Johnson and Johnson To Pay up to $1 Billion for Aragon Pharma

Andrew Klips |

jnjDrug developer giant Johnson & Johnson (JNJ) said Monday that it will spend up to $1 billion to acquire Aragon Pharmaceuticals Inc., a privately held company focused on drugs for hormone driven cancers.  Johnson and Johnson will make an upfront payment of $650 million and has agreed to $350 million in additional payments should developmental milestones be met in an attempt to bolster its cancer drug franchise.

With the acquisition, J&J gets San Diego-based Aragon’s androgen receptor antagonist program, including ARN-509, Aragon’s most advanced drug candidate currently in mid-stage clinical trials in patients with castration-resistant prostate cancer.  Androgen is a hormone that can assist in tumor growth in the prostate.

The deal does not give New Brunswick, New Jersey-based Johnson & Johnson Aragon’s breast cancer drugs in development.  Ahead of closing the deal, which is expected in the third quarter, Aragon will spin off an independent, newly formed corporation called Seragon Pharmaceuticals.   Richard Heyman, the co-founder and CEO of Aragon, will assume the chief executive job at Seragon, which will be focused primarily on Aragon's Selective Estrogen Receptor Degrader (SERD) platform, including ARN-810, its lead SERD currently being evaluated in a Phase I trial for ER+ metastatic breast cancer.   Current Aragon investors will fund Seragon and J&J will not have any ownership or rights to any of Seragon’s technology or pipeline.

"The acquisition of Aragon further enhances our leadership in prostate cancer drug development.  ARN-509 complements ZYTIGA® and provides the potential for exciting, novel approaches to treat prostate cancer patients," said Dr. Peter F. Lebowitz, Global Therapeutic Area Head, Oncology for J&J’s Janssen Research & Development.  Prostate cancer is a main area of focus for Janssen.

Big pharma has been relying heavily on acquisitions in 2013 to rebuild dwindling pipelines and offer support to coffers as revenue-generating drugs lose exclusivity rights.  Last week, AstraZeneca (AZN) agreed to spend up to $1.15 billion to buy respiratory drug specialist Pearl Therapeutics.  Similar to the J&J/Aragon terms, AstraZeneca will pay $560 million up front and potentially about $580 million more if other milestones are met with Pearl’s drugs.

Shares of Johnson & Johnson, the world’s biggest maker of health care products, are trading ahead early in Monday action with the acquisition news; up about 1 percent at $85.66.  The stock has been marching upward all year, rising more than 24 percent so far in 2013, including hitting an all-time high at $89.32 in May.

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Companies

Symbol Name Price Change % Volume
JNJ Johnson & Johnson 110.99 -0.11 -0.10 7,774,740
AZN Astrazeneca PLC 26.27 0.42 1.62 7,209,079
TOOPRB Teekay Offshore Partners LP n/a n/a n/a 0

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