Metabolex and J&J: Why Biotech's Pipelines Needs Pharma's

 
• By Roger Longman
  
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The J&J/Metabolex drug-swap transaction creates significant value for a private company looking to maximize the exit opportunities for its investors. But radical as it appears for the hitherto conservative J&J, the structure allows the alliance to morph comfortably into a very traditional J&J deal: an acquisition. Moreover, while Metabolex is leveraging J&J's pipeline to the benefit of its investors, J&J is leveraging Metabolex's investors to the benefit of its P&L.

Johnson & Johnson —hardly known as an innovative or aggressive in-licenser—has peeled off a string of unusual deals. Ex-US arrangements with Vertex Pharmaceuticals Inc. [See Deal] and MGI Pharma Inc. [See Deal], following a similarly structured 2003 deal with Millennium Pharmaceuticals Inc. [See Deal], show that J&J is now the most flexible of Big Pharmas in terms of its willingness to carve out the US market for its biotech partners. (See "Vertex/J&J: Pushing Big Pharma's Deal Flexibility to the Limit," IN VIVO, July/August 2006 Also see "Vertex/J&J: Pushing Big Pharma's Deal Flexibility to the Limit" - In Vivo, 1 July, 2006..) But its transaction with Metabolex Inc. [See Deal] shows a different kind of flexibility—more valuable for a private company looking to maximize the exit opportunities for its investors.

The deal didn't come easily—J&J sources say it took them at least three years to do the transaction, in the...

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