MacroGenics Inks Deal with J&J for Blood Cancer Therapy - Analyst Blog

MacroGenics, Inc.'s (MGNX) shares jumped 11.73% following the company's announcement that it has entered into a global collaboration and license agreement with Janssen Biotech, Inc., a wholly-owned subsidiary of Johnson & Johnson (JNJ), for the development and commercialization of pipeline candidate, MGD011.

MGD011 is being developed for the treatment of B-cell hematological malignancies based on MacroGenics' proprietary platform for Dual-Affinity Re-Targeting (DART). An investigational new drug (IND) application for MGD011 is slated for submission in 2015.

Terms of the Deal

MacroGenics is entitled to an upfront license fee of $50 million and may receive additional payments of up to $575 million upon the achievement of clinical, regulatory and commercialization milestones. Johnson & Johnson will be completely responsible for the development of MGD011.

Additionally, Johnson & Johnson will purchase 1,923,077 new shares of MacroGenics common stock at $39 per share, amounting to a total of $75 million.

MacroGenics also stated that it may partially fund the late-stage development of MGD011 in exchange for a share of the profit generated in the U.S. and Canada. MacroGenics retains the option to co-promote the product with Johnson & Johnson in the U.S. upon approval and stands eligible to receive double-digit royalties on global net sales of the product.

Our Take

We are positive on MacroGenics' collaboration with Johnson & Johnson since the deal looks beneficial for the former both strategically and financially. MacroGenics, a development stage company, has gained a strong partner in Johnson & Johnson, whose commercial expertise should help establish MacroGenics' position in the oncology market. Moreover, costs associated with the development of MGD011 will be fully borne by Johnson & Johnson following the IND application. However, MacroGenics retains the option to co-promote the product with Johnson & Johnson in the U.S., if and when approved.

We note that of late, companies in the biotech sector are teaming up with other companies for the development of oncology treatments. In Nov 2014, Five Prime Therapeutics, Inc. (FPRX) entered into an agreement with Bristol-Myers Squibb Company (BMY) to evaluate the Opdivo–FPA008 combination for six types of cancer.

MacroGenics carries a Zacks Rank #2 (Buy). A better-ranked stock in the pharmaceutical sector is The Medicines Company (MDCO), carrying a Zacks Rank #1 (Strong Buy).