I don't know what surprises me more -- that Johnson & Johnson
J&J and Vertex Pharmaceuticals
Even for a high-potential drug like VX-950, that's a generous agreement for a drug still in phase 2 testing. And I think that, at some level, competition must have played a role in the price. As I said before, Novartis has been locking up hep-C drugs left and right, and Pfizer
What remains to be seen, though, is how much further J&J is willing to go. There are still several unpartnered drugs out there, as well as more than a few medical-technology buyout candidates. And while I realize this violates value-investing orthodoxy, I think I'd rather see J&J pay a little too much for a good business than sit on its nest egg like a stubborn chicken. After all, I recall Johnson & Johnson getting a lot of criticism for overpaying for Cordis back in the day, but nobody seems to be complaining about the profits from its Cypher drug-eluting stent today.
In closing, I'm very curious to see how the hep-C world plays out in the next few years. Companies including Schering Plough
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Fool contributor Stephen Simpson owns shares of Johnson & Johnson and Valeant but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares). The Motley Fool has a disclosure policy.