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MERGERS AND ACQUISITIONS

Gilead Agrees to Buy Pharmasset for $11 Billion

Acquisition serves antiviral drug developer’s long-term aspiration to dominate untapped hepatitis C market.

MICHAEL FITZHUGH

The Burrill Report

“It is increasingly clear that the future treatment landscape for HCV will be defined by regimens of oral antivirals that are safe and well-tolerated, simpler to use, and offer the best rate of cure for the largest segment of patients.”

Gilead Sciences is buying the clinical-stage hepatitis C drug developer Pharmasset, intensifying its effort to become the leading supplier of next-generation drugs to combat the virus.

Gilead, which built its success in HIV therapeutics, now sees an opportunity to parallel that victory with hepatitis C in a world where it estimates that more than 12 million people are infected with HCV in major markets, but fewer than 200,000 people are treated each year. Many people don’t even know they’re infected with the virus, exposing them to potential liver scarring or liver cancer.

“It is increasingly clear that the future treatment landscape for HCV will be defined by regimens of oral antivirals that are safe and well-tolerated, simpler to use, and offer the best rate of cure for the largest segment of patients,” says John Martin, chairman and CEO of Gilead, which is based in Foster City, California. “The acquisition of Pharmasset represents an important and exciting opportunity to accelerate Gilead's effort to change the treatment paradigm for HCV-infected patients by developing all-oral regimens for the treatment of the disease regardless of viral genotype.”

Pharmasset shareholders will receive a cash payment of $137 per share for the company when the transaction closes, which is expected to be in the first quarter of 2012. The offer represents an 89 percent premium to Pharmasset's closing share price on Friday, November 18, the last trading day prior to announcement. Gilead expects the transaction will be dilutive to its earnings through 2014 and accretive in 2015 and beyond.

Gilead already has seven candidate molecules for the treatment of hepatitis C in various stages of development. One or several of those compounds could eventually be marketed as part of an all-oral treatment regimen, allowing patients to skip injections of pegylated interferon, which with ribavirin is currently part of the standard of care treatment for patients with chronic hepatitis C. The company sees the addition of Pharmasset’s portfolio as an opportunity to accelerate progress toward the goal of an all-oral, once-daily dosing regimen.

Pharmasset is testing three clinical stage drug candidates for the treatment of chronic hepatitis C. Its lead candidate, PSI-7977, recently moved into late-stage testing in genotype 2 and 3 patients. A third, late-stage study of genotype 1 patients will be initiated in the second half of 2012. If successful, Pharmaset expects it could achieve initial U.S. regulatory approval of PSI-7977 in 2014.

The company is also testing a second candidate, PSI-938, in interferon-free trial as monotherapy and in combination with PSI-7977 in subjects with HCV of all viral genotypes. The company’s third candidate, Mericitabine (RG7128), is partnered with Roche and is being evaluated in three mid-stage trials for which Roche is responsible.

With an estimated 160 million to 180 million people infected with hepatitis C worldwide, competition to develop a market-leading treatment is fierce. Both Merck and Vertex have entered the market with newly approved therapies this year, but neither achieved a single-dosing regimen.

Burrill & Company, publisher of The Burrill Report, is an investor in Pharmasset.



November 22, 2011
http://www.burrillreport.com/article-gilead_agrees_to_buy_pharmasset_for_11_billion.html

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