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TheStreet Open House

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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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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