Johnson & Johnson’s $6.5 billion takeover of Momenta Pharmaceuticals came out of the blue last month. Yet, behind the scenes, the companies had been circling each other for more than 18 months, culminating in a drawn out due diligence process that drove Momenta to issue J&J an ultimatum.
The story of J&J’s acquisition of Momenta starts with a meeting between the companies at the J.P. Morgan Healthcare Conference in January 2019. Having expressed an interest in Momenta’s assets, J&J stayed in touch with the biotech and entered into a confidentiality agreement to facilitate talks in April. Two other companies entered into similar agreements later in 2019.
Discussions continued into 2020, when J&J floated the possibility of putting a proposal to Momenta ahead of the delivery of data from a phase 2 trial of the asset at the center of the talks, nipocalimab. J&J missed that deadline but moved quickly after seeing the top-line data, submitting a nonbinding buyout offer of $50 a share a week after Momenta publicly disclosed the results.
The data sent Momenta’s share price up 26% to close to $40 over the week leading up to J&J’s offer. Under normal circumstances, a biotech may issue stock to capitalize on the price rise and secure cash for the next stage of development, but with J&J in pursuit Momenta opted against such an offering. At the start of July, Momenta granted J&J access to a virtual data room to support its due diligence.
In the days either side of that event, Momenta learned that neither of the other two companies with which it formed confidentiality agreements in 2019 were willing to make a bid. Fearing it may jeopardize the J&J deal, Momenta opted against a broad outreach effort. Momenta chose to limit its outreach to just two companies in light of “the risk of leaks” and the speed at which J&J said it would be willing to proceed.
J&J ultimately moved rather slower than expected. By Aug. 4, Momenta’s transaction committee was telling management to get J&J to file a revised offer “as promptly as possible.” The next day, Momenta CEO Craig Wheeler gave J&J an ultimatum: Submit a revised offer within three days or we switch our focus to financing. By then, Momenta’s stock price had fallen well below the high it hit in the aftermath of the phase 2 data.
On Aug. 8, the last day covered by Wheeler’s ultimatum, J&J offered $52 a share. Negotiations later that day bumped the price up to $52.50. Having agreed that figure, Wheeler, who wanted to get the deal done quickly, asked to talk to J&J CEO Alex Gorsky to learn if the transaction had the support of him and his team. Six days later, Gorsky called Wheeler.
J&J’s board of directors was unable to meet to review the transaction for another four days after the call between Gorsky and Wheeler. Having received the board’s support and finalized certain details, J&J disclosed the deal on August 19, 49 days after it gained access to the data room.
Sanofi disclosed its $3.7 billion takeover of Principia Biopharma 12 days after being granted access to a virtual data room. Fifty-one days passed between Gilead gaining initial access to Forty Seven’s data room and publicly disclosing its $4.9 billion takeover deal. However, in that case the initial data room lacked documents Gilead needed to make a decision. After gaining access to the second data room, Gilead took just four days to seal the deal.