Johnson & Johnson (JNJ - Get Report) said Thursday it will purchase Swiss biotech Actelion Pharmaceuticals (ALIOY) for $30 billion, and it plans to spin out the company's research and development unit into a separate business.
J&J will pay $280 per share for the Allschwil, Switzerland-based group, which is the Swiss franc equivalent of Sfr280.08 per share, the companies said in a statement. Once the R&D unit is spun out, Actelion shareholders will receive a one-for-one holding in the new company as a dividend. The deal was unanimously approved by both boards, the statement said. No shareholder approval is required.
"We believe this transaction offers compelling value to both Johnson & Johnson and Actelion shareholders," said Johnson & Johnson CEO Alex Gorsky. "Actelion has built an attractive, growing business with world-class commercial and clinical development capabilities."
As a part of the deal, JNJ will own approximately 16% of the spun out R&D unit, and will have an option through a convertible note to acquire another 16%. The deal is expected to close mid-February.
"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," Gorsky said. "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."
According to JNJ's CFO, Dominic Caruso, the initial accretion of the deal will be put back into the company's R&D pipeline.
"We're quite excited about the structure of the deal," Gorsky said during the company's investor call Thursday morning. "It's part of a continuing example of our ability to find early opportunities and work with them in very collaborative, flexible ways."
Gorsky noted that the deal is an effective way for JNJ to deploy its cash still outside the U.S. JNJ has one of the largest stashes of overseas cash among all pharmaceutical companies. While Gorsky noted during the company's earnings call earlier this week that he and President Donald Trump talked about economic policies and a potentially lower tax rate for repatriation, no policy changes have been decided on yet.
Actelion shares closed at Sfr227.40 each in Zurich Wednesday, up 1.97% on the session and pegging the company's market value at Sfr24.5 billion ($24.5 billion). The shares have rise 12.57% since it confirmed exclusive talks with J&J on Dec. 21 but are more than 50% higher since takeover speculation first surfaced in late November.
The company said earlier this week that its potential blockbuster Opsumit drug failed to meet a key target in late-stage trials. Opsumit, a follow-up to the Swiss biotech's Tracleer treatment for patients with pulmonary arterial hypertension, missed a Phase 3 trial goal, measured by a "six minute walk test", the company said Monday.
"Although the results point towards a benefit of treatment with macitentan, we do not see a significant treatment effect on the primary endpoint of exercise capacity as measured in the 6 minute walk test," Actelion officials said. "We need to fully analyze the data to understand what could have caused this phenomenon."
J&J posted better-than-expected fourth-quarter earnings earlier this week and reiterated its aim to look at strategic options for the company that could include mergers or asset sales amid lower 2017 forecasts. The company said Thursday it expects that the Actelion purchase will be immediately accretive to earnings and revenue.
The New Brunswick, N.J.-based group said earnings for the three months ended in December, excluding special items, came in at $1.58 a share, marginally higher than the $1.56 forecast of analysts. Revenue for the quarterly period was tabbed at $18.1 billion, the company said, just shy of the FactSet forecast of $18.26 billion.
However, 2017 adjusted earnings forecasts were set at between $6.93 and $7.08 a share, well shy of analysts' estimates of $7.11. Revenue forecasts were set at $74.1 billion to $74.8 billion, short of forecasts of $75.1 billion.
Johnson & Johnson shares closed at $112.80 in New York Wednesday, up 0.93% on the session. Shortly after opening Thursday they were down just under $1 at $111.89.
--Alicia McElhaney contributed to this story.