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Bristol-Myers Agrees to Acquire Inhibitex for $2.5 Billion
  January 08, 2012, 8:18 AM EST

By Jim McDonald and Makiko Kitamura

(Adds analyst comment in fourth paragraph.)

Jan. 8 (Bloomberg) -- Bristol-Myers Squibb Co. agreed to buy Inhibitex Inc. for about $2.5 billion to boost its position in hepatitis C medicines as it faces generic competition for its best-selling blood thinner Plavix this year.

Both boards approved the transaction, the companies said in a statement today. Inhibitex agreed to recommend that its shareholders accept an offer of $26 per share, more than double its closing price of $9.87 on Jan. 6.

Bristol Chief Executive Officer Lamberto Andreotti said the acquisition of the Alpharetta, Georgia-based biopharmaceutical firm will enhance his company's portfolio of hepatitis C medicines, a market that may be worth $20 billion by 2020. The acquisition will also help the company replace Plavik's estimated $7 billion in annual sales, said Navid Malik, an analyst with Merchant Securities Ltd. in London.

"It needs to buy its way out of trouble," Malik said. "Hepatitis C is also a very competitive space now and this is a sign that Bristol-Myers wants to be a part of that."

The acquisition follows Gilead Sciences Inc.'s decision to buy experimental hepatitis C drugmaker Pharmasset Inc. for $10.8 billion at a 94 percent premium, announced on Nov. 21.

Last year, Merck & Co. and Vertex Pharmaceuticals Inc. won approval for the first new therapies for hepatitis C in almost a decade. Roche Holding AG, based in Basel, Switzerland, agreed in October to buy Anadys Pharmaceuticals Inc., another maker of experimental medicines for hepatitis C, for about $230 million.

$3 Billion Market

Hepatitis C is a viral infection that can lead to swelling of the liver. As many as 170 million people globally carry the virus, which is transmitted through exposure to infected blood, and more than 350,000 die from related illnesses each year, according to the Geneva-based World Health Organization. The hepatitis C market is currently about $3 billion worldwide, according to Andrew Berens, a senior health-care analyst with Bloomberg Industries, in Skillman, New Jersey. (I think it will be 50$ billion: jules)

"There is significant unmet medical need in hepatitis C," Andreotti said. "This acquisition represents an important investment in the long-term growth of the company."

Bristol shares rose 33 percent in 2011 and closed 0.2 percent higher at $34.22 in New York on Jan. 6. The transaction is expected to dilute earnings for Bristol-Myers through 2016, with an impact of about 4 cents per share in 2012 and 5 cents per share in 2013, according to the statement.

Inhibitex, traded on the Nasdaq exchange, more than tripled in value last year, boosting the company's market capitalization to $857 million as of Dec. 31.

Acquisitions Strategy

Bristol-Myers faces a tough task in replacing Jeremy Levin, who drove the New York-based drugmaker's acquisition strategy since 2007, according to analysts and industry officials.

Levin, considered the industry's "number one person in business development" according to Mark Schoenebaum, an analyst at International Strategy & Investment Group in New York, left Bristol on Jan. 1 to become chief executive officer of Teva Pharmaceutical Industries Ltd.

Ron Cohen, CEO of Acorda Theraputics Inc., said that Levin has spent years as an investor, biotech company CEO and then at Bristol developing close, personal relationships across the industry that will be hard for anybody to replicate.

Bristol made 17 acquisitions over four years with Levin, seeking to diversify its drug portfolio before facing revenue erosion as the company's top-selling drugs lose U.S. patent protection. Levin's deals included the 2009 purchase of Medarex Inc., which gained the company the Yervoy skin cancer drug.

--Editors: Hellmuth Tromm, John Deane

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