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Janssen's "Newest" Biotech Licensing Deal

|Includes: Aduro Biotech (ADRO), CELG, CTIC, GERN, INCY, JNJ, KURA, MDVN

Johnson & Johnson's biotech focused subsidiary, Janssen biotech, has been one of the most successful biotech acquisitions in history. The Philadelphia based company has successfully developed many cutting edge drugs and life saving therapies. With JnJ's bankroll, the sky is the limit on how many drugs they can have in development at once. A new hands off strategy I believe could result in some clinical failures, however there is a lot of upside in the indications these companies are targeting.

Geron (NASDAQ:GERN): A risky one drug unicorn. Imtetelstat is a treatment for MF, a rare blood disease that Incyte (NASDAQ:INCY) currently has the leading treament for: Jakafi. If approved after Phase 3 trials they would be in for over $100M in revenue just in Q1, as Incyte has easily turned their drug into a multibillion dollar cash cow. Warning: CTI Biopharma already failed phase 3 studies in this area for the same indication. Geron also has a study in the works for an MDS indication which is Celgene's biggest revenue contributor: Vidaza.

Kura (NASDAQ:KURA): Tipifarnib is a recycled drug that failed to meet its primary end point in 2005. JnJ licensed out the drug for development to Kura oncology, a company that recently performed a reverse merger to acquire a Nasdaq listing. Already Fidelity, FMR, and EcoR1 hold over 10% of the outstanding shares.

Aduro Biotech (NASDAQ:ADRO): the phase 2b Mesothelioma drug developer just got paid a $22M milestone from Janssen last month. 2 strong drug candidates have the Berkeley based company's valuation above $1B.

In conclusion, all of these companies are losing money developing drugs now, that if approved in the next 52 weeks, would compete with the top drug companies in the world like CELG, MDVN, and INCY. Downside risk is not capped by a JnJ collaboration, however upside is and I will be reporting more info on each collab deal in an update over the weekend.

Disclosure: I am/we are long MDVN, ADRO, CELG, GERN.