Johnson & Johnson (
JNJ
) struck an approximately $1.1 billion deal with Genmab to gain
rights of the latter's cancer agent, Daratumumab. In
a separate event, the U.S. FDA has given a priority
review status to the company's application for expanded use of
its prostate cancer drug, Zytiga. All of these
events can help Johnson & Johnson strengthen its position
in the oncology drug market where it presently has a very
modest position.
See our complete analysis for Johnson &
Johnson
More About the Genmab Deal
Daratumumab is in an experimental drug for a type of bone marrow
cancer multiple myeloma. It has the potential for many other bone
marrow cancer indications, including acute myeloid leukemia.
Following the deal, Janssen, a Johnson & Johnson unit, will get
exclusive worldwide rights to develop and commercialize
Daratumumab. JNJ will pay upfront fee of $55 million to
Genmab in addition to the $80 million investment
in Genmab's common stock. In addition, Genmab stands to
receive certain payments to the tune of $1 billion after reaching
certain milestones.
While the upfront payments will certainly hit the company's cash
flow this year, the long-term benefits from the deal may surpass
the hit due to the payments. With promising drugs like
Daratumumab, we expect the company to perform better in the
oncology drug market, going forward. If the drug shows good
progress in clinical trials, it could provide a significant upside
to our current price estimate.
Zytiga Holds Promise
Zytiga is used in the treatment of prostate cancer, one of the
most prevalent cancers in men, with around 218,000 Americans
diagnosed with the cancer each year. Currently, the drug is
approved for patients who have been diagnosed with both hormone
treatment as well as chemotherapy. After demonstrating
encouraging results in its clinical trials recently, the company
filed applications with the U.S. FDA and the EU's European
Medicines Agency (EMA) to extend the use of its metastatic prostate
cancer drug, Zytiga, to patients who have not yet been treated with
chemotherapy but have failed hormone treatment.
A priority review status means the drug could be approved
in about six months. The FDA usually grants this
status for drugs that either show strong efficacy in treatment
or where no treatment exists currently.
The drug also showed
strong results in eliminating early stage tumors in
metastatic prostate cancer patients
. Zytiga grossed around $200 million in 2011 in sales, and
many are already seeing a $1 billion sales potential for the
drug.
We are in the process of updating our
$74 price estimate for JNJ
to reflect the earnings and recent developments.
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