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Dec 15, 2016

The auction process to acquire Pharmacyclics was too competitive, and Actelion Pharmaceuticals was too expensive for Johnson & Johnson. Is there any deal that will be just right for J&J?

Officials from Johnson & Johnson announced that it had ended discussions with Actelion on a potential deal. Analysts say that J&J is flush with cash and needs to do a deal soon. Now, the question is, what is J&J looking for?

Analyst Ashtyn Evans of Edward Jones Trust said that the pharma giant could probably handle a deal of any size with $40 billion in cash. He said: “What’s good about JNJ is that because of their size and cash balance, they can do any size of deal.”

However, Analyst Damien Conover of Morningstar cautioned that the company traditionally hasn’t been interested in mega-mergers and says J&J’s cap is somewhere near $20 billion.

Conover recognized the need of an acquisition for J&J. He said: “They need to make an acquisition, especially because their growth is not as fast as it could be. They’re motivated to do it. There’s a huge range of acquisition options out there.”

Conover also added that several of the company’s drug patents are coming up on expiration dates. This means that the company will soon be faced with more generic competition.

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