The Banking and Strategy Initiative

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Advantage Dealbook: Upending that premium again, Gilead gets HCV portfolio

The culprit of course is another rrich Pharma company saturated with its current mdeicine/ device/service product opr package portfolio. After a J&J bid for Synthes that has  not progressed and an out of Industry HP deal with Autonomy which is currently under the scanner by the new management, Novartis’s eye popping bid for the Alcon stake in Nestle remains the one to follow for Gilead as it bid a $64 premium over the market for the $73 a share Pharmasset. Even at the top end of a tolerable 20-30% premium for the Hepatitis C specialist. Novartis paid $243.8 bln for its last 25% from Nestle.

Image representing Gilead Sciences as depicted...

Image via CrunchBase


The proclivity to overbid on a listed company is too well established for anyone to miss, Of course we have seen conservative bidders like Kraft engaging longer but still snagging a good Cadbury without overspending and even bigger bids at a smaller premium but none in this sector. Queering the pitch is a recent approval for Pharmassets AIDS drug (Hepatitis C) PSI 7977 that got FDA approval in September

Though Pharmasset has another HIV drug Racivir and others in its HEpatitis portfolio as does Gilead thru numerous acquisitions since 2006, Gilead seemed to need the PSI7977 and others of Pharmasset’s HCV portfolio according to the NY Times. Pharmasset had negligible revenue and $92 mln in R&D expenses for the year ended September 11 However, Pharmasset has risen 242% in the last year, so the market was either expecting this deal or the premium is part of its inexorable run in the markets ahead of the approval. Glead is listed as GILD and Pharmasset as VRUS on the NYSE

Simplified diagram of the structure of Hepatit...

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Anadis drug Setrobuvir also showed obliteration of the virus in 78% of its sample in a similar report last month, so more deals are not out of the question , Merck and the veritable Lipitor loser Pfizer looking to fill gaps in revenue and boutiques doing well in the sector. Channeling speculative interest in the sector seems next to impossible with the number of listed boutiques out there esp on the West Coast

Pharmasset said earlier this month it had started late-stage clinical trials of an experimental hepatitis C drug. It also plans two other late-stage trials in 2012.

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Pharmasset’s 80.3mln shares will cost Gilead its profits till 2014 (diluting earnings) when the acquisition funded by BofA and Barclays loans and company cash finally turns profitable



This entry was posted on November 21, 2011 by in Financial Services, Global, Private Equity, US and tagged , , , , , , , .


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