Friday, May 22, 2009

JNJ Likes it Some Cougar. Rwwwaaarrrr!

Last night (alas, not at "midnight" like the Cougar in the above ad--email subscribers if you can't see the ad [you want to, it's a classic] click here.) Johnson & Johnson bought Cougar Biotechnology for $43/share in cash, or approximately a cool one billion dollars. To which we say: rrrwwwaaaar!, and, Ka-Ching!

OK a few caveats on the terms: minus Cougar's existing cash reserves the deal's valuation drops to about $870 million. And that price was only a 16% premium to the shares' previous close--by no means near the top of the list in takeout premiums.

But still the acquisition demonstrates the value of late-stage oncology assets (see Cougar's pipeline here), and Cougar hasn't exactly been kicking around forever--it was founded only six years ago. And despite the relatively small premium Cougar's institutional investors will have made out very well here.

The company, since going public via reverse merger with public acquisition shell SRKP4 in April 2006 (THIS is what VCs dream about when spending all those weeks and months trying to pull together a reverse merger) has raised a couple hundred million in private placements at per-share prices ranging from less than $2 (in 2006 in conjunction with its reverse merger) up to $29 (in 2008).

While early investors in Cougar like RA Capital, T. Rowe Price, Tavistock and others are counting their money, the deal will also throw a spotlight on a few other compounds. Medivation's MDV3100 is in the same class as Cougar's lead Phase III program abiraterone; both target androgen signalling. Algeta's prostate-cancer bone metastases candidate and "next-generation alpha radiopharmaceutical" Alpharadin, which we recently discussed here, is also in Phase III. A review of other companies in the space, including some earlier-stage companies, appeared in our March 2009 START-UP.

The deal may also be a 'win' of sorts for UK biotech BTG, which originally held rights to the abiraterone compound after funding the UK's Institute of Cancer Research's program in that area, and licensed it to Cougar in 2004 (not as big a win had BTG developed the candidate itself, of course). Looking at the disclosed terms of that deal it doesn't seem that BTG will get a payout as part of the JNJ acquisition, unless a 'milestone' was tied to a Cougar takeout.

No comments: