Biotech Strategy Blog

Johnson & Johnson (JNJ) just announced the acquisition of privately-held Aragon Pharmaceuticals and the rights to ARN-509 a second-generation androgen receptor antagonist that will be a future competitor to Medivation’s Xtandi.

The deal, valued at $1billion, with $650M upfront and $350M based on contingent milestone payments, is a blow to Medivation who have been locked in litigation with Aragon and the University of California over ownership of the rights to ARN-509.  Both ARN-509 and Xtandi were developed in the laboratories of Charles Sawyers and Michael Jung at UCLA.

The Aragon acquisition is a sound strategic decision for JNJ, offering them the ability to develop their prostate cancer franchise after Zytiga goes off patent and more importantly, offer a product that at the very least is equivalent to Xtandi, and potentially, may be superior.  ARN-509 will also allow JNJ to compete in earlier stages of prostate cancer with a drug that does not require use of steroids, something that has always been a major problem for Zytiga in the chemotherapy-naïve setting.

JNJ now have a corporate strategy for life post-Zytiga. They have the resources and expertise to fund large phase III clinical trials for ARN-509, not only in prostate cancer, but potentially also in breast cancer.  Aragon being bought out by a big Pharma with deep pockets is a blow to Medivation/Astellas.

What this acquisition also tells us is that Johnson and Johnson lawyers consider the Medivation appeal over intellectual property rights to be weak.  They will no doubt have done considerable due diligence on Medivation’s claims and consider the risk to be low or manageable.

My personal view was that cash-rich Medivation should have acquired Aragon themselves and neutralized the competitive threat rather than pursue a scorched-earth litigation strategy.

The JNJ acquisition of Aragon also suggests that ARN-509 may be perceived as the best in class of the second-generation androgen receptor inhibitors in development. There are others that JNJ could have sought to acquire or licence, including ODM-201 (Orion).  The fact that JNJ chose ARN-509 or a better version of Xtandi is not good news for other companies with AR antagonists in early-stage development.

Medivation are unlikely to feel the competitive threat from ARN-509 in the prostate cancer market for a few years, because registration trials against the current standard of care are needed to show that the drug offers an equivalent or better survival benefit.  ARN-509 will most likely be compared against Zytiga, offering yet another benefit of the deal – the ability to provide free comparator drug in the clinical trials.

The JNJ acquisition is good news for men with advanced prostate cancer who may in 5 years see another new treatment option become available.  It is, however, a blow to Medivation and Astellas who now have a serious competitor to deal with in the future in a space where they may have thought they had a major competitive advantage.