AbbVie share price down, to acquire Pharmacyclics for $21 billion

AbbVie Inc. announced it will purchase Pharmacyclics and its blockbuster cancer drug Imbruvica for about $21 million as the Chicago-based company looks to strengthened its presence in oncology.

In a statement issued late Wednesday, AbbVie said it had agreed to pay $261.25 for each share of Pharmacyclics, following the approval of both boards of directors. The price represents a huge premium to Pharmacyclics share value even after it jumped 6.33% on Wednesday and an additional 2.92% to $237.20 before the bell on Thursday.

On Wednesday several medias speculated that the cancer drug maker has reached an agreement with Johnson & Johnson. However, AbbVie made a better last-minute offer in order to take control over the precious Imbruvica drug.

J&J was expected to win the bid war as the worlds largest maker of healthcare products helped Pharmacyclics in the development of Imbruvica and struck a deal to distribute it in 2011.

The drug was approved by the U.S. Food and Drug Administration in 2013 and it is used to threat three different types of blood cancer. Additionally, the company said it could use its expertise in immunology to further improve the drug, which has been approved in more than 40 countries.

Imbruvica generated an international revenue of $548 million in 2014 with sales estimated to hit more than $1 billion during this year. The pill, which is taken orally and is the only drug to have received three breakthrough therapy designations by the FDA, is projected to hit $5 billion to $6 billion in sales at its peak.

The acquisition of Imbruvica will help the company to establish a strong lead over competitors in the hematological oncology market, which AbbVie estimated to be near $24 billion world-wide.

The new drug will also help the company to reduce its reliance on its top-selling Humira drug and better cope with increased competition when the arthritis treatments patent protection expires next year. Imbruvica is protected against “biosimilar” rival products until 2026.

“The acquisition of Pharmacyclics is a strategically compelling opportunity. The addition of Pharmacyclics talented and innovative team will add enormous value to AbbVie,” said Chief Executive Richard Gonzalez.

AbbVie gained 1.09% on Wednesday and closed at $60.27 in New York, marking a one-year increase of 16.82%. The company is valued at $95.03 billion. On Thursday the stock slipped 0.12% during after-hours trading.

According to the Financial Times, the 14 analysts offering 12-month price targets for AbbVie have a median target of $70.00, with a high estimate of $80.00 and a low estimate of $48.00. The median estimate represents a 16.14% increase from the last closing price.