Johnson & Johnson (J&J) agreed to buy Aragon Pharmaceuticals Inc. and gain the company's experimental prostate cancer drug, according to reports.
The company will pay as much as $1 billion to purchase Aragon Pharmaceuticals, Inc., and will reportedly receive an initial cash payment of $650 million.
What J&J really wanted was Aragon's lead compound, ARN-509, which is in the second of three stages required for U.S. regulatory approval become the next preferred drug in prostate cancer treatment.
According to Bloomberg News, J&J will gain "Aragon's entire program for drugs that block androgen, a hormone that can fuel tumors in the prostate."
Zytiga is the current drug being used for prostate cancer treatments.
"The patent for Zytiga expires at the end of 2016 in the U.S.," Derrick Sung, an analyst with Sanford C. Bernstein, said. "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."
J&J stock shares have reportedly gained 30 percent increase in the last 12 months. According to USA Today, the company's stock value increased more than 1 percent to $89.99 on Monday.
"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.
According to Reuters, the J&J deal with Aragon does not include the development of treatment for breast cancer. Aragon will reportedly create a separate company called Seragon Pharmaceuticals ahead of the deal to continue their breast cancer drug research.
J&J is reportedly the fastest-growing company among large pharmaceutical makers last year, and their success can be attributed to eight new medicines that generated $4.4 billion in new sales in 2012.
