Johnson & Johnson said Monday that it has agreed to buy Aragon Pharmaceuticals Inc. for at least $650 million in cash, boosting its position in prostate drug development.

The privately-held San Diego, company is focused on the development of drugs to treat hormonally-driven cancers.

Under the terms of the deal, Johnson & Johnson will make an upfront cash payment of $650 million, plus additional payments of up to $350 million if certain milestones are met. The deal is expected to close in the third quarter.

Aragon’s lead drug candidate is a second generation androgen receptor signaling inhibitor being developed for the treatment of castration-resistant prostate cancer.

Before the deal closes, Aragon will transfer all assets other than its androgen receptor antagonist program to a newly formed company to be called Seragon Pharmaceuticals, which Aragon will spin off, the companies said.

Seragon will be based in San Diego and will be financed by the current Aragon investors. It will retain members of the company’s management team including current CEO Richard Heyman, who will become the new company’s CEO.

The boards of both companies have approved the sale.

Johnson & Johnson shares rose $1.08, or 1.3 percent, to $85.99 in morning trading. That is near the upper end of its 52-week range of $65.82 to $89.99.