Who says Johnson & Johnson's
The $970 million that Johnson & Johnson is paying for Cougar Biotechnology
Most of the value of Cougar is tied up in abiraterone, its phase 3 prostate cancer drug; the rest of Cougar's pipeline is in early-stage testing. The data from two trials testing abiraterone against metastatic prostate cancer isn't expected until early 2011, so Johnson & Johnson's investors will have to wait a while before they'll know whether the bet will pay off. The rewards will be huge if the trials are positive; a sub-$1 billion price tag will look cheap if abiraterone hits sales of $1 billion annually.
By the time the results are out, we should know whether Dendreon's
Johnson & Johnson may be making a huge mistake here and abiraterone could flop, but investors can learn a lesson from its purchase. As long as you keep each development-stage drugmaker as a reasonable percentage of your portfolio -- and Cougar will make up less than 1% of Johnson & Johnson market cap -- it's reasonable to take on those risks for the potential reward.
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