Johnson & Johnson announced this morning that they have entered a “definitive agreement” to acquire Momenta Pharmaceuticals at $52.50 per share. The acquisition has been confirmed as an all-cash transaction, which has been approved “unanimously” by the Board of Directors from both J&J and Momenta. The acquisition is set to be finalised later this year, assuming all the closing conditions are met by both parties in the tender process. MNTA is up 69.39% pre-market while J&J share price has remained unchanged according to pre-market movements.
Table of Contents 1. Acquisition details 2. What this means for MNTA and J&J investors?
What this means for both MNTA and J&J investors?
There is no doubt, this is a very positive opportunity for MNTA to accelerate it’s current research and development in the treatment of autoimmune and rare diseases. At the core of MNTA business, lies the exploration and development of auto-immune diseases which have little to no current treatments.
MNTA have four treatments in the pipeline which include the use of Nipocalimab, to treat generalized myasthenia gravis (gMG), hemolytic disease of the fetus and newborn (HDFN) and autoimmune hemolytic anemia (wAIHA). These are three examples of auto-immune diseases that cause the immune system to react in a counter intuitive manner, causing harm to the host. The J&J acquisition will allow for further development of these treatments, ultimately assisting MNTA to reach a cure for these auto-immune diseases. This is excellent news for MNTA investors assuming the acquisition can be smoothly and efficiently finalised by the end of 2020.
J&J is one of the largest multi-national pharmaceutical companies in the US, boasting a tidy Market Cap at $395 Billion USD. The $6.5 Billion acquisition should have little effect to the Cash assets for J&J. All-cash acquisitions are a preferred alternative for most corporations as Cash agreements will not fluctuate at the levels stock value does. As large corporations focus on steady stock growth, the higher the buyers stock goes – the more they end up paying for the acquisition.
This is definitely a strong opportunity for J&J to extend their operations into the autoimmune treatment sector.
“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.”
Jennifer Taubert, Executive Vice President, Worldwide Chairman, Pharmaceuticals, Johnson & Johnson – read full statement by J&J here
Summary of the risk involved
MNTA stock has boosted dramatically as J&J have agreed to buy-out all outstanding shares in MNTA via all cash transaction at $52.50. The risk for investors is that in the event the acquisition falls out, investors who bought in above $30 may be left with a significantly over priced stock. Although acquisition fall outs are rare, we have seen the detrimental effect it has on the investor. The recent Boeing acquisition fall out with Embraer was due to a three year long negotiation between both parties. Agreements were never met and the initial agreement fell out as per the closing conditions.
Nonetheless, this is also a strong opportunity for J&J to expand their wings into the auto-immune sector, lead by MNTA. This is definitely an acquisition to watch come late 2020.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.