J&J looks to be bolder on deals

Tuck-ins are the order of the day, although new chief doesn’t rule out a large buy.

Add Johnson & Johnson to the growing list of big pharma groups that could soon be going shopping. Today’s third-quarter call was dominated by questions about M&A after the company, which is in the process of spinning off its consumer business, said it would “be bolder” in strategic acquisitions in the coming years. 

The preference is for small tuck-ins, but J&J’s new chief executive officer, Joaquin Duato, is not ruling out large deals, saying: “We don’t have an artificial ceiling as far as deal size.” Takeouts look likely across both pharma and medical devices, with the chief exec stating that both will be core to the new-look J&J.

Still, the bar for justifying a big deal is higher, Mr Duato said, given that these are harder to make work from an operational and financial perspective.

However, the group does not seem too hopeful of getting a bargain. When asked whether prices looked attractive given the recent pullback in biotech valuations, J&J’s chief financial officer, Joe Wolk, replied: “It’s really hard to say whether there’s been a capitulation. I think we probably need to see [it for] a little bit longer.”

He added that targets were not “necessarily on sale”, but concluded: “It just takes two parties to agree on a valuation that makes sense.”

Covid vaccine sales

Unlike Pfizer, however, J&J’s spending money has not come from its Covid vaccine. The J&J jab sold just $2.4bn in 2021 and is forecast to net another $3.0-3.5bn next year, mainly from use in low and middle-income countries.

As well as what is seen as suboptimal efficacy, J&J could also be suffering from its pledge to provide its vaccine on a non-profit basis. The group has said that it expects to shift to for-profit sales at the end of 2022 or early 2023, although by then this might not make too much difference.

Selected Covid vaccine sales forecasts for 2022
Vaccine Company/ies 2022 forecast sales ($bn)
Comirnaty Pfizer/Biontech 29.0*
Spikevax Moderna 17.0-22.0*
JNJ-78436735 Johnson & Johnson 3.0-3.5**
*Forecast made during Q3 2021; **forecast made during Q4 2021. Source: company releases.

Another potential rival at the M&A negotiating table could be Novartis, which recently sold its stake in Roche and could have even more cash if it also offloads its Sandoz generics business.

And Glaxosmithkline is also spinning off its consumer unit this year; the UK group could do with a boost after several recent disappointments and the departure of its chief scientific officer, Hal Barron.

Consumer timings

J&J is further behind in separating its consumer unit, a move it announced in November. The group provided some more detail today: in the first half it will name the leaders of the new consumer company, with details on its name and location to follow around mid-year. The second half of 2022 will see more information on costs and “potential short-term dyssynergies”.

Mr Duato said the separation would not stop J&J from “forging ahead” with deals, however. The chief exec has only been in the job since January 3, but it seems that his stall is already clearly laid out.

Share This Article