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Merck to buy Idenix in race for hepatitis C treatments

Last updated: June 9, 2014 6:25 pm

Merck to buy Idenix in race for hepatitis C treatments

By Andrew Ward, Pharmaceuticals CorrespondentAuthor alerts

Merck & Co has agreed to buy Idenix Pharmaceuticals for $3.85bn in a deal aimed at bolstering its position in the hotly contested race to develop a new generation of hepatitis C treatments.

The US drugmaker is vying with rivals including Gilead SciencesJohnson & Johnson and AbbVie for share of a market forecast to reach at least $20bn of annual sales by the end of this decade.

Idenix shareholders will receive $24.50 a share in cash under the agreement announced on Monday – more than triple the $7.23 closing price on Friday.

The deal will deliver a windfall to Novartis, the Swiss drugmaker, which owns 22 per cent of Idenix stemming from a discontinued partnership between the pair.

Another big winner will be Baupost Group, the Boston-based hedge fund run by Seth Klarman, which owns 35 per cent of the US biotech company.

The hefty premium paid by Merck underscores intense competition for assets in the pharmaceuticals sector amid a surge of dealmaking by cash-rich drugmakers seeking fresh sources of growth.

Merck hopes Idenix will help it close the gap with Gilead, whose hepatitis C drug Sovaldi is on course to become the most successful launch in industry history after generating $2.3bn of revenues in its first three months on the market this year.

Scientists have hailed the raft of new treatments as the biggest advance for a decade in the fight against a disease affecting 150m people worldwide.

While Gilead has taken an early lead, analysts say there is still much to play for because long-term success is likely to be determined by which company can offer the most effective combination of two or more drugs.

Idenix has long been at the forefront of hepatitis C research, but has struggled to get its products to market. The Massachusetts-based company is suing Gilead in the US and Europe for alleged patent infringement.

For Merck, success in hepatitis C could help restore its fortunes after a long period of patent expiries and weak innovation.

Kenneth Frazier, chief executive, last year announced a 20 per cent cut in Merck’s global workforce and last month agreed to sell its consumer business to Bayer of Germany for $14.2bn as part of efforts to sharpen focus on prescription drugs.

As well as hepatitis C, Merck is also among the leaders in a new wave of oncology drugs that harness the immune system to fight cancer.

Roger Perlmutter, Merck’s head of R&D, said the Idenix deal would advance the push for a once-daily, oral hepatitis C therapy that works against all subtypes of the virus without the harsh side-effects associated with existing treatments.

Idenix has three hepatitis C drugs in clinical development, while Merck is focused on a combination of two experimental medicines that entered a phase three trial – the final step before seeking regulatory approval – in April.

Shares in Idenix peaked at $27.16 in 2005 but have fallen in recent years as the company was hit by research setbacks.

 

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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