AbbVie Inc [NYSE:ABBV] said on Thursday that the company will acquire Pharmacyclics Inc [NASDAQ:PCYC] for about U.S. $21 billion, giving it access to top-selling chronic lymphocytic leukemia (CLL) drug Imbruvica, and boost its peak annual sales of cancer drugs to over $15 billion in a few years. AbbVie Chief Executive Richard Gonzalez said in a statement that their company could reap more than $7 billion alone in peak annual sales from Imbruvica.

AbbVie’s oncology and immuno-oncology drugs in the pipeline, include ABT-199/GDC-0199, co-developed with Genentech, is a selective inhibitor of B-cell lymphoma-2; Veliparib (ABT-888) is a potential anti-cancer drug for brain metastasis cancer, breast cancer, non-small cell lung cancer and other cancers; Elotuzumab, co-developed with with Bristol-Myers Squibb, is a humanized monoclonal antibody which is under phase III clinical investigation in relapsed multiple myeloma; ABT-414; ABT-700; ABT-767; ABT-165; and ABBV-399.

Since December 2011, Pharmacyclics, a Sunnyvale, CA-based biotech company, has partnered with Janssen Biotech, a unit of Johnson & Johnson [NYSE:JNJ] to develop and market the tyrosine kinase inhibitor PCI-32765, or Ibrutinib, for which Johnson & Johnson paid 60% of the development costs. Pharmacyclics is also partnering with Amgen [NASDAQ:AMGN], AstraZeneca [NYSE:AZN], Bristol-Myers Squibb [NYSE:BMY], Celgene [NASDAQ:CELG] and Roche [NYSE:RHHBY] to study Imbruvica as part of cancer-treatment combos.

Tyrosine kinase is a type of protein kinase that send signals to the cell’s control center to turn the cell “on” or “off”. Ibrutinib is a Bruton's tyrosine kinase (Btk) inhibitor that targets the B-cell receptor (BCR) signaling pathway linked to the growth and spread of certain types of blood cancers.

Imbruvica (Ibrutinib or PCI-32765) is a capsule, an orally-administered anticancer drug targeting B-cell malignancies. It was approved by the U.S. FDA in February 2014 for CLL treatment. Patients will have to take four capsules a day at U.S. $100 per pill, which is about U.S. $130,000 per year.

Pharmacyclics’ pipeline includes several clinical trials in Phase III CLL/small lymphocytic lymphoma (SLL), Phase III – diffuse large B-cell lymphoma, Phase III – follicular lymphoma, one of the most common kinds of non-Hodgkin lymphoma as well as Phase III – marginal zone lymphoma, FDA Orphan Drug Designations (ODDs).

AbbVie CEO Gonzalez sees a non-GAAP diluted EPS of $4.25 to $4.45 per share, compared with analysts' estimates for $4.37 per share. The company sees the annual sales of Viekira Pak to reach $3 billion by the end of 2015 with further growth in 2016 as the drug expands into other countries outside the U.S. 

From our technical analysis, the price projection for ABBV is between $70 and $78. BMO Capital Markets reduced their target price last month for ABBV from $63.00 to $62.00, while Morgan Stanley’s price target for ABBV was reduced from $72.00 to $65.00.

Disclosure: Long Position ABBV in Portfolio