AbbVie has agreed to acquire Pharmacyclics, a pharmaceutical company developing and commercializing small-molecule drugs for treating cancer and immune-mediated diseases, for $21 billion. The cash-and-stock deal has been approved by the boards of director of both companies. It follows AbbVie’s efforts last year to acquire the specialty pharmaceutical company, Shire, for nearly $55 billion, a deal in which AbbVie eventually decided not to pursue.

Pharmacyclics’ key product is Imbruvica (ibrutinib) for treating hematologic malignancies. Imbruvica is a Bruton’s tyrosine kinase (BTK) inhibitor approved for use in four indications to treat three different types of blood cancers, including chronic lymphocytic leukemia, mantle cell lymphoma, and Waldenstrom’s macroglobulinemia. Imbruvica received initial US Food and Drug Administration (FDA) approval in 2013 and received three Breakthrough Therapy designations by the FDA for these indications. (Breakthrough Therapy designations are provided if preliminary clinical evidence indicates the drug may offer a substantial improvement over available therapies for patients with serious or life-threatening diseases). The drug is now is approved in more than 40 countries. Imbruvica works by blocking a specific protein, BTK, which transmits important signals that tell B cells to mature and produce antibodies and is needed by specific cancer cells to multiply and spread. Imbruvica targets and blocks BTK, thereby inhibiting cancer-cell survival and spread.

AbbVie says that the acquisition of Pharmacyclics will strengthen its position in hematological oncology drugs, a market which AbbVie estimates at $24 billion on a global basis. AbbVie said it sees further opportunity to develop Imbruvica for additional indications, including solid tumors, as well for immunology-related uses. Pharmacyclics, headquartered in Sunnyvale, California, also has three product candidates in clinical development and several preclinical molecules in lead optimization.

Under the deal, AbbVie will acquire all of the outstanding shares of common stock of Pharmacyclics through a tender offer, followed by a second-step merger. In the tender offer, AbbVie will offer to acquire all of the outstanding shares of Pharmacyclics’ common stock for $261.25 per share, consisting of cash and AbbVie common stock. Pharmacyclics’ stockholders will be permitted to elect cash, AbbVie common stock, or a combination, subject to proration. The aggregate consideration will consist of approximately 58% cash and 42% AbbVie common stock. The closing of the tender offer is subject to customary closing conditions, including regulatory approvals, and the tender of a majority of outstanding shares of Pharmacyclics’ common stock, and is expected to close in mid-2015. AbbVie will acquire all remaining shares of Pharmacyclics’ common stock that are not tendered in the tender offer through a second-step merger, which will be completed immediately following the tender offer and without a vote of Pharmacyclics’ stockholders.

AbbVie’s decision to acquire Pharmacyclics follows its decision in 2014 to terminate a proposed $54.7-billion bid to acquire Shire. AbbVie’s proposed acquisition of Shire involved a tax inversion structure by which the New AbbVie was to become a holding company for the combined AbbVie and Shire and which was to be incorporated in Jersey, the UK, Shire’s place of incorporation. Through its incorporation in the UK, the AbbVie board expected the transaction to reduce New AbbVie’s effective tax rate to approximately 13% by 2016. A subsequent notice by the US Department of Treasury, however, which signaled a limiting of corporate tax inversions, cast uncertainty as to this practice, so AbbVie decided to terminate the proposed acquisition.

AbbVie’s move to acquire Shire last year and its decision to now acquire Pharmacyclics is based on a strategy to diversify its pipeline and commercial portfolio. The company’s total revenues are heavily reliant on Humira (adalimumab), which accounted for sales of $12.5 billion, or 63%,of the company’s 2014 product sales of $19.879 billion. Humira is indicated for treating rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn's disease, ulcerative colitis, and plaque psoriasis. A key issue for AbbVie in the near-term is the patent expiry for Humira. The United States composition of matter (i.e., the compound) patent covering adalimumab is expected to expire in December 2016, and the equivalent European Union patent is expected to expire in the majority of European Union countries in April 2018.

Pharmacyclics has several key partnerships with other pharmaceutical companies, with the key one being its partnership to develop and commercialize Imbruvica. In 2011, Pharmacyclics formed a collaboration with Janssen Biotech, Inc., (one of the Janssen Pharmaceutical Companies of Johnson & Johnson) to develop and commercialize Imbruvica for oncology and other indications, excluding inflammation and immune-mediated conditions.

In 2014, AstraZeneca partnered with Pharmacyclics in three different collaboration agreements to evaluate Imbruvica in combination with AstraZeneca’s investigational anti-PD-L1 immune checkpoint inhibitor, MEDI4736, and P13 kinase pathway inhibitors. One collaboration is to evaluate Imbruvica in combination with AstraZeneca’s MEDI4735 as a potential treatment for patients with hematologic cancers, including diffuse large B-cell lymphoma (DLBCL) and follicular lymphoma (FL). In another agreement, AstraZeneca partnered with the company to evaluate the combination of Imbruvica and MEDI4736 as a novel combination therapy targeting solid tumors. In the third agreement, the companies partnered to explore separately two different investigational P13 kinase pathway inhibitors in combination with Imbruvica for treating relapsed or refractory DLBLC.

Also, in 2014, Bristol-Myers Squibb partnered with Pharmacylics and Janssen Research & Development LLC to collaboratively evaluate BMS’ PD-1 immune checkpoint inhibitor, nivolumab, in combination with Imbruvica as a potential treatment option for patients with non-Hodgkin lymphoma, including relapsed DLBCL, relapsed FL, and relapsed chronic lymphocytic leukemia.

Source: AbbVie and Pharmacyclics