AbbVie Wins Bidding War but looses

ar132761516213089POST SUMMARY: Pharmacyclics, the publicly traded cancer drug company is being sold to AbbVie for $21 billion. The amount stunned Wall Street, pushed aside one of the giants of the pharmaceutical sector, Johnson & Johnson, and set off a debate about whether AbbVie had paid too much.  In fact, they did pay too much.


AbbVie will own only half of Imbruvica, splitting marketing and profits with Johnson & Johnson, Pharmacyclics’s partner but that’s not the whole story.  In talking with a number of experts in the Oncology field experts  I heard that there was significant doubt that Imbruvica is a “breakthrough” treatment and most agree that there is still a lot of testing that needs to be done with this product.

Cut Spending

According to the NY Times..

In 2011, Gilead Sciences agreed to pay $11 billion to buy a company that was developing what became the hepatitis C drug Sovaldi. Sovaldi recorded an astonishing $10.3 billion in sales last year, its first full year on the market.

By contrast, AbbVie is paying almost twice as much for Pharmacyclics, but it is obtaining a drug that is expected to have about $1 billion in sales this year, its second full year on the market. (AbbVie assumed less risk than Gilead because Imbruvica is already on the market, while Sovaldi was still in clinical trials when Gilead obtained it.)

When is the madness around industry consolidation going to end and when is there going to be a reality check around the price made for biotech’s?  The CEO doesn’t really care because whether he fails or succeeds, he is still going to get a golden parachute, but you can be but that budget, and people are going to get tight to help pay off this debt.