J&J to spin off Actelion R&D unit into new biotech in major M&A deal

Under the deal, J&J will also gain an option on the spinoff's hypertension candidate.

Johnson & Johnson has always been partial to a new biotech and under its buyout of Actelion announced early this morning, it’s creating another by spinning off the Swiss company’s research ops.

As part of the deal, worth $280 a share or $30 billion, Actelion will spin out its drug discovery unit, as well as its early-stage assets into a newly created Swiss biopharma known as the slightly uninspiring name of “R&D NewCo.”

Its shares will be listed on the Swiss Exchange and given to Actelion’s shareholders as a stock dividend. The deal is expected to be done in the coming months. 

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Johnson & Johnson said in a statement that it will start things off by holding 16% of the shares of the biotech, and have rights to an additional 16% through a convertible note. The Big Pharma also gets an option on its midstage hypertension candidate ACT-132577.

“Together, these arrangements with R&D NewCo will provide Johnson & Johnson with additional sources of innovation and value,” the company said.

The NewCo will be led by Actelion's current team, including founder and CEO Jean-Paul Clozel, who remains as chief, and Jean Pierre Garnier, current chairman of Actelion, who becomes chair of R&D NewCo.

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.”

R&D NewCo will work out of Actelion’s drug discovery engine based in Allschwil, Switzerland, specializing in small molecule therapeutics across several areas, including specialty cardiovascular disorders, CNS disorders, immunological disorders and orphan diseases.

Actelion had been seeking its own deals in recent years, including, according to reports, ZS Pharma and its hyperkalemia candidate ZS-9, although it was beaten out by AstraZeneca in 2015 with a $2.7 billion deal (although, the biotech may have dodged a bullet there).  

Actelion has over the past two years repeatedly downplayed concerns that it needed to sign a big deal to secure its future, and thus ward off potential unwanted takeover attention from Big Pharmas. 

Actelion’s, and now NewCo's, phase 3 pipeline includes cadazolid, a treatment for Clostridium difficile-associated diarrhea, as well as a late-stage study of ponesimod for multiple sclerosis, part of a plan to build up a new franchise in immunology.

It also has midstage candidates for lupus in the form of cenerimod, as well as an endothelin receptor antagonist for specialty CV disorders, and a dual orexin receptor antagonist for insomnia.

Further back in phase 1 it's experimenting with lucerastat in the rare disorder Fabry disease, while also working on a selective orexin 1 receptor antagonist, and a T-type calcium channel blocker, in unspecified neurological disorders. 

Analysts at Jefferies note: "Whilst the R&D NewCo retains all the phase 2 and earlier products in development, JNJ does retain rights to the two phase 3 development assets: ponesimod, an S1P1 in development for relapsing multiple sclerosis and cadazolid, a novel antibiotic in development for clostridium difficile associated diarrhoea."

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