Just How Expensive Is the Pharmacyclics Buyout?
News finally broke late Wednesday that there was an official buyout of Pharmacyclics in the works by AbbVie for $21 billion.
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Pharmacyclics Inc. (NASDAQ: PCYC) has seen its stock surge in the past week as rumors swirl about a potential acquisition. News finally broke late Wednesday that there was an official buyout in the works by AbbVie Inc. (NYSE: ABBV) for $21 billion.
Note that this is AbbVie’s first major deal attempt since last fall, when it attempted a takeover of Shire PLC (NASDAQ: SHPG) for $55 billion.
Some analysts saw this coming and issued calls leading up to the announcement. Others are just reacting to it. 24/7 Wall St. has included information from the Credit Suisse report and tagged a few other calls that have been made.
Credit Suisse detailed that it likes AbbVie’s diversification strategy, which it indicated in its “surprising” $21 billion acquisition of Pharmacyclics and its blood-cancer drug Imbruvica. However, the brokerage firm is bearish on the price.
It is not hard to be bearish on the price, considering Pharmacyclics shares have increased 88.5% year-to-date. Looking back even further, this was just a $10 stock in 2011.
The investment bank calls the deal size “manageable” and possibly “highly accretive” by 2017. But the price, given Pharmacyclics’ 50-50 profit split with Johnson & Johnson (NYSE: JNJ) on Imbruvica, “seems to imply some degree of success for Imbruvica in other indications where there is limited human clinical data.”
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In the week leading up to the announcement, these analysts made calls when the buyout was only suspected:
- WallachBeth Capital downgraded shares to Hold from Buy on February 26.
- Goldman Sachs downgraded Pharmacyclics to Neutral from Buy on February 27.
- Wedbush downgraded shares to Neutral from Outperform with a price target of $234, up from $225, on March 3.
A couple of analysts weighed in after the announcement:
- BTIG Research downgraded Pharmacyclics to Neutral from Buy.
- RBC Capital maintained a Sector Perform rating and raised its price target to $261 from $145.
Shares of Pharmacyclics were up about 10.6% at $254.84 Thursday morning. The stock has a consensus analyst price target of $196.95 and a 52-week trading range of $82.51 to $255.52.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
