Johnson & Johnson makes deal to buy Aragon Pharmaceuticals for as much as $1 billion

SAN DIEGO—Johnson & Johnson (JNJ) has signed a definitive agreement to acquire Aragon Pharmaceuticals Inc., which is focused on developing drugs for hormone-driven cancers, for $650 million in upfront cash. Furthermore, Aragon reported June 17, there is another $350 million incontingent development milestone payments on the table that could bring the totaltransaction value to $1 billion.

 

The acquisition brings to JNJ Aragon'sandrogen receptor antagonist program, including its most advancedcompound, ARN-509, a second-generation androgen receptor signalinginhibitor that is currently being evaluated in a Phase II trial inpatients with castration-resistant prostate cancer (CRPC).

 

This is good for JNJ because it could go a long way toward extending the company's prostate cancer franchise; the patent on Zytiga expires in 2016 in the United States while ARN-509's would expire in 2028 in the United States and 2027 in the European Union at the earliest.

 

But while that is one benefit market-watchers have noted, Leerink Swann also notes there is an added potential "toimprove upon current treatments through improved safety and efficacyand potential combination therapy with Zytiga. We envision that underthe control of JNJ, the ARN-509 Phase III trial planning will beginshortly after the 3Q13 deal closing and could investigate first- and second-line metastatic and non-metastatic CRPC, as well as PhaseII-type trials evaluating ARN-509/Zytiga combination therapy."

 

Another benefit of the deal is the JNJ is only taking on responsibility for what it wants: the androgen receptor antagonist program. Prior to closing, Aragon will spin off an independent, newly formedcorporation called Seragon Pharmaceuticals, which will be focusedprimarily on Aragon's selective estrogen receptor degrader (SERD)platform, including ARN-810, its lead SERD currently being evaluated in aPhase I trial for ER+ metastatic breast cancer. Seragon will be basedin San Diego and will be financed by the current Aragon investors.It will retain members of the management team including Richard Heyman,the current CEO of Aragon, who will become Seragon'sCEO. JNJ will have no ownership of Seragon nor rights to its technology or pipeline.

"This agreement represents seamless transition between biotech and pharma and will provide an optimal outcome for the ARN-509 program andthe prostate cancer patient community," Heyman said. "The Aragon team is passionateabout bringing game-changing therapies to cancer patients and is excitedto have Johnson & Johnson carry forward this innovative prostatecancer treatment. Johnson & Johnson is clearly a recognized leaderin the oncology field, and their development and commercial capabilitiesin the prostate cancer area are unparalleled."