Johnson & Johnson Seeks Cancer Medicines In Cougar Acquisition
J&J will initiate a tender offer of $43 a share for Cougar, a 16 percent premium on yesterdays closing price of $36.98 for the company, New Brunswick, New Jersey-based J&J and Cougar said yesterday in a statement.
Los Angeles-based Cougar, founded in 2003, has been viewed by investors and analysts such as Simos Simeonidis with Rodman & Renshaw in New York, as one of the most likely takeover targets for major pharmaceutical companies seeking new products in the $78 billion market for cancer drugs. Cougar is conducting late- stage trials on a prostate cancer therapy, called abiraterone acetate, which would be its first marketed treatment.
“I think it makes a lot of sense for Cougar,” Simeonidis said in a telephone interview. “It makes sense for J&J because they want to increase their footprint in oncology.”
The offer of about $1 billion was “a couple hundred million” less than Simeonidis said he had been expecting for Cougar. “I wouldnt be surprised if there was another offer for Cougar, given the low premium. Somebody could always bid it up,” he said.
Cougar rose as high as $42.70 in Nasdaq Stock Market extended trading after the deal was announced. J&J fell 88 cents, or 1.6 percent, to close at 4 p.m. yesterday at $54.99 on the New York Stock Exchange.
Earnings Effect
J&J said the deal would reduce its 2009 earnings 2 cents to 3 cents a share. The transaction, which has been approved by both companies boards, is expected to be completed in the third quarter, J&J and Cougar said.
Cougars prostate cancer drug is a pill that works by stopping tumor cells from making a hormone they need to survive and reproduce. Prior studies showed the medicine shrank tumors and prolonged life for men with advanced prostate cancer who were no longer responding to other medicines. The drug so far has shown negligible side effects.
Cougar has been vying with San Francisco-based Medivation Inc. to get a prostate cancer drug to market. Both companies are presenting key data at the American Society of Clinical Oncology annual meeting, which begins May 29 in Orlando, Florida.
Cougar also is conducing early-stage trials for drugs to treat prostate and breast cancer, as well as hematological malignancies.
Expand Cancer Products
J&Js oncology medicines include Doxil, a treatment for ovarian cancer and the AIDS-related cancer Kaposis syndrome, and Velcade for multiple myeloma, which the company sells outside the U.S. in an agreement with Japans Takeda Pharmaceutical Co.
Cougar Chief Executive Officer Alan Auerbach said in a statement the transaction “strongly positions” the companys lead prostate cancer treatment “with a leading health-care company that has the expertise, resources, dedication and motivation to deliver it to the cancer patients who need it.”
Auerbach was unavailable for further comment, said Andreas Marathis, a spokesman for Cougar with Russo Partners LLC in New York.
Cougar may have fetched a higher price for the company had it waited until results of late-stage trials for the cancer pill, Simeonidis said. Waiting would have also carried some risk, he said.
“We dont know what that data will look like,” he said. Either “its a blockbuster” or “its nothing.”