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Pharmaceutical giant Merck (NYSE:MRK) announced today that it has agreed to acquire Idenix Pharmaceuticals (NASDAQ:IDIX) for $3.85 billion. Even compared to the now defunct attempt of Pfizer (NYSE:PFE) to acquire AstraZeneca (LSE:AZN), this could be one of the biggest acquisitions of all time in this sector, not necessarily in volume, but in impact. It appears to be a marriage made in heaven.
The Deal
Merck will pay $24.50 per share in cash for each share of Idenix. That’s quite a premium considering the Idenix share price closed at 7.23 on Friday, 06 June, the highest is has been in the last 30 days. The Merck share price closed Friday at 57.85.
The Response
The Merck share price opened at 57.49 this morning, making it to 57.92 by 10:52 am. It is currently trading at 57.73. In effect, no real change. On the other hand, Idenix’ share price opened this morning at 24.01 after early trading, more than triple Friday’s close and almost equal to the Merck offer. So my $10,000 investment on Friday is now worth about $35,000.
The Purpose
According to the report, “Idenix is a biopharmaceutical company that focuses on developing treatments for human viral diseases, including hepatitis C. The company currently has three hepatitis C drug candidates in clinical development, the companies said. It has no products on the market.”
Merck President, Dr. Roger Perlmutter explained, “Idenix’s investigational hepatitis C candidates complement our promising therapies in development” and will help to develop a highly effective, once-daily, all-oral treatment.”
The Market
There are approximately 3.2 million Americans with the deadly hepatitis C viral infection. It is estimated that more than 170 million people are infected worldwide. The demand for a cure is great. Heretofore, Gilead Sciences (NASDAQ:GILD) has been able to produce the only truly recognized effective cure in the form of Solvadi.
Since we all know the supply and demand argument, we should not be surprised that Gilead charges $1,000 per pill. That makes the range of treatment cost in the US as high as $168,000, while the average treatment cost in the UK is £35,000 over a 12-week course of treatment. That’s not pricing a product, that’s holding the product for ransom.
The Irony
Gilead has already made $2.3 billion in sales revenue in the first quarter from the sales of Sovaldi. Merck is so confident that it will be able to deliver a much lower cost drug with a much shorter cure time (about a month), that it was willing to $3.85 billion to obtain the medication and to market it through its well-developed network.
The Beauty
Idenix has been lacking a path to market. Merck has been lacking “nucleoside/nucleotide chemistry and prodrug technologies.” Idenix brings that to the party.”
The deal has already been approved by the boards of both companies.
Perlmutter said that, “Idenix’s investigational hepatitis C candidates complement our promising therapies in development and will help advance our work to develop a highly effective, once-daily, all oral, ribavirin-free, pan-genotypic regimen that has a duration of treatment as short as possible for millions of patients in need around the world.”
Ron Renaud, President and CEO of Idenix agreed, saying, “his agreement creates shareholder value by positioning Idenix’s strong portfolio of candidates for future success with a leading healthcare company with the experience and commitment to develop fixed-dosed combinations with the potential to impact the global burden of hepatitis C.”
