J&J’s Decision to Walk Away Set Stage for Renewed Actelion Talks

  • Drugmakers enter exclusive discussions about a potential deal
  • Actelion calls possible transaction ‘strategic;’ shares up

Actelion and J&J Circle Back to Negotiating Table

Johnson & Johnson’s willingness to walk away from talks to acquire Swiss biotechnology company Actelion Ltd. for about $28 billion is the very thing that got the two sides back to the negotiating table.

This week, amid rising pressure from shareholders, Actelion surprised investors and re-entered negotiations with J&J, which signaled a willingness to raise its offer if granted exclusivity, said people familiar with the matter. The two sides are in final discussions on the price and other details, said the people, who asked not to be identified because the process is confidential.

“Walking away from the deal sets a line in the sand,” Peter Hahn, dean of The London Institute of Banking and Finance, said in a phone interview. It “sends a signal there are limits and you’re not desperate or emotional, but rational. It can backfire, of course, because if you do it a second time, you lose all credibility.”

J&J pulled out of the discussions on Dec. 13, after Actelion unexpectedly asked for a higher bid, according to people familiar with the matter. That cleared the way for Paris-based Sanofi to step in with its own proposal of about $275 a share, which included a so-called contingent value right for Actelion stockholders that would pay out depending on the performance of certain pipeline drugs, people familiar with the matter said. Those talks faltered amid complications over the CVR, said the people.

Actelion Gains

Shares of Actelion, which specializes in treatments for a type of hypertension that affects arteries connecting the heart to the lungs, jumped 4.5 percent to 224.60 Swiss francs at 2:30 p.m. in Zurich. Sanofi gained 1.2 percent to 76.08 euros 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 percent to $115.31 at the close Wednesday in New York.

There can be no assurance that the talks will lead to an agreement, J&J and Actelion said, without providing further details. The companies are negotiating “a possible strategic transaction,” Actelion said in its statement Wednesday. While they’d like to reach an deal before the end of the year, the people involved in the talks cautioned that they could be delayed or fall apart.

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

The surprise twist to one of 2016’s biggest potential health deals is also another blow to Sanofi, which lost out on cancer drug maker Medivation Inc. to another U.S. giant, Pfizer Inc., in August.

Past Talks

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

Any transaction will likely need the backing of Actelion Chief Executive Officer and Co-founder Jean-Paul Clozel, who is among the largest shareholders and has said he wants the company to remain independent. Clozel is a believer in Actelion’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.

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.