AbbVie Wins Pharmacyclics

Everybody hates a winner, it seems. Last week’s announcement that AbbVie Inc. (NYSE: ABBV) won the bidding war for Pharmacyclics Inc. (NASDAQ: PCYC) had many analysts shaking their heads in disbelief. The consternation was over the price, which at $261.25 per share for PCYC came to approximately $21 billion, about 27.8x revenue and 165.6x EBITDA. The real prize for AbbVie is Imbruvica, an effective treatment against a form of leukemia and other diseases that Pharmacyclics is marketing under an agreement with Johnson & Johnson (NYSE: JNJ). J&J and Pfizer (NYSE: PFE) were also in the final round of bidders. AbbVie’s shares fell nearly 6% on March 5, the day after the announcement, despite AbbVie CEO Richard Gonzalez’s assurances that Imbruvica can generate sales of $7 billion, after J&J takes its cut.



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