Johnson & Johnson has hit the acquisition trail and is buying viral disease expert Alios BioPharma for $1.75 billion in cash.

The acquisition will include Alios’ portfolio of potential therapeutics for viral infections including AL-8176, an orally administered antiviral therapy currently in Phase II for the treatment of infants with respiratory syncytial virus (RSV).

William Hait, global head of R&D at J&J’s Janssen unit, said “we are excited that this acquisition will enable us to explore treatment options for a number of viral infections, including RSV, the last of the major pediatric diseases with no available preventive therapy””. He added that AL-8176 “complements our existing early stage portfolio for RSV which aims to prevent and treat this disease, the leading cause of acute lower respiratory infection in children under the age of five”.

The transaction has been approved by both boards of directors and is expected to close during the fourth quarter.

Deal includes HCV candidates

Aside from the RSV drug, analysts have noted that Alios also has two nucleotide analogues, i.e. in the same class as Gilead Sciences’ gamechanger  Sovaldi (sofosbuvir) for hepatitis C which will be of interest to J&J which markets Olysio (simeprevir), a NS3/4A protease inhibitor. The latter is used in combination with Sovaldi, but if the Alios drugs come up trumps .

Michael Yee at RBC Capital Markets issued a research note saying that a successful RSV drug could become a blockbuster but “we clearly think the long-term 'call option' upside here is the Alios nukes ... if those can show a four-log (99.99%) reduction in HCV virus and have a good safety profile”.

However, he goes on to warn that development of nukes “can be extremely difficult and the bar for continued progression is very high”. Mr Yee also reminds investors that Vertex “was partnered on two prior Alios nukes and dropped development of both due to a narrow therapeutic window (one weak efficacy, one had signs of liver toxicity)”.

The news that J&J has plumped for Alios has surprised a numbers who thought Achillion Pharmaceuticals, which is also developing a nuke, was a more likely target. The latter’s stock was hit by the news.