As AbbVie Eyes Alzheimer's Franchise, Speculation Mounts About a $4.5B Marriage to Acadia
April 8, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Hot on the heels of news that deal-happy AbbVie will pay $21 billion for Pharmacyclics, Inc. , market participants are once again speculating that the company could go shopping again, this time suggesting that AbbVie snap up Acadia Pharmaceuticals for its promising new serotonin inverse agonist, Nuplazid.
The asking prices? Likely a hefty $4.5 billion to sell, said one columnist Wednesday.
Nuplazid (pimavanserin), hold a lot of potential to tackle a variety of diseases, and is indicated for Alzheimer's (ADP) and Parkinson's disease psychosis (PDP), and the lucrative and chronic schizophrenia market. That would make a deal between the two companies a great fit, wrote columnist Georgie Burdwell over at the Motley Fool this morning, because the two firms make “strategic” sense.
“For AbbVie's part, the pharma giant would gain a key asset that is expected to generate upwards of $3 billion in sales for its first indication alone, which would dovetail with the company's growing neuroscience franchise,” wrote Burdwell.
“Specifically, Nuplazid should conceivably create important marketing synergies with AbbVie's newly-approved intestinal gel Duopa, used to alleviate involuntary motor fluctuations in people with advanced Parkinson's disease,” he said.
“Fleshing this idea out further, AbbVie could take advantage of its sales force for Duopa, and their experience with this particular patient population, to help bring Nuplazid to market in a more efficient manner than Acadia could do by itself -- assuming the drug is ultimately approved by the [U.S. Food and Drug Administration (FDA) ].”
Burdwell also pointed out that Nuplazid “would fit nicely” with AbbVie's longstanding aim to create its own Alzheimer's unit, “giving it another strong clinical candidate.”
The same column estimated that if Abbvie followed last year’s formula on pricing, which has been tacking around a 30 percent to 40 percent premium onto buyout prices, Acadia would likely want at least $4.5 billion to sell.
“[That] might simply be too rich for AbbVie after its monstrous deal for Pharmacyclics,” wrote Burdwell. “Then again, this merger should create comparatively more value for shareholders than the Pharmacyclics deal that won't add to earnings until at least 2017.”
The news March 3 that AbbVie (ABBV) will acquire Pharmacyclics (PCYC) for a “staggering” $21 billion is surprising to some Wall Street watchers, said an analyst that week, because the deal only includes the rights to 50 percent of Pharmacyclics blockbuster cancer drug Imbruvica.
In a note titled “Shh...Don't Tell AbbVie--They're Only Getting 1/2 Of Imbruvica,” analyst Joshua Schimmer of Piper Jaffray said that the sale price seems unusually high given the limited rights obtained and AbbVie’s relative $100 billion market capitalization.
“Hope there's no buyer's remorse!,” wrote Schimmer in a note to investors, arguing that Imbruvica is projected to deliver less than $1 billion in revenue in 2015—which means the purchase price represents a 40-times multiple on revenue, considering PCYC has partnered half the asset already with Johnson & Johnson .
“Who, we would note, was apparently not the highest bidder for the company...not that that should tell us something, right?” said Schimmer. “The purchase price would not have seemed reasonable for all of Imbruvica, let alone half of it.”
He pointed out it will take “many years for this deal” to deliver sufficient cash flow to justify such a valuation.
“With numerous competitive BTK inhibitors in development and a rapidly evolving hematologic malignancy field which may include combinations which can drive very deep cure-like responses (and as such substantially reduce the average duration of therapy),” said Schimmer, it seems “challenging” to Piper Jaffray to believe “long-term confidence” in Imbruvica's profile that would justify such a high valuation.
“Time, of course, will be the ultimate judge of that; in the meantime, PCYC does represent one of the strongest emerging growth companies in biotech with the potential to move the EPS CAGR needle on even large-cap companies like ABBV,” wrote Schimmer.
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