J&J invests in, licenses oncology candidates to microcap Tracon

Johnson & Johnson

Johnson & Johnson’s ($JNJ) Janssen has licensed two early oncology assets to Tracon Pharmaceuticals ($TCON) through Phase I/II development, then the pharma has the exclusive option to reacquire them. If it opts to do so, Janssen would pay $45 million up front to Tracon, in addition to further regulatory and commercial milestones that could total $137.5 million and a single-digit royalty.

As part of the deal, Johnson & Johnson Innovation - JJDC bought $5 million worth of Tracon shares at $5.95 per share, which was its closing price on Sept. 21. Tracon went public via a January 2015 IPO that priced at $10 per share and raised $36 million.

Tracon climbed about 7% in early trading on the J&J news--bringing its market cap up to only $80 million. Venture firm NEA remained Tracon's largest shareholder as of the end of June with more than 15% of the company.

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The Janssen oncology programs that are part of the deal are prostate cancer candidate TRC253 (formerly JNJ-63576253), a small molecule high affinity competitive inhibitor of wild type androgen receptor (AR) and multiple AR mutations that confer drug resistance, and hematologic malignancies candidate TRC694 (formerly JNJ-64290694), an orally bioavailable inhibitor of NF-kB inducing kinase (NIK).

TRC253 is slated to start Phase I/II testing to obtain proof-of-concept data during the first half of next year. TRC694 is in preclinical testing with an IND application expected in 2018.

Tracon can retain the programs if Janssen doesn’t exercise its exclusive option to reacquire them. In that instance, the biotech would pay Janssen up to $45 million in development and regulatory milestones, as well as a single-digit royalty.

“This agreement expands our portfolio of potential first-in-class oncology therapies and leverages our existing drug development expertise,” said Tracon President and CEO Dr. Charles Theuer in a statement. “JJDC’s $5 million equity investment strengthens our balance sheet and is expected to offset the development expenses associated with these programs over the next 12 months.”

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