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J&J confirms talks with Actelion over pharma deal

Johnson & Johnson, the world’s largest healthcare group, confirmed on Friday it is in preliminary discussions with Actelion, Europe’s largest biotechnology company, over a potential deal.

Its statement came after days of speculation among investors that J&J had been preparing a bid for Actelion, although the Switzerland-based biotech had earlier warned “there can be no certainty that a transaction will result” from the J&J approach.

People close to the matter told the Financial Times that Actelion was working with advisers to review its options.

Shares in Actelion, which have been heavily traded in the past two weeks, soared 17 per cent on late Friday afternoon to SFr184.5. This gave the company a market value of SFr19.9bn ($19.6bn).

A deal for Actelion would give J&J a portfolio of drugs predominantly focused on treating pulmonary arterial hypertension, adding to the US group’s existing pharma franchise. Actelion, which employs about 2,500 people, had sales of SFr2bn in 2015. A growing part of this revenue now comes from its Opsumit drug, as its blockbuster treatment Tracleer has lost its patent protection.

J&J has been studying acquisition targets in the pharma sector for some years, but has struggled to participate in the frenzy of dealmaking seen in recent times.

$19.6bn

Actelion market value after shares soared 17%

With a net cash position, J&J said openly that it was monitoring dealmaking opportunities, but last year it was beaten by US rival AbbVie in the $21bn battle to acquire Pharmacyclics, maker of a blood cancer treatment.

Actelion is one of the few midsized pharma companies left in Europe. It is a sector dominated by a handful of large-cap groups such as Switzerland’s Roche and Novartis.

Jean-Paul Clozel, a former Roche executive, founded Actelion in 1997 and managed to keep it independent for nearly three decades.

In 2011, Mr Clozel successfully fended off activist investor Elliott Management, which was pushing the company to explore a sale. He promised investors he could deliver superior returns if Actelion courted its own path. Since then, shares in the company have tripled.

But the question of whether Mr Clozel would support a sale at some later date has remained.

In September, he said: “I do not intend to go on a beach and to enjoy life. My passion, and let’s be clear, is to discover drugs and provide them to the patients. I would say, give me three years, three to four years, to change completely Actelion and to have Actelion at another level as a company.”

Part of the what has made the company attractive has been its strategy of using the same approach with its small molecule lung treatment expertise in other areas, such as oncology, cardiovascular and infectious diseases.

“What J&J may be able to bring is a further depth of medical expertise that falls outside Actelion’s natural PAH territory,” said David Cox, analyst at Panmure Gordon in London. “This could help accelerate the R&D programmes in the other therapeutic areas.”

Shares in J&J were 0.8 per cent higher to $114 in late trading in New York, giving the company a market value of $311bn.

Via FT