J&J finally grabs Actelion's marketed meds for $30B, with R&D spinoff to come

Handshake
Johnson & Johnson will pay $30 billion to gain Actelion's marketed meds, which brought in $1.8 billion in the first nine months of 2016.

It took months, but growth-starved Johnson & Johnson and longtime solo flyer Actelion finally have a deal agreement that’ll make both parties happy.

The details: The New Jersey pharma giant will fork over $30 billion—$280 per Actelion share—in cash to swallow the Swiss biotech’s portfolio of marketed meds, which includes pulmonary arterial hypertension up-and-comers Opsumit and Uptravi. Actelion brought in 1.8 billion Swiss francs (about $1.8 billion) in the first nine months of 2016, so the deal will give J&J an immediate revenue boost—one large enough to swell sales growth at least 1% beyond Wall Street’s current estimates, the company said

Meanwhile, Actelion will spin out its R&D unit into a standalone company, basing and listing the new drugmaker in Switzerland and handing J&J a hefty minority stake.

J&J has thus scored the sort of deal that many Big Pharma companies crave these days. Major drugmakers have shown they'll pay up for a company that combines marketed meds and their instant sales boost with pipeline prospects that can deliver more revenue down the road. Pfizer paid a rich $14 billion for the cancer-focused biotech Medivation last year after a bidding war that drew in Big Pharma and Big Biotech.

In Actelion's case, Sanofi jumped into the fray in hopes of a deal, but J&J elbowed the French drugmaker aside to enter exclusive deal talks in December. Those talks yielded the combination sale-and-spinoff structure, in which Actelion's longtime CEO Jean-Paul Clozel will helm his company's pipeline efforts going forward and which gives J&J that immediate sales hike.

The pair plans to close the transaction by this year’s second quarter, and once it does, J&J expects to add 35 to 40 cents to 2017 EPS. That’ll be a welcome change, considering the disappointing sales performance and flat expansion rate some of the company’s key meds put forth in Q4.

The agreement ends several months of back-and-forth between the two drugmakers, which included J&J at one point walking away. That's when Actelion struck up talks with Sanofi. But the way Actelion chairman Jean-Pierre Garnier sees it, the relatively complex deal arrangement was worth the wait.

“When a Big Pharma buys a smaller company, very often there’s also destruction of value. ... They don’t have the same culture, they don’t have the same processes," Garnier said on a Thursday conference call. "There’s always this dark side to the transaction. Today, we have found the structure that pretty much avoids these dark sides.”

“I do believe today that R&D NewCo will be a very successful company,” Clozel—who will run the new spinoff—added on the call.

J&J, of course, will benefit from that company’s success, too. It’ll initially hold 16% of shares, and it’ll have rights to another 16% through a convertible note. J&J will also pick up an option on phase 2 hypertension prospect ACT-132577.