Bristol-Myers Squibb will pay $2.5 billion to buy Inhibitex and its lead drug INX-189, an experimental hepatitis C therapy currently in mid stage trials.

The acquisition, valued at $26 per share, offers a 150 percent premium to Inhibitex’s pre-announcement market close and caps an active past year for the hepatitis C market spurred on by the success of Merck’s Victrelis and Vertex’s Incivek—both oral protease inhibitors— winning FDA approval in early 2011. Ever since, companies with promising HCV lines have become major acquisition targets.

Gilead made a splash last fall when it agreed to acquire Pharmasset for $11 billion. That represented an 89 percent premium for shareholders of Pharmasset, a company whose lead experimental hepatitis C drug PSI-7977 is in late-stage studies. Burrill & Company, publisher of The Burrill Report, is an investor in Pharmasset.

“These deals tell us there’s a lot of demand and need in hepatitis C,” says Jeffrey Leiden, who will become CEO of Vertex in February.

The demand has been for the new breed of hepatitis C nucleotides. It is in this new class of nucleotide inhibitor drugs that BMS is hoping to make a mark. INX-189 does not have to be used in combination with an injection that causes side effects for patients. Both Vertex’s and Mercks’ hepatitis C drugs, which are oral protease inhibitors, are used in tandem with an interferon injection.

“This transaction puts INX-189 and the company’s other infectious disease assets in the hands of an organization that can more optimally develop them,” says Russell Plumb, CEO of Inhibitex. “Bristol-Myers Squibb’s expertise in antiviral drug development, and its existing complementary portfolio, will assure that the potential of INX-189 is realized.”