Picture: REUTERS
Picture: REUTERS

London — Johnson & Johnson (J&J) has agreed to pay $6.5bn in cash to acquire Momenta Pharmaceuticals, a maker of autoimmune-disease drugs, in the largest pharmaceutical-industry merger in 2020.

Though the price tag falls short of some of the industry-shifting takeovers of recent years, the deal is the latest sign that drug companies are looking for ways to bulk up even as the coronavirus pandemic upends other businesses.

At $52.50 a share, the deal represents a premium of more than 70% to Momenta’s closing price on Tuesday of $30.81. The biotechnology company had seen its shares surge 56% this year after encouraging clinical-trial data for its treatment for a rare blood disorder that affects foetuses and newborns. That treatment has received an orphan-drug designation from the US Food and Drug Administration (FDA).

Autoimmune diseases have been an area of increasing interest for big drugmakers. Earlier this week, French drugmaker Sanofi agreed to acquire US biotech company Principia Biopharma for about $3.4bn. The all-cash deal gives Sanofi treatments for multiple sclerosis and a range of other disorders.

Shares of Momenta rose 69% to $52.06 at 9.33am in New York, while J&J shares were up 0.3% to $150.47.

Drugmakers weren’t shielded from disruptions caused by the outbreak of Covid-19 in the US early in 2020. A sharp decline in elective medical procedures helped curb demand for cancer drugs and other high-priced therapies that have become the industry’s main profit engines in recent years.

However, many pharmaceutical executives indicated during the most recent earnings season that they believe the most serious effects of the pandemic have passed. And investors have been eager to snap up stocks of drugmakers, especially smaller biotech companies that could become takeover targets. The Nasdaq Biotechnology Index has risen 12% in 2020, compared with a 4.9% gain for the S&P 500, which climbed to a record on Tuesday.

J&J said in a statement that acquiring Momenta would bolster its Janssen Pharmaceutical unit’s leadership in immune-mediated diseases. Momenta said in June that its experimental drug nipocalimab hit its primary goal in a phase 2 trial as a treatment for myasthenia gravis, an autoimmune neuromuscular disorder.

Both J&J and Sanofi are among several healthcare giants that have been racing to develop treatments and vaccines for Covid-19. At the same time, however, pharmaceutical companies battling the pandemic have also been looking for opportunities to expand. Gilead Sciences, the maker of virus therapy remdesivir, agreed to pay $4.9bn to buy cancer-therapy maker Forty Seven in March.

Shares of some of Momenta’s peers rallied on the news of the deal. Immunovant jumped 18% in trading before the US market opened, and Argenx SE rose as much as 4.9% in Brussels.

Stifel analyst Derek Archila wrote in a note to clients that it was unlikely other bidders would emerge for Momenta.

Bloomberg

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