Tracon Pharmaceuticals said today it has licensed two preclinical oncology candidates from Johnson & Johnson’s Janssen Pharmaceutica, which will retain rights to potentially reacquire the programs.

Johnson & Johnson Innovation facilitated the licensing agreement, which includes a $5 million equity investment in Tracon by J&J’s venture capital subsidiary, Johnson & Johnson Innovation–JJDC, and could generate up to $242.5 million more for Tracon, tied to development of the two candidates, plus royalties.

Johnson & Johnson Innovation–JJDC purchased Tracon common stock at $5.95 per share, 3% below the company’s closing share price yesterday of $6.13.

The agreement gives Tracon rights to develop two Janssen oncology programs:

  • TRC253 (formerly JNJ-63576253), a novel small-molecule, high-affinity, competitive inhibitor of wild-type androgen receptor (AR) and multiple AR mutations that confer drug resistance, to be developed for prostate cancer
  • TRC694 (formerly JNJ-64290694), a novel, potent, orally bioavailable inhibitor of NF-κB inducing kinase (NIK), to be developed for hematologic malignancies, including myeloma.

Tracon said it expects to launch a Phase I/II proof-of-concept clinical study in the first half of 2017 for TRC253, which has completed IND-enabling studies.

Following completion of the initial proof-of-concept study, Janssen will have an exclusive option to reacquire from Tracon full rights to TRC253, for $45 million upfront, up to $137.5 million tied to achieving regulatory and commercialization milestones, plus a low single-digit royalty.

If Janssen opts not to exercise that option, Tracon said, it would retain worldwide development and commercialization rights to the program and would have to pay Janssen up to $45 million in development and regulatory milestone payments plus a low-single-digit royalty.

TRC694 is now in preclinical development, with Tracon expecting to file an IND application in 2018, following completion of additional preclinical studies.

Upon completion of an initial clinical proof-of-concept study, or at any time earlier, Janssen has a right of first negotiation to reacquire the TRC694 development program on terms to be negotiated between the parties.

Should Janssen not exercise its negotiation right, or the companies fail to come to terms, and if Tracon continues development of TRC694, Tracon agreed to pay Janssen up to $60 million tied to development and regulatory milestones, and a low-single-digit royalty.

“This agreement expands our portfolio of potential first-in-class oncology therapies and leverages our existing drug development expertise,” Tracon President and CEO Charles Theuer, M.D., Ph.D., said in a statement. “It also creates incremental opportunities for near-term nondilutive funding and long-term value creation that complement our ongoing clinical development efforts with TRC105, our lead late-stage product candidate.”

TRC105 (carotuximab), an antibody to endoglin, is the subject of multiple Phase II clinical trials sponsored by Tracon or the NIH’s National Cancer Institute for the treatment of solid tumor types in combination with vascular endothelial growth factor (VEGF) inhibitors. An ophthalmic formulation of TRC105 called DE-122 is in a Phase I/II trial in patients with wet age-related macular degeneration (AMD).

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