By Oliver Hirt and Pamela Barbaglia
ZURICH/LONDON (Reuters) - Switzerland's Actelion Ltd <ATLN.S> is in talks with French drugmaker Sanofi <SASY.PA> about a deal, sources said on Wednesday, after U.S. healthcare group Johnson & Johnson <JNJ.N> abandoned efforts to buy the company.
Two people familiar with the situation said discussions were advanced but a deal was not assured. Actelion's shares ended 9 percent lower on investor concern that J&J's exit underlined the challenges facing any bidder for Europe's biggest biotech group.
One option under consideration is for Sanofi to give shareholders a so-called contingent value right (CVR) on top of cash. The CVR would pay out if certain Actelion drugs live up to commercial expectations.
Sanofi, which also provided a tradable CVR when it bought U.S. rare diseases firm Genzyme for $20 billion in 2011, declined to comment.
Sources said Roche was closely monitoring developments and might yet step in, if talks with Sanofi foundered. A Roche spokesman declined to comment.
Sanofi was trumped in August by Pfizer's <PFE.N> $14 billion bid for U.S. cancer drug company Medivation and is still eager for deals to broaden its drug line-up.
However, analysts said Sanofi Chief Executive Olivier Brandicourt could ill afford to fail in a second high-profile bid.
Actelion told J&J it was confident it could attract an offer significantly higher than the approximately 250 Swiss francs per share the U.S. company had offered, according to one person familiar with the matter.
There were also disagreements about the proposed deal's structure, the person added.
Actelion shares had closed at 208.50 Swiss francs on Tuesday, a 25 percent premium to their price before J&J's bid became public two weeks and giving the company a market capitalization of 22.5 billion Swiss francs ($22.2 billion).
"I presume these parties are prepared to make offers that are more attractive than that which J&J was envisaging," said Eleanor Taylor Jolidon, a fund manager at Union Bancaire Privee in Geneva, which is among Actelion's top 40 investors.
"Otherwise, the board of directors would not have acted in the interests of the stakeholders by creating a situation in which J&J walked away."
CEO'S PIVOTAL ROLE
The Swiss company, founded by its CEO Jean-Paul Clozel in 1997, confirmed talks over a "possible strategic transaction" but did not name the counterparty.
A spokesman declined further comment but sources with knowledge of the matter identified Sanofi.
Analysts have previously named Sanofi as a potential buyer for Actelion, whose portfolio of drugs against deadly pulmonary arterial hypertension -- elevated pressure in arteries connecting the heart and lungs -- would supplement Sanofi's Genzyme unit.
Even so, a competitive auction could drive up its price to unrealistic levels.
"Winning a bidding war when it comes to acquiring biopharmaceutical companies almost always equates to way over-paying," wrote Tim Anderson, an Bernstein analyst.
"These are not bragging rights," he said. "If Actelion were to go out at around $30 billion, this equates to around 13 times sales and 30 times earnings before interest and taxes. These are high figures."
Clozel, who worked for Roche for 12 years before founding Actelion, and his wife, Chief Scientific Officer Martine Clozel, have built up a world-leading drug portfolio at Actelion to treat pulmonary arterial hypertension.
The Clozels aim to expand in drugs for multiple sclerosis and clostridium difficile, but regulatory approvals for those are years away.
The company is also counting on its new pulmonary arterial hypertension treatments Opsumit and Uptravi, which combined are forecast to bring in nearly 4.5 billion francs in annual sales by 2020.
Clozel has rebuffed past pressure from some shareholders to do a deal, maintaining Actelion is better off staying independent. Five years ago, he successfully fended off an effort by activist hedge fund Elliott Management to put Actelion up for sale.
(Additional reporting by Greg Roumeliotis in New York, Sophie Sassard and Ben Hirschler in London, John Miller in Zurich and Matthias Blamont in Paris; Editing by Keith Weir and David Evans)