Johnson & Johnson will buy Swiss drugmaker Actelion in a $30 billion deal that both secures promising research and bolsters the product portfolio controlled by the U.S. health care giant.
Much of Actelion's research operation will be spun off into a separate company in which J&J will own a minority stake. The U.S. conglomerate will then buy Actelion's seven drugs that are currently on the market and two potential treatments in late-stage testing.
Actelion Chairman Jean-Pierre Garnier told analysts Thursday that the research cultures of big and smaller companies often don't blend well, and they made the spin-off a condition of the deal. The former CEO of British pharmaceutical giant GlaxoSmithKline, confident in Actelion's pipeline of drugs under development, said that a complete company takeover "would not allow us to grow those fragile flowers."
J&J will own 16 percent of the new, stand-alone business, which will be based in Switzerland, and have rights to an additional 16 percent.
Structuring such a deal in an industry where companies are often bought for their potential as much as for what they currently produce makes sense to industry analyst Steve Brozak. The president of WBB Securities said the research arms of smaller companies often get bogged down in bureaucracy from bigger companies, and star scientists will flee.
"Innovation is stifled by large entities ... this is the only way this could work," he said.
The deal comes a little more than a month after J&J said it had ended talks to buy Actelion, and the Swiss company had said it was in discussions with another party.
Actelion, founded in 1997, specializes in treatments for pulmonary arterial hypertension, which is high blood pressure in the arteries between the heart and lungs. Its products include Tracleer, an oral treatment sold in 60 markets.
J&J said the Actelion portfolio will complement the drug lineup of its Janssen Pharmaceutical subsidiary.
Earlier in the week, J&J announced fourth-quarter profits that topped expectations but gave Wall Street a softer-than-expected 2017 earnings forecast.
The maker of Band Aids, medical devices and prescription drugs has been dealing with sliding revenue from a top-selling drug, the biologic immune disorder treatment Remicade, which is facing competition from a Pfizer product.
With the Actelion deal, J&J is paying "top dollar" to replace Remicade sales, said Erik Gordon, a professor and pharmaceuticals analyst at University of Michigan's Ross School of Business.
J&J Chairman and CEO Alex Gorsky told analysts Thursday that mergers and acquisitions were an important part of the company's growth strategy and have historically made up about half its growth.
The New Brunswick, New Jersey, company made several deals in 2016, including a $3.3 billion purchase of hair and personal products maker Vogue International LLC.
The Actelion deal, approved unanimously by the boards of both companies, is to be completed in the second quarter, pending regulatory approvals. J&J said it expects the deal to immediately boost revenues and earnings per share.
J&J will pay for the deal with cash held outside the United States. Many U.S. companies with international operations have built sizeable holdings of money overseas due to high tax rates they would pay to bring the cash to the United States. That's an issue new President Donald Trump has said he would like to address.
Shares of J&J — a component of the Dow Jones industrial average — slipped 5 cents to $112.75 in midday trading Thursday, while broader indexes also were flat.
AP writer Jamey Keaten contributed to this report from Geneva.