Takeover speculation usually isn't worth the paper it's printed on. The idea of Roche buying VRUS is nothing new and some would suggest it's why VRUS trades at a premium to its clinical peers. Since Adam Feuerstein is in a speculative mood I will add my own thoughts. If Roche does make a bid for VRUS I would expect the offer to be at least twice the company's current valuation. The last thing Roche wants is to put VRUS in play and have Gilead Sciences come in with a better offer. GILD's dual nuke combo Truvada for HIV was approved in 2004 and has been incredibly profitable. Given GILD's list of management blunders the last few years this strategy for HCV could play right into their pocket if they buy VRUS. VRUS is in an enviable bargaining position.
thestreet.com...credit jbog at BV message board
Do you think the acquisition of Zymogenetics(ZGEN) by Bristol-Myers Squibb(BMY) signals more consolidation or takeout activity in the hepatitis C space? I know there are other partnerships out there already, but can we expect to see more deals?"
Great question. This was a rather busy week in Hep C land, with Bristol buying partner Zymogenetics for $885 million, or $9.75 a share (and at a whopping 84% premium, no less), Idenix Pharmaceuticals(IDIX) putting its two lead Hep C drugs on clinical hold (temporarily, it's hoped) and Vertex Pharmaceuticals(VRTX) releasing the final phase III clinical data supporting the strong efficacy of telaprevir in helping treatment-resistant patients achieve a cure.
Investors should think about the evolving Hep C drug market like a buddy system. Everyone, meaning every company developing a new Hep C drug, needs a buddy, a partner, a wing man. Partnering is essential because in five or 10 years, maybe sooner, doctors will be treating Hep C patients with various combinations of drugs -- i.e. drug cocktails -- in many of the same ways that doctors treat HIV patients today.
The current standard of care for treating Hep C is a 48-week, two-drug regimen consisting of long-acting interferon (either Roche's Pegasys or Merck's(MRK) PEG-Intron) plus the generic medicine ribavirin.
If Vertex and/or Merck are successful in getting their respective direct-acting antiviral drugs approved next year, a third drug will be added to the Hep C treatment cocktail. If that add-on drug is Vertex's telaprevir, for instance, newly-treated Hep C patients will take telaprevir plus interferon-ribavirin for 12 weeks, followed by another 12 weeks of interferon and ribavirin. Total treatment time, just 24 weeks or six months. Based on what we know today about telaprevir, cure rates of 75% will be achieved compared to about 40% today with standard of care alone.
The goal of much of today's Hep C research is to eliminate interferon and/or ribavirin from the treatment regimen because the side effects of both drugs are nasty. The hope is that two- or three-drug combinations of new direct antivirals will be equally or more effective in eliminating the Hep C virus. Perhaps these antivirals could one day be combined into a single pill that patients would take once daily -- thus simplifying treatment vastly.
To reach this utopian state of Hep C treatment, experimental drugs -- mostly developed by separate companies -- need to be studied in combination. Roche is partnered with Pharmasset(VRUS) and InterMune(ITMN) for that purpose. Vertex is partnered with Johnson & Johnson(JNJ), although Vertex also bought a private company to gain control of another direct antiviral to combine with telaprevir.
Those small companies without partners today need to buddy up soon lest they miss out. Most prominently (for investors, at least), the list of "singles" includes Idenix, Achillion Pharmaceuticals(ACHN) and Anadys Pharmaceuticals(ANDS). (More on Idenix below.)
Pharmasset is an interesting case: The company has a deep stable of Hep C drug candidates and a strong partnership with Roche that many people believe will ultimately lead to Roche buying Pharmasset outright. That seems like a totally plausible scenario to me -- in fact, I'm a bit surprised it hasn't happened yet.
Getting to T.S.' last question, yes, I do think we will see more consolidation and deal making among the Hep C drug makers. Whether the Bristol-Zymogenetics deal is the start of a new wave or just the continuation of an ongoing trend probably doesn't matter a whole lot.
What is undeniable, however, is that the next year or so is going to bring unprecedented -- and positive -- change for Hep C patients. Two new Hep C drugs from Vertex and Merck are likely to be approved and the potential (or lack thereof) of a host of other drugs in earlier stages of testing will come into better focus.
