Insight journal - Therapy

Who’s next in the hepatitis C acquisition trail?

Posted on 23 November 2011

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The recent acquisition of Pharmasset for a record breaking drug maker acquisition by Gilead has got markets asking who will be next.

The deal between Gilead and Pharmasset is valued at $11 billion, representing an overnight doubling of Pharmasset's valuation based on share price prior to the deal announcement. To put it a nother way, the deal represents a 70x multiple of net assets, as record for a drug acquisition valued at over $500 million, according to data released by Bloomberg.

Whilst many analysts have suggested that Gilead is overpaying for Pharmasset, the size of the deal reflects the huge potential of the hepatitis C therapy market in the future. If Gilead has got it right and acquired the potential market leader in this new field, the deal will seem good value.

Hepatitis C is currently treated using interferon and its derivatives. The virus is thought to infect as many as 170 million people worldwide, with more than 350,000 dying from the disease every year, according to data from WHO.

The interest in Pharmasset is primarily due to its development of a new, non-interferon drug for the treatment of hepatitis C, representing a major advance over existing therapies.

As is the case with many significant acquisitions, the industry turns its eye to other companies with similar pipeline potential, in order to speculate on the next big acquisition possibility.

Three companies are in the running:

Achillion - the company has openly canvassed for acquisition suitors. The company has three hepatitis therapies in development. It is reported to be in advanced discussions with several partners and acquirors.

Inhibitex - the company has a very similar drug candidate, INX-189, to that owned by Pharmasset. The company's shares increased by 34% as a result of speculation on the day of the Pharmasset deal announcement. To date, INX-189 has progressed well in clinical study and provides a serious contender for acquisition or partnering.

Idenix - the company has five candidate hepatitis C treatments in development. The most advanced candidate, IDX184 is a nucleotide polymerase inhibitor, the same type of drug as the Pharmasset lead product. The product is currently in clinical trials with initial results expected by year end.

With the Pharmasset deal now in the open, expect a flurry of activity as Gilead's competitors seek to respond. This could be good times for investors in these three companies in an otherwise downbeat economic climate.

Steve Poile


Related items:

Read the deal terms here

Read the Gilead-Pharmasset Point of view here

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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