Johnson & Johnson (J&J) announced that Janssen Pharmaceutica NV, a Johnson & Johnson company, has entered into a collaboration with Vertex Pharmaceuticals Incorporated to develop and commercialize Vertex's investigational hepatitis C virus (HCV) protease inhibitor, VX-950.

Under the agreement, Janssen will have exclusive rights in Europe, South America, the Middle East, Africa and Australia. Vertex will retain exclusive commercial rights to VX-950 in North America. Tibotec Pharmaceuticals, Ltd., another Johnson & Johnson company, will lead the development and commercialization of VX-950 for Janssen.

Terms of the transaction include a before-tax upfront payment of $165 million, which will be expensed in the second quarter. In addition, there will be additional payments contingent upon successful development, approval and launch of VX-950 in the regions where Janssen has commercial rights and reimbursement of certain drug development costs. The agreement also includes a royalty on product sales in Europe, South America, the Middle East, Africa and Australia.

The company anticipates that the $165 million payment will largely be offset by other non-recurring gains recognized over the balance of the year. Therefore, this transaction is not expected to impact full year guidance.

VX-950 is an investigational oral inhibitor of hepatitis C virus protease, an enzyme essential for viral replication, and is one of the most advanced investigational agents that specifically targets HCV. In clinical studies to date, researchers have observed rapid and dramatic antiviral activity with VX- 950 and no patients have discontinued treatment and no serious adverse events have been reported.