Updated: J&J locks in blood cancer compound in $975M pact

A unit of Johnson & Johnson ($JNJ) has made big bet on the future of developer Pharmacyclics' ($PCYC) experimental compound in midstage testing for blood cancers, shelling out $150 million in upfront money to seal the deal and promising up to $825 million in milestone payments.

While the pact may be a small piece of the pipeline puzzle at the healthcare giant J&J, it's a significant step forward for Sunnyvale, CA-based Pharmacyclics, which has no products on the market and failed to get FDA approval of a previous cancer drug. Pharmacyclics now has a deep-pocketed development partner to advance PCI-32765, a Bruton's tyrosine kinase (Btk) inhibitor that targets the BCR signaling pathway linked to the growth and spread of certain types of blood cancers. The developer is keeping for itself rights to the drug for inflammation and immune-mediated ailments.

The drug has made it as far as Phase II testing, making the sizable $150 million down payment from J&J's Janssen Biotech worth noticing, as many upfront payments for midstage assets haven't been so rich. Pharmacyclics is now trialing the small molecule drug in non-Hodgkin's lymphoma, chronic lymphocytic leukemia and multiple myeloma. With its big partner on board, the developer will pay for 40% of development costs of the program and J&J will handle the rest. Bloomberg reports that the companies will split worldwide profits from potential sales of the drug right down the middle.

Some investors apparently weren't thrilled with the terms of the deal for Pharmacyclics, sending the company's shares down by more than 15% as of 12:50 pm ET on Friday.

"The agreement with Pharmacyclics is an opportunity to bring a new form of oral therapy to patients with B-cell malignancies," said Dr. William Hait, global therapeutic head of oncology for Janssen, in a statement. "PCI-32765 is an innovative compound, with broad applicability and the potential to help a large number of patients with B-cell malignancies."

For Pharmacyclics, PCI-32765 gives the company another chance for FDA approval after the agency shot down an application for a market green light on a previous cancer therapy, Xcytrin, with a refuse to file letter in 2007. Now that J&J is backing PCI-32765's development, there's likely to be some extra attention on the program's midstage data that are to be presented at the upcoming American Society of Hematology meeting.

- here's Pharmacyclics' release
- see J&J's release
- and Bloomberg's report