J&J Inks New Research Pact
On the same day that it agreed to spend $16.6 billion for Pfizer's (PFE) nonprescription drugs and consumer products, Johnson & Johnson (JNJ) made a more modest investment to develop experimental prescription treatments for diabetes and obesity.
The deal with privately held Metabolex of Hayward, Calif., was overshadowed by the Pfizer transaction, but it serves as another example of how big drug companies look outside their laboratories for potential prescription products.
Although prescription drugs account for the biggest portion of J&J's sales, Wall Street has become worried about future growth for a division that contributed 44% of corporate revenue last year.
"The biggest risks to our overweight rating relates to competition for key branded pharmaceuticals and/or meaningful delay to important pipeline projects," says Michael Weinstein of JP Morgan in a research report. He doesn't own shares, but his firm has had a recent investment-banking relationship.The agreement with Metabolex calls for J&J to pay $40 million up front in equity and convertible financing, plus as much as an extra $508 million depending on certain research and sales goals. The companies will collaborate on two Metabolex products now in clinical trials, as well as unnamed products for which J&J gets an exclusive worldwide license. Metabolex is trying to develop drugs that enable the body to better process insulin and reduce the side effects, such as weight gain and fluid build-up, that characterize existing drugs. In addition, Metabolex will get an exclusive license to a J&J diabetes drug, which has completed early-stage clinical testing, and an experimental J&J obesity drug. The J&J agreement "provides us with financial resources and clinical development and commercial expertise, while allowing us to lead clinical development of our two lead product candidates," said Harold E. Van Wart, president and CEO of Metabolex, in a prepared statement. "Metabolex's expertise and portfolio of potential high-value product candidates for metabolic diseases make it an ideal fit for our strategy of collaborating with best-in-class companies," said Dr. Garry Neil group president for J&J's pharmaceutical research and development.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV