New Drug Data May Draw Bids for Actelion

25.05.2012 -

Knock-out data for Actelion's big new drug hope could be a double-edged sword for embattled founder and CEO Jean-Paul Clozel, making it a worthy buy for pharma companies hungry for new medicines, against the scientist's fervent wishes.

Actelion received a shot in the arm last month from results in a late-stage clinical study on heart and lung medicine macitentan, reassuring doubters that sales will not trickle away once its blockbuster drug Tracleer goes off patent from 2015.

But that is also likely to pull the company back into the takeover spotlight, as big drugmakers hunt for biotech gems to restock pipelines depleted by the biggest wave of patent expiries in pharmaceutical history.

"We're convinced they have a sustainable top-line business and that must awake some interest, no question," said one major Actelion shareholder, who did not wish to be identified.

Despite the better-than-expected data, Actelion's shares have dropped below the 40 Swiss franc mark, a far cry from the 57.95 francs hit in November 2010 when speculation was rife the company might be sold.

At a strategic review earlier this month, Clozel and Chairman Jean-Pierre Garnier - a former chief executive of GlaxoSmithKline - were keen to stress that the stock deserves a re-rating, but the lacklustre share performance suggests nagging doubts about the management's credibility.

"If I were the company, I'd be fairly nervous. Looking at the share price there are enough frustrated investors and a bid would most probably meet very little resistance," the shareholder said.

Cardiologist turned businessman

Clozel, 57, is already wearing battle scars having successfully fended off an attempt by activist shareholder Elliott Advisors to force the company to sell last year.

Unlike jet-set billionaire businessman Ernesto Bertarelli, who sold Swiss biotech firm Serono to Merck KGaA of Germany in 2006 and went on to win the Americas Cup for sailing for the second time, Clozel has few passions or hobbies outside the firm, said another investor who has met him a few times.

"Clozel would struggle to reinvent himself and could end up quite isolated if he was no longer Actelion's boss."

While Italian-born Bertarelli took over the business from his father, Clozel, who trained as a cardiologist, quit pharma giant Roche to found Actelion with his wife Martine in 1997 and has often stressed his desire to keep the company independent.

Another big shareholder remarked Clozel would likely go "stir crazy" if he were forced to give up running Actelion.

One healthcare banker said the dispute with Elliott could act as a warning signal for buyers, saying any bidder would be "foolhardy" to go for a hostile approach.

"Companies don't like to go hostile and lose. This is a case where there's probably a high risk of failure, given they (Actelion) were successful against the activist shareholder not so long ago," said the banker, who did not wish to be identified. "I think people will really think twice before picking up the phone and trying to get a deal."

Swiss drugmaker Roche's hostile bid for Illumina was met with stiff resistance from the U.S. genomics specialist which adopted a so-called "poison pill" mechanism that could make it more difficult and costly for a suitor to buy shares. Roche walked away from the deal last month.

But any bidders interested in Actelion might have an easier ride considering the company does not have a poison pill in place, noted one of the shareholders.

Waiting for more data

UBS suggests macitentan could notch up potential sales of 2.0 to 2.5 billion francs by 2025 and many analysts say the current share price fails to reflect the company's potential.

Vontobel's Andrew Weiss believes Actelion now has a standalone value of at least 49 Swiss francs per share.

Given recent takeover multiples of mid-sized biopharmaceuticals, he calculated a potential bid price range of 58-73 francs in a recent research note.

"If you want to make a friendly takeover you want to approach them now, because they'll be able to discuss behind closed curtains what the data looks like," Weiss said.

Helvea analyst Olav Zilian also said it could be a good time to look at the company while the market is distracted.

"Right now, the market is not considering the possibility Actelion will be taken over," he said. "Instead the prime topic is how fast patients will be able to be switched from Tracleer to macitentan."

Drugmakers who might have Actelion on their shopping list include Amgen, which is in need of building up small molecule drugs and has a lot of spare cash outside the United States that it cannot repatriate, Zilian said. Amgen has been tipped as a potential suitor for Actelion since late 2010.

Another bidder could be Germany's Bayer, which also needs to boost its pharma activities.

In the past, however, pharma companies have been burned by splurging on promising drugs in trials that have turned out to be duds, and cautious suitors may yet prefer to wait until later this year when detailed data on macitentan become available.

Actelion will also present the results of a dose-finding study for its ponesimod drug in patients with moderate to severe chronic plaque psoriasis in the fourth quarter, which could act as a trigger for any bids.

One of the shareholders said it made sense for any bidder to wait until it had a clearer picture.

"Pharma and big biotech tend to act when they know what they are buying."






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