It's official. Scios Inc. is selling out to Johnson & Johnson in a $2.4 billion cash deal.
With rumors flying Friday, Scios' stock swelled by nearly 22 percent. Its shares (NASDAQ:SCIO), which closed Thursday at $34.69, finished Friday at $42.20. (See BioWorld Today, Feb. 10, 2003.)
Under the definitive agreement reported Monday, Johnson & Johnson is paying $45 for each of Scios' nearly 59.8 million fully diluted shares outstanding. Its shares closed up another $1.72 Monday at $43.92, a 52-week high. A year ago the stock closed at $20.82.
"By joining with Johnson & Johnson, we will take a major step forward toward fulfilling our mission of becoming a leader in the development and commercialization of innovative products in cardiovascular and inflammatory diseases," Scios President and CEO Richard Brewer said during a conference call Monday.
Founded in 1981, Scios will retain its name, identity and management. The company employs about 450 people. The Sunnyvale, Calif.-based firm's assets include Natrecor (nesiritide), a marketed cardiovascular drug, and SCIO-469, an orally administered, late-stage product designed to treat rheumatoid arthritis.
The former, approved a year and a half ago to treat acute congestive heart failure, was in line to generate 2002 sales of $92 million to $95 million. Scios will report its fourth-quarter and year-end financials later this week.
"We believe that by investing needed additional financial and management resources, Scios and our lead product Natrecor will grow more rapidly, outstripping current expectations," Brewer said, later adding that 2003 sales for the drug were estimated before the deal to range between $160 million and $170 million.
New Brunswick, N.J.-based Johnson & Johnson pointed to other potential ways to grow Natrecor's sales.
"Scios focuses primarily on clinical cardiologists in a limited number of institutions," Christin Poon, the worldwide chairman of Johnson & Johnson's pharmaceuticals group, said during the conference call. "We plan to explore new uses and formulations for Natrecor through the use of Alza's drug delivery technology."
She said J&J also plans to explore a link between the drug and a heart failure diagnostic test the company is developing.
But the lead candidate in Scios' p38 MAP kinase inhibitor program could become the crown jewel in the deal. Results from a multicenter, randomized, placebo-controlled, 120-patient, Phase II study of SCIO-469 are expected next quarter.
Prior Phase I studies have demonstrated safety and tolerability in all dose ranges tested.
J&J already sells a biologic rheumatoid arthritis treatment, Remicade (infliximab). Sold through Malvern, Pa.-based Centocor Inc., Remicade competes with Enbrel (etanercept), jointly marketed by Thousand Oaks, Calif.-based Amgen Inc. and Madison, N.J.-based Wyeth.
Both differ significantly from SCIO-469, though - they block the activity of tumor necrosis factor (TNF) alpha, and neither is orally dispensed. Given its simpler route of administration, SCIO-469 could easily slip into such a market.
The MAP kinase inhibitor program also includes SCIO-323, a second-generation product. Jason Kantor, an analyst with WR Hambrecht & Co. in San Francisco, on Friday told BioWorld Today that the purchase bears out Scios' recent development efforts.
"No one gave them credit for a pipeline, but they have come up with a MAP kinase inhibitor where most of the big pharma companies have failed," he said.
Scios' research and development efforts are focused on potential treatments for pain and inflammatory diseases. Deeper in its pipeline, Scios has developed small-molecule inhibitors designed to block activation of the TGF-beta receptor. The company planned to advance through preclinical development later this year two lead molecules, after which it planned to disclose the first indication for the new therapeutic class.
J&J said the transaction, expected to close next quarter, is expected to have a 5-cent dilutive impact this year and next. It said it expects to take an estimated one-time charge of about $700 million for in-process research and development that will have an earnings-per-share impact of 23 cents. For the year, its Thomson First Call Consensus estimate is $2.62, which J&J said was in line with its expectations.
Johnson & Johnson's stock (NYSE:JNJ) climbed 55 cents Monday to close at $52.39.