Actelion snubs Sanofi and restarts talks with J&J

Swiss drugmaker Actelion is back at the negotiating table with Johnson & Johnson, appearing to have given Sanofi the cold shoulder just as the French drugmaker was thought to have figured out how to bring the biotech to ground.

J&J put out a release today saying: "Johnson & Johnson today confirmed it has entered into exclusive negotiations with Actelion regarding a potential transaction.” It then cautioned that there can be no assurance any transaction will result from these discussions.

No kidding. It was just 5 days ago that J&J said it had given up on making a deal with Actelion. It was then Sanofi that was looking to pick up Actelion and its pipeline of promising drugs.

Actelion investors were said to be getting very restless over the fact that the biotech had yet to bring a deal with Sanofi home for the holidays. But shares rose Tuesday on leaked word that progress is being made and that Sanofi may have found just the right wrapping for the $30 billion deal that will get the Swiss biotech to accept.  

Then it reversed again and now Sanofi is on the sideline and J&J is back at it.

Sources were telling Bloomberg that the contingent value right, or CVR, Sanofi has included is worth about $20 of the $275 price per Actelion share, amounting to a $2 billion bonus if certain pipeline drugs were as successful as Actelion CEO Jean-Paul Clozel suggests. They thought the offer would appeal to Clozel’s belief that the future value of his company exceeds what most suitors have indicated a willingness to pay.

“I’ve never met a biotech CEO who doesn’t believe that his or her share price is worth more than what’s on the screen,” Daniel Mahony, a fund manager for Polar Capital, told Bloomberg. “Whatever you bid, it’s never enough,” said Mahony, whose fund is invested in both Sanofi and Actelion.

The companies had no comment for the news service.

It was price that led J&J to walk away from negotiations with Actelion last week, giving Sanofi an opening to walk in. But when J&J withdrew, so did Actelion’s share price, which fell about 7%, and Reuters reports that has not set well with hedge fund investors. Sources are telling Reuters that Clozel may now be in a place where he has to make a deal or risk that angry investors will take steps to replace the Actelion board with members that will make a deal.

Sanofi has some experience using a CVR to woo a reluctant target, Bloomberg points out, having included CVRs in its $20.1 billion deal for Genzyme in 2011. But the pub also points out that based on the Genzyme deal, Actelion shareholders are unlikely to get the full value from the extra payout. It points out that while Sanofi agreed to pay as much as $14 per share, none of the six milestones had been met as of last year and that CVRs are currently trading at about 40 cents a share.

While investors were hoping for culmination of a deal before Christmas, a source pointed out to Reuters that it is "neither impossible nor unusual" to see big deals finally tied up between Christmas and New Year's Eve.

Editor's Note: The story was updated with information about Johnson & Johnson returning to negotiations with Actelion.