Sanofi, Actelion Under Pressure for Deal After Past Failures

Updated on
  • Actelion’s talks with J&J ended over price, deal structure
  • Sanofi looking for target after getting outbid on Medivation

The shadows of recent deal failures will loom large as executives from European drugmakers Sanofi and Actelion Ltd. work this week to hash out an agreement. 

Sanofi Chief Executive Officer Olivier Brandicourt lost cancer-drug maker Medivation to Pfizer Inc. in August after months of public pursuit. And Actelion CEO Jean-Paul Clozel turned down Johnson & Johnson, leading some investors to question whether his desire to retain control over the company he built got in the way of a transaction that would have brought a 67 percent premium for shareholders since the talks were first reported.

Now that J&J has ended discussions, Clozel and Actelion Chairman Jean-Pierre Garnier, the former chief executive of GlaxoSmithKline Plc, are increasingly being pushed to consider another offer, according to people familiar with the matter. That might mean showing more flexibility to Sanofi about the price or structure of a transaction -- and friendly negotiations would be a welcome change for the French drugmaker, which earlier this year had to threaten to oust Medivation’s board to get management to consider its offer.

“We suspect Clozel doesn’t want to do a deal, but obviously he doesn’t own the company,” said Christophe Eggmann, who helps manage $185 million in health-care shares for Zurich-based GAM Holding AG, and doesn’t own stock in either firm. “He has shareholders, and they have a say too.”

A combination would end more than a decade and a half of insistence on independence by Clozel, 61, who’s one of Actelion’s largest stockholders with about 5 percent of the shares outstanding. His wife Martine, 60, is chief scientific officer and discovered blockbuster lung drug Tracleer. Though a deal isn’t guaranteed, talks are advanced, and Paris-based Sanofi has lined up financing, a person familiar with the matter said.

Sanofi, where the top managers are French, is potentially a better cultural fit than J&J for Actelion, which is also run run by Frenchmen and a stone’s throw from the border, according to Eggmann.

Specifics of the discussions with Sanofi emerged after J&J said late Tuesday that it had pulled out of talks, unable to reach a deal that would create “adequate value” for shareholders. The hitch for New Brunswick, New Jersey-based J&J was deal structure as well as price, according to people who asked not to be identified because the deliberations were private. The U.S. company had offered about $260 per share, or more than $28 billion, the people have said. Actelion has indicated it wants as much as $285, one person said.

Actelion’s shares traded at 158 Swiss francs on Nov. 24, before Bloomberg reported the discussions with J&J, or about $156. They dropped 9.2 percent to 189.30 Swiss francs Wednesday.

“If they were listening to their shareholders they would have taken the bid,” said Markus Manns, who helps oversee about 280 billion euros ($298 billion) in assets, including both Sanofi and Actelion shares, at Union Investment GmbH in Frankfurt. “If they really did turn that down, it would disturb me a lot.”

Actelion’s Portfolio

Actelion, based in Allschwil, Switzerland, said in a statement early Wednesday that it’s talking with a party other than J&J “regarding a possible strategic transaction,” without naming the party. Neither Actelion nor Sanofi have confirmed they’re in negotiations. Both declined to comment in more detail on Wednesday.

Actelion’s portfolio would slot nicely into Sanofi’s as the French company looks for revenue sources to offset sinking sales of Lantus, its best-selling insulin. The Swiss biotech’s drugs for pulmonary arterial hypertension -- high blood pressure in the arteries leading from the heart to the lungs -- would give Sanofi a foothold in the respiratory market, useful if it wins approval for its experimental drug for asthma, dupilumab, said Eric Le Berrigaud, a Paris-based analyst for Bryan Garnier & Co.

Negotiations may turn on whether Sanofi’s willingness to pay can match Clozel’s enthusiasm for his pipeline of experimental medicines, which will determine Actelion’s future growth prospects. The Medivation process showed that Sanofi can also be disciplined on price as it negotiates deals, according to Manns, the Union Investment investor. Sanofi spent five months courting and pressuring Medivation, before getting outbid by Pfizer.

“It depends on how desperate you would describe Sanofi for a deal or new products,” said Birgit Kulhoff, a fund manager for Rahn & Bodmer Co. in Zurich, adding that a deal at the price levels reported would destroy value for Sanofi shareholders. “I think they can calculate as well as J&J.”

— With assistance by Aaron Kirchfeld, James Paton, and Manuel Baigorri

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