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.”

Reporter at New Brunswick Today | dschatz@nb.today

Dave is an award-winning business reporter who has authored over 200 articles for New Brunswick Today.