Achillion Pharma attracts buyout buzz as hep C rivals fall

With developers of oral hepatitis C drugs falling hard in recent weeks, Achillion Pharmaceuticals ($ACHN) has attracted fresh M&A speculation because the developer's contenders in this closely watched race remain unscathed in clinical studies.

In an analysis of Achillion's prospects, Bloomberg quoted analysts about multiple possible scenarios that could result in a buyout of the New Haven, CT-based company. A slate of potential buyers--including big names such as Merck ($MRK), Roche, ($RHHBY) and Vertex Pharmaceuticals ($VRTX)--could take a gamble on Achillion soon and pay a premium in the neighborhood of 79% higher than current stock price. Or, as Brean Murray Carret analyst Brian Skorney suggests, buyers could hold off from acquiring Achillion until data are available from trials of its oral hep C treatments.

Achillion's shares skyrocketed early this year as all-oral treatments for hep C became all the rage in pharma, with Gilead Sciences ($GILD) buying Pharmasset last year for $10.8 billion and Bristol-Myers Squibb ($BMY) scooping up Inhibitex for $2.5 billion in February to acquire experimental drugs that could spare patients from the flu-like side effects of the standard injected treatment interferon. Achillion's share price came back to reality as the buyout fever fizzled, but now the failure of Bristol's lead candidate from the Inhibitex deal and toxicity concerns threatening oral candidates from Idenix Pharmaceuticals have sparked renewed interest in Achillion's candidates.

Yet expect none of the breathlessness seen in the past year's hep C buyouts in the next round of M&A events. Concerns loom about the safety of the new classes of oral drugs against the disease, and the disastrous result of Bristol's bet on Inhibitex should serve as a cautionary tale for pharma dealmakers interested in other unproven players in the hep C game such as Achillion and Idenix.

"What's that phrase, 'Once burned, twice shy?'" Les Funtleyder, a fund manager at New York-based Poliwogg, told Bloomberg. "If someone was to repeat what happened to Bristol, shareholders would start to ask questions about management's judgment."

- check out Bloomberg's article

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