Actelion Founder’s $1.5 Billion Payday Gives Him Shot at More

  • CEO and team will keep risky parts of pipeline in new company
  • New company could be worth $1-2 billon, analyst estimates

Why J&J Is Buying Actelion for $30 Billion

After pocketing $1.5 billion from selling Actelion Ltd., co-founder and Chief Executive Officer Jean-Paul Clozel gets to return to his roots with a shot at another payday.

Clozel and his team will keep the riskier portions of Actelion’s pipeline after selling the rest of the Swiss biotech to Johnson & Johnson for $30 billion under the terms of a deal announced Thursday. The experimental treatments -- drugs that are yet to go through the most exacting stages of clinical tests and regulatory scrutiny -- will be spun off into a new Swiss biotech that Clozel will helm.

The challenge ahead has the French scientist fired up. “If we are not successful, I frankly think something is wrong,” Clozel told reporters in the Swiss city of Allschwil. “We know the products, because we have discovered them.”

For his second fresh start, Clozel is walking away with a portfolio that includes experimental compounds for lupus, Fabry disease and insomnia. Actelion’s very profitable portfolio of drugs for pulmonary arterial hypertension, which have thus far funded the research into other medicines, will go to J&J.

The new company could be worth about $1 billion to $2 billion, Klara Fernandes, an analyst at Berenberg Bank, wrote in a note to clients. Its cash and more advanced drugs in development could be worth about 14 to 20 Swiss francs a share, based on back-of-the-envelope calculation, said Peter Welford, an analyst at Jefferies LLC.

‘Unremarkable’ Pipeline

The deal with the U.S. behemoth gives Clozel about $1 billion to push the treatments, many of which are viewed by investors as long shots in terms of sales potential. Few of the products may endure, investors said.

“The entire pipeline is unremarkable at best,” said Ori Hershkovitz, founding partner and chief investment officer of Nexthera Capital LP, a New York-based health-care hedge fund with about $250 million under management. “I can clearly see why J&J were ready to let it go.”

The new biotech will inherit the research and development team in Actelion’s headquarters city of Allschwil, just across the Rhine River from Roche Holding AG. Even the PAH drugs that lured J&J were born in Roche’s labs. When the company declined to pursue discoveries made by Clozel’s wife and co-founder Martine, the couple struck out on their own.

Fresh Start

Now the couple will take a similar risk, with new untested drugs. Clozel argued in an interview in November that the insomnia drug, Dora, could turn out to be “the best sleep drug on earth.” There’s also a medicine for a stubborn form of hypertension that is undervalued, according to Bruno Bulic, an analyst at Helvea AG.

Clozel struck an upbeat note at a press conference on Thursday. “We have been able to create the value from zero,” he said. “Now we have a company with 13 or 14 new products.”

J&J retains rights to ponesimod, an experimental drug in late-stage tests for multiple sclerosis, as well as a new antibiotic that’s also in the final stage of clinical trials. Therein lies one of the risks.

“All the important drugs are going to J&J,” said Sibylle Bischofberger, an analyst for Zuercher Kantonalbank in Zurich. At the new company, only Dora has the potential to be a blockbuster, and there’s a high risk it could fail, she said.

Magic Sauce

The deal also gives J&J the inside track to benefit if Clozel is successful. The U.S. pharma giant will hold 16 percent of the new biotech’s shares and have rights to an additional 16 percent. J&J will also get an option on the experimental treatment for resistant hypertension, a mid-stage product dubbed ACT-132577.

One thing Clozel has done right is letting his researchers loose on a range of diseases instead of trying to be just a central nervous system specialist or only a heart-disease company, said John Rountree, managing partner at pharma consulting firm Novasecta Ltd. in London. With a broad remit, the new company will be able to try things and pursue what works, he said.

“J&J is getting in on the Actelion magic sauce, and if it doesn’t deliver, they haven’t lost much,” Rountree said. “If it delivers, they’ve got the upside.”

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