Europe's biggest biotech firm and rare disease medication specialist Actelion has confirmed that it is in early discussions with U.S. healthcare firm Johnson & Johnson regarding a possible takeover of the company which could be worth upwards of $25 billion.
A spokeswoman for the company said there was no guarantee that any deal would go through and talks are at a “below executive” level at this time.
J&J have been on the ropes in the past year as its biggest selling product Remicade, a popular arthritis medication, faces stiff competition from a cheaper Pfizer alternative.
In response to the takeover news, Actelion stock jumped nearly 20 percent to a record high of 187.52 Swiss francs in early trading on Friday. Closing price was up 17 percent at 184.55, its best performance of the year by far.
Regulators have been getting tough on medication pricing certifications over the past few years, but those companies specializing in rare diseases have been largely exempt from scrutiny, making them a very attractive target in M&A.
Actelion's focus on lung disease puts them in that category and many analysts say that due to the industry’s appetite for businesses such as these, the final bid for the company’s shares could be as high as $250 per share.
Sales forecasts put the firm’s operating profits from their lung medication at around $5 billion in the next 4-years. Actelion's Opsumit and Uptravi medication relieve high blood pressure in the lung region which sometimes proves fatal, especially in young children.
“J&J are looking for some diversification and to boost their drug pipeline with a focus on Europe and the U.S.,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “We’ve just seen them purchase Abbott Laboratories' eye care business for around $4 billion and they’ve had their eye on Actelion for a while.”
One major sticking point in the deal could be Actelion’s founder and CEO Jean-Paul Clozel who has said on numerous occasions that he would like to see the company remain autonomous. Clozel holds a 4 percent stake and has previously called on shareholders to block attempts by activist investor groups to sell the firm, and since then the company’s shares have quadrupled in value.
J&J could face tough competition on the bid by Swiss rival Novartis AG, however a spokesman for the group said they have not entered the bidding process.
