J&J to pay nearly $1 billion for cancer drug candidate

US health care giant Johnson & Johnson (NYSE: JNJ), through its subsidiary Janssen Biotech, has executed an agreement with fellow USA-based Pharmacyclics (Nasdaq: PCYC) to jointly develop and market the anti-cancer compound, PCI-32765.

Under the terms of the deal, Pharmacyclics will receive an upfront $150 million. The company will also get up to an additional $825 million in development and regulatory milestone payments, based upon continued development, regulatory progress and approval of the product, for total potential upfront and milestone payments of $975 million.

This transaction is expected to have a dilutive impact to J&J’s 2011 earnings per share of around $0.04-$0.05. J&J’s shares dropped just over 1% to $63.78 after-market trading last night, while Pharmacyclics, whose stock has more than doubled so far this year, advanced a modest 1.9% 28 to $14.90, having fallen 2.5% to $14.62 ahead of New York’s close.