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Johnson & Johnson Gets Key Cancer Drug With Aragon Buy

Given that Johnson & Johnson is willing to pay a king's ransom for ARN-509, it's highly doubtful the company intends to lose out in any court case, especially since Medivation would still need to prove that it is the right-holder of the drug.

Investors shouldn't overreact here, however. Given Xtandi's market dominance, it's premature to speculate that Medivation would immediately lose market share if and when ARN-509 receives approval from the Food and Drug Administration.

Granted, Johnson & Johnson has deep pockets, but money has rarely mattered when it comes to the FDA. Plus, we can rule out the possibility that both Xtandi and ARN-509 can be successful at the same time. There's precedent here.

In the meantime, some will question the merits of this deal and its structure and will wonder if Aragon is worth $1 billion. For Johnson & Johnson, which has close to $22 billion in cash, this was a deal it had to make.

As I noted in my last article mentioned above, as important as cancer drug Zytiga is to Johnson & Johnson's recovery, the company needed better diversification and leverage. This deal offers that and more. It was dangerous to assume that Johnson & Johnson could live by Zytiga alone. Management agreed. Accordingly, the stock is now a buy.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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