Johnson & Johnson (JNJ), the world’s biggest maker of health-care products, agreed to pay as much as $1 billion to buy Aragon Pharmaceuticals Inc. and gain the closely held company’s experimental prostate cancer drug.
Aragon will receive an initial cash payment of $650 million, New Brunswick, New Jersey-based J&J said in a statement today. Additional payments totaling as much as $350 million may follow if San Diego-based Aragon’s prostate cancer program achieves certain milestones, J&J said.
The company’s lead compound, ARN-509, is in the second of three stages usually required for U.S. regulatory approval and may supplement Zytiga, the prostate cancer treatment J&J unveiled two years ago. It would compete against Medivation Inc. (MDVN)’s Xtandi, Dendreon Corp. (DNDN)’s Provenge, and Xofigo from Bayer AG (BAYN) and Algeta ASA (ALGETA) for tumors resistant to hormone therapy.
“The patent for Zytiga expires at the end of 2016 in the U.S.,” Derrick Sung, an analyst with Sanford C. Bernstein, said in a note to clients today. “ARN-509 would serve the purpose of both extending the longevity of J&J’s prostate cancer franchise as well as providing a potentially complementary therapy to Zytiga,” he wrote.
J&J rose less than 1 percent to $85.63 at the close of New York trading. The shares have gained 30 percent in the past 12 months. Medivation, based in San Francisco, fell 6.8 percent to $47.41.
J&J will receive Aragon’s entire program for drugs that block androgen, a hormone that can fuel tumors in the prostate.
“Prostate cancer is one of our main areas of focus, and we are pleased to be adding ARN-509 to our portfolio,” Peter F. Lebowitz, the head of oncology research for J&J’s Janssen Research & Development unit, said in a statement.
Aragon’s remaining assets will be spun off to a new company called Seragon Pharmaceuticals before the purchase by J&J is completed, Aragon said in a separate statement. J&J won’t have a stake in that venture or rights to products it might produce.
J&J was the fastest-growing company among large pharmaceutical makers last year, buoyed by eight new medicines that generated $4.4 billion in new sales in 2012.
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