Investors skeptical about AbbVie’s Pharmacyclics deal

Investors skeptical about AbbVie’s Pharmacyclics deal

Investors have questioned the $21 billion deal signed by AbbVie Inc to buy cancer drug Imbruvica maker Pharmacyclics Incorporated. AbbVie CEO Richard Gonzales has defended the decision of the company to buy Pharmacyclics as AbbVie faces tough times in 2016 with the expiry of its best-selling arthritis drug’s patent.

Investors and market analysts have questioned the valuation offered to Pharmacyclics ($261.25 per share). AbbVie has beaten two other drug makers to take control of the company. AbbVie had to cancel its $52 billion deal with Shire Plc last year after the U.S. government changed the tax rules to control the companies trying to avoid the higher taxes in the United States.

AbbVie stock declined nearly six percent as investors shared their concerns over the high priced paid by the company for acquisition. AbbVie also announced that its earnings could take a hit in 2015 and 2016 and expects improvement in 2017.

CEO Richard Gonzalez informed investors that Imbruvica will add nearly $7 billion per year to its sales. The experimental cancer drug pipiline is also looking interesting and the company aims to improve its product offering in near future.
In a statement issued to Reuters, Gonzalez said, "We bid against two large, sophisticated pharmaceutical companies. And when disclosures come out, you'll see the spread (between bids). I don't think we'll look embarrassed."

AbbVie registers annual sales worth $13 billion for its blockbuster arthiritis drug Humira. However, the company would need to reduce its dependence on Humira as the patent expires next year. In January, the company stock faced another hit as it informed that its Hepatitis C treatment Viekira Pak would take until the end of 2015 to be on pace for $3 billion in annual sales.

Clearly, AbbVie has to perform in the market to assuage the fears of investors. Investors are looking at the company to introduce its own products as it has its own research and development team.

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