dilution and because they look a little desperate to do a deal," Chris Pultz, portfolio manager for Kellner Merger Fund, told Reuters News Service two days earlier.

“AbbVie lost a little credibility’ by paying top dollar for Pharmacyclics,” wrote Reuters.

But in a conference call, Gonzalez said Imbruvica will eventually bring the company $7 billion in annual sales and boost a pipeline of experimental cancer drugs that AbbVie hopes will be worth more than $8 billion in combined sales each year, and that made it worth fighting for.

"It was a highly competitive multi-round process," Gonzalez was quoted as telling Reuters.

"We bid against two large, sophisticated pharmaceutical companies. And when disclosures come out, you'll see the spread (between bids). I don't think we'll look embarrassed."

In a statement released late on March 4, J&J 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.”