In a big gamble Gilead Sciences ($GILD) has struck a deal to buy Pharmasset, one of the hottest public biotech companies in the world, for $11 billion. Gilead will pay $137 per share for the company ($VRUS), which has seized wide attention for its work on new hepatitis C treatments that may do away with the need for interferon and create a new standard of care for the disease.
Remarkably, Pharmasset's investors are avoiding the hedging that often gets built into an acquisition of a clinical-stage development company. The news instantly triggered an 86% spike in the company's share price--which has been zooming up this year--as investors jumped on board for the ride up to the buyout price.
Angling for a potential approval in 2014, Pharmasset's unpartnered lead program--PSI-7977--has advanced into two late-stage studies involving genotype 2 and 3 patients. One study will compare the oral therapy combined with ribavirin against the standard-of-care: pegylated interferon/ribavirin in treatment-naive patients. The second study will compare PSI-7977 to a placebo in interferon-intolerant or ineligible patients. A third Phase III launches in the second half of 2012.
While Vertex ($VRTX) has been grabbing market share for the recently approved Incivek, a significant advance in the treatment of hepatitis C, a number of investors and analysts have picked Pharmasset as the biotech most likely to succeed at the near-term development of an interferon-free product. How much would that be worth?
Canaccord Genuity life sciences analyst George Farmer said this morning that an interferon-free competitor to Incivek would blast Vertex's revenue. "We model for a steep decline of Incivek sales from $3.7B in 2014 to ~$500M in 2015, as a consequence of the first interferon-free regimens expected to hit the market," he noted. "We anticipate significant threats to Incivek market share from competitive drugs under development in all-oral interferon-sparing regimens. Current innovation leaves Incivek well behind and without a role in future FDA approved all-oral regimens, in our view."
The acquisition marks a big step for Gilead, which has been adding new R&D space at its corporate headquarters. Gilead built its reputation developing treatments for HIV and intimately understands the work being done on hepatitis C.
Analysts quickly turned to a central question this morning: Is Pharmasset, which had a hefty market value of more than $5 billion on Friday, worth $11 billion to Gilead today? Some don't think so. "Pharmasset was an attractive company," noted the online site 24/7 Wall St, "but this one seems like Gilead is spending above and beyond a normal amount here to close this deal." A number of investors appeared to agree, driving down Gilead shares by 12% this morning.
Inevitably, the rich buyout immediately triggered an intense round of messaging on Twitter as some long-time industry observers began to wonder who else may have been sitting at the bargaining table, and whether other hepatitis C drug developers would be next in line. Something like that may be on the mind of Achillion CEO Michael Kishbauch, who was touting overtures from prospective buyers last Friday.
"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 Gilead Sciences CEO John C. Martin. "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."
- here's the press release
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