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
— Johnson & Johnson (@JNJCares) January 26, 2017
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.
— Actelion (@actelion_com) January 26, 2017
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.