) -- Semi-random thoughts and questions about hepatitis C drug stocks in the wake of
(GILD - Get Report)
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
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.]
is up Monday.
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.
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.