Market Overview

Here's Why AbbVie's Pharmacyclics Deal Will Boost Revenue 5%


AbbVie Inc.'s (NYSE: ABBV) $21 billion deal Wednesday to acquire Pharmacyclics, Inc. (NASDAQ: PCYC) will expand its presence in the market for cancer treatments and add to its revenue, an analyst said Thursday.

AbbVie changed hands recently down 2.3 percent to $58.85; Pharmacyclics jumped more than 10 percent to $254.91.

Morgan Stanley's David Risinger expects the acquisition will boost AbbVie's 2016 revenue by 5 percent to $26.5 billion, and by a further 13 percent in 2020.

The cash and stock deal represents a little more than 20 percent of AbbVie's market capitalization.

Risinger, who didn't offer comment on merits of the transaction, noted that Pharmacyclics' sole product, Imbruvica, is co-marketed by Johnson & Johnson (NYSE: JNJ).

Johnson & Johnson had been considered the lead bidder for Pharmacyclics as recently as Tuesday, when unconfirmed reports surfaced that a signed acquisition agreement was sent for unveiling at around $18 billion.

U.S. sales of Imbruvica go to Pharmacyclics, while Johnson & Johnson gets revenue from sales of the drug outside the U.S. and pays 60 percent of development costs, according to Risinger.

The drug is approved in the U.S. for two forms of cancer while it's under study for seven additional indications.

Johnson & Johnson expects to continue its collaboration with AbbVie, according to reports.

Latest Ratings for ABBV

Dec 2020SVB LeerinkMaintainsOutperform
Nov 2020Morgan StanleyMaintainsOverweight
Nov 2020BMO CapitalInitiates Coverage OnOutperform

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