J&J seeks immune momentum with Momenta

NEW BRUNSWICK, N.J.—Fall normally signals the end of growth for the year, but that’s not the case for Johnson & Johnson. As summer came to a close, the company announced a definitive agreement under which it will acquire Cambridge, Mass.-based Momenta Pharmaceuticals Inc. in an all-cash transaction that will total approximately $6.5 billion.

Per the terms of the agreement, Vigor Sub Inc. (also known as Merger Sub), a new wholly owned subsidiary of Johnson & Johnson, will commence a tender offer to purchase all of Momenta’s outstanding shares at $52.50 per share. The closing of the offer is subject to the tender of a majority of said outstanding shares to the offer, clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. Once the tender offer closes, Johnson & Johnson will acquire any shares not tendered into the offer through a merger of Merger Sub with and into Momenta for the same share price as the tender offer. The transaction is expected to close in the second half of this year.

While the acquisition of Momenta provides the Janssen Pharmaceutical Companies of Johnson & Johnson with several benefits—including a bigger stake in the immune disease market and a foothold in the Cambridge biotech hub—the key driver for this deal was nipocalimab, a fully human IgG1 monoclonal antibody. The drug candidate is a potentially best-in-class anti-FcRn antibody that Momenta is advancing in myasthenia gravis, warm autoimmune hemolytic anemia and hemolytic disease of the fetus and newborn. The company shared data in June from a proof-of-concept trial in myasthenia gravis that pointed to strong efficacy, safety and tolerability—52 percent of patients on nipocalimab saw significant reductions in myasthenia gravis Activities of Daily Living (MG-ADL) scores in all four dosing arms, compared to 15 percent of patients in the placebo arm. The trial, Vivacity-MG, is due to be completed in Q3 2020, with 16-week data to be presented in Q4.

“This acquisition broadens Janssen’s leadership in autoimmune diseases and provides us with a major catalyst for sustained growth. Autoantibody-driven diseases are often serious, and patients are underserved by current treatment options,” said Jennifer Taubert, Johnson & Johnson’s executive vice president and worldwide chairman, Pharmaceuticals. “We’re excited by the opportunity to further advance patient care by combining Johnson & Johnson’s world-class R&D, commercial and supply chain capabilities with Momenta’s talented people, pipeline and deep expertise in this important area.”

Johnson & Johnson reported that it expects the acquisition to be modestly dilutive, though it is maintaining its 2020 adjusted earnings per share guidance. Costs associated with advancing Momenta’s pipeline candidates are forecast to be “incremental to planned R&D investment levels over the next few years given the value creation potential of our current portfolio,” according to Johnson & Johnson, with an expected impact on 2021 earnings per share of roughly $0.10 to $0.15.

“The agreement with J&J recognizes the value created by years of commitment and dedication to our mission by the many current and past Momenta employees. Programs such as nipocalimab have the potential to improve the lives of countless patients suffering from autoimmune and fetal maternal diseases,” Craig Wheeler, president and CEO of Momenta, remarked in a press release. “This acquisition provides strong value for our shareholders and ensures a level of investment in our exciting portfolio that will further enhance its potential for patients. I believe J&J is the right company to advance our portfolio of novel drug candidates for autoimmune and rare diseases. J&J’s leadership in immunology, extensive capabilities and global reach, as well as its alignment with our vision of pioneering therapies for complex diseases, is a strong fit for our company and our portfolio.”

The transaction is one Johnson & Johnson clearly expects to pay off, with the company noting that nipocalimab could eventually post annual sales of more than $1 billion. SVB Leerink analyst Thomas Smith wrote in an investor note that the anti-FcRn antibody class could be a strong contender in a market valued at $20 billion to $25 billion, as there are approximately “195 million patients who suffer from autoantibody-driven disease worldwide (including maternal-fetal disorders, neuro-inflammatory disorders, rheumatology, dermatology, and autoimmune hematology).”

Smith says that SVB Leerink expects to see additional M&A transactions from Johnson & Johnson, adding “[I]t’s clear, in our view, that JNJ will be acquisitive—the question is when the right asset at the right value will come along. We continue to believe the most likely area for a ‘mega-deal’ will be within the Medical Devices business, where the company has the most glaringly obvious gaps that would benefit the most from a deal.”