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Gilead acquires Pharmasset in $11 billion mega bet on interferon-free drugs

Posted on 22 November 2011

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Gilead has acquired Pharmasset for a massive $11 billion, in one of the biggest acquisition deals of 2011.

The deal gives Gilead access to Pharmasset's new hepatitis C treatments that could revolutionize the way the disease is treated. If successful, the treatment could mark the emergence of interferon-free treatment of the disease.

The question that will be on many peoples minds will be the valuation. Is Pharmasset worth the $11 million being paid by Gilead, given that the company already had a significant valuation of $5 billion before the deal announcement?

Gilead will of course be convinced it has done a good deal, however how will investors react? Early indications suggest that investors are wary with Gilead shares down 12% on the day of the anouncement.

In addition, a Wall Street survey conducted by ISI Group analysts Mark Schoenebaum suggested that 82 percent of respondents felt Gilead paid too much.

The value of this deal will surely hinge on the success of the interferon-free drugs being accessed through this deal. If the drug is a success, then the deal will look good. However, much hinges on the successful development, launch and commercialization of these drugs in the coming years.

Pharmassets drugs are not free of competition - Abbott also has significant interferon-free assets in development and will give Gilead a run for its money.

Gilead will acquire Pharmasset for $137 per share in cash. The transaction, which values Pharmasset at approximately $11 billion, was unanimously approved by Pharmasset’s Board of Directors. Gilead plans to finance the transaction with cash on hand, bank debt and senior unsecured notes.

The $137 per share price in the transaction represents an 89% premium to Pharmasset’s closing share price on Friday, November 18, 2011, the last trading day prior to announcement, and 59% to Pharmasset’s all time high closing stock price.

“The acquisition of Pharmasset represents an important and exciting opportunity to accelerate Gilead’s effort to change the treatment paradigm for HCV-infected patients by developing all-oral regimens for the treatment of the disease regardless of viral genotype,” said John C. Martin, PhD, Chairman and Chief Executive Officer of Gilead. “Pharmasset presented compelling Phase 2 data earlier this month further characterizing the strong efficacy and safety profile of PSI-7977. The compound, together with Pharmasset’s other pipeline candidates, represents a strong strategic fit with Gilead’s vision, pipeline and capabilities. This transaction will serve to drive the long-term growth of our business, and we look forward to working closely with the Pharmasset team to advance a broad clinical program in HCV to address the unmet needs of patients and the medical community.”

“We are excited to join together with Gilead, which shares our commitment to providing HCV patients with new, highly efficacious and safe oral therapies,” said Schaefer Price, President and Chief Executive Officer, Pharmasset. “We are very encouraged by the data from our Phase 2 studies of PSI-7977 and believe strongly in the potential of this compound to be a component in the transformation of the treatment of chronic HCV. Gilead’s established expertise and leadership in the field of antiviral drug development and commercialization, coupled with the company’s existing portfolio of promising compounds for HCV, make this partnership an ideal step to fully realize the potential of our promising molecules as part of future all-oral combination therapies for millions of patients in need around the world.”

Will the deal be a success for Gilead? Only time will tell. Watch the interferon-free drug space closely for the answer.

Steve Poile


Related items:

Read the deal terms here

Read Who’s next in the hepatitis C acquisition trail?

View the M&A Scorecard 2011

Buy the Partnering Agreements with Gilead report

View the deal at Current Agreements (subscription required)

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2 Responses to “Gilead acquires Pharmasset in $11 billion mega bet on interferon-free drugs”

  1. alexandre ostojic says:

    Changes for GILD and VRUS quotes are significantly slight for a $11 billion market

  2. Thanks for your comment Alexandre… would you like to elaborate further? Kind regards, Claire.

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