A GLIMPSE INTO OUR FUTURE: WE HAVE THE POTENTIAL

A GLIMPSE INTO OUR FUTURE:

WE HAVE THE POTENTIAL TO DWARF THIS BUYOUT

In a big gamble Gilead Sciences ( $GILD ) has struck a deal to buy Pharmasset, one of the hottest public biotech companies in the world, for $11 billion. Gilead will pay $137 per share for the company ( $VRUS ), which has seized wide attention for its work on new hepatitis C treatments that may do away with the need for interferon and create a new standard of care for the disease.

Remarkably, Pharmasset's investors are avoiding the hedging that often gets built into an acquisition of a clinical-stage development company. The news instantly triggered an 86% spike in the company's share price--which has been zooming up this year--as investors jumped on board for the ride up to the buyout price.

Angling for a potential approval in 2014, Pharmasset's unpartnered lead program--PSI-7977--has advanced into two late-stage studies involving genotype 2 and 3 patients. One study will compare the oral therapy combined with ribavirin against the standard-of-care: pegylated interferon/ribavirin in treatment-naive patients. The second study will compare PSI-7977 to a placebo in interferon-intolerant or ineligible patients. A third Phase III launches in the second half of 2012.

While Vertex ( $VRTX ) has been grabbing market share for the recently approved Incivek , a significant advance in the treatment of hepatitis C, a number of investors and analysts have picked Pharmasset as the biotech most likely to succeed at the near-term development of an interferon-free product. How much would that be worth?

Canaccord Genuity life sciences analyst George Farmer said this morning that an interferon-free competitor to Incivek would blast Vertex's revenue. "We model for a steep decline of Incivek sales from $3.7B in 2014 to ~$500M in 2015, as a consequence of the first interferon-free regimens expected to hit the market," he noted. "We anticipate significant threats to Incivek market share from competitive drugs under development in all-oral interferon-sparing regimens. Current innovation leaves Incivek well behind and without a role in future FDA approved all-oral regimens, in our view."

The acquisition marks a big step for Gilead, which has been adding new R&D space at its corporate headquarters. Gilead built its reputation developing treatments for HIV and intimately understands the work being done on hepatitis C. 

Analysts quickly turned to a central question this morning: Is Pharmasset, which had a hefty market value of more than $5 billion on Friday, worth $11 billion to Gilead today? Some don't think so. "Pharmasset was an attractive company," noted the online site 24/7 Wall St, "but this one seems like Gilead is spending above and beyond a normal amount here to close this deal." A number of investors appeared to agree, driving down Gilead shares by 12% this morning.

Inevitably, the rich buyout immediately triggered an intense round of messaging on Twitter as some long-time industry observers began to wonder who else may have been sitting at the bargaining table, and whether other hepatitis C drug developers would be next in line. Something like that may be on the mind of Achillion CEO Michael Kishbauch , who was touting overtures from prospective buyers last Friday.

"The acquisition of Pharmasset represents an important and exciting opportunity to accelerate Gilead's effort to change the treatment paradigm for HCV-infected patients by developing all-oral regimens for the treatment of the disease regardless of viral genotype," said Gilead Sciences CEO John C. Martin . "Pharmasset presented compelling Phase 2 data earlier this month further characterizing the strong efficacy and safety profile of PSI-7977. The compound, together with Pharmasset's other pipeline candidates, represents a strong strategic fit with Gilead's vision, pipeline and capabilities. This transaction will serve to drive the long-term growth of our business, and we look forward to working closely with the Pharmasset team to advance a broad clinical program in HCV to address the unmet needs of patients and the medical community."

Read more: UPDATED: Gilead Sciences bags Pharmasset's hep C pipeline in $11B buyout - FierceBiotech http://www.fiercebiotech.com/story/gilead-sci...z2AtIuvZ9s
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