Johnson & Johnson has signed an agreement to acquire Cougar Biotechnology for just under $1 billion, a deal which will give it access to the much-touted investigational prostate cancer drug abiraterone.

Under the terms of the agreement, J&J is offering $43 per share, which represents a 16% premium on Cougar’s closing price yesterday. Upon closing (scheduled for the third quarter), the transaction is expected to have a dilutive impact to the healthcare giant’s 2009 earnings per share of $0.02-$0.03.

Cougar is currently conducting two Phase III trials for abiraterone, a first-in-class compound for prostate cancer. The first study is testing the drug in patients with metastatic, castration-resistant prostate cancer who have progressed after docetaxel-based chemotherapy has failed and the second trial involves men who have yet to receive chemotherapy.

William Hait, head of Ortho Biotech Oncology R&D, a unit of J& J, said the acquisition of Cougar “with its talented team will strengthen our growing capabilities toward a leadership position in the global oncology market". He added that the company is developing new drugs “that we anticipate will change the course of cancer treatment by targeting the tumour and its microenvironment”.

Cougar chief executive Alan Auerbach said the firm believes that this transaction “strongly positions abiraterone for future success with a leading healthcare company that has the expertise, resources, dedication and motivation to deliver it to the cancer patients who need it”.

The deal did not surprise analysts though the fact that it is J&J doing the buying raised a few eyebrows. Simos Simeonidis at Rodman & Renshaw, has been predicting a sale of Cougar for a month or so, and said that the deal “absolutely” makes sense for CGRB shareholders.

In a note sent to PharmaTimes World News, Mr Simeonidis said that the premium is fairly low, “given the fact that the compound has not yet shown a survival advantage and that we will not see Phase III data for a while, we like the risk/reward”. However, “if we end up seeing an overall benefit in Phase III”, what J&J is paying “could seem like a bargain, since we believe that if abiraterone shows a significant survival benefit, it can achieve blockbuster-level, especially given its oral administration”.

He concluded by saying that given abiraterone’s high profile, “should an additional suitor emerge, given J&J’s disciplined approach to M&A, we do not expect them to get in a bidding war, at least not one for much more than $43”. In which case, “we could see Cougar in the arms of another lusting suitor for an even higher price tag”.