Johnson & Johnson said late yesterday that it’s buying Cougar Biotechnology for about $894 million, or $43 a share. That’s a 16% premium to where the stock closed yesterday. Including Cougar’s cash on hand, the deal’s value is about $970 million. Cougar’s lead product is an experimental drug called abiraterone , which is in late-stage trials for prostate cancer. J&J has a few cancer drugs on the market, but it’s not a particularly strong area. And it’s a field the drug industry has been rushing toward, given the high prices the drugs command and what seems to be a relatively easier approval process for drugs that extend patients’ lives. Analysts liked the deal. David R. Lewis of Morgan Stanley notes that the acquisition makes sense, given that J&J doesn’t currently have a drug on the market for prostate cancer. He says abiraterone could have sales of

more than $500 million a year for prostate-cancer patients whose disease doesn’t respond to other drugs. But he adds that there is some risk with the deal, given that the drug remains unproven and other companies are developing drugs that could be potential competitors. Catherine Arnold of Credit Suisse notes that the price is a premium of about 35% to the company’s average closing price over the last three months. She writes that the “deal and price seem inexpensive to reasonable.” Wachovia’s Larry Biegelsen says data from two late-stage abiraterone trials are expected in 2010. He looks beyond the Cougar buy to a few other key events coming soon for the company, including FDA decisions on the anticlotting drug Xarelto (generic name: rivaroxaban) and the psoriasis drug Stelara .

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Analysts Like J&J’s Deal for Cougar