Vertex Pharmaceuticals ( VRTX) is adding two new drugs to its hepatitis C pipeline with the acquisition of ViroChem, a privately held Canadian drugmaker, the company announced Tuesday.

The final purchase price for ViroChem has not been set, but it includes a cash payment of $100 million and 9.9 million common shares. At Vertex's Tuesday closing price of $27.96, the stock portion of the deal is valued at about $280 million.

The acquisition of ViroChem adds two experimental hepatitis C drugs to Vertex's pipeline, which already includes telaprevir, a drug currently in a series of phase III studies.

Vertex intends to begin clinical trials later this year combining telaprevir with the ViroChem drugs. The goal of these new studies would be to develop more effective treatment regimens for hepatitis C patients that could potentially eliminate the need to treat patients with long-acting interferon and ribavirin, the current standard of care for the disease but one with only a 50% cure rate.

Both Vertex's telaprevir and ViroChem's drugs, known as VCH-222 and VCH-759 are direct antivirals. That means the drugs work by directly suppressing and killing the hepatitis C virus. By comparison, interferons and ribavirin work by helping a patient's immune system eliminate the virus.

Roche and InterMune ( ITMN) are also working on combination studies of direct antivirals against hepatitis C.

The ongoing telaprevir phase III studies combine the drug with long-acting interferon and ribavirin -- a combination that Vertex hopes will create a more effective and shorter treatment regimen for hepatitis C patients. Data from the first of these phase III studies is expected in mid-2010.

VCH-222 and VCH-759 are still in early stages of clinical development, but on a conference call Tuesday, Vertex said it was particularly excited about the early efficacy data on VCH-222. In a small study of five hepatitis C patients, treatment with a twice-daily dose of VCH-222 for three days resulted in a viral load reduction that was very similar to that of telaprevir when it was first tested in patients.

In addition to studying the ViroChem drugs with telaprevir, Vertex says the drugs will also be studied in combination with interferon and ribavirin.

The final price of the ViroChem acquisition will depend on the average Vertex share price before closing. The agreement calls for a collar that will cap Vertex shares involved in the deal at 11 million.
At the time of publication, Feuerstein's Biotech Select model portfolio had no positions in stocks mentioned.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. 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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