Johnson & Johnson
(
JNJ
) recently entered into an agreement which should strengthen its
oncology pipeline. Johnson & Johnson's Janssen Biotech, Inc.
signed an agreement with
Pharmacyclics, Inc.
(
PCYC
) for the development and marketing of a mid-stage oncology
candidate, PCI-32765. The deal covers the development of PCI-32765
for oncology and other indications, excluding inflammation and
immune mediated conditions.
The Candidate
The agreement is focused on anti-cancer compound, PCI-32765,
which is currently in phase I and phase II studies for hematologic
cancers like chronic lymphocytic leukemia, mantle cell lymphoma,
and diffuse large B-cell lymphoma.
Posters on the efficacy and safety of PCI-32765 in chronic
lymphocytic leukemia, mantle cell lymphoma, and activated B-cell
subtype diffuse large B-cell lymphoma will be presented at the
American Society of Hematology in December.
Deal Valued at $975 Million
Per the terms of the agreement, Janssen will make an upfront
payment of $150 million. Additional payments of $825 million will
depend on the achievement of certain development and regulatory
milestones. Janssen will be responsible for 60% of the development
costs. The $150 million upfront payment is expected to impact
Johnson & Johnson's 2011 earnings by 4-5 cents per share.
Once PCI-32765 is approved, Pharmacyclics and Janssen will book
sales and co-promote the drug with the companies splitting equally
the profits and losses from the commercialization activities. While
US sales will be booked by Pharmacyclics, ex-US sales will be
booked by Janssen. US commercialization activities will be shared
by the companies. Outside the US, Janssen will spearhead
commercialization activities.
Neutral on Johnson & Johnson
We currently have a Neutral recommendation on Johnson &
Johnson, which carries a Zacks #3 Rank. Even though we expect the
company to continue facing headwinds in the form of pricing
pressure, manufacturing issues and US healthcare reform, we believe
Johnson & Johnson's diversified business model, lack of
cyclicality, and strong financial position will continue helping
the company pave its way through tough situations.
JOHNSON & JOHNS (
JNJ
): Free Stock Analysis Report
PHARMACYCLICS (
PCYC
): Free Stock Analysis Report
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