After almost a couple of months of seesaw negotiations, the megadeal between Johnson & Johnson and Actelion has been finally announced by both the partners.

The J&J-Actelion deal was in preliminary talks in November 2016. Later in December that year, the US healthcare giant – Johnson & Johnson had virtually ended all discussions regarding the strategic acquisition of the Swiss biotech behemoth – Actelion. The former backed out of the deal due to uncertainty about the value it will create for its shareholders. Meanwhile, there were talks of Sanofi eyeing a deal with Actelion. However, that was not to be.

After a series of on-and-off the negotiations, Johnson & Johnson has agreed to acquire Actelion in a $30 Bn all-cash-deal on Wednesday, January 25, 2017. The acquisition involves the formation of a new standalone spin-off research company, leveraging Actelion’s R&D pipeline. For Jean-Paul Clozel (CEO, Actelion), who will spearhead the budding spin-off following this deal, will reportedly gain around $1.52 Bn from his Actelion stake.

Aspiration to Gain a Clutch of New Drug Products

Remicade, J&J’s blockbuster arthritis treatment drug, currently collides head-on with the US-based Pfizer’s Inflectra, a copy drug. While a slew of novel drugs are already in the pipeline to potentially balance the resultant revenue loss, Johnson & Johnson believes that acquiring Actelion will be a quicker and more effective step to plug the hole. As J&J’s top selling drugs face solid competition from less-expensive copy drug products, the company is simultaneously challenged with hefty price in a bid to replenish its existing drug pipelines.

Cashing in On the Loopholes in US Tax Policy

Though expensive than all recent takeovers within the industry, this acquisition highlights a clear upside for both the companies, as it will potentially foster their sales and land up in obtaining better reimbursements for both.  Currently, Johnson & Johnson has around $ 42 Bn cash offshore, which will reduce significantly post-deal. Using the entire overseas cash for buying Actelion will possibly cut down J&J’s tax bills in future, on the backdrop of the US Congress’ focus on restructuring the existing US tax code.

Urge to Immediately Bolster Sales

Having a blockbuster drug targeted to a rare disease niche is always beneficial when it comes to facing pricing pressures. Having a drug product portfolio in rare disease category is thus a valuable asset for Actelion and the deal is a win-win for Johnson & Johnson,” says Jean-Pierre Garnier, Chairman, Actelion.

The agreement is the biggest deal so far in the history of J&J, and will enable the company to access Actelion’s much desirable rare-disease portfolio. Amidst immense competitive pressures for Johnson & Johnson’s bestselling drugs, this would be an unusual deal for J&J that will spin out the drug discovery operation of Actelion. “We hope that the new drugs will instantly boost J&J sales, and provide a quick access to Actelion’s promising drug products targeted to life-threatening pulmonary arterial hypertension and multiple sclerosis,” claims Alex Gorsky, CEO, Johnson & Johnson. The transaction will possibly accomplish by the second quarter this year, instantly pushing the earning of J&J. The company anticipates huge profits in the long run.

About the Author

Anurag Sharma

Delivering high-quality research and consulting projects at tight deadlines remains Anurag Sharma's forte. An experienced market research professional, he has helped business of varied scales make key strategic decisions. Anurag is a specialist in the medical devices market research domain, and has accurately predicted the trends in the market. Anurag is an avid traveller and music aficionado; in his free time, he loves to introspect and plan ahead.

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