Actelion shares jump as M&A talk swirls

ZURICH Fri Oct 8, 2010 10:20am EDT

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ZURICH (Reuters) - Actelion shares surged on Friday after a newspaper report fueled talk the Swiss biotech group could be the next bid target in the pharmaceuticals sector, with a U.S. buyer possible.

Actelion said it was committed to remaining independent, after the Wall Street Journal reported the group had formed a committee that was considering a sale.

Speculation over which company might be the next takeover target has taken hold since Sanofi-Aventis launched a $18.5 billion hostile bid for U.S. biotech Genzyme this week.

"We reiterate that we are committed to remaining independent," an Actelion spokesman told Reuters.

The Wall Street Journal reported Actelion had formed a special committee of board members to evaluate strategic alternatives for the company, including a potential sale. The Actelion spokesman declined to comment on the report.

Actelion, which has a market capitalization of $5.7 billion, already has a number of committees in place that cover issues such as compensation, finance and audit as well as governance.

At 1316 GMT, shares in Actelion, which have lost nearly a fifth of their value so far this year, were trading up 10.8 percent at 49.54 Swiss francs, outperforming a near flat European healthcare sector index.

Hostile bids in the pharma sector have traditionally been rare as buyers have feared key employees could jump ship, but Sanofi's hostile bid could set a precedent.

Cheap money from banks has also made it easier for predators across many industries to go hostile.

Thomson Reuters data showed unsolicited bids accounting for 8 percent of global mergers and acquisitions so far in 2010 -- the highest percentage in at least a decade.

ATTRACTIVE BUY

Some analysts said Actelion, frequently the subject of takeover talk, could attract interest from the other side of the Atlantic.

"BristolMyersSquibb is interested in any biotech after losing Imclone to Lilly," said Vontobel analyst Andrew Weiss.

Analysts said rumors were rife on Thursday BMS would announce it holds more than 3 percent of the Swiss biotech group.

"Some U.S. companies have foreign subsidiary cash which they can't repatriate, which could mean a European acquisition makes more sense for them. I wouldn't be surprised if a U.S. company hasn't run the ruler over it," said Atlantic Equities analyst Ben Yeoh.

"Amgen, for example, have said they are looking for non-U.S. acquisitions around about the size of Actelion," he said.

Actelion is also seen as an attractive target for drugmakers with lung-disorder treatments in late-stage development thanks to its leading position in the multi-billion dollar pulmonary arterial hypertension (PAH) market.

Vontobel's Weiss said any major drugmaker could be interested in the group, adding that raising money for a deal would not be an issue for companies.

"Roche could be interested. Novartis is known to do acquisitions as is AstraZeneca, which bought MedImmune in 2007," Weiss said.

Bayer and Novartis have been cited as possible buyers as they have lung drugs in late-stage development, making Actelion's salesforce attractive as they look to commercialize their products.

But sources close to Bayer said the German group was not interested in Actelion. Novartis is still busy trying to buy the 23 percent of U.S. eyecare group Alcon it does not already own. Both Bayer and Novartis declined to comment.

"GlaxoSmithKline could be interested as they have the partnership with almorexant and if that drug works then they will owe Actelion a large chunk of cash so they could just buy the company and get the benefit from Actelion's cash flow," Weiss said.

Safety problems linked to insomnia drug almorexant, has, however, cast uncertainty over its development, adding to doubts about whether Glaxo would have any interest in Actelion.

Glaxo declined to comment.

CHEAP

Actelion's shares have taken a beating this year, following setbacks to broaden use of its key heart and lung drug Tracleer, while the failure of experimental brain hemorrhage drug clazosentan in a late-stage trial dealt a blow to its bid to expand its pipeline.

Analysts said markets do not to attribute enough value to Actelion's pipeline, which includes macitentan, a successor to blockbuster Tracleer, as well as selexipag, which some analysts estimate could generate 1-2 billion francs per year and add to Actelion's PAH franchise.

The group is also developing S1P1, an oral drug for multiple sclerosis, that works in a similar way to Novartis' Gilenya, but is thought to be more specific than Gilenya and could have fewer side effects.

Actelion's S1P1 could be attractive to companies that make the traditional injected MS treatments after Gilenya became the first oral treatment for MS to get U.S. approval, potentially hitting sales of companies such as Biogen.

Sarasin analyst David Kaegi said the acquisition price could be paid with the cash flow from the five years of patent life left in Tracleer.

"Thus, a buyer would get the pipeline, which is longer term still attractive and among other drugs contains a follow-up product to Tracleer, almost for free," Kaegi said.

(Additional reporting by Catherine Bosley and Jason Rhodes in Zurich, Ludwig Burger and Philipp Halstrick in Frankfurt and Ben Hirschler in London; Editing by Erica Billingham and Andrew Callus)

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