September 11, 2015 / 7:30 AM / 4 years ago

Actelion in talks with ZS Pharma amid surge in biotech deal-making

ZURICH (Reuters) - Swiss drugmaker Actelion Ltd has initiated talks that could lead to a bid for U.S. biotech company ZS Pharma Inc, marking the latest bout of deal-making in a healthcare sector that has seen a wave of recent takeovers.

A general view shows Swiss biotech group Actelion Headquarters in Allschwil near Basel February 17, 2015. REUTERS/Arnd Wiegmann

Actelion, Europe’s biggest biotech company, and ZS Pharma both issued statements late on Thursday stating they had held preliminary discussions, but did not specifically mention if the talks were related to a buyout.

ZS Pharma said the talks were “regarding a potential strategic transaction” and Actelion said the talks were “without any commitment on either party”.

Bloomberg had reported earlier that Actelion had offered to buy ZS Pharma last month in a deal valued at $2.5 billion.

Actelion said in April it was looking for acquisition opportunities but would not pay an overly high price.

Healthcare deal-making hit a record of $392.4 billion in 2014 and has already surpassed that this year, reaching $447.5 billion as of Sept. 10, according to Thomson Reuters data.

Acquirers are taking advantage of low borrowing costs to tap into a wave of promising new drugs from smaller companies, broadening their product line-ups to help them compete better.

“We have a team of six people who are supporting acquisitions and business development,” Andrew Weiss, Actelion’s head of investor relations, said on Friday.

Kepler Cheuvreux analyst Fabian Wenner said ZS Pharma’s drug portfolio could be a good fit in terms of therapeutic focus and a deal at $2.5 billion would probably be neutral for Actelion’s earnings.

ZS Pharma’s shares closed up 28 percent on Actelion’s reported interest, valuing the company at $1.9 billion, while shares in Actelion fell 3 percent on Friday morning, valuing it at around $15.5 billion.

Actelion has a dominant position in treatments for pulmonary arterial hypertension (PAH), which weakens the heart, but is looking at ways to expand its sources of revenue. Its original blockbuster drug Tracleer is about to lose patent protection, although sales of new product Opsumit are growing.

The Swiss group has itself often been the subject of takeover talk and its shares leapt in June on speculation that Shire was considering a $19 billion bid.

San Mateo, California-based ZS Pharma’s lead experimental drug, ZS-9, is aimed at treating hyperalkemia, a build up of potassium in the body that could lead to heart failure.

Analysts at Jefferies said ZS-9 had some overlap with the cardiology component of Actelion’s PAH business, adding that an all-cash deal might be possible.

ZS Pharma filed a marketing application for ZS-9 with the U.S. Food and Drug Administration in May. The FDA is expected to issue a ruling on the application in May next year.

Additional reporting by Vidya L Nathan in Bengaluru and Ben Hirschler in London; Editing by Savio D'Souza and Mark Potter

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