J&J buys Centocor in $4.9 billion stock swap, profits up 15%

Johnson & Johnson has entered into a definitive agreement to purchaseCentocor in a stock-for-stock exchange valued at $4.9 billion, based upon Centocor's approximately 83 million fully-diluted outstanding shares. The announcement of the deal, which is subject to approval from the US antitrust authorities and Centocor's shareholders, brings to an end speculation about a merger of the two companies, following the breakdown of talks earlier this year (Marketletter May 17). The transaction is expected to be completed in the fourth quarter of 1999.

The logic behind the takeover seemed compelling when first mentioned, given that J&J is perceived to have one of the weakest pharmaceutical pipelines among the major US firms. Centocor will now provide it with a strong presence in the cardiovascular field, notably through its bestselling thrombolytic agent ReoPro (abciximab), which had second-quarter sales of $114.3 million (+13%), according to marketing partner Eli Lilly. Since its launch in early 1995, more than 750,000 patients have been treated with ReoPro and sales have topped $1 billion.

J&J's chairman, Ralph Larsen, said that with the acquisition of Centocor, his firm "becomes one of the largest biotechnology companies in the world." He added that the Malvern, Pennsylvania-based company's products "and global leadership in monoclonal antibody technology" will enhance existing J&J growth platforms not only in biotechnology and cardiology diseases, "but also in gastrointestinals, pain management and oncology."