Johnson & Johnson (JNJ) announced this morning it was buying the Swiss pharmaceutical company Actelion for $30 billion in an all cash deal. The value of the deal comes to $280 per share which equates to roughly 279.50 Swiss Francs at current exchange rates of 0.9991 USD to CHF. The deal also includes spinning-off Actelion's R&D unit into a separate business. (See also, Johnson and Johnson to Acquire Swiss Biotech Firm for $30 Billion)
JNJ will get a 16% stake in the new R&D company and rights to another 16% through a convertible note. The consumer product and pharmaceutical giant will also receive an option on ACT-132577, a drug currently in Phase 2 for the treatment of resistant hypertension. The new R&D spin-off will start with cash of 1 Billion Swiss Francs. JNJ expects the deal to increase its long-term revenue growth rate by at least 1.0%.
Actelion had total revenue of 2.0 billion Swiss Franc in 2015, according to financials posted on Actelion's website. Through the first nine months of 2016 Actelion reported total revenue of 1.7 billion Swiss Francs. JNJ reported total sales of $71.9 billion for the full year 2016. The Actelion deal would provide about 1.25% growth to JNJ's top line at current revenue rates. JNJ reported top line growth only grew 2.6% in 2016 and cited in its fourth quarter release it expects 2017 revenue in the $74.1 billion to $74.8 billion range.
It appears, at $30 billion, JNJ paid roughly 15 times Actelion's revenue, which in my opinion seems excessive for the top line revenue it is getting in return. In my view, it shows how far some of these pharmaceuticals will go to continue to grow their business.
In the end, Actelion gets what it wanted all along: the right to keep the R&D portion of the firm. As I have written about previously, Actelion was looking for the right deal and finally got the deal it could not refuse. (See also, Who Killed the Actelion/J&J Deal?)