Johnson & Johnson Is Said to Win a Bid for the Cancer Drug Maker Pharmacyclics

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Johnson & Johnson is said to have prevailed in a bidding contest for Pharmacyclics, the developer of a cancer drug that some analysts predict will eventually become one of the best-selling treatments for that disease.

If completed, the deal would be the latest major acquisition in the health care industry and would culminate a remarkable turnaround for Pharmacyclics and its chief executive, Robert W. Duggan. Biopharmaceutical companies like Pharmacyclics have been especially popular takeover targets as drug companies try to stock their pipelines.

A formal announcement could come as soon as this week, people who were briefed on the matter said on Wednesday.

Pharmacyclics had a market value of about $17.5 billion as of Wednesday’s market close, though its shares rose substantially after The Financial Times reported that a deal was near.

The deal would make a takeover of Pharmacyclics the biggest deal for Johnson & Johnson since it acquired Synthes for over $21 billion in 2011.

Based in Sunnyvale, Calif., Pharmacyclics focuses on anticancer drugs. Its product is Imbruvica, a pill used to treat certain blood cancers. A one-month treatment can cost around $9,000 or more.

Pharmacyclics’ revenue was $730 million in 2014, compared with $260 million the previous year.

The acquisition cements a huge financial windfall for Mr. Duggan, the Pharmacyclics chief, who had no experience in pharmaceuticals when he took over the company in 2008, a year in which the stock dipped below $1 a share. It closed on Wednesday at $230.48; Mr. Duggan’s stake is worth about $3.2 billion.

Mr. Duggan had made fortunes investing in and helping run companies as varied as a maker of children’s embroidery sets, a cookie bakery and Computer Motion, a pioneer in robotic surgery, which became part of Intuitive Surgical.

He became an investor in Pharmacyclics in 2004 because he had a son with a brain tumor. The company was developing a drug for brain cancer that eventually failed to win approval from the Food and Drug Administration. Most of the company’s board resigned to allow Mr. Duggan and a slate of directors he proposed to take over.

Mr. Duggan thought about trying to revive the brain cancer drug, but the company instead concentrated on starting clinical trials for a compound it had acquired a few years earlier for only $6.6 million. That compound became Imbruvica, known generically as ibrutinib, which was approved late in 2013. It is used to treat chronic lymphocytic leukemia and some other rarer blood cancers.

Johnson & Johnson already was a partner with Pharmacyclics, helping to develop and market Imbruvica. As part of that partnership, Johnson & Johnson agreed to a standstill, committing to not engage in a hostile bid for Pharmacyclics.

It was not publicly known when that standstill agreement expires, but the agreement was voided if Pharmacyclics was approached by a third party seeking an acquisition.

At least one other company had made an offer for Pharmacyclics in recent days, and that approach might have paved the way for Johnson & Johnson to make its move.

For much of last year, inversions — tax-driven deals that saw American companies acquire overseas rivals — drove a wave of health care deals.

Those deals largely stopped after the Treasury Department changed tax rules. Nonetheless, the pace of health care deals has continued to be brisk.


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