Good read from ISI From Celg board on investorvillsge. Thanks JBWIN
Merger Monday: ISI - MRK announced a $3.85B acquisition (>300% premium) of hep C play, Idenix (IDIX)
IDIX specializes in "nucs" which is what GILD's Sovaldi is. Nucs are scarce and thus perhaps quite valuable. IDIX also has what they have always claimed is a vast patent estate covering the nuc space. Thus, bear in mind that part of MRK's purchase price almost certainly applied some kind of value to IDIX's patent portfolio.
IDIX's lead nuc is called IDX21437. At least 3 other nucs have failed in clinical development previously (IDX184, PSI-938, and Inhibitex's nuc). MRK believes that the pre-clinical toxicity data on the IDIX compound was extensive and has made them comfortable that the compound does not exhibit mitochondrial toxicity, which was a problem for some of the other failed nucs. In addition, clinical (human) data indicate that potency is adequate, with log reductions across genotypes of over 4 logs. According to MRK, 83 patients have been treated with the IDIX compound for durations between 7 and 14 days. I don't know the exact number of patients with 14 days exposure, nor do I yet know the number of patients treated with what will likely be the registration dose level.
Obviously, MRK's plan is to combine IDIX's nuc with its in house PI and NS5a inhibitors. MRK's goal is to eventually develop a one pill, once per day regimen for ALL patients (all genotypes; all fibrosis levels, etc) with the shortest possible duration. MRK felt that the addition of a nuc to its regimen was likely necessary in order to maximize the probability that it can achieve all its goals. Recall that MRK has already shown very good data (>90% cure rates) on its PI+NS5a combination after 12 weeks of therapy in G1 patients (G2/3 data coming).
MRK must complete a ddi (drug drug interaction) study before starting a combination trial with the IDIX nuc. We would expect this study to be complete in the next few months. In addition, MRK may wait for data from the just started C-SWIFT trial before initiating IDIX/MRK combo trials. Recall that C-SWIFT is studying MRK's PI/NS5a in combo with GILD's Sovaldi and is testing treatment durations of 4-12 weeks (cirrhotics as short as 6 weeks). I now view the data from this study as extremely important and potentially stock moving.
By the way, in MRK's slides (see below), they seem to endorse a 2018 WW hep C sales estimate of more than $20B. Just sayin' . . . . .
Is this bad for GILD? Remember that IDIX could have just partnered with MRK (or any number of companies). Thus, the fact that MRK will now own IDIX outright doesn't change the competitive outlook much for GILD. However, what the acquisition does do - PERHAPS - is "validate" IDIX's nuc. In other words, we all might need to raise our odds of success of the IDIX nuc based on MRK's due diligence and the price they ended up paying. Whether the market will do that or not isn't clear considering that we all watched BMY buy Inhibitex a few years ago, declare the drug safe, then promptly write off basically the entire value of the program a few months later. Based on my conversation with MRK, it's clear they are acutely aware of BMY's experience and feel that the extent of the data package here is very different from Inhibitex's.
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