For Sanofi SA, a deal with Actelion Pharmaceuticals Ltd. would help offset declining sales of its best-selling insulin Lantus--though, like Johnson & Johnson, it might struggle to agree on price or structure.
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Paris-based Sanofi is in talks for a deal with the Swiss biotech company, which had also drawn interest from J&J until the U.S. health-care company bowed out of the race on Tuesday.
The negotiations are focused on the structure of a deal and the value of Actelion's pipeline, according to a person familiar with the matter. To bridge their differences, the companies are discussing a so-called earn-out, which would shift the value of the deal over time based on Actelion's results, and the possibility of excluding some of its research-and-development operations, this person said.
The big attraction for Sanofi is Actelion's portfolio of drugs for pulmonary arterial hypertension, a rare respiratory disease. That franchise is expected to notch strong growth thanks to the recent launch of two new drugs for the disorder.
Those drugs, and others in the portfolio, would immediately boost Sanofi's top line, which is struggling to grow amid dwindling sales of its best-selling insulin Lantus.
Sanofi, like other insulin makers, is being forced to cut or flatten its prices by powerful middlemen that buy drugs on behalf of insurers and employers. Eli Lilly & Co. plans to launch a less-costly copycat of Lantus in the U.S. early next year, piling further pressure on Sanofi.
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That has sent Sanofi on a deal-hunting spree: Earlier this year it mounted a failed bid for cancer biotech Medivation Inc.
Acquiring or otherwise joining with Actelion would also fit with Sanofi Chief Executive Olivier Brandicourt's aim of focusing the company on a narrow group of areas where it can play to its strengths. Sanofi is already one of the world's largest makers of rare-disease drugs through its Genzyme business.
Still, Sanofi could come up against the same roadblocks as J&J: price and structure.
One problem is that wringing synergies out of an acquisition of Actelion could "kill the goose that lays the golden egg," said UBS analyst Michael Leuchten. That is because Actelion's sales force is highly specialized and would need to be retained after any deal.
Another is the difficulty of evaluating Actelion's pipeline of experimental drugs, many of which are in the midst of crucial clinical trials that haven't so far produced results. It isn't clear what price Sanofi is discussing paying or what structure is envisioned, but a deal could value Actelion at as much as $30 billion. Sanofi declined to comment.
"There is a disconnect between what [Actelion] thinks it is worth and what the market believes it is worth," said UBS's Mr. Leuchten. Actelion had a market value of more than $22 billion as of Tuesday's close but was down nearly 10% in afternoon Zurich trading on Wednesday. Sanofi shares were down 2.1% in afternoon Paris trading.
What's more, Actelion's founder and chief executive, Jean-Paul Clozel, has been resistant to takeover approaches in the past and ultimately could decide to remain independent or strike a deal that falls short of an acquisition.
Sanofi might not be willing to pay the price it takes to secure Actelion. While its failed pursuit of Medivation was driven by its need to catch up with rivals in oncology, Sanofi already has a strong rare-disease unit in Genzyme. "I wouldn't necessarily characterize this as a deal that they have to do," said a banker who isn't involved in the talks. "Do they really need to do this to get to critical mass in rare diseases?"
Actelion is unusual among companies of its size for a strong sense of identity that stems from the husband-and-wife team at its core.
Dr. Clozel's wife, Martine, is the company's chief scientific officer. The pair, along with other former Roche Holding AG employees, left the Swiss drug giant to found Actelion in 1997 after Roche decided not to pursue a project their group was working on.
Actelion declined to comment beyond a statement it released Tuesday confirming that J&J had withdrawn from talks and that it was engaged with another party regarding a possible transaction.
Write to Denise Roland at Denise.Roland@wsj.com and Dana Mattioli at firstname.lastname@example.org