Twist in Actelion tale as ‘strategic’ talks restart with J&J

In a surprise twist to one of 2016's biggest potential health deals, Actelion and US drug giant Johnson and Johnson are back at the negotiating table just a week after ending earlier talks.

This time, the companies entered into exclusive discussions about a possible transaction that Switzerland-based Actelion, in a statement Wednesday, called “strategic”. There can be no assurance any transaction will result from these talks, both companies said, without providing further details.

The reversal is a rare instance where two companies restarted discussions just days after announcing publicly that they had failed to reach an agreement. It's also another blow to French drugmaker Sanofi, which has been in advanced talks to buy Actelion after J&J dropped out last week, according to people familiar with the matter. Sanofi lost out on cancer-drug maker Medivation Inc. to another US giant, Pfizer, in August.

“J&J, of all the big pharmas, is the best one for Actelion,’’ said John Rountree, managing partner at Novasecta, a pharmaceutical consulting firm in London. J&J would give the Swiss company access to the US capital market and may allow Actelion to maintain at least some independence, he said. “They perhaps might be more hands off than some other potential acquirers,’’ he said.

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During their previous talks, New Jersey-based J&J had made Actelion an offer that it later increased to about $260 a share, people familiar with the situation have said, valuing the Swiss biotech at about $28 billion.

Shares of Actelion, which specialises in treatments for a type of hypertension that affects arteries connecting the heart to the lungs, jumped 5.4 per cent to 226.70 Swiss francs at 9.08am in Zurich. Sanofi gained 1.6 per cent to €76.42 in Paris. J&J, the world’s largest maker of health-care products with a market value of more than $310 billion, fell 0.3 per cent to $115.31 at the close Wednesday in New York.

Shareholder Pressure

J&J ended negotiations last week after Actelion unexpectedly asked for a higher bid, according to people familiar with the matter. Talks with Sanofi then began but ran into complications related to contingent value rights, or CVRs, for Actelion shareholders, which would pay out depending on the future performance of certain pipeline drugs, the people said.

This week, amid rising shareholder pressure, Actelion re-engaged with J&J, which signalled a willingness to increase its offer if granted exclusivity, people familiar with the matter said on Wednesday. The two sides are in final negotiations on the price and other details, the people said. While the companies would like to reach an agreement before the end of the year, the people involved in the talks cautioned that they could still be delayed or fall apart.

Regardless of its structure, any transaction will likely need the backing of Actelion chief executive and co-founder Jean-Paul Clozel, who is among the largest shareholders and has said in the past he wants the company to remain independent. Clozel is a strong believer in the company’s pipeline of experimental medicines, and over the years, he and his wife, Martine, who is chief scientific officer, have resisted takeover bids.

Among options that were discussed during the previous talks with J&J was creating a separate entity for Actelion’s experimental drugs and research activities, people familiar with the matter said last month.

In its official statement last week, J&J said it had failed to arrive at an agreement that would create “adequate value” for its shareholders.

Sanofi Stance

Sanofi was said to be discussing a price of $275 per Actelion share, people familiar with those talks have said.

Actelion’s strength in pulmonary hypertension and focus on rare diseases would fit J&J’s interest in adding another therapeutic category, Larry Biegelsen, an analyst at Wells Fargo, said in a note last month after the previous talks were announced. On Wednesday, Biegelsen updated his estimates of the impact of a deal for J&J based on a $280-per-share price, or about $32 billion. An Actelion purchase would add 3 percent to J&J’s earnings per share in 2018, said the analyst, who rates J&J’s stock outperform.

Actelion spokesman Andrew Weiss declined to comment beyond the company’s statement, and so did Johnson and Johnson spokesman Ernie Knewitz. Sanofi declined to comment.

Bloomberg