Actelion Falls as the 'It's Complicated' Tag Gets Slapped on Relationship With Johnson & Johnson

Published: Nov 29, 2016

Actelion Falls as the 'It's Complicated' Tag Gets Slapped on Relationship with Johnson & Johnson November 29, 2016
By Mark Terry, Breaking News Staff

Yesterday’s report that Johnson & Johnson is in talks to acquire Switzerland-based Actelion Pharmaceuticals appears to be only the tip of the iceberg. New information indicates that the two companies are discussing a complicated, structured transaction that would allow Actelion to remain independent.

Actelion focuses on rare diseases, with a particular emphasis on pulmonary arterial hypertension (PAH), a form of high blood pressure that affects arteries in the lungs. About half of the company’s revenue comes from sales of 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 been consistent in insisting he wants the company to remain independent. Sources are saying that the two companies are discussing a deal where J&J would essentially create 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 invest cash into the deal as well.

It’s not clear at this point if J&J would be interested in this type of deal. It would require the company to give up control of some of its assets. It also has plenty of cash that would make a more straightforward acquisition feasible.

Some analysts were skeptical of the original idea of an acquisition. Analysts with JP Morgan Cazenove wrote in a note to clients, “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, ahead of a likely favorable ex-U.S. cash repatriation window for U.S. corporates. 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.”

Other companies have been floated as perhaps more suitable buyers, including Roche , Sanofi and Novartis . But at least one unidentified source told Reuters earlier that Novartis wasn’t impressed with Actelion’s pipeline.

Roche has an internal connection with Actelion. Clozen was a Roche executive prior to founding Actelion with his wife, Martine, and Walter Fischli, Thomas Widmann and Andre Mueller in 1997.

Sanofi’s chief executive officer, Olivier Brandicourt, indicated last month that the company was interested in acquisitions. Eric Le Berrigaud, an analyst with Bryan Garnier & Co. in Paris, told BloombergMarkets that Sanofi would be a good option. “It fits really well with what Sanofi is looking for.”

The recent news has caused some volatility for Actelion. Actelion was trading on October 7 for $167.30. On November 4, shares traded for $135.30, and after the news of the potential acquisition, jumped to $190. Shares are currently trading for $181.30.

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