A developing medical theory that hepatitis C can be overcome with the same type of drug cocktails that tamed HIV may drive acquisition strategies as companies try to anticipate which products work best with other medicines.
Because only a few hepatitis C drugs are approved, and others in testing may not pan out, “we don’t know what the winning formula will be,” Ben Weintraub, an industry analyst at Wolters Kluwer InThought in New York, said during a Bloomberg Industries panel. To raise the odds, “companies are doing M&A and starting new trials on almost a daily basis.”
With more than two dozen drugs in development, doctors predict a new age of therapy for a bloodborne virus carried by 170 million people that now has few treatment options. The promise of a potential $20 billion market has already spurred three deals in the last year, the latest Bristol-Myers Squibb Co.’s $2.5 billion purchase this month of Inhibitex Inc.
Next in line may be Idenix Pharmaceuticals Inc. and Achillion Pharmaceuticals Inc., said Raghuram Selvaraju, an analyst with Morgan Joseph TriArtisan in New York.
“I don’t think either of these companies will remain independent very long,” Selvaraju said in a telephone interview. “I think we’ll see both of them out of there by the end of the year.”
Blocking the Virus
Achillion, based in New Haven, Connecticut, is testing a so-called protease inhibitor, while Idenix, of Cambridge, Massachusetts, is developing a nucleotide polymerase inhibitor. The two medicines, which work differently to block the virus’s ability to replicate in the body, are in the second of three stages of testing normally required for U.S. approval.
By combining several classes of these new hepatitis C drugs, doctors may be able to limit the virus’ ability to infect, mimicking the strategy that a decade earlier helped turn HIV from a killer disease to a controlled one, said Charles Chiu, an infectious disease doctor at the University of California, San Francisco.
With the success of treatments that “work on the virus itself, there’s an increased urgency now to explore drugs in many different stages of the viral life cycle,” Chiu said in a telephone interview.
Until last year’s introduction of Victrelis from Merck & Co. and Incivek by Vertex Pharmaceuticals Inc., both protease inhibitors, the standard treatment combined the antiviral drug ribavirin with interferon, an immune-boosting protein sold by Whitehouse Station, New Jersey-based Merck as PegIntron and by Basel, Switzerland-based Roche Holding AG as Pegasys.
That treatment relied on interferon shots given weekly for a year and cured only about half of patients with the most common U.S. strain, called genotype 1. The drugs also caused side effects that include fatigue and flu-like symptoms.
The new protease inhibitors stop an enzyme that splits proteins and allows them to replicate. While they’ve been shown to cure more patients in less time than previous therapies, with fewer side effects, they still need to be combined with interferon shots.
Scientists see promise in the other class being developed, the nucleotide polymerase inhibitors, which bind to a different part of the virus than the protease inhibitors. These drugs are pan-genotypic -- meaning they are effective across the different types of hepatitis C. They could become the backbone for an interferon-free combination.
Mixing the classes together may be even more effective in beating the disease, which is blamed for more than 350,000 deaths a year worldwide.
“We waited 15 years for protease inhibitors, and a year later we could have a new class of drugs, nucleotides, that surpass them,” said Steve Worland, former chief executive officer of Anadys Pharmaceuticals, an experimental hepatitis C drugmaker acquired by Roche in November for about $230 million. “That kind of dramatic change I have never seen before.”
Drugmakers want to own a piece of the eventual cocktail that will work best among patients worldwide, and have been working in the lab to create their own drugs as well as scouting other companies with an eye toward buying promising candidates.
Gilead Sciences Inc. paid $10.8 billion for Pharmasset Inc. last month to use its experimental nucleotide drug, PSI-7977, as a cornerstone to a new hepatitis C combination -- one that it expects other drugmakers will want to use -- opening the door to added licensing revenue.
“7977 is going to be the driver of an all oral regimens, and all of these other drugs are going to be layered on top of it,” said Selvaraju.
Rivals have the same idea as they hunt for potential targets. That’s why Achillion and Idenix are being closely watched as potential takeover targets, Selvaraju said. Abbott Laboratories and Roche are potential bidders, he said. Merck, Bristol-Myers and Johnson & Johnson are also in pursuit of the new regimens.
The potential market size for these therapies is at least $20 billion, according to Michael Kishbauch, chief executive officer of Achillion. The company is considering a licensing deal, selling itself or just its hepatitis C “asset,” the protease inhibitor, ACH-1625, Kishbauch said in a November interview.
Gilead increased its offer to acquire Pharmasset four times last year to $137 a share from $100 a share, after a clinical trial showed PSI-7977 cured all patients in a study and the company reached out to four other potential bidders.
“The opportunity to be able to cure people with three months of therapy is one of the most amazing breakthroughs we can bring to health care -- and there’s a lot of competition,” Gilead CEO John Martin said in a Jan. 9 interview.
Gilead rose less than 1 percent to $54.82 in New York trading. The company’s shares have gained 41 percent in the past 12 months.
Idenix is in talks to find a partner to create a combination hepatitis C treatment, said Ron Renaud, the company’s CEO. While declining to comment on whether the company may be acquired, he said interest in hepatitis C drugs picked up last year during a liver disease conference.
“There is a tremendous market opportunity here, that people want to take advantage of, and there’s an intense race that’s under way to get to that point,” Renaud said in an interview on Jan. 11.
Inhibitex and Pharmasset parlayed multiple bids for their companies into record premiums. Inhibitex sold for a premium of 126 percent over the 20-day average of its share price in the 20 days prior, the second-largest on record for a drugmaker worth more than $500 million, according to data compiled by Bloomberg since 1999. Gilead’s purchase of Pharmasset, completed last month, featured an 89 percent premium.
At least one other buyer was willing to match Bristol-Myers’ $2.5 billion offer on Jan. 6 for Inhibitex, U.S. Securities and Exchange Commission filings reveal. Inhibitex began attracting bids last year, and had at least six suitors, including Bristol-Myers.
“This market is giant,” said Mark Schoenebaum, an analyst with ISI Group in New York, who estimates sales of hepatitis C treatments may reach $100 billion over a decade.
Bristol-Myers and another, still unnamed, company both offered bids of $26 a share to buy Inhibitex. That’s raised questions as to whether another deal, led by the mystery bidder, is on the horizon, said ISI Group analyst Schoenebaum in a note to clients on Jan. 17.
“The revelation that there were six parties looking at Inhibitex could intensify investor speculation that consolidation in the HCV space could continue,” he said.