All AbbVie's CEO wanted for Christmas was Cerevel—oh, and ImmunoGen, too

AbbVie's CEO Richard Gonzalez wanted one thing and one thing only for Christmas: Cerevel Therapeutics wrapped up quickly and neatly under his Christmas tree. 

After months of negotiations, he got his wish for $8.7 billion, according to Securities and Exchange Commission (SEC) documents filed January 5. The company outgunned at least three companies and contended with uncertainty that Pfizer might swoop in. But once those companies backed out, opting instead to wait and see how the biotech's phase 2 trials read out later this year, it was game on for Gonzalez, who personally handled the bulk of negotiations with Cerevel's Ron Renaud. 


From Japan to Illinois

In early 2023, Cerevel was speaking to companies about a potential regional partnership in Japan for emraclidine, the M4-selective positive allosteric modulator in development for schizophrenia and Alzheimer’s disease psychosis. As part of that process, the biotech reached out to 17 other companies who could potentially counter, one of them being AbbVie.

While that ultimately didn’t work out, AbbVie came back to the table on Sep. 25, not offering to up its bid for the Japanese rights, but instead with a request to discuss rights outside the region. The Illinois pharma made no mention at that time that an acquisition deal for all of Cerevel might be on the table.

Ways to extend Cerevel’s cash runway beyond 2025, a potential equity financing and other strategic options were top of mind when the biotech’s board met on Sep. 27, 2023.

But first, a quick reminder of where Cerevel came from. The biotech emerged in 2018 with assets taken from Pfizer’s storeroom. As of the end of 2023, the pharma giant and another top investor, Bain capital, owned 51% of Cerevel. Pfizer holds two board seats. And so, when the agenda turned to the future of the company, those two members were recused, as Pfizer was widely thought to be a potential buyer.

The board ultimately decided to find a way to extend its cash runway into 2026, given the tough biotech markets at that time and the difficulty executives may have in finding a suitable offer. This extension would carry Cerevel at least 12 months past the emraclidine phase 2 readouts that are expected in the second half of 2024.

Executives informed AbbVie that the focus was on the Japanese regional partnership and no other strategic transactions were being considered at the time.

A few weeks later, on October 10, 2023, the board met again and decided on a public equity offering, which was authorized and raised $498.7 million in gross proceeds. The offering sold shares for $22.81 apiece.

Then, all of a sudden, AbbVie dropped in with an unsolicited offering of $35 per share on October, 19, 2023. This initial offer was rejected by the board and a request was made for a “meaningfully higher offer.” A meeting was scheduled between Cerevel’s Renaud and AbbVie’s chief executive Gonzalez.

Cerevel’s financial advisors were also asked to reach out to other potentially interested parties. The first on the list was, of course, Pfizer, given the history between the two companies. Pfizer declined without the phase 2 data in hand. Another unnamed pharmaceutical company had the same answer.

After the CEO’s tête-à-tête, AbbVie revised the offer to $40 per share. Now that Pfizer confirmed its disinterest, the pharma’s two board members were brought back into the discussions.

Cerevel’s advisors found two more large pharma companies that were potentially interested in a transaction, both of which struck up confidentiality agreements. The first company dropped out in mid-November.

The board again rejected AbbVie’s $40 proposal and asked for something more in the mid-$40 range.


Gonzalez’s Christmas wish

Renaud and Gonzalez again met on Nov. 17, 2023, with the AbbVie CEO bringing along a revised offer of $41.50 per share. Cerevel’s CEO turned it down, saying that it did not subscribe enough value to the company. Gonzalez said $45 could be possible, but only as long as they got the deal wrapped up by the Christmas holiday, plus a few other contingencies.

Meanwhile, the second pharma company remained interested, but said they were not ready to make a formal offer.

Cerevel also wanted a swift deal closing and so they began to work on deal documents. On November 17, 2023, AbbVie indicated it wanted to move even faster, with announcement occurring in December 11, 2023.

The other pharma company took a look at Cerevel’s virtual dataroom, which AbbVie had also been granted access to.

And then on Nov. 30, 2023, AbbVie announced the acquisition of ImmunoGen for $10.1 billion. This seems to have shaken Cerevel’s management, who engaged in calls with the pharma to see what the impact might be on the proposal. AbbVie’s team assured them that the $45 per share offer was still on and the company was confident that it could get two transactions through the regulatory process.

AbbVie even offered to up the termination fee to Cerevel’s benefit as extra assurance in the event that regulators block the transaction. AbbVie proposed accelerating the deal announcement to Dec. 4, 2023.

Finally on that day, the other pharma company that had been in the running backed out, saying that “while they were impressed with the Cerevel business,” they would only offer $40 per share.

Meanwhile, Cerevel’s shares rose on the markets from $26.64 as of Nov. 17, 2023 to $35.59 on Dec. 5, 2023. The regulatory documents that no major media outlet had gotten wind of the potential transaction prior to Reuters publishing an account of the deal just an hour before it was officially announced. The announcement was made after the close of trading that day.

The companies ultimately agreed on a termination fee of 3.25% of Cerevel’s equity value, with the fee payable by AbbVie in the event regulatory approval couldn’t be secured was set at 7.5% of the biotech’s equity value. Each were valued at the proposed merger price. In the event regulatory authorities did step in, AbbVie would be obligated to litigate.

The board unanimously agreed to the merger on Dec. 6, 2023, and the deal was announced after trading stopped for the day.

The next day, Gonzalez came out strong against questions about the regulatory scrutiny the Cerevel deal might face, reflecting the risky termination fee that was included in the deal. "Obviously we looked very carefully at the FTC risk before we proceeded forward. I can tell you, this acquisition is not anticompetitive," he told investors.