Roche-Anadys Hookup Could Spark More Hep C Acquisitions

Updated with additional information.

SAN DIEGO (TheStreet) -- Roche (RHHBY) is buying Anadys Pharmaeuticals (ANDS) for $230 million to bolster its pipeline of experimental hepatitis C drugs, the company said Monday.

Anadys shareholder will receive $3.70 per share in cash from Roche, which represents a 256% premium over Anadys' closing price of $1.04 per share on Friday.

By acquiring Anadys, Roche hopes to develop safer, convenient and all-oral treatments for hepatitis C that do not the use of injectable interferon -- a goal shared by all of the major drug makers pursuing new hepatitis C therapies.

Anadys' most advanced hepatitis C drug candidate is a pill known as setrobuvir. Results from a mid-stage study testing setrobuvir in combination with injectable interferon and ribavirin, another oral hepatitic C medicine, were announced last Thursday.

On a conference call Thursday, Anadys' executives insisted that the phase II results demonstrated setrobuvir's potential to be part of a future combination therapy against hepatitis C. Yet Anadys' share price barely moved after the setrobuvir data were released last week, suggesting investors took a dimmer view of the drug's prospects.

Other small, independent hepatitis C drug makers may react in sympathy Monday as investors anticipate more deal-making activity in hepatitis C. Idenix Pharmaceuticals (IDIX), Inhibitex (INHX) and Achillion Pharmaceuticals (ACHN) are all developing hepatitis C drugs that could potentially be a part of an all-oral, interferon-free regimen being pursued by larger drug companies such as Merck (MRK), Johnson & Johnson (JNJ), Abbott Labs (ABT) and Bristol-Myers Squibb (BMY).

Pharmasset (VRUS) is the best-performing biotech stock this year due to the excitement over its hepatitis C drug candidates. Yet the Anadys acquisition may be perceived as a negative given Roche's existing hepatitis C partnership with Pharmasset. Investors will inevitably ask why Roche didn't acquire Pharmasset, although with a current market value of almost $6 billion, Roche may have deemed Pharmasset to be too expensive.

In addition to setrobuvir, Roche's portfolio of hepatitis C drugs includes danoprevir, which it acquired from InterMune last year; RG7128 (the drug partnered with Pharmasset); and wholly owned RG7432. Roche, of course, also sells the Pegasys, the market-leading interferon.

The Anadys deal may also up the pressure on existing hepatitis C powerhouse Vertex Pharmaceuticals (VRTX) to seek out new deals to develop an all-oral therapy. The commercial launch of Vertex's new, powerful hepatitis C drug Incivek has been a success but the drug must be combined with interferon and ribavrin. Vertex has a next generation hepatitis C drug, VX-222, in clinical testing but has not yet been able to find a way to make that drug work without the need for interferon.

--Written by Adam Feuerstein in Boston.



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