Johnson & Johnson/Actelion

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Analysts at SVBLeerink issued a report recently listing Johnson & Johnson's purchase of Actelion as one of the worst biopharma acquisitions of the last decade (J&J).

Johnson & Johnson/Actelion
Deal size: $30 billion
Date announced: June 16, 2017

Johnson & Johnson’s quest to acquire specialty drugmaker Actelion was a long-fought battle that included fending off a competing bid from Sanofi. But that was just the start of J&J’s troubles with Actelion, raising serious doubts that the final $30 billion price tag was worth it.

Actelion brought J&J the blockbuster Tracleer to treat pulmonary arterial hypertension (PAH), plus two follow-ups, Opsumit and Uptravi. The next-gen drugs were expected to pick up the slack as Tracleer fell to generic competition, and they’ve done OK: J&J’s total sales of PAH drugs rose 5% in the first nine months of 2019 to $2 billion.

But OK growth may not be good enough to justify the purchase price. In fact, in October, analysts at SVBLeerink issued a report listing J&J’s purchase of Actelion as one of the worst biopharma acquisitions of the last decade, because the deal wouldn’t create value over J&J’s lifetime but rather destroy value—to the tune of about $15 billion.

A spokesperson for J&J said in a statement emailed to FiercePharma that the Actelion acquisition was immediately accretive to earnings per share and was consistent with the company’s overall strategy to pursue therapies for “patients with serious illnesses and significant unmet medical need."

"Our focus is to extend the reach of the currently marketed medicines from this portfolio to help more patients," the spokesperson added, "as well as to bring new innovations to patients in need in this category.”

Potential competition for Actelion could well have driven up its cost. J&J initially walked out of talks with Actelion, only to see Sanofi step up with an offer. But then Sanofi tried to knock down the deal price and change the terms, prompting Actelion to rekindle the courtship with J&J.

The way SVBLeerink sees it, the final valuation simply didn’t make sense. “If our estimate of the value of the assets today and cumulatively is equal to or less than 80% of the transaction price, we consider the deal a failure,” SVBLeerink wrote.

Why? The analysts assert that lifetime value is ultimately determined by the ability of the buyer to capitalize on the acquired company’s pipeline. By that standard, J&J has struggled.

In addition to picking up Actelion’s PAH portfolio, J&J got two late-stage pipeline assets: the antibiotic cadazolid and the multiple sclerosis (MS) treatment ponesimod. But a week before the Actelion purchase closed, the company released mixed results from a phase 3 trial of cadazolid, which was being developed to treat Clostridium difficile-associated diarrhea. In April 2018, J&J scrapped the drug.

J&J is having better luck with ponesimod. In September of this year, it rolled out data showing that the drug was better than Sanofi’s Aubagio at lessening the incidence of MS flare-ups that lead to symptoms like fatigue.

Still, J&J’s main goal was to expand the audience for Actelion’s flagship PAH portfolio—but even before the deal closed, it became evident just how big a challenge that expansion might be.

In January 2017, Opsumit failed a phase 3 trial in patients with Eisenmenger syndrome, a heart condition that causes PAH. In January 2019, the FDA rebuffed Opsumit's bid for a new approval in patients with inoperable chronic thromboembolic pulmonary hypertension, citing the need for more data.

J&J isn’t giving up on its ambition to grow the PAH market, though: It has two additional phase 3 trials underway for Opsumit and two for Uptravi.

Johnson & Johnson/Actelion