Merck announced that it is buying Idenix of Cambridge, Mass., a maker of hepatitis C drugs, for $ 3.85 billion, or $ 24.50 a share, a 238% premium over Idenix’s closing price on Thursday. The deal is expected to close in the third quarter.
With the deal, Merck is doubling down on the ability of its own hepatitis C drugs, all still experimental, to compete with those of Gilead, which has had the most successful drug launch ever with its $ 1,000 pill, Sovaldi, this year. Sovaldi generated sales of $ 2.3 billion during its first quarter on the market, and Gilead is expected to launch a three-drug combination pill in October. Sovaldi’s price and its rapid uptake in usage have resulted in worries among insurance companies and government officials that the drug is too expensive to afford.
In an interview, Roger Perlmutter, the president of Merck Research Laboratories, said that he believes that triple drug combinations are “the future ” in hepatitis C, and that he expects to be able to reduce the duration of treatment from two months for Gilead’s treatments to as little as a month. Owning all three types of drugs needed to cure people of the virus is the fastest way to move forward.
Hepatitis C affects as many as 170 million people worldwide and can lead to liver failure. Many Wall Street investors seem to believe that Gilead will manage to hold on to this lucrative hepatitis C market indefinitely, with competitors like Merck and AbbVie, which is bringing another hepatitis C drug combo to market, taking what’s left behind. With today’s deal, Merck is betting they are wrong. “”Let’s recognize that there are on the order of 170 million people who have hepatitis C infection,” says Perlmutter. “You’re not going to treat a substantial fraction of the world’s infections in a few years. It’s just impossible.”
Among hepatitis C acquisitions, the Idenix deal still ranks behind Gilead’s $ 11 billion purchase of Pharmasset, which gave it Sovaldi, but ahead of Bristol-Myers Squibb’s purchase of Inhibitex for $ 2.5 billion. Bristol had to halt development on Inhibitex’s lead drug after nine patients were hospitalized and one died.
Worries about toxicity have also held Idenix back. After Bristol abandoned the Inhibitex compounds, the Food and Drug Administration told Idenix to stop clinical trials of its two lead drugs, both a type of hepatitis C drug called a nucleotide polymerase inhibitor. In February, Idenix abandoned those drugs, continuing instead with the two medicines that led to Merck’s purchase of the company.
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