Johnson & Johnson (US)'s largest all-cash transaction values Actelion shares at a 23% premium, and includes a minority stake in the firm's discovery platform and early-development pipeline that will be spun-out into a new Swiss company.
Implications | The transaction will give US major Johnson and Johnson (J&J) access to Actelion (Switzerland)'s pulmonary arterial hypertension (PAH) franchise, including promising products such as recently approved Uptravi (selexipag) and Opsumit (macitentan), as well as Veletri (epoprostenol). Actelion will spin out its drug discovery unit and early-stage clinical development candidates into a new Swiss biopharmaceutical firm led by Actelion's CEO and chairman. |
Outlook | The USD30-billion transaction comes only weeks after initial talks with Actelion failed to result in an agreement, and marks the largest deal for J&J as it serves to solidify its leading position within the PAH market. It is anticipated to immediately have a favourable impact on J&J's top-line and bottom-line growth rates, as well as boost the financial outlook for the firm in the long-term. |
Johnson & Johnson (J&J; US) has entered into a definitive agreement with Swiss firm Actelion whereby J&J will acquire Actelion in an all-cash transaction valued at USD280 per share, equivalent to CHF280.08 as of 25 January 2017, a 23% premium. The acquisition will be funded with "cash held outside the United States", according to J&J. The Board of Directors of both companies unanimously approved the transaction, which is anticipated to close in the second quarter of 2017 pending Actelion shareholder approval and other customary closing conditions.
Actelion's portfolio
The transaction will give J&J access to Actelion's pulmonary arterial hypertension (PAH) franchise, including promising products such as recently approved Uptravi (selexipag) and Opsumit (macitentan), as well as Veletri (epoprostenol), which represent more than 50% of the company's overall sales in the third quarter of 2016 (see Switzerland: 20 October 2016: Actelion reports 17% y/y increase in product sales for Q3, driven by strong Uptravi launch). The promising trio will serve to offset the declines that affected more well-established products such as Tracleer (bosentan) and Ventavis (iloprost), which have been mainly due to increased competition and switching of patients to newer products.
Actelion also markets other specialty products, including Valchlor (mechlorethamine) for mycosis fungoides and Zavesca (miglustat) for Niemann-Pick disease, which have both demonstrated double-digit growth in the latest quarterly financial report. J&J will also gain access to two late-stage candidates, S1P1 receptor modulator ponesimod, under development for multiple sclerosis, and novel antibiotic cadazolid, under development for Clostridium difficile-associated diarrhoea.
New R&D Company
Furthermore, as outlined in the agreement, Actelion will spin out its drug discovery unit and early-stage clinical development candidates into a new biopharmaceutical firm listed on the SIX Swiss Exchange. The validated drug discovery platform along with the research and development (R&D) team will continue to focus on development of small molecule candidates that address unmet medical needs across four main therapeutic areas: specialty cardiovascular disorders, central nervous system disorders, immunological disorders, and orphan diseases. The independent firm will be led by Actelion's founder and CEO Jean-Paul Clozel, and chairman of the board, Jean Pierre Garnier. Actelion shareholders will receive shares in the new Swiss company as stock dividend, with J&J holding 16% of the shares and the option to an additional 16% through a convertible note. As part of the agreement, J&J will also have the option to acquire ACT-132577, a mid-stage resistant hypertension candidate that will be part of the new Swiss company.
Short-term and long-term accretion
The deal is anticipated to immediately have a favourable impact on J&J's top-line and bottom-line growth rates. The addition of promising new products serves to boost the firm's outlook over the long term, with J&J anticipating an increase of at least 1.0% in long-term revenue growth, and 1.5–2.0% in earnings per share (EPS) growth rate compared to current estimates. The US firm anticipates immediate EPS accretion equivalent to USD0.35–0.40 in the first full year following completion of the transaction.
Outlook and implications
The strategic acquisition comes only weeks after initial talks with Actelion failed to result in a transaction agreement, and the Swiss drug maker opened merger and acquisition discussions with another firm (see France - Switzerland: 14 December 2016: Sanofi enters M&A discussions with Actelion). The USD30-billion transaction marks the largest deal for J&J as it serves to solidify its leading position within the PAH market. J&J's 2017 guidance had forecast growth rates that were somewhat subdued compared to previous years, and the acquisition will certainly boost the firm's financial performance (see United States: 25 January 2017: J&J reports 6.5% y/y growth in pharmaceutical sales for 2016).
Actelion's portfolio includes leading products for PAH that complement the US firm's existing cardiovascular and metabolic therapeutic area offering. J&J will also gain access to promising late-stage candidates that will boost growth prospects for the firm in specialty areas with a highly unmet medical need. By utilising its extensive global commercial presence, J&J will boost sales for Actelion's products and late-stage candidates in new markets. Furthermore, the options available to J&J with regards to the new development-stage Swiss company will give the firm strategic access to more promising candidates and resources while maintaining a very low risk profile.