Pharmacyclics Inc.’s (PCYC) shares were up 16.9% after a report from Bloomberg suggested that the company is exploring its options including a potential sale and has attracted interest from the likes of Johnson & Johnson (JNJ) and Novartis (NVS).
The Bloomberg report stated that Pharmacyclics could be valued at $17 billion to $18 billion. An offer of $18 billion would represent a premium of approximately 25% over Pharmacyclics’ undisturbed market value on Feb 24.
Imbruvica Makes Pharmacyclics an Acquisition Target?
Imbruvica is Pharmacyclics’ sole marketed product. The product gained FDA approval in January this year for all lines of therapy for the treatment of patients suffering from Waldenstrom's macroglobulinemia (WM). This makes Imbruvica the first and only FDA approved treatment for this indication.
Imbruvica is also approved for three other indications. Imbruvica is approved for the treatment of patients with mantle cell lymphoma (MCL) and chronic lymphocytic leukemia (CLL) who have received at least one previous therapy and for CLL patients with a deletion of the short arm of chromosome 17. We are encouraged by the label expansion of Imbruvica.
Meanwhile, Pharmacyclics is working on expanding Imbruvica’s label further and is evaluating the drug for indications like small lymphocytic lymphoma and diffuse large B-cell lymphoma among others.
In the fourth quarter of 2014, Imbruvica’s net product revenues in the U.S. rose 31% sequentially to $185 million. For 2015, the company continues to expect Imbruvica U.S. net product revenues to be approximately $1 billion, representing a year-over-year jump of 103%. The increase is expected to be driven by higher market penetration of the four approved indications.
Why are Johnson & Johnson and Novartis Interested?
We note that Pharmacyclics has an agreement with Janssen Biotech, a Johnson & Johnson company, for Imbruvica. While Johnson & Johnson markets Imbruvica in ex-U.S. territories, the two companies jointly commercialize Imbruvica in the U.S. If it acquires Pharmacyclics, Johnson & Johnson would enjoy the full sales of Imbruvica in the U.S.
Meanwhile, Novartis is facing generic competition for several products including Diovan monotherapy. Genericization of branded drugs impacted the company’s 2014 revenues by $2.4 billion. Going forward, the company will continue to face generic competition for other blockbuster products including Gleevec.
We note that Novartis has been looking to strengthen its oncology portfolio for some time now. Last year, the company entered into an agreement to acquire oncology products from GlaxoSmithKline (GSK). Given this, the addition of Imbruvica will provide the company’s revenues a much needed boost and will be in line with its strategy of expanding its oncology portfolio.
The health care sector has been witnessing a flurry of mergers and acquisitions and licensing deals over the past few quarters. These deals show no signs of slowing down. We believe that investors will eagerly await further updates on a potential Pharmacyclics takeover.
Pharmacyclics holds a Zacks Rank #2 (Buy). Another well-ranked stock in the health care space include Theravance, Inc. (THRX) carrying a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment