The companies confirmed the takeover approach on Friday with Actelion saying, "There can be no certainty that a transaction will result," while J&J said the two are, "engaged in preliminary discussions."
Actelion's shares (SIX:ATLN) rose by 17 percent to CHF184.5 (US$181.6) when the Allschwil, Switzerland-based company put out its announcement on Friday afternoon, boosting the market capitalization to CHF20 billion. On Monday, shares closed at CHF190.
At the heart of Actelion's portfolio is its range of treatments for pulmonary arterial hypertension (PAH), covering the spectrum of disease severity and with oral, inhaled and intravenous medications.
That represents a step outside J&J's current franchises in immunology, neuroscience, infectious diseases, cardiovascular/metabolic disorders and oncology. However, buying Actelion to extend its reach into respiratory diseases would instantly map across to J&J's strategy of embedding biotech-like teams into its disease area strongholds.
In a note, Jeffries Analyst Peter Welford said he expects other bidders to emerge. While there are "few direct synergies" with J&J's marketed drugs, "the long lifecycle of Actelion's highly profitable PAH franchise, plus potentially overlooked pipeline opportunities," may be attractive to a number of pharma companies, Welford said.
Over the past few years Actelion has been intent on positioning itself to withstand patent expiries on its first-generation endothelin receptor agonist Tracleer (bosentan), launching Opsumit (macitentan), Uptravi (selexipag) and Veletri (epoprostenol).
The third quarter financial results published on Oct. 20 show the effort is bearing fruit, with the three new products surpassing Tracleer for the first time, accounting for sales of CHF827 million in the first nine months of 2016, compared to CHF790 million for Tracleer.
At the same time, with generic versions of Tracleer yet to reach the U.S. market, sales of the product have not fallen as sharply as anticipated.
While generic launches can wipe out 90 percent or more of an originator's sales in a matter of weeks, Tracleer has seen only a 15 percent drop in the first three quarters of 2016, compared to the same period in 2015. Most of the fall is attributed to generic competition in Europe.
However, as Welford noted, that is only putting off the inevitable, and the price differential of generic versions will not only undermine sales of Tracleer, but could also hit Actelion's newer products. He estimates peak sales of $2.3 billion for Opsumit and $1.8 billion for Uptravi.
Work in hand to build the Opsumit franchise includes a study in pediatric PAH and one in chronic thromboembolic pulmonary hypertension.
In addition to the marketed PAH products, Actelion has a development-stage neurology pipeline, which could be seen as a better fit with J&J's portfolio.
The lead program, ponesimod, an orally active spingosine-1-phosphate receptor agonist, is in phase III development in relapsing multiple sclerosis. The trial is due to complete enrolment by the end of the year with results expected in the first half of 2017.
Ponesimod also has been tested in psoriasis and graft-vs.-host disease.
Following on behind is a dual orexin receptor antagonist, which is in phase II in the treatment of insomnia. Actelion also is developing a selective orexin-1 receptor antagonist for anxiety disorders and a calcium channel blocker for epilepsy.
In total, Actelion has 2,560 staff of which 1,077 are based in Switzerland, 510 elsewhere in Europe, and 490 in the U.S.
The company has been a bid target in the past, fighting off an ambush by activist shareholder Elliott Advisors in May 2011.
That was an extremely personal crusade for CEO and founder Jean-Paul Clozel, who has often stated an intention to remain independent and grow Actelion into a large-cap pharma. As Welford noted, with Clozel and his wife CSO Martine Clozel owning around 5 percent of the shares, he will again be the lynchpin in any deal.