Actelion’s silence stirs up betting
Fiercely independent Swiss biotech firm’s silence in face of offer from J&J signals it may be too good for shareholders to refuse
Actelion’s silence speaks volumes to the dozens of event-driven hedge funds piling into the Swiss biotech firm, betting that the approach by Johnson & Johnson will result in an outright takeover and handsome returns.
Actelion’s silence speaks volumes to the dozens of eventdriven hedge funds piling into the Swiss biotech firm, betting that the approach by Johnson & Johnson (J&J) will result in an outright takeover and handsome returns.
A source familiar with the matter has said the two companies were discussing a bid of close to $27bn, or Sf250 ($247) per share, which is 25% above Actelion’s current share price.
Both companies have confirmed that US diversified healthcare group J&J — maker of Pizbuin sunscreen, surgical tools and arthritis drug Remicade — has approached Actelion about a potential takeover, but kept mum on details.
Co-founder and CEO JeanPaul Clozel and fellow shareholder Rudolf Maag have in the past been outspoken defenders of an independent Actelion, which has built a $2bn business by focusing on a debilitating lung disease. But they have made no public comment since the companies confirmed the talks a week ago, and fund managers with a more conventional investment approach said Clozel would have some explaining to do if he rejected an offer with such a big premium.
“This time it’s different. It has not been outright rejected. That’s an indication that you can go a little bit bigger,” said Michael Wegener, managing partner at Hong Kong-based, event-driven hedge fund Case Equity Partners. He has staked 1% of his fund’s net assets under management on Actelion but did not disclose the size of his assets and is prepared to stock up if J&J tables a more detailed takeover proposal.
“We don’t think Clozel is going to fight,” said another hedge fund manager, who asked not to be named.
Clozel holds about 5% in the biotech firm, according to its annual report, while his wife, Martine Clozel, co-founder and chief scientific officer, owns an undisclosed stake.
Daily turnover in Actelion shares has, on average, jumped more than fourfold from their three-month average since media reports of a J&J approach emerged on November 24.
The shares were trading at Sf200 in afternoon trade on Friday, which is up 27% since November 24.
Many investors are counting on J&J to structure a deal that would grant shareholders a cash payout and award Clozel a facesaving departure that honours the value of the company’s development pipeline of experimental drugs.
Some analysts argue J&J, or any rival suitor, will pay up for Actelion’s launched products — two new drugs alone are seen generating combined peak sales of well above $4bn — but have little appreciation for its drug development projects.
Analysts at brokerage Brian Garnier on Friday suggested Clozel could be offered control of the experimental drugs portfolio and he could cash in on the rest of the assets.
“A stand-alone Actelion going forward would therefore consist of a pipeline company with limited or no revenues.”
Maag, another linchpin investor, who according to Thomson Reuters data holds 5.1%, has previous ties to J&J.
He made much of his almost $2bn fortune when he sold his stake in medical device maker Synthes-Stratec to J&J four years ago.
Maag declined to comment, a departure from five years ago when he and Clozel defended Actelion against an attempt by US-based hedge fund Elliott Advisors to get the biotech company to put itself up for auction.
Hedge funds see Maag playing a critical role in a J&J deal, potentially persuading Clozel that the offer is too good for shareholders to pass up.
“We are monitoring the situation very actively,” said one hedge fund manager, speaking on condition of anonymity.