April 26, 2024

DealBook: Bristol-Myers to Buy Inhibitex for $2.5 Billion

Bristol-Myers Squibb agreed late on Saturday to buy Inhibitex, a maker of a hepatitis C treatment, for about $2.5 billion in cash, as major drug makers seek to bolster their pipelines with more profitable specialty products.

Under the terms of the deal, Bristol-Myers will pay $26 a share through a two-step merger, beginning with a tender offer. That represents an enormous 163 percent premium over Inhibitex’s Friday closing price.

A slew of big pharmaceutical companies have turned to mergers in recent years to plug holes in their drug pipelines, in large part to replace products that are set to face generic competition. Such companies are turning increasingly to smaller biopharmaceutical players developing specialized — and therefore hard to replicate — treatments.

In Inhibitex, Bristol-Myers will buy a company focused on antiviral products. Its main drug, INX-189, is an oral drug for hepatitis C that the company hopes will form the basis for simpler treatments of the disease.

Yet the deal poses an expensive bet by Bristol-Myers, which said that it expects the takeover to hurt its profitability for the next four years. Its earnings per share are expected to fall by four cents this year and five cents next year.

Inhibitex hasn’t proven profitable lately, reporting annual losses between 2008 and 2010. For the quarter ended Sept. 30, the company, based in Alpharetta, Ga., reported a $5.3 million loss atop $1.3 million in revenue.

Bristol-Myers said that it plans to finance its bid by drawing upon its existing cash hoard. Shareholders owning about 17 percent of Inhibitex’s stock have already agreed to support the merger.

Bristol-Myers was advised by Citigroup and the law firm Kirkland Ellis. Inhibitex was advised by Credit Suisse and the law firm Dechert.

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Merck’s Hepatitis C Drug Wins F.D.A. Approval

The new drug, Victrelis from Merck, effectively cured more than 60 percent of patients in clinical trials when used along with existing drugs. That compared with 20 to 40 percent of patients cured by the existing drugs alone.

“This new medication provides an effective treatment for a serious disease, and offers a greater chance of cure for some patients hepatitis C infection compared to currently available therapy,” Dr. Edward Cox, director of the F.D.A.’s office of antimicrobial products, said in a statement.

An estimated 3.2 million Americans have a chronic infection of the hepatitis C virus. The virus can cause serious liver disease, including cirrhosis and liver cancer, though these problems may take decades to develop and may not develop at all.

The existing treatment consists of nearly a year of weekly injections of long-lasting alpha interferon combined with ribavirin, a pill taken daily. The regimen is considered extremely harsh, with side effects including flulike symptoms, depression and anemia. It is not entirely clear how those drugs work.

Victrelis, also known as boceprevir, inhibits an enzyme, called protease, that the virus needs in order to replicate. By blocking viral enzymes, Victrelis borrows a page from the strategy that has been successful in treating H.I.V.

Vertex Pharmaceuticals is expected to win F.D.A. approval this month for its own hepatitis C protease inhibitor, starting a fierce marketing war with Merck. Based on clinical trial results, analysts generally expect Vertex’s drug to outsell Merck’s. Both drugs received unanimous recommendations from an F.D.A. advisory committee late last month.

Many other companies are not far behind, making hepatitis C one of the hottest areas in the pharmaceutical industry.

“Regardless of the ultimate success of this drug, it’s a harbinger of a great new era in treating patients with hepatitis C,” said Dr. Scott L. Friedman, chief of liver diseases at the Mt. Sinai School of Medicine in New York. While the Vertex drug, called telaprevir, and Victrelis must be used with the existing drugs, the hope is that in several years, three or four new drugs might be combined, as is done for H.I.V., doing away with the need for the interferon injections.

For now, though, the Merck and Vertex drugs could allow some patients to clear the virus from their bodies with shorter durations of treatment. In Merck’s clinical trial, 44 percent of patients who had not previously been treated were able to complete their treatment in 28 weeks instead of the usual 48.

Dr. Ira M. Jacobson, professor of medicine at Weill Cornell Medical College in New York, said many patients have been forgoing treatment in order to wait for the approval of the new drugs. “There are also patients who have tried to be treated in the past, often more than once, and have been waiting for something that gives them a significant chance of success,” said Dr. Jacobson, who is a consultant to both Merck and Vertex and a speaker for Merck.

Victrelis is approved for treatment of the genotype 1 strain of hepatitis C, which represents about 70 percent of the cases in the United States and is one of the toughest strains to treat.

Merck set the wholesale price of Victrelis at $1,100 a week, meaning a full course of treatment will cost $26,400 to $48,400. Although the treatment takes 28 to 48 weeks, Victrelis is not used for the first four weeks.

In Merck’s clinical trials, about half the patients who got Victrelis suffered from anemia, roughly double the rate for those who got only the existing drugs. The risk of having low white blood cell counts was also higher for those who got Victrelis.

Moreover, patients will have to take a lot of pills. Victrelis is taken three times a day, with a total of 12 capsules daily. Ribavirin is taken twice a day, usually with a total of five or six pills. If patients do not take Victrelis faithfully, the virus might become resistant to the drug.

Most people who are infected with hepatitis C virus do not know it, health authorities say. The biggest group consists of baby boomers who might have been infected decades ago through needles used to inject drugs, or through sex, blood transfusions or hemophilia medications.

Article source: http://feeds.nytimes.com/click.phdo?i=87ea5c8bb6ebdb139a223abd3ee0dd62