Johnson & Johnson Walks and Sanofi Steps in to Woo Actelion
December 14, 2016
By Mark Terry, BioSpace.com Breaking News Staff
After Johnson & Johnson walked away from its acquisition bid of Swiss-based Actelion Pharmaceuticals , yesterday, Paris-based Sanofi is believed to be filling the void.
Since late November, J&J has been in talks with Actelion over a complicated, structured transaction. Actelion focuses on rare diseases, with an emphasis on pulmonary arterial hypertension (PAH), a form of high blood pressure that affects arteries in the lungs. About half the company’s revenue comes from Tracleer, for PAH. It has two new drugs, Opsumit and Uptravi, both for PAH, and are likely to replace Tracleer, which faces generic competition early next year.
Actelion’s chief executive officer and founder, Jean-Paul Clozel, has repeatedly insisted he wants the company to remain independent.
In a statement yesterday, J&J indicated that it could not come to terms on a deal with Actelion that would create “adequate value” for its shareholders. Apparently, it collapsed under problems with both price and deal structure. J&J is said to have offered about $260 per share, or more than $28 billion, but Actelion is looking for as much as $285 per share.
Although details are not yet forthcoming, early observers suggested that the deal would have been complicated, with J&J creating a biotech company that unites Actelion with relevant parts of its own pharmaceutical business. J&J would be a major shareholder in this new entity, and would probably have invested cash into the deal. Since this would have required J&J to give up control of some of its assets, many analysts were skeptical.
Analysts with JP Morgan Cazenove wrote in a note to clients in late November, “With J&J having a market cap exceeding $300 billion, Actelion would clearly be an affordable asset for the company. Less clear to us is the logic of the timing.... We also see little in the way of obvious therapeutic overlap to allow synergies, beyond J&J’s interest in the Xarelto anti-coagulant which could have some modest overlaps with cardiologists prescribing PAH therapies.”
Actelion has stated that it “is engaged in discussions with another party regarding a possible strategic transaction.” That “party” is Sanofi, per inside sources.
Bloomberg writes, “Buying Actelion would bolster Sanofi’s rare disease portfolio as the French drugmaker seeks to offset declines for its best-selling product, the insulin Lantus. The company has signaled interest in deals as big as its $20.1 billion purchase of Genzyme Corp.Genzyme Corp. in 2011 and said it wants to use acquisitions to strengthen its business in key areas.”
On Tuesday, Actelion shares closed at 208.50 francs, a premium of 25 percent on the price prior to J&J’s bid became public. That gives Actelion a market cap of 22.5 billion Swiss francs, or $22.2 billion (U.S.).
“I presume these parties are prepared to make offers that are more attractive than that which J&J was envisaging,” said Aleanor Taylor a fund manager at Union Bancaire Privee in Geneva, to Reuters. “Otherwise, the board of directors would not have acted in the interests of the stakeholders by creating a situation in which J&J walked away.”
Many comparisons are being made to Sanofi’s failed attempt to acquire Medivation , which was scooped up by Pfizer for $14 billion. Many analysts have argued that Pfizer overpaid for the U.S. cancer drug company. There are concerns that any kind of auction for Actelion, would push a bigger company, such as Sanofi, into overpaying.
“Winning a bidding war when it comes to acquiring biopharmaceutical companies almost always equates to way over-paying. These are not bragging rights,” Tim Anderson, an analyst with Bernstein, said to Reuters. “If Actelion were to go out at around $30 billion, this equates to around 13 times sales and 30 times earnings before interest and taxes. These are high figures.”