AbbVie's proposed $21 billion acquisition of Pharmacyclics is the latest effort by AbbVie to diversify its product portfolio and pipeline following its decision to terminate its nearly $55 billion acquisition of Shire in 2014. So what will AbbVie gain with the acquisition of Pharmacyclics? DCAT Value Chain Insights takes an inside look.
AbbVie agreed to acquire Pharmacyclics, a pharmaceutical company developing and commercializing small-molecule drugs for treating cancer and immune-mediated diseases, for $21 billion in a cash-and-stock deal, which has been approved by the boards of director of both companies. It follows AbbVie's efforts last year to acquire the specialty pharmaceutical company, Shire, for nearly $55 billion, a deal in which AbbVie eventually decided not to pursue. The deal strengthens AbbVie’s position in oncology drugs, but to what degree? DCAT Value Chain Insights (VCI) examines the implications for AbbVie’s pipeline and commercial products.
Looking at the terms of the deal
Under the deal, AbbVie will acquire all of the outstanding shares of common stock of Pharmacyclics through a tender offer, followed by a second-step merger. In the tender offer, AbbVie will offer to acquire all of the outstanding shares of Pharmacyclics' common stock for $261.25 per share, consisting of cash and AbbVie common stock. Pharmacyclics' stockholders will be permitted to elect cash, AbbVie common stock, or a combination, subject to proration. The aggregate consideration will consist of approximately 58% cash and 42% AbbVie common stock. The closing of the tender offer is subject to customary closing conditions, including regulatory approvals, and the tender of a majority of outstanding shares of Pharmacyclics' common stock, and is expected to close in mid-2015. AbbVie will acquire all remaining shares of Pharmacyclics' common stock that are not tendered in the tender offer through a second-step merger, which will be completed immediately following the tender offer and without a vote of Pharmacyclics' stockholders.
Key product and pipeline gains for AbbVie
Pharmacyclics' key product is Imbruvica (ibrutinib) for treating hematologic malignancies. Imbruvica is a Bruton's tyrosine kinase (BTK) inhibitor approved for use in four indications to treat three different types of blood cancers, including chronic lymphocytic leukemia, mantle cell lymphoma, and Waldenstrom's macroglobulinemia. Imbruvica received initial US Food and Drug Administration (FDA) approval in 2013 and received three Breakthrough Therapy designations by the FDA for these indications. (Breakthrough Therapy designations are provided if preliminary clinical evidence indicates the drug may offer a substantial improvement over available therapies for patients with serious or life-threatening diseases). The drug is now is approved in more than 40 countries. Imbruvica works by blocking a specific protein, BTK, which transmits important signals that tell B cells to mature and produce antibodies and is needed by specific cancer cells to multiply and spread. Imbruvica targets and blocks BTK, thereby inhibiting cancer-cell survival and spread. In 2014, Pharmacyclics posted revenues of $730 million, compared to $260 million for 2013, primarily due to a $479-million increase in Imbruvica net product revenue in 2014, the first full year of the drug's product sales. In its 2014 earnings release, Pharmacyclics said it expects US net product revenue of Imbruvica to be approximately $1 billion.
AbbVie says that the acquisition of Pharmacyclics will strengthen its position in hematological oncology drugs, a market which AbbVie estimates at $24 billion on a global basis. In 2014, Pharmacyclics began 25 Imbruvica trials across a variety of hematologic histologies. AbbVie said it sees further opportunity to develop Imbruvica for additional indications, including solid tumors, as well for immunology-related uses. . Pharmacyclics, headquartered in Sunnyvale, California, also has three product candidates in clinical development and several preclinical molecules in lead optimization.
AbbVie's decision to acquire Pharmacyclics follows its decision in 2014 to terminate a proposed $54.7 billion bid to acquire Shire. AbbVie's proposed acquisition of Shire involved a tax inversion structure by which the New AbbVie was to become a holding company for the combined AbbVie and Shire and to be incorporated in Jersey, the UK, Shire's place of incorporation. Through its incorporation in the UK, the AbbVie board expected the transaction to reduce New AbbVie's effective tax rate to approximately 13% by 2016. A subsequent notice by the US Department of Treasury, however, which signaled a limiting of corporate tax inversions, cast uncertainty as to this practice, so AbbVie decided to terminate the proposed acquisition.
AbbVie's move to acquire Shire last year and its decision to now acquire Pharmacyclics is based on a strategy to diversify its pipeline and commercial portfolio. The company's total revenues are heavily reliant on Humira (adalimumab), which accounted for sales of $12.5 billion, or 63%,of the company's 2014 sales of $19.960 billion (see Table I ). Humira is indicated for treating rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis, and plaque psoriasis. A key issue for AbbVie in the near-term is the patent expiry for Humira. The United States composition of matter (i.e., the compound) patent covering adalimumab is expected to expire in December 2016, and the equivalent European Union (EU) patent is expected to expire in the majority of EU countries in April 2018.
After Humira, other key products for AbbVie are: AndroGel (testosterone gel), a replacement therapy in males for conditions associated with a deficiency or absence of endogenous testosterone due to primary hypogonadism or hypogonadotropic hypogonadism (2014 revenues of $934 million); the antiretroviral agent Kaletra (iopinavir/ritonavir) (2014 revenues of $870 million); Synagis (palivizumab), a drug to prevent of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV) in children at high risk of RSV disease (2014 revenues of $835 million); and Lupron (leuprolide), a drug for the palliative treatment of advanced prostate cancer and for treating endometriosis and fibroid tumors in women and premature puberty in children (2014 revenues of $778 million) (see Table I).
In 2015, AbbVie expects sales performance to be driven by continued strong growth from Humira, the launch of Viekira Pak (ombitasvir/paritaprevir/ritonavir tablets; dasabuvir tablets), its oral, interferon-free regime for treating gentotype 1 chronic hepatitis C virus infections (HCV), and sales growth in certain key products, including Creon (pancrelipase) for treating exocrine pancreatic insufficiency and Duodopa (levodopa/carbidopa intestinal gel) for treating Parkinson's disease, partially offset by a decline in several products due to generic competition, including AndroGel 1% and the remainder of the lipid franchise. Viekira Pak was approved by the US Food and Drug Administration in December 2014. In Europe, where it its marketed as Viekirax + Exviera, the regime is approved for use in patients with genotype 1 and genotype 4 HCV. The European Commission granted marketing authorization for this treatment in January 2015. AbbVie expects to continue to drive strong Humira sales growth in several ways, including expanding the Humira patient base by applying for regulatory approval of new indications for Humira treating conditions such as uveitis and hidradenitis suppurativa. AbbVie will also seek to drive Humira sales growth by expanding its market share and its presence in underserved markets. AbbVie plans to continue making investments in key emerging markets, including Brazil, China, and Russia.
Another key driver of AbbVie's performance in 2015 will be Viekira Pak, which is approved in the United States, the EU, and a number
of other countries around the world. AbbVie expects to support the successful launch of the product in the United States by securing payor positions and
patient access and focusing commercial efforts on penetration in AbbVie-exclusive and parity accounts. The company has launched the product in several
European countries, including Germany and the United Kingdom as well as Canada, and continues to work with various governments around the world to gain
AbbVie has approximately 30 drugs in Phase II or Phase III development. In 2014, it completed several late-stage clinical trials, including one for Zinbryta (daclizumab) for treating the relapsing/remitting form of multiple sclerosis (MS) and registrational programs for an expanded use of Humira for hidradenitis suppurativa. In 2014, AbbVie also augmented its pipeline through strategic licensing and partnering activities, including in-licensing duvelisib, a dual acting PI3 kinase inhibitor currently under investigation for use in a variety of hematological malignancies, from Infinity, and a collaboration with Calico, a new Google-backed life sciences company, to discover, develop, and commercialize new therapies for patients with age-related diseases.
AbbVie is partnered with Infinity to develop and commercialize duvelisib, Infinity's oral inhibitor of phosphoinositide-3-kinase (PI3K)-delta and PI3K-gamma, for treating cancer. Under the agreement, Infinity received an upfront payment of $275 million and is eligible to receive up to $530 million in additional payments in development, regulatory, and commercial milestones, including up to $405 million for the achievement of milestones through the first commercial sale of duvelisib. In the US, the companies will jointly commercialize duvelisib and will share equally in any potential profits. Outside the US, AbbVie will be responsible for the conduct and funding of commercialization of duvelisib, and Infinity is eligible to receive tiered double-digit royalties on net product sales.
Duvelisib is an oral inhibitor of Class I PI3K-delta,gamma. The PI3Ks are a family of enzymes involved in multiple cellular functions, including cell proliferation and survival, cell differentiation, cell migration and immunity. The PI3K-delta,gamma isoforms are preferentially expressed in leukocytes (white blood cells), where they have distinct and mostly non-overlapping roles in immune cell development and function. Targeting PI3K-delta and PI3K-gamma may provide multiple opportunities to develop differentiated therapies for the treatment of hematologic malignancies. Duvelisib has shown clinical activity across a broad range of blood cancers, including indolent non-Hodgkin lymphoma and chronic lymphocytic leukemia.
Under the agreement with Calico, Calico will use its scientific expertise to establish a R&D facility, with a focus on drug discovery and early-drug development. AbbVie will provide scientific and clinical development support and commercial expertise. AbbVie and Calico are each initially providing up to $250 million to fund the collaboration with the potential for both sides to contribute an additional $500 million. Calico will be responsible for research and early development during the first five years and continue to advance collaboration projects through Phase IIa for a 10-year period. AbbVie will support Calico in its early R&D efforts and, following completion of Phase IIa studies, will have the option to manage late-stage development and commercial activities. Both parties will share costs and profits equally.
Pharmacyclics has several key partnerships with other pharmaceutical companies, with the key one being its partnership to develop and commercialize Imbruvica. In 2011, Pharmacyclics formed a collaboration with Janssen Biotech, Inc., (one of the Janssen Pharmaceutical Companies of Johnson & Johnson) to develop and commercialize Imbruvica for oncology and other indications, excluding inflammation and immune-mediated conditions.
In 2014, AstraZeneca partnered with Pharmacyclics in three different collaboration agreements to evaluate Imbruvica in combination with AstraZeneca's investigational anti-PD-L1 immune checkpoint inhibitor, MEDI4736, and P13 kinase pathway inhibitors. One collaboration is to evaluate Imbruvica in combination with AstraZeneca's MEDI4735 as a potential treatment for patients with hematologic cancers, including diffuse large B-cell lymphoma (DLBCL) and follicular lymphoma (FL). In another agreement, AstraZeneca partnered with the company to evaluate the combination of Imbruvica and MEDI4736 as a novel combination therapy targeting solid tumors. In the third agreement, the companies partnered to explore separately two different investigational P13 kinase pathway inhibitors in combination with Imbruvica for treating relapsed or refractory DLBLC.
Also, in 2014, Bristol-Myers Squibb partnered with Pharmacylics and Janssen Research & Development LLC to collaboratively evaluate BMS' PD-1 immune checkpoint inhibitor, nivolumab, in combination with Imbruvica as a potential treatment option for patients with non-Hodgkin lymphoma, including relapsed DLBCL, relapsed FL, and relapsed chronic lymphocytic leukemia. Pharmacyclics also formed a master clinical drug supply agreement with Roche to evaluate the safety, tolerability and preliminary efficacy of Imbruvica in combination with obinutuzumab, in patients with non-Hodgkin's lymphoma and chronic lymphocytic leukemia/ small lymphocytic lymphoma.
| Table I: AbbVie’s Top-Selling Products, 2014
| Proprietary name
(active pharmaceutical ingredient)
| 2014 sales
| Humira (adalimumab)
|| $12.543 billion
|| Rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis, and plaque psoriasis
| AndroGel (testosterone gel)
|| $934 million
|| Replacement therapy in males for conditions associated with a deficiency or absence of endogenous testosterone due to
primary hypogonadism or hypogonadotropic hypogonadism
| Kaletra (Iopinavir/ritonavir)
|| $870 million
|| In combination with other antiretroviral agents for the treatment of HIV-1 infection in adults and pediatric patients (14 days and older).
| Synagis (palivizumab)
|Prevention of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV) in children at high risk of RSV disease.
| Lupron (leuprolide)
|| $778 million
|| Palliative treatment of advanced prostate cancer, endometriosis and fibroid tumors in women, and premature puberty in children.
| Synthroid (levothyroxine)
|| $709 million
| Ultane (sevoflurane)
|| $550 million
| Creon (pancrelipase)
|| $516 million
|| Exocrine pancreatic insufficiency
due to cystic fibrosis, chronic pancreatitis, pancreatectomy, or other conditions.
| Duodopa (levodopa/carbidopa intestinal gel)
|| $220 million
|| Parkinson's disease
| Viekira Pak (ombitasvir/paritaprevir/ritonavir tablets; dasabuvir tablets)
|| $48 million
|| Chronic hepatitis C infection.
| Dyslipidema products*
|| $328 billion
| Other products
|| $1.629 billion
| Dylipidema products include TriCor (fenofibrate), Trilipix (fenofibric acid), and Niaspan (niacin).
Source: AbbVie (2014 10-K Annual Filing, US Securities and Exchange Commission).