Gilead Sciences to buy Pharmasset for $11 billion
INDIANAPOLIS (AP) — Gilead Sciences Inc. has agreed to pay about $11 billion for drug developer Pharmasset Inc. in a huge bet on its experimental hepatitis C treatments. The offer is an 89 percent premium over the stock's latest closing price.
Pharmasset, based in Princeton, N.J., currently has no products on the market, but it is developing potential treatments for a disease that is expected to become a larger public health problem as baby boomers get older.
Hepatitis C is a viral infection that often has no symptoms and can lead to life-threatening liver damage. It is the primary cause of liver transplants in the United States.
Hepatitis C is spread through the blood. That can happen through needle sharing or having sex with an infected person. The disease could also be picked up from blood transfusions before 1992, when testing of the blood supply for the virus began.
Analysts note that the disease can take years to manifest, and they expect more cases of it to crop up due to the aging, large population of U.S. baby boomers, some of whom used intravenous drugs when they were younger.
Gilead, based in Foster City, Calif., said Monday it will pay $137 per share in cash for each Pharmasset share. The stock, which has more than tripled in price this year closed at $72.67 on Friday. It soared another 85 percent, or $61.95, to $134.62 as trading opened on Monday.
Gilead shares dropped 12 percent, or $4.78, to $35.10.
Gilead also is developing some oral hepatitis C treatments, but unlike Pharmasset, it has several drugs on the market. Its top sellers include the HIV drugs Atripla and Truvada. In October, Gilead reported third quarter earnings of $741.1 million, or 95 cents per share, on $2.12 billion in revenue.
Pharmasset shares had climbed earlier this month after the company said it had started late-stage clinical testing of an experimental hepatitis C drug labeled PSI-7977. The company will run a 12-week study that treats hepatitis C with a combination of PSI-7977 and ribavirin, both of which are given orally.
Pharmasset plans to start two other late-stage trials in 2012 and hopes to file for marketing approval of PSI-7977 in the United States and European Union in the second half of 2013.
Pharmasset's regimen could become a preferred option for hepatitis C if studies show it works as well as drug cocktails containing the injectable drug interferon. Dosing would be more convenient, and it could have fewer side effects because it does not include interferon.
But the market for new hepatitis C treatments is growing crowded. Earlier this year, the Food and Drug Administration approved Vertex Pharmaceuticals Inc.'s hepatitis C pill Incivek. That drug and Merck & Co.'s Victrelis, which also was approved earlier this year, are the first new breakthrough treatments for the liver disease to be approved in 20 years.
The Pharmasset board unanimously approved the deal, which will be made in the form of a tender offer for the stock.
Gilead said it will pay for the acquisition with cash on hand, bank debt and senior unsecured notes. It expects the acquisition to close in next year's first quarter.