AbbVie is set to spend approximately $10 billion to acquire a potential blockbuster cancer treatment, aiming to bolster its portfolio amid challenges from cheaper alternatives impacting its best-selling drug, Humira.
The pharmaceutical giant will pay $31.26 in cash for each share of ImmunoGen, representing a substantial 95% premium over the closing price of ImmunoGen’s stock on Wednesday at $16.06.
The centerpiece of this deal is Elahere, an ovarian cancer treatment developed by ImmunoGen. AbbVie anticipates that Elahere could generate billions of dollars in annual sales, contributing to long-term revenue growth. However, executives caution that the returns on this investment might take time to materialize, expecting the deal to be dilutive to earnings until 2027.
Elahere received accelerated approval from U.S. regulators last year, and AbbVie is now seeking full approval from the Food and Drug Administration (FDA) while eyeing expansion into other markets.
In the third quarter of this year, Elahere brought in $105.2 million in revenue, nearly constituting ImmunoGen’s total sales.
AbbVie’s strategic move with this acquisition aims to expedite its presence in the solid tumor treatment market. Elahere is identified as the most significant aspect of this deal, and company leaders envision substantial sales growth, foreseeing a notable inflection point in the early 2020s.
AbbVie has been grappling with increased competition for Humira, its leading autoimmune disease treatment. Despite generating $21 billion in total revenue last year, accounting for about 36% of AbbVie’s total revenue, Humira has faced a 31% decline in U.S. sales during the first nine months of this year.
The acquisition has received approval from the boards of both AbbVie and ImmunoGen. The transaction is expected to conclude by mid-2024, pending approval from ImmunoGen shareholders and regulatory authorities.
Following the announcement, shares of ImmunoGen Inc., based in Waltham, Massachusetts, surged over 80%, reaching above $29 in mid-morning trading on Thursday. AbbVie Inc., headquartered in North Chicago, Illinois, experienced a 2% increase in stock value, reaching $141.26, while broader market indexes showed mixed trends.
Gary P Hernal started college at UP Diliman and received his BA in Economics from San Sebastian College, Manila, and Masters in Information Systems Management from Keller Graduate School of Management of DeVry University in Oak Brook, IL. He has 25 years of copy editing and management experience at Thomson West, a subsidiary of Thomson Reuters.
