Source: The New York Times
10 June 2014
Merck will buy the biotechnology company Idenix Pharmaceuticals for $3.85 billion in an effort to bolster its arsenal of potential drugs in the hotly competitive hepatitis C area, the companies announced on Monday.
Merck will pay $24.50 in cash for each share of Idenix, an eye-popping 3.4 times Idenix’s closing price of $7.23 a share on Friday.
New drugs are transforming the treatment of hepatitis C, replacing injections with pills, which is increasing the cure rates, reducing side effects and cutting the duration of treatment to as little as eight to 12 weeks from as long as a year.
But the new pills for hepatitis C must be used in combinations of two, three or more drugs. Drug companies are scrambling to procure the components of such regimens.
“Idenix has established a promising portfolio of hepatitis C candidates,” Dr. Roger Perlmutter, the president of Merck Research Laboratories, said in a statement Monday. He said those candidates would help Merck develop what is considered an ideal regimen – taken once a day for as short a duration as possible and highly effective against all subtypes of the hepatitis C virus.
Gilead Sciences is the leader in the hepatitis C race. Its new pill, Sovaldi, recorded sales of $2.3 billion in the first three months of this year, shattering the pharmaceutical industry’s record for sales of any drug in its first full quarter on the market. Gilead obtained the rights to Sovaldi through its own acquisition of a smaller company, Pharmasset, for $11 billion in late 2011.
Merck is considered one of the more viable potential competitors and is hoping to bring a combination of two of its hepatitis C drugs to market in the next year or two.
Idenix, based in Cambridge, Mass., is somewhat behind in the race after it dropped two earlier drugs because of potential safety issues. But it has three hepatitis C drugs in clinical trials. Two of them are in the same class as Gilead’s Sovaldi and could be important in improving Merck’s regimen.
Idenix also has some hopes of profiting from Sovaldi itself. It has sued Gilead for patent infringement, and the United States Patent and Trademark Office is examining which company’s patents on these drugs take precedence. Merck has also been seeking to be paid royalties on Sovaldi sales, saying the drug infringes its own patents. Gilead is fighting both companies’ claims.
Idenix has an accumulated deficit of $864.5 million since its formation in 1998. For much of that time, it has been working in collaboration with Novartis, which still owns 22 percent of the company, according to Idenix’s last quarterly report to the Securities and Exchange Commission. It appears that Novartis will have rights to royalties on sales of Idenix’s hepatitis C drugs.
The Baupost Group, the Boston hedge fund run by Seth Klarman, owned 53.3 million shares, or 35.4 percent, according to the Idenix proxy statement filed in late April.
Merck’s acquisition has been approved by the boards of both companies. Merck will make a tender offer to acquire all shares of Idenix. Assuming at least half the shares are tendered, Merck will then acquire the remaining shares through a second-step merger. The companies expect the deal to close in the third quarter.
Credit Suisse acted as financial adviser to Merck and Hughes Hubbard & Reed provided legal advice. Idenix was advised by Centerview Partners and Sullivan & Cromwell.