J&J to acquire Actelion for $30B, spin-out new R&D company
Johnson & Johnson and Actelion have entered into a definitive transaction agreement under which Johnson & Johnson will launch an all-cash tender offer in Switzerland to acquire all of the outstanding shares of Actelion for $280 per share, payable in U.S. dollars, which equates to CHF 280.08 per share as of January 25, 2017. The transaction, which was unanimously approved by the boards of directors of both companies, is expected to be immediately accretive to Johnson & Johnson adjusted earnings per share and accelerate Johnson & Johnson revenue and earnings growth rates. Johnson & Johnson will fund the transaction with cash held outside the U.S.
Actelion has established a leading franchise of differentiated, innovative products for pulmonary arterial hypertension (PAH) that is highly complementary to the existing portfolio of the Janssen Pharmaceutical Companies of Johnson & Johnson. The addition of Actelion's specialty in-market medicines and late-stage products is consistent with Johnson & Johnson's efforts to grow in attractive and complementary therapeutic areas and serve patients with serious illnesses and significant unmet medical need. In addition, the transaction structure will provide Johnson & Johnson flexibility to accelerate investment in its industry-leading, innovative pipeline to drive additional growth. Further, Johnson & Johnson expects to retain Actelion's presence in Switzerland and also leverage its complementary capabilities in shaping medical paradigms.
As part of the transaction, immediately prior to the completion of the acquisition, Actelion will spin out its drug discovery operations and early-stage clinical development assets into a newly created Swiss biopharmaceutical company (R&D NewCo). The shares of R&D NewCo, which will be listed on the SIX Swiss Exchange (SIX), will be distributed to Actelion's shareholders as a stock dividend upon closing of the tender. Johnson & Johnson will initially hold 16% of the shares of R&D NewCo and have rights to an additional 16% of R&D NewCo equity through a convertible note.
The arrangements will result in R&D NewCo launching with cash of CHF 1 billion to be made available at the closing of the transaction. Johnson & Johnson will also receive an option on ACT-132577, a product within R&D NewCo being developed for resistant hypertension currently in phase II clinical development. Together, these arrangements with R&D NewCo will provide Johnson & Johnson with additional sources of innovation and value. R&D NewCo will be led by Actelion's current scientific team with Jean-Paul Clozel, M.D., chief executive officer and founding member of Actelion, as chief executive officer. Jean Pierre Garnier, Chairman of the Board of Actelion, will be chairman of the board of R&D NewCo.
"We believe this transaction offers compelling value to both Johnson & Johnson and Actelion shareholders," said Alex Gorsky, chairman and chief executive officer of Johnson & Johnson. "Actelion has built an attractive, growing business with world-class commercial and clinical development capabilities. Adding Actelion's portfolio to our already strong Janssen Pharmaceuticals business is a unique opportunity for us to expand our portfolio with leading, differentiated in-market medicines and promising late-stage products. We expect to leverage our established global presence and commercial strength to accelerate growth and patient access to these important therapies. Further, we believe R&D NewCo will be strongly positioned to continue Actelion's legacy of innovation and look forward to collaborating on the development of cutting-edge new therapies."
Garnier said, "I'm very proud that we have created such a unique value proposition through this structured transaction. Actelion's shareholders can monetize their holdings in Actelion at a highly attractive cash price of $280 per share, while at the same time retaining a significant stake in the future potential upside of Actelion's earlier stage pipeline, through their ownership of R&D NewCo. Jean-Paul Clozel and I have high expectations for this new, well-funded biotech company with a significant portfolio of drugs in the clinic. R&D NewCo will be led by an experienced and proven scientific team."
Dr. Clozel said, "In making this offer, Johnson & Johnson is recognizing all that has been created at Actelion during the last 20 years, and in particular the quality of our PAH franchise, the potential of our key marketed medicines and our promising late-stage development assets. The newly created R&D company allows us to continue with our successful culture of innovation. It is enormously exciting to continue to develop new and differentiated products, in multiple therapeutic areas, to improve the lives of patients."
Benefits of the Transaction
- Compelling, all-cash transaction for Actelion shareholders: The transaction will deliver a significant and immediate premium to Actelion shareholders, with greater value certainty as compared to Actelion's standalone prospects. Actelion shareholders are also expected to realize substantial additional value from their ownership interest in R&D NewCo.
- Value-enhancing transaction for Johnson & Johnson shareholders: The transaction is expected to be immediately accretive to Johnson & Johnson earnings per share and accelerate Johnson & Johnson revenue and earnings growth rates, while enhancing long-term growth and value creation of the Janssen Pharmaceuticals business. Post-transaction close, Johnson & Johnson expects the transaction to increase its long-term revenue growth rate by at least 1.0% and its long-term earnings growth rate by 1.5% - 2.0% above current analyst consensus. Johnson & Johnson estimates EPS accretion in the first full year of $0.35 to $0.40. Johnson & Johnson shareholders are also expected to realize additional value from the Johnson & Johnson ownership interest in R&D NewCo.
- Additional value creation through new R&D NewCo: R&D NewCo will inherit Actelion's fully established and validated drug discovery engine based in Allschwil, Switzerland and its proven and experienced discovery and development team. It will be well positioned to continue Actelion's strong legacy of innovation to discover and develop new and differentiated products in multiple therapeutic areas. As an independent clinical stage biopharmaceutical company, specializing in the discovery and development of small molecule therapeutics to meet significant unmet medical need, R&D NewCo will have a broad portfolio of drug candidates in clinical development, across four focused therapeutic franchises: specialty cardiovascular disorders, central nervous system disorders, immunological disorders and orphan diseases.
- Aligns with Janssen Pharmaceuticals' Transformational Medical Innovation Strategy: Actelion's PAH franchise, including differentiated, innovative medicines Opsumit, Uptravi, Tracleer, Veletri and Ventavis, expands Janssen Pharmaceuticals' portfolio in its attractive and complementary cardiovascular and metabolic therapeutic area, and provides a leading commercial position in an established area where the science is transformational for patients. Through the proposed transaction, Johnson & Johnson will also acquire Actelion's other marketed products, including Valchlor and Zavesca as well as global rights to ponesimod, an S1P1 receptor modulator in phase III development for multiple sclerosis, and cadazolid, a novel antibiotic in phase III development for Clostridium difficile-associated diarrhea.
- Extends Actelion products' geographic and commercial reach: The Johnson & Johnson global presence and commercial capabilities will help open new markets and opportunities for Actelion's in-market products and provide additional support for the successful launches of its promising late-stage therapies in highly competitive therapeutic areas.
Roadmap to Completion
The transaction is expected to close by the end of the second quarter of 2017. The Pre-Announcement including the conditions of the tender offer is being published concurrently with this press release. Johnson & Johnson intends to file a prospectus and commence the tender offer by mid-February. In addition, Actelion will convene an Extraordinary General Meeting (EGM) for shareholders to approve the distribution of shares of R&D NewCo by way of a dividend in kind to Actelion's shareholders upon closing of the tender offer. The EGM is expected to be held in the second quarter of 2017.
The transaction is conditioned upon:
- At least 67% of all Actelion shares that are issued and outstanding at the end of the offer period, which may be extended, tendering into the offer;
- The approval of the Actelion shareholders of the distribution of the shares of R&D NewCo at the EGM called for this purpose; and
- Further customary offer conditions described in the offer prospectus, including regulatory approvals
Tax clearances in relation to the spin-off of R&D NewCo have been received from both the Swiss Federal and the Basel-Landschaft cantonal tax authorities. Jean-Paul Clozel has committed to tender all Actelion shares he owns into the offer and vote his shares in favor of the transaction at the EGM. Actelion's Board of Directors unanimously recommends that Actelion shareholders tender their shares into the offer and vote in favor of the distribution of shares at the EGM.
Actelion is prepared to pay the price per tendered share to the retail shareholders in CHF and therefore provide a wholesale exchange facility. The exchange facility shall be provided only to persons who hold their Actelion shares in a bank deposit in Switzerland, and who hold no more than 1,000 shares each.