Analysts pelted Abbvie Inc. with questions after its disclosure of the surprise $21 billion deal to take over Pharmacyclics Inc., but most agreed that the asset Imbruvica (ibrutinib) is well worth having aboard. The mix of cash and equity has Chicago-based Abbvie laying down $361.25 per share.

"You can go out and buy a biotech company that has a very exciting asset, and it's in phase III as an example, and you think you know what's going to happen," said CEO Richard Gonzalez. "But you never really know until you're done. You can go through the regulatory process and never be 100 percent sure."

Imbruvica, on the other hand, is "an asset that's on the market today. We have lots of experience – or they have lots of experience with it, from the standpoint of having it in 15,000 patients. It's safe. It's efficacious. We know we can expand it."

Pharmacyclics' stock (NASDAQ:PCYC) closed Thursday at $254.22, up $23.74, or 10.3 percent.

Cleared for use in four indications that involve three blood cancers, Imbruvica is partnered with Johnson & Johnson (J&J), of New Brunswick, N.J., which speculators had believed might acquire Sunnyvale, Calif.-based Pharmacyclics. The firm runs a 50/50 partnership with J&J, with the latter entirely responsible for selling Imbruvica outside the U.S.; inside the U.S., the pair share sales duties. Pharmacyclics handles the programs for chronic lymphocytic leukemia and diffuse large B-cell lymphoma, while J&J is in charge of follicular lymphoma – the larger indication. Abbvie said three bidders were at the table in the deal, and onlookers guessed the other two likely were J&J and Basel, Switzerland-based Novartis AG.

Of particular interest in the Abbvie buyout was the matter of how the Bruton's tyrosine kinase (BTK) inhibitor will fit with the hematological oncology roster held by Abbvie, which includes ABT-199, a B-cell lymphoma 2 inhibitor partnered with Roche AG, of Basel, and duvelisib, a phosphoinositide-3-kinase (PI3K)-delta and PI3K-gamma inhibitor partnered with Cambridge, Mass.-based Infinity Pharmaceuticals Inc. (See BioWorld Today, Sept. 4, 2014.)

Wells Fargo analyst Matthew Andrews said that "while this will ultimately be driven by phase III clinical data in various indications, we believe all three novel oral drugs should be able to co-exist and find respective important roles in various hematologic malignancies either as monotherapy, in combination with standard-of-care agents, or possibly in novel/novel oral combinations." For its part, Pharmacyclics' management "clearly has maximized shareholder value with this potential transaction," Andrews wrote in a research report. The deal, approved by the boards of both companies, is expected to close in the middle of this year.

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, shareholders can choose cash, Abbvie common stock or a combination, subject to proration. The entire agreement comprises about 58 percent cash and 42 percent stock. Pharmacyclics shares not included in the tender offer will be acquired in a step-merger without a vote of the companies' stockholders. Abbvie said it will fund the buyout with existing cash, new debt and stock.

Gonzalez fielded questions about balancing the collaborations for the hematology/oncology therapies. "At the end of the day, I think in all of these partnerships you manage them to be able to maximize the value and maximize the benefit for patients, because there is a strong linkage between those two in our business. When we can deliver a therapy that does significantly improve standard of care for patients, typically the commercial performance is in line with that value proposition. And I think most partnerships will always work in a way where they certainly won't stand in the way of that happening. Frankly, they'll encourage that to happen, to try to be able to create treatment approaches that maximize the patient experience and the patient result, so we're not concerned about our ability to be able to manage through that. These are two fine organizations that I think have alignment around those objectives, just like we do." He added that Abbvie is "not doing this to create any kind of synergies. In fact, I'd say the opposite. We will set up Pharmacyclics as a center of excellence and build upon it."

Speaking of the phase III blood cancer drug duvelisib, Michael Severino, chief scientific officer, said "hematologic malignancies and particularly B-cell malignancies are a broad and complicated space in terms of tumor types, subtypes, different activation patterns, different drivers of the malignant cells. We view the three assets that we have as being very promising, novel and giving us a wide range of abilities to explore the best therapy in each of those tumor types. It's a little bit early to speculate exactly which will play in exactly what subtype, but I think broadly speaking with this set of assets we will be able to explore a very wide range of tumors, drive deep responses, and we believe make meaningful differences in the standard of care."

ACHILLION EFFECT

Gonzalez referenced ABT-199, which has reached phase II in acute myelogenous leukemia and phase III in chronic lymphocytic leukemia, saying the Pharmacyclics deal did not signal a loss of faith. "I'd say there are no changes at all in our assumptions or enthusiasm or excitement in ABT-199," he said. "Our excitement continues to grow. Everything we see about it confirms what we had hoped."

Laura Schumacher, vice president of business development, took up the issue of Federal Trade Commission rules. Abbvie "see[s] these assets as very complementary so, as we look at this transaction and these assets, we really don't anticipate any issues with respect to antitrust," she said. RBC Capital Markets analyst Michael Yee agreed. "It's rare for biopharma deals to fall through based on antitrust issues, and it's even tougher to determine the validity of this issue when the two other agents are not even approved [or] on the market yet. We think there are likely clauses in each partnership that allows flexibility to invite new molecules and, long-term, these agents may benefit by being used in combination."

Piper Jaffray analyst Joshua Schimmer questioned the size of the deal. The agreed-upon price, "relative to Abbvie's current $100 billion market cap, makes one wonder why it felt a need to pay so much," wrote Schimmer in a research report. Yee saw valuation as "a separate debate, and it looks like Abbvie has bold promises to deliver on," he remarked. Abbvie said Imbruvica should sell north of $7 billion for the firm's share of U.S. and ex-U.S. revenues, and that end-user sales of $11 billion to 12 billion could be reasonable, asserting that the 2019 accretion estimate is based on the assumption of sales well over $4 billion. "Based on our model, many optimistic assumptions such as high penetration, long duration of therapy, multiple indications, multiple lines of therapy are required to meet these uber-bullish numbers," Yee wrote in a report.

In any case, new bidders seem unlikely to surface, in Yee's view, though prospects include Celgene Corp. and Gilead Sciences Inc. The former "has growth and faith in its 20-plus existing partners" and the latter already has a BTK deal. In late December, Ono Pharmaceutical Co. Ltd., of Osaka, Japan, and Gilead entered an exclusive license agreement to develop and commercialize ONO-4059, Ono's oral BTK inhibitor for B-cell malignancies and other diseases. Gilead paid an undisclosed up-front fee and pledged more money based on the achievement of development, regulatory and commercial milestones.

Word of the deal put an early day chill on Achillion Pharmaceuticals Inc.'s shares, as Gonzalez said during the conference call that he "wouldn't anticipate that over the short to medium term there would be another acquisition of this size." Shares of the New Haven, Conn.-based firm (NASDAQ:ACHN) closed Thursday at $10.99, down 64 cents, after falling as low as $10.12, apparently based on the idea that Abbvie is turning away from hepatitis C virus assets such as those held by Achillion in favor of oncology. Just after he made the prediction, though, Gonzalez said Abbvie "continue[s] to have a tremendous amount of financial capacity to be able to do business development."

Abbvie's stock (NYSE:ABBV) ended Thursday at $56.86, down $3.41.