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Johnson & Johnson approaches Actelion about potential deal

November 28, 2016
Life sciences

Johnson & Johnson said Friday it is in “preliminary discussions” with Swiss drug company Actelion Pharmaceuticals Ltd., a deal that would help the health-products company overcome any lost momentum for its top-selling drug.

J&J, which is based in New Brunswick, N.J., has been trying to reassure Wall Street that it can withstand looming competition to its drug Remicade, an autoimmune therapy that had $4.5 billion in U.S. sales last year. Pfizer Inc. has said it plans to start selling its copy, Inflectra, in the U.S. this month.

J&J says it has several new drugs in development whose launch could make up for any revenue loss.

A deal for Actelion, however, would help J&J quickly plug the lost sales, which analysts estimate could amount to $1 billion in 2017. Actelion sells drugs for rare diseases, such as an artery disorder that affects the lung and heart known as pulmonary arterial hypertension. The company reported about 1.785 billion Swiss francs ($1.8 billion) in sales for the first nine months of this year.

A deal for all of Actelion would come at a steep price.

Bloomberg reported J&J’s interest in the Swiss company on Thursday. Applying a typical takeover premium of 25% or more to its market capitalization at Wednesday’s market close, Actelion could fetch more than $20 billion.

Shares of Actelion rose nearly 17% to 182.50 Swiss francs ($184.03) on the SIX Swiss Exchange on Friday, after the company confirmed J&J had approached it about a possible transaction.

With a market value of more than $300 billion and nearly $40 billion in cash overseas, J&J could afford the high price. J&J’s biggest deal to date was the $21 billion acquisition of trauma-device maker Synthes in 2011.

Both J&J and Actelion cautioned in their statements that a transaction wouldn’t necessarily happen.

It wasn’t clear where talks between the companies stand or whether Actelion is receptive.

Actelion was founded in 1997 by husband-and-wife team Jean-Paul and Martine Clozel and other former Roche Holding Ltd. employees who left the Swiss drug firm after it decided not to pursue a project their group was working on, according to Actelion’s website.

In 2000, Actelion went public and its valuation has climbed sharply since then. Last year, the company reported revenue of 2.05 billion Swiss francs and a profit of 551.9 million Swiss francs.

This year, it averted a decline in revenue after its best-selling drug, Tracleer, lost patent protection, thanks to swift sales gains for new pulmonary arterial hypertension drugs Opsumit and Uptravi.

Johnson & Johnson makes an array of products, from baby soap to Tylenol pills and devices that manage diabetes care. In September, it reached a deal to buy Abbott Laboratories’ eye-surgery equipment business for $4.3 billion.

Rare diseases aren’t an area of focus for the company. Yet Actelion’s top-selling drugs could complement J&J’s portfolio of heart drugs.

Big drug companies such as Pfizer and Sanofi SA have prioritized rare diseases, because advances in understanding the molecular roots of disease have led to new treatments and health insurers have been willing to pay the high costs because few of their members require such treatments.

Shares of J&J rose nearly 1% to close at $114.13 Friday on the New York Stock Exchange.

By Jonathan D. Rockoff

Source: Wall Street Journal

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