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TheStreet Open House

Hep C Takeover Speculation Rains Down on Idenix and Achillion

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SAN FRANCISCO ( TheStreet) -- Three independent hepatitis C drug developers bought, two more -- Idenix Pharmaceuticals (IDIX) and Achillion Pharmaceuticals (ACHN) -- waiting at the altar.

Bristol-Myers Squibb (BMY) snatches up Inhibitex (INHX) for $2.5 billion in a deal announced Saturday night as the entire biopharmaceutical industry travels here for the start of the J.P. Morgan Healthcare Conference on Monday morning. Is there any better way to kick off a closely watched investor confab like this than a blockbuster buyout? I think not.

Gilead Sciences (GILD) is expected to close on its $11 billion acquisition of Pharmasset (VRUS) this week or no later than before the end of the month.

It seems teeny by comparison, but let's not forget that Roche (RHHBY) bought Anadys Pharmaceuticals for $230 million in October.

All three buyouts were done to achieve the same goal: Develop the next generation of highly potent hepatitis C therapies composed entirely of pills so patients no longer need to endure weekly shots of interferon. The prize for the companies that can cobble together the two or three drugs (perhaps just one) necessary to create this all-oral regimen is about $10 billion or more in expected future hepatitis C revenue.

The pace of hepatitis C deal activity is breathtaking if not unprecedented. Takeover speculation will certainly rain down Monday on Idenix and Achillion given their status as the last two independent Hep C drug developers.

Idenix's lead drug, IDX184, belongs to the same "nucleoside" or "nuc" class of oral Hep C drugs as Pharmasset's PSI-7977 and Inhibitex's INX-189.

The Food and Drug Administration has a partial clinical hold on IDX184 due to liver toxicity that cropped up in a study that combined '184 with another Idenix Hep C drug known as IDX320. Idenix believes this safety signal was caused by '320, and development of that drug was shelved.

To remove '184 from the Hep C safety doghouse and clear it for future combination studies, Idenix is conducting a short phase IIb study with interim data expected imminently, perhaps even this week. If the safety profile of '184 comes back clean, the FDA should be persuaded to lift the partial clinical hold and potential suitors may move quickly to snatch up Idenix.

Idenix executives will be presenting at the J.P. Morgan conference on Wednesday at 5 p.m. EST.

Achillion expects to release proof-of-concept data from studies of three experimental hepatitis C drugs -- ACH-1625, ACH-2684 and ACH-2928 -- in the first half of the year. ACH-1625 is a once-daily protease inhibitor (the same Hep C drug class as Vertex Pharma's Incivek and Merck's Victrelis) that is being combined with interferon and ribavirin.

Achillion is not scheduled to present at the J.P. Morgan conference this week, but the company's CEO Michael Kishbauch has not been shy about letting investors (and potential suitors) know that his company is for sale.

Additional thoughts and questions on the rapidly evolving (and consolidating) hepatitis C drug landscape:

Who are the potential buyers still out there? Merck (MRK) , Johnson & Johnson (JNJ) and Abbott (ABT) are all invested heavily in hepatitis C drug development already, so each could step up as potential acquirers. Merck may have the most to lose because its approved Hep C drugs PEG-Intron and Victrelis are threatened by the push to develop new all-oral therapies.

This is actually the second time that Bristol-Myers has made a hepatitis-related deal in the midst of the J.P. Morgan Healthcare Conference. In January 2009, Bristol licensed a long-acting interferon from Zymogenetics. In September 2010, Bristol bought Zymogenetics for $885 million. The payoff on this deal now has to be questioned given the drive to do away with long-acting interferons in hepatitis C in favor of developing all-oral regimens.

How many, if any, of these experimental oral Hep C drugs will ultimately fail clinical trials or be shelved due to safety problems? It's hard to believe that all will ultimately be successful, given the typical failure rate seen in drug development.

What happens if either Idenix or Achillion are not acquired? Can these small companies survive on their own? If Hep C turns out to be anything like HIV, the answer is no.

Inhibitex shares have been very volatile recently due to worries about the safety of INX-189. It's not known whether Bristol is protecting itself with an exit clause in its tender offer if INX-189 does run into safety issues.

-- Written by Adam Feuerstein.



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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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