Actelion fails key phase 3, but investors brush it off as J&J megadeal draws near

Disappointing trial results for a key drug, Opsumit, are not expected to derail a long-anticipated merger between J&J and Actelion.

Swiss specialty drugmaker Actelion Pharmaceuticals is the target of a long-rumored $26 billion-plus takeover bid by Johnson & Johnson, thanks partly to Opsumit, its FDA-approved drug to treat pulmonary arterial hypertension (PAH). So when Actelion announced Monday that Opsumit failed a phase 3 trial meant to expand its market, one might think investors would worry about that deal.

Clearly, they’re not concerned. Actelion shares actually traded up nearly 3% on the Zurich exchange after the announcement.

That’s likely because Actelion's bag of tricks includes other opportunities to expand Opsumit’s market—not to mention a second PAH drug, Uptravi, that may be even more valuable. While it’s true the trial failure will make it more difficult for Actelion to set Opsumit apart from generic rivals, including impending versions of its own older drug, Tracleer, it shouldn’t be a deal-killer, some analysts predict.

“We believe the news is unlikely to be terminal to ongoing discussions over a potential strategic transaction with Johnson & Johnson,” wrote Richard Parkes of Deutsche Bank in a note to investors on Monday. He added that the trial failure should prove to be a “modest disappointment” in the effort to protect Opsumit from competitive pricing pressure.

The troublemaker in the phase 3 trial, involving patients whose PAH is caused by a heart disorder called Eisenmenger Syndrome, was a six-minute walk test, a measurement commonly used to indicate changes in respiratory symptoms. Although patients in the Maestro trial did show improvements in cardiac stress and heart pumping function, their ability to perform the test did not get significantly better.

Tracleer, by contrast, did produce improvements in the walk test, and the Opsumit predecessor is actually FDA-approved for patients with Eisenmenger Syndrome. Add to that the fact that Tracleer will lose its patent protection this year, opening the door to inexpensive generics, and the Opsumit marketing challenge starts to come into focus.

Still, Actelion is pursuing other market-expansion avenues that are promising. The company recently announced positive results from a phase 2 trial of Opsumit in a type of PAH caused by blood clots, for example. It is also running a phase 3 trial in patients with portopulmonary hypertension, which could boost the targetable patient population for Opsumit by about 10%, Parkes estimates.

Then there’s Uptravi, Actelion’s newest blockbuster hopeful, which won FDA approval in December 2015 to delay the progression of PAH. It’s yet another therapy to help cushion the revenue loss from Tracleer. In the third quarter of last year, Tracleer sales fell 16%, but Opsumit was up 49% to CHF 218 million ($218.2 million). And Uptravi brought in CHF 160 million ($160.1 million) in its first nine months on the market.

As for the J&J deal, investors expected that to be sewed up by the end of last year, so anticipation has now reached fever pitch. Bloomberg reported in late November that Actelion had rejected a $26 billion offer from J&J, prompting the New Jersey pharma giant to up its bid. Both companies have confirmed they’re negotiating a deal, though they haven’t talked publicly about potential buyout numbers. They're said to be considering a combination sale-and-spinoff that would turn Actelion's pipeline assets into an independent company.