J&J Woos Billionaire Doctors Who Don’t Need Cash in Actelion Bid

  • Actelion CEO Clozel says he has little interest in selling
  • “It’s not a question of money. We have enough money.”

Sanofi Said to Weigh Actelion Bid Challenging J&J

Jean-Paul and Martine Clozel represent the dream of just about every pharmaceutical researcher. After the multinational that employed them declined to pursue a compound they discovered, the Clozels founded a company to develop the drug. That startup birthed a blockbuster that has improved the lives of heart patients worldwide -- and the Clozels became billionaires in the process. For Johnson & Johnson, they’re a problem.

The Clozels’ company is Actelion Ltd., a Swiss biotech for which J&J has offered more than $27 billion, according to a person familiar with the talks. The Clozels rejected an earlier, lower proposal, and while the people say negotiations are continuing and J&J has been given access to Actelion’s financial details, Jean-Paul Clozel has made no secret of his lack of enthusiasm for selling out.

Jean-Paul Clozel, left, and Martine Clozel

Source: Actelion Ltd.

“I don’t see why I should” sell, Clozel, 61, said in a November interview before the J&J bid was revealed. “What would it bring? It’s not a question of money. We have enough money.”

The Clozels built the company -- now Europe’s largest biotech -- on the promise of two experimental drugs licensed from Roche Holding AG. Over the years, they have fended off takeover bids and ouster efforts, ensuring Actelion’s survival despite unsuccessful bets on drugs and a failure to diversify beyond its initial therapy area.

Now J&J’s pursuit has propelled Actelion shares to a record, valuing the Clozels’ stake in the company at more than $1 billion. For investors who’ve stood by them from the start, Actelion has generated a ninefold return, versus an almost twofold gain from Roche’s stock.

“Obviously the money is nice, but he’s there because he’s passionate about his work,” said Alexandre Stucki, founder of AS Investment Management in Geneva, an acquaintance of Clozel who has owned shares in Actelion for more than a decade.

Potential Counterbid

J&J is open to structures other than a complete takeover in order to reach a deal, people familiar with the talks said. French drugmaker Sanofi is considering a counterbid, and working with advisers in weighing its options, separate people with knowledge of the matter said.

Still, anything less than a full-on buyout by J&J might not deliver the most value for shareholders, said Eleanor Taylor Jolidon, who manages $1.9 billion in shares, including Actelion, at Union Bancaire Privee in Geneva.

“The timing is very attractive,” said Taylor Jolidon. "It comes down to price."

Jean-Paul Clozel studied cardiology in his native France, then trained in Montreal and San Francisco. After working as a physician for about a decade, he joined Roche as a researcher, rising to vice-president in the cardiovascular department, where he oversaw a team of 40 scientists.

Parting Ways

Martine Clozel, also a researcher at Roche, in 1990 discovered a potential new drug for pulmonary arterial hypertension (PAH), a life-threatening condition that limits the heart’s ability to pump blood to the lungs. PAH afflicts fewer than 50 people out of every million, too small a population to interest a giant like Roche. In early 1997, the Clozels approached Roche CEO Franz Humer about spinning off the project. Humer gave his blessing but made it clear the company wouldn’t fund the startup.

The Clozels licensed the rights to two compounds from Roche and founded Actelion in Allschwil, just outside their former employer’s hometown of Basel. Jean-Paul initially remained focused on R&D, though he became CEO in 2000 when the company listed its shares in Zurich.

“He’s more a scientist rather than a commercial guy,” says David Ebsworth, an executive with almost four decades in the pharma industry.

Martine, who trained to be a pediatrician specializing in neonatal intensive care, now oversees drug discovery at the biotech. The 60-year-old is also chief scientific officer.

The Clozels’ strategy was risky: Despite industry failures in PAH compounds, Actelion stayed focused on the disease. And when its first medicine was ready, Actelion didn’t license it to a larger pharmaceutical company -- as biotechs often do -- instead marketing the drug on its own.

Exceeds Expectation

The company’s first product, Tracleer, wildly exceeded expectations. In 2002, Wall Street projected its sales to peak at between $300 million and $600 million a year. Instead, it generated over $1.5 billion some years and has delivered more than $15 billion cumulatively, according to data compiled by Bloomberg.

Actelion, though, has been dogged by investor worries over its dependence on Tracleer and the quality of the treatments it was developing, making it a perennial subject of takeover rumors. After a decade of Jean-Paul Clozel’s vows to keep the company independent, a hedge fund called Elliott Advisors built up a 6 percent stake in Actelion, becoming its biggest shareholder.

In February 2011, Elliott called for Clozel and Chairman Robert Cawthorn to leave the board and the company to consider a sale. The showdown took an ugly turn when co-founder Andre Mueller joined Elliott in demanding Clozel’s departure.

While that move failed, the events served as a wake-up call for Clozel, who said he felt personally attacked, according to people familiar with his thinking. Clozel also said the incident showed that shareholders expect him to make decisions like a CEO, and not only as a scientist, one of the people said, asking not to be identified discussing private conversations.

Drug Stumbles

A few months later, investors were spooked when Actelion’s follow-on medicine for Tracleer, a compound called macitentan, failed a mid-stage trial. From spring through September 2011, the value of the company fell by almost half, to $4.2 billion. But in April 2012, Actelion announced a successful study of the same medication.

Branded as Opsumit, the drug is now projected to rack up more than $1 billion in sales next year, and helped propel Actelion’s market value to almost $16 billion at the start of 2016.

While some in the industry question whether Actelion’s experimental drugs for conditions such as insomnia and multiple sclerosis can deliver, Clozel says he’s confident. He has the researchers and the money to come up with medications that will reward patients and investors alike, he says.

Of the dozen or more compounds the company is developing, “maybe two or three will work,” and that may be enough, Clozel says. “I would not exchange my pipeline for any other.”

— With assistance by Dinesh Nair, Ed Hammond, Aaron Kirchfeld, and Manuel Baigorri

    Before it's here, it's on the Bloomberg Terminal.