Gilead Sciences Buying Achillion Was Twitter Speculation at Its Finest

BOSTON (TheStreet) -- For a brief moment, and mostly on Twitter, Gilead Sciences (GILD) was buying Achillion Pharmaceuticals (ACHN).

The speculation of another hepatitis C-related acquisition took off Monday afternoon, sparked by a rumor that Gilead executives canceled a scheduled Tuesday presentation at a health care investor conference. Earlier Monday, Achillion Pharmaceuticals cancelled its presentation at the same investor conference.

You see where this is going. Gilead and Achillion must have bowed out of the investor conference because the companies were about to announce a deal for the hepatitis C juggernaut (Gilead) to buy out its smaller competitor (Achillion).

A compelling theory, but like most M&A rumors, it was a false one. Before the market closed Monday, a Gilead spokesperson said executives were still scheduled to speak publicly on Tuesday. The conference cancellation rumor was, itself, cancelled.

A good market rumor needs a modicum of plausibility to be truly fun. A Gilead takeout of Achillion is not entirely ridiculous, just highly unlikely. Gilead is already dominating hepatitis C with its two-drug, single-pill therapy Harvoni, but the company continues to pursue development of follow-on drugs to improve cure rates and shorten treatment duration.

Achillion is the Lil' Orphan Annie of Hep C. The company is developing some interesting drugs on its own but needs a Daddy Warbucks to find them a proper home. Idenix Pharmaceuticals was in a similar situation until the company was "adopted" by Merck (MRK). The adoption, in this case, cost $3.8 billion.

A scenario can be conjured in which Gilead buys Achillion for its NS5A inhibitor ACHN-3102, which might be more potent and broadly active compared to Gilead's own NS5A inhibitors --  Ledispavir (approved already and a component of Harvoni) and the still-experimental GS-5816.

Or, Gilead could buy Achillion to block other hepatitis C rivals -- AbbVie (ABBV), Bristol-Myers Squibb (BMY) or Johnson & Johnson (JNJ) -- from potentially owning drugs that threaten its market dominance.

But let's be realistic, Gilead isn't buying Achillion. Gilead has no need to make defensive acquisitions and the incremental benefit from owning ACHN-3102 is small relative to the cost. Investors are pining for Gilead to acquire something, but not in hepatitis C, which is already (or will soon be) in a declining market precisely because of the company's success.

Investors want Gilead to make a big, transformative acquisition in another disease area where the company has only just dipped its toe. Vertex Pharmaceuticals (VRTX) with its growing cystic fibrosis drug has been suggested. Personally, I think Gilead should buy (or merge with) Bristol-Myers Squibb.

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.

More from Stocks

The Stock Market Has Every Reason to See a Fresh Rally

The Stock Market Has Every Reason to See a Fresh Rally

3 Simple Tips on Investing From TheStreet's Jim Cramer

3 Simple Tips on Investing From TheStreet's Jim Cramer

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly