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What's Next for Hep C Drug Stocks Following Gilead's $11B Pharmasset Buy?

Stocks in this article: GILD VRUS BMY INHX IDIX ACHN

BOSTON ( TheStreet) -- Semi-random thoughts and questions about hepatitis C drug stocks in the wake of Gilead Sciences (GILD) buying Pharmasset (VRUS) for $11 billion:

Wow, $11 billion is a lot of money, but that's what happens when you dangle a great hepatitis C drug (Pharmasset's PSI-7977) in front of a desperate buyer (Gilead.)

One of the best bio-pharma acquisitions measured by return on investment (ROI) was Gilead's $464 million purchase of Triangle Pharmaceuticals in 2003. The Triangle deal gave Gilead the HIV drug Emtriva, which when combined with Gilead's HIV drug Viread into a single pill, created Truvada. In turn, Gilead has generated tens of billions of dollars in sales from Truvada and various HIV regimens that incorporate Truvada as a backbone.

Gilead's challenge will be to convince investors that it can deliver a decent ROI with Pharmasset by spending $11 billion to acquire the asset.

One hedge fund shareholder isn't buying it. "They're dead to me," he said, in a phone call, spitting mad. With Gilead shares down 11% to $35.23, this hedge funder doesn’t appear to be a lone voice of dissent. See below for more buy-side investor reactions.

Inhibitex (INHX) is up Monday. Achillion Pharmaceuticals (ACHN) shares are higher too, although less so. Both companies are developing their own hepatitis C drugs and neither company has a partner yet, so no surprise that already-present speculation about M&A activity involving these two stocks is ramping even higher.

The Inhibitex buzz makes some sense because its drug belongs to the same class of nucleotide polymerase inhibitors -- "nucs" for short -- that Pharmasset is developing.

Meantime, Achillion's CEO can't seem to pass a reporter's microphone without reminding everyone that he's in "advanced talks" with potential partners or aquirers. Smart, effective bio-pharma CEOs get deals done, they don't talk about them incessantly.

Idenix Pharmaceuticals (IDIX) shares are also up Monday on the same M&A speculation, although the stock should probably be selling off. A large part of the bull thesis on Idenix has been based on speculation that the company's intellectual property (IP) portfolio around Hep C "nucs" would allow it to demand and receive royalty payments from other companies developing similar drugs, most notably Pharmasset.

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