AbbVie (ABBV) to Acquire Cerevel Therapeutics (CERE) for $8.7B

AbbVie ABBV has announced a definitive agreement to acquire neuroscience drugmaker, Cerevel Therapeutics CERE, for $8.7 billion. This marks its second acquisition announcement in less than a fortnight.

The acquisition will strengthen AbbVie’s neuroscience pipeline by adding CERE’s novel pipeline candidates being studied across a range of psychiatric and neurological disorders, including schizophrenia, Parkinson's disease (PD) and mood disorders.

Per the deal terms, AbbVie will pay Cerevel Therapeutics $45 per share in cash, which adds up to a total equity value of approximately $8.7 billion. The purchase price of $45 represents a premium of almost 22% on Cerevel’s closing price of $36.93 on Dec 6. AbbVie/Cerevel made the merger announcement after market on Dec 6

Cerevel’s stock was up 15.8% in after-hours trading on Dec 6. The stock is up 33.2% year to date against the industry’s 9.1% decline.

 

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Image Source: Zacks Investment Research

 

So far this year, AbbVie’s stock has lost 9.7% against the industry’s 5.0% rise.

 

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Image Source: Zacks Investment Research

 

Cerevel’s lead pipeline candidate is emraclidine, a M4-selective positive allosteric modulator (PAM), which is being evaluated in two phase II studies for treating schizophrenia. In a phase I study, the next-generation antipsychotic has shown promising efficacy and safety in treating schizophrenia patients. Emraclidine also holds the potential to be developed for Alzheimer's disease psychosis.

Cerevel’s other key pipeline candidates are tavapadon, a first-in-class dopamine D1/D5 selective partial agonist, being developed in phase II for PD and darigabat, an α2/3/5-selective GABAA receptor PAM, in phase II for epilepsy and panic disorder. Data from studies on emraclidine, darigabat and tavapadon are expected in 2024.

The transaction is expected to close in mid-2024, subject to shareholder and regulatory approval. The boards of directors of both companies have approved the transaction.

AbbVie has a strong portfolio of neuroscience products, which boasts some key products like Botox (therapeutics) and Vraylar. In the first nine months, AbbVie clocked almost $5 billion in sales from its neuroscience drugs. Cerevel's clinical-stage pipeline candidates, which AbbVie believes have multibillion-dollar sales potential, complement its marketed neuroscience drugs portfolio, representing a significant long-term growth opportunity for AbbVie. However, some analysts found the move “bold” as AbbVie opted to buy Cerevel now rather than after top-line data read-outs in 2024, which would have been major catalysts for the stock.

On Nov 30, AbbVie announced a definitive agreement to acquire cancer biotech ImmunoGen IMGN for $10.1 billion, including its new ovarian cancer drug, Elahere. Elahere (mirvetuximab soravtansine) is a first-in-class antibody-drug conjugate (ADC) that was granted accelerated approval by the FDA in November 2022 for the treatment of platinum-resistant ovarian cancer (PROC). 

Elahere is the first and only ADC approved for ovarian cancer. Immunogen recorded $212 million in Elahere product sales in the first nine months of 2023, which exceeded management’s expectations.

The purchase price for the deal was $31.26 per share in cash, which was quite a rich premium of almost 95% on Immunogen’s closing price of $16.06 on Nov 29.

Zacks Rank & A Key Pick

AbbVie and Cerevel have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

A better-ranked large drugmaker worth considering is Novo Nordisk NVO, which has a Zacks Rank #1 (Strong Buy) at present.

Estimates for Novo Nordisk’s 2023 earnings per share have increased from $2.51 to $2.63 over the past 60 days. Estimates for 2024 have jumped from $2.95 per share to $3.12 over the same timeframe. NVO’s stock has surged 44.3% year to date.

Earnings of Novo Nordisk beat estimates in two of the last four quarters, missed in one and matched estimates in one, delivering an earnings surprise of 0.58% on average.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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