In the context of a competitive, some say overheated, market for mergers and acquisitions, Johnson & Johnson’s $30 billion purchase of Swiss biotech Actelion could be seen as a value-destructive move for shareholders.
Particularly as the firm’s founder and chief executive, Jean-Paul Clozel, walked away with “a rich collection of compounds” at the heart of a new company, Idorsia.
At the time, Dr Clozel said his aim was to “create another Actelion,” leveraging “something like 20,000 patents and between 10 and 20 projects in the pipeline.”
So what did J&J get for its 27.9 billion euros?
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In buying the company, J&J acquired a strong portfolio of medicines in pulmonary arterial hypertension, with a long runway, and good potential for certain synergies.
The novel transaction enabled Dr Clozel to keep his innovative pipeline intact, while J&J took home a new therapeutic area, adding to the firm’s existing units in oncology, infectious diseases, immunology, cardiovascular diseases and neuroscience.
Soon after the acquisition, it was announced that Jane Griffiths would lead the company, which continues to be based in Basel, Switzerland, on the border with France and Germany.
Dr Griffiths, who served as company group chairman EMEA at J&J subsidiary Janssen since 2011, updated The Pharma Letter on her strategy for the latest member of the New Jersey-based family of companies.
Diagnostic gap
The global market for therapies in PAH is estimated to be worth around $5 billion. Actelion, which has long been a leader in the area, faces competition from Pfizer, Gilead Sciences, and Eli Lilly.
Part of the attractiveness of the acquisition for J&J is the possibility of leveraging key aspects of the firm’s existing strengths. As Dr Griffiths notes: “Diagnostics is an important part of growing the business.”
“Our strategy is to maximize our current portfolio and, going forward, to close the diagnostics gap. If it takes two years to diagnose PAH and during that time your disease progresses quite substantially, that tells you there’s something wrong.”
Looking to J&J’s own diagnostics division, Dr Griffiths says: “We’re leveraging the expertise we have. At the moment, the mainstay of the diagnosis is a right heart catheterization, which is obviously pretty invasive and requires going to a specialist center.”
Although there are a number of more light touch tests, including echocardiogram, which can suggest a diagnosis of PAH, right heart catheterization is the only way of accurately and officially diagnosing the condition.
Dr Griffiths says: “We want to find a diagnostic that is easier to use, that isn’t invasive, or at least narrows down the population to a group with high levels of suspicion of PAH. The nirvana state would be no right heart catheterization, but is that available? We’ll see.”
As well as building on the diagnostics aspect of treating patients, the firm wants to develop the available therapies for PAH.
“Even with the treatments that we have now, which have significantly increased life expectancy, patients are still not living a normal life expectancy, so there’s room for new medicines with completely new mechanisms of action.”
Looking beyond PAH, there is potential also to expand Actelion into related therapeutic areas. Dr Griffiths says: “We might look at other disease areas that leverage our footprint with cardiologists and pulmonologists, but that’s a little bit further in the future.”
Cultural differences
Although only founded in 2011, Actelion is no biotech minnow. The firm employs around 2,500 and brings in over $2 billion in revenue. J&J, however, is a big fish in a big pond, employing closer to 135,000 worldwide and taking in $76 billion last year.
Despite the size difference, there are similarities. Dr Griffiths says they are both “deeply rooted in science. At J&J there has been a huge focus on finding the science wherever it is, and not necessarily only focusing on your own research topics.”
Both firms also have “a huge focus on patients. PAH is a horrible disease, and understanding what patients feel when they suffer from it is key to inspiring people to continue to find better medicines and, who knows, one day a cure.”
The cultures of J&J and Actelion are also similar “on the people side of things,” she says. “At J&J, we’re known to be quite a ‘friendly’ company, we have that label attributed to us a lot.”
Big fish, little fish
The integration of the smaller biotech into J&J’s sprawling corporate structure is “going well. It’s not complete yet, but we’ll have ‘broken the back of it’ by 2019,” she says. “It takes time to integrate things, you have to be purposeful, but sensitive. It doesn’t happen overnight.”
Key to the process has been a lot of talking. Dr Griffiths says: “If you read many integration theses, they will say one of the key things is to over-communicate, almost, about what is going to happen, and we’re working very hard on that.”
One of the advantages of the match up has been that J&J can augment some of the Swiss biotech’s capacity in terms of health economics and outcomes research, and pricing. The American firm’s expertise in this area is among “the best in industry,” Dr Griffiths says. “We were able to bring those skills to bear with the existing teams in Actelion.”
Asked if there would be any job losses, or other changes, she says: “Not really,” but “if we see some synergies, we’ll take them. These are unlikely to be in the customer-facing area. All of the sales people, country-based medical affairs, health economics and pricing teams are intact.”
It’s too early to say whether the newly-remodelled Actelion, benefiting from the strengths of the J&J empire, can add the kind of value needed to justify its eye-watering price tag as the company’s sixth pharma division.
And it may be a while before the firm adds a seventh. Asked whether J&J is seeking more acquisitions, Dr Griffiths says: “Not at the moment,” adding: “The areas we’ve got are keeping us pretty busy.”
Date: October 1, 2018
Source: The Pharma Letter