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Bristol-Myers Raised Offer 30% to Beat Competitor for Inhibitex
  January 14, 2012, 6:33 AM EST

By Drew Armstrong

Jan. 14 (Bloomberg) -- Bristol-Myers Squibb Co. increased its bid for Inhibitex Inc. and its experimental hepatitis C drug twice in five days, raising its offer 30 percent to top an unnamed competitor, according to a filing.

The courtship of Inhibitex began last October, with New York-based Bristol-Myers seeking to purchase Alpharetta, Georgia-based Inhibitex's experimental drug for $550 million, according to a filing with the U.S. Securities and Exchange Commission. Four months later, on Jan. 7, it had become a $2.5 billion agreement to buy Inhibitex for $26 a share.

The purchase was the second major acquisition of a company for its hepatitis C assets in the past three months. Drugmakers are seeking to enter a developing $20 billion market for hepatitis C medicines that are easier to use and more effective than existing therapies.

Bristol-Myers Chief Executive Officer Lamberto Andreotti was at the head of the negotiations for Inhibitex, going back and forth with an Inhibitex board member as the price went up, according to yesterday's regulatory filing.

"We did not have a nuke, and we wanted a nuke," Andreotti said at the J.P. Morgan Healthcare Conference in San Francisco, three days after the deal was announced.

The Inhibitex experimental drug, INX-189, is a nucleotide polymerase inhibitor, or "nuke," a pill that stops the hepatitis C virus from replicating. "It is the high unmet medical need in hepatitis C that has made us pursue very seriously the acquisition of Inhibitex," he said.

Patient Population

As many as 170 million people worldwide carry the virus, a bloodborne disease that can lead to liver cirrhosis and cancer, according to the Centers for Disease Control and Prevention in Atlanta.

Gilead Sciences Inc. purchased Pharmasset, the maker of an experimental hepatitis C drug, for $10.8 billion in a deal announced Nov. 21. The price was 94 percent higher than Pharmasset's 20-day trading average. The 126 percent premium paid by Bristol-Myers over Inhibitex's average price in the 20 days before the deal ranks as the second-largest on record for a biotechnology or pharmaceutical company worth more than $500 million, according to data compiled by Bloomberg since 1999.

Idenix Pharmaceuticals Inc. and Achillion Pharmaceuticals Inc. are also testing medicines against the virus. Shares of both companies have risen since the Bristol-Myers deal. Idenix has more than doubled in value, closing yesterday at $14.42. Achillion shares have increased 56 percent during the period to $12.37.

First Meeting

The Bristol-Myers deal was at least four months in the making, according to yesterday's filing. It started at Inhibitex's Georgia headquarters, with a two-day meeting between three Bristol-Myers executives and Russell Plumb, Inhibitex's CEO. Two weeks later, after a phone call on Nov. 3 from Bristol- Myers, Plumb had a $550 million offer for INX-189.

On Nov. 4, though, Inhibitex released data from a study that showed the drug "did well in reducing HCV in patients, and was well tolerated, with no serious side effects." The study results more than doubled Inhibitex's shares to $8.54.

Over the next month, what started as a look at INX-189 became a broader examination of all of Inibitex. Bristol-Myers examined the company's "other pipeline assets, its technology platform, and information regarding its discovery, and research and development capabilities" and was given access to "confidential non-public information related to its business and operations," according to the regulatory filing.

Competitor Emerges

On Dec. 5, Bristol-Myers Chief Financial Officer Charles Bancroft got a phone call from Credit Suisse Group AG, Inhibitex's bankers. Bancroft was told Inhibitex had an offer from another company to buy it outright and Bristol-Myers could make an offer, as well. The competitor wasn't identified in the filing.

Bristol-Myers's board took only a day to decide that an acquisition of Inhibitex was worth exploring, and four days before Christmas told Plumb they intended to make an offer. It came on Jan. 3, at $20 per share, almost double Inhibitex's stock price of $10.11 that day.

Less than 24 hours later, Inhibitex's bankers from Credit Suisse were back in touch, telling Bristol-Myers and their bankers at Citigroup Inc. that the rival also had bid $20. Bristol-Myers was given until 6 p.m. the next day to propose their "best and final" offer.

Raising the Bid

Andreotti decided to increase the offer to $23.50 in cash. He also reached out to Gabriele Cerrone, a board member of Inhibitex, e-mailing and calling him to work out the details.

It wasn't enough, yet. The other bidder matched Bristol- Myers's offer, the drugmaker's lawyers were told.

The Bristol-Myers board met Jan. 6. They voted to raise the bid to $26, and Andreotti called Cerrone to say the offer was the best they would get. Inhibitex was given until 2 p.m. the next day -- a Saturday -- to take the deal. If they didn't, Bristol-Myers would pull back its offer, and "actively pursue the transaction" at $23.50.

The news of the deal was released in a statement at 9:13 p.m. Jan. 7. "This acquisition represents an important investment in the long-term growth of the company," Andreotti said in announcing the purchase.

--Editors: Andrew Pollack, Stephen West

To contact the reporter on this story: Drew Armstrong in Washington at

To contact the editor responsible for this story: Reg Gale at


Inhibitex, Inc., a biopharmaceutical company, focuses on the development of differentiated anti-infective products to prevent or treat serious infections. It primarily focuses to treat shingles caused by the varicella zoster virus and chronic infections caused by hepatitis C virus (HCV). Its antiviral product candidates include INX-189, a HCV nucleoside polymerase inhibitor that has completed Phase Ib clinical trials for the treatment of chronic hepatitis C infection; FV-100, an orally available nucleoside analogue prodrug, which is in Phase II clinical trials for the treatment of herpes zoster or shingles. The company is also developing anti-bacterials comprising Staphylococcal Vaccines, which is under Phase I clinical trials to prevent Staphylococcus aureus infections; and Aurexis, a humanized monoclonal antibody that has completed Phase II trials for the treatment of Staphylococcus aureus bloodstream infections in hospitalized patients. It has a license and development collaboration agreement with Pfizer, Inc. for the development of Staphylococcus aureus vaccine for humans. Inhibitex, Inc. was founded in 1994 and is based in Alpharetta, Georgia.


Merck & Co. will make whatever deals are necessary to ensure the company leads the race for future hepatitis C combination therapies, said Roger Pomerantz, the drugmaker's worldwide head of licensing and acquisitions.

"Our goal is to be a leader in hepatitis C, and we will do what it takes to get there," Pomerantz said in an interview at the J.P. Morgan Healthcare Conference in San Francisco. "We would consider small deals to large deals, whatever is necessary to lead in hepatitis."


A key element of the BioPharma model is a streamlined and flexible approach to business, including the processes underlying selective integration working with third parties to improve and enhance the company's abilities.

"The quest to bring new medicines to patients is a long and expensive one, and we recognize that we can't do everything ourselves," says Elliott Sigal, M.D., Ph.D., chief scientific officer and president, R&D."

The announcement of buying the US biotechnology company Inhibitex (INHX) or USD 2.5 billion or USD 26 per share, a premium of 163% on Friday's closing price for the stocks, is a good move for BMY as the company also recognizes the huge potential for vaccines in the years ahead. Inhibitex is a maker of vaccines with specialization in Hepatitis C or HCV. HCV is a rapidly spreading virus with a market value for vaccines of around USD 3 billion rising to come USD billion in 2020. Especially in emerging markets, the virus spreads quickly and no medication is available. Vaccines are and remain a very large growth market, but only a few companies have the know-how to make and develop them successfully. BMY is one of them.

Pharma pays up for scarce assets

(Reuters) - When it comes to healthcare deals, the new motto may be "too expensive to fail."

Drug companies have been forced to pay massive premiums on acquisitions as the selection of target companies with viable prospects narrows and the need to fill out their portfolio of medicines intensifies, industry executives and bankers said at the JPMorgan Healthcare Conference this week in San Francisco.

Bristol-Myers Squibb Co's (BMY.N) deal to buy Inhibitex (INHX.O) at a 163 percent premium may be the most extreme example to date, but they are not likely to be alone as other global pharmaceutical makers compete for a small number of companies.

"There's always been a steady wave of health care M&A. The only difference now is there is a panicky quality to deals as companies appear to be playing musical chairs and they are grabbing at things to avoid being left alone when the music stops," said an investment banker, who declined to be named because he was not authorized to speak to the media.

Inhibitex's lead product is INX-189, an oral hepatitis C drug in Phase II or mid-stage development. It still must go through additional clinical testing and regulatory hurdles before it can be offered to patients. In other words, Bristol paid a hefty price tag for a drug candidate that may never see the light of day.

MKM Partners analyst Jon LeCroy said the firm views "the valuation of this deal as quite aggressive considering the historical failure rates of Phase II assets (18-28 percent)."

"While hepatitis C is an exciting space right now, we think paying $2.5 billion in cash for Phase II assets seems excessive," LeCroy said in a research report. (BMS did the right thing, Jules)

The deal comes on the heels of Gilead Sciences Inc's (GILD.O) $11 billion acquisition in November of Pharmasset Inc (VRUS.O), which has its own promising hepatitis C therapies in development. That deal was at an 89 percent premium.

Charles Bancroft, Chief Financial Officer of Bristol-Myers, said the company had little choice but to pay up for Inhibitex.

"It was a very competitive bidding process," Bancroft said, without elaborating on other suitors.

The deal, however, met the company's criteria for acquiring products that address an unmet medical need, he said.


Over the past five years, the average takeover premium for biotechnology firms has been 44 percent, above the average premium across all industries of 26 percent, according to data from Thomson Reuters.

Worldwide, the healthcare industry broadly attracted a higher premium than any other industry over the past two years, the data showed. Last year, the average premium for any health care deal was 35.2 percent, compared with an average premium of 30.0 percent across all industries, Thomson Reuters data showed.

Buyers in this industry may need to accept those rates will go higher, even if that means raising the risks as well.

"These deals (Inhibitex and Pharmasset) inflate valuations across the board and make prices in some sub-sectors astronomical," said a second healthcare banker, who also declined to be named because he was not authorized to speak to the media. "The Bristol deal may turn out to be a prescient move, but the backlash that could be felt if this Phase II drug fails will make it a cautionary M&A tale."

Novartis (NOVN.VX) Chief Executive Officer Joseph Jimenez, when asked about the Inhibitex and Pharmasset deals, said "I'm amazed at the prices."

Jimenez said Novartis has looked at all the hepatitis C assets out there and has its own drug in development. Novartis would consider partnering to develop another hepatitis C drug, but "we don't think we necessarily need to own one," he said.

The high-profile hepatitis C deals could push other top players like Merck (MRK.N) to go after companies such as Idenix (IDIX.O), Achillion (ACHN.O) or Vertex Pharmaceuticals (VRTX.O), said another health care investment banker who declined to be named because he was not authorized to speak to the media.

"Achillion, in particular, has three drugs where it is unpartnered, which makes it a cleaner acquisition target," the banker said.

Ben Weintraub, director of research for Wolters Kluwer inThought, said the prices Bristol and Gilead were willing to pay for experimental drugs shows that Vertex, with a product on the market, is significantly undervalued.

Weintraub noted that Vertex's stock has fallen about 50 percent since the successful launch of its Incivek treatment. He said Johnson & Johnson (JNJ.N) would be obvious buyer of Vertex given their partnership on the antiviral Incivek, but added that Abbott Laboratories (ABT.N) may also be looking to boost its hepatitis C business.

Other areas likely to attract keen takeover attention include oncology specializations such as ovarian cancer, pancreatic cancer and hematology, bankers said.

Emerging markets would get more interest as companies need local representation and local branding to succeed in those markets, bankers and executives said.

Pfizer Inc (PFE.N) Chief Executive Ian Read told investors at the JP Morgan conference that the company would consider small deals in China, India and Turkey if the prices were attractive.

"Companies are taking bets earlier and earlier to beat competitors to the punch. That brings risk and requires a leap of faith - which is something shareholders tend to frown upon. At the same time, a 'sure bet' is hard to find when you're talking about research and development of drugs," said one investment banker, who declined to be named because he was not authorized to speak to the media.


Bristol's $2.5B acquisition won't be last

Bloomberg News Jan 9, 2012

Bristol-Myers Squibb Co., the drugmaker that will lose patent protection for three of its top four drugs within three years, will follow its $2.5 billion Inhibitex Inc. purchase with more deals as the company's "string of pearls" acquisition strategy begins to pay off.

Bristol-Myers is satisfied the plan is working and is in "a very good financial position" to pursue it further, said Chief Financial Officer Charles Bancroft by telephone yesterday. The company had $8.2 billion in cash and equivalents in the third quarter of 2011, according to data compiled by Bloomberg.

Bristol-Myers's Yervoy, an immune system drug that fights cancer, last year became the first product bought as part of the company's acquisition and diversification plan to get U.S. marketing approval. The Inhibitex agreement announced Jan. 7, the largest of 18 deals since 2007, gives the New York-based drugmaker two medicines that could enter a developing $20 billion market for hepatitis C drugs.

"The world is moving toward an all-oral regimen for hepatitis C, and Bristol-Myers, which is strong in antivirals, seems like it wants to be a part of that," Les Funtleyder, a health-care strategist and portfolio manager with Miller Tabak & Co. in New York, wrote in an e-mail yesterday.

Hepatitis drugs now in use are given through injection, and can have side effects that are difficult to endure. The generation now in testing would be easier-to-use pills that may be more effective than their predecessors.

Idenix Pharmaceuticals Inc. and Achillion Pharmaceuticals Inc., other developers of hepatitis C drugs, rose in early trading on speculation they may follow Inhibitex and Pharmasset Inc., which reached an agreement announced Nov. 21 to be acquired by Gilead Sciences Inc. for $10.8 billion, as acquisition targets.

Idenix, based in New Haven, Connecticut, rose 31 percent to $9.20 at 10:21 a.m. New York time, after earlier gaining 47 percent in its biggest intraday climb since 2004. Cambridge, Massachusetts-based Achillion gained 10 percent to $8.75. Bristol-Myers fell less than 1 percent to $33.99.

The agreement by New York-based Bristol-Myers to purchase Inhibitex for cash offers $26 per share, a price that more than doubles the Alpharetta, Georgia-based biotech company's $9.87 closing price 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 shares more than doubled to $23.89 in New York trading.

Bristol-Myers's $6.7 billion-a-year blood-thinner Plavix loses patent protection this year. The Sustiva HIV drug, with $1.4 billion in sales, and the antipsychotic Abilify, with $2.6 billion in revenue, faces generic competition in 2013 and 2015, respectively. The "string of pearls" strategy, designed to give the company a more diverse stable of products, was begun by now-chairman James Cornelius in 2007, when he was Bristol- Myers's chief executive officer.

Bristol-Myers has the best pipeline among drugmakers, when measured against how much they spend on research and development, said John Boris, a Citigroup analyst based in New York, in a Jan. 6 note to clients. Prior to the announcement of the Inhibitex acquisition, Boris projected the Bristol-Myers pipeline would produce $4.62 billion in additional revenue by 2015.

"We expect the company to far exceed its 2010 revenues by 2020 on the strength of its pipeline and recently launched opportunities," he wrote in the note.

Inhibitex's INX-189 is in the second stage of testing normally needed for U.S. regulatory approval. Pharmasset's PSI- 7977 is in the third and final phase, and could draw $3 billion to $5 billion in revenue for Foster City, California-based Gilead, Michael Yee, an analyst with RBC Capital Markets in San Francisco, estimated in November.

The Inhibitex drug "is the best chance anyone has of competing with Gilead/Pharmasset," Brian Skorney, an analyst with Brean Murray Carret & Co. in New York, wrote in an e-mail yesterday. "That explains the premium."

The premium paid by Bristol, of about 126 percent of Inhibitex's price over the previous 20 trading days, ranks as the second-largest on record for a biotechnology or pharmaceutical company worth more than $500 million, according to data compiled by Bloomberg since 1999. The record is Genzyme Corp.'s 2006 deal for AnorMed Inc. with a 162 percent premium.

"The deal seems a bit expensive for an early-stage compound, but there is scarcity value," said Miller Tabak's Funtleyder, whose fund holds Bristol shares.

Bristol-Myers's biggest previous deal since 2007 was the acquisition of Medarex Inc. for $2.5 billion in 2009. That purchase gained the company its Yervoy cancer drug.

Bristol-Myers is already developing its own medicines for hepatitis C, including a collaboration with New Brunswick, New Jersey-based Johnson & Johnson on a combination therapy with one of its own experimental products.

"The addition of Inhibitex's nucleotide polymerase inhibitor to our own promising portfolio, which includes other direct-acting antivirals, brings additional options to develop all-oral regimens with better cure rates, shorter duration of therapy and lower toxicity than the current standard of care," said Elliott Sigal, Bristol-Myers's head of research and development.

Hepatitis C is one of three major growth areas for Bristol- Myers, along with stroke and immuno-oncology, he said by telephone.

"The commercial opportunity is huge," Sigal said. "Our goals are to be very competitive."

Merck & Co. and Vertex Pharmaceuticals Inc. last year won approval for the first new therapies for hepatitis C in almost a decade.

The market for medicines that work against the virus is about $3 billion worldwide, according to Andrew Berens, a senior health-care analyst with Bloomberg Industries, in Skillman, New Jersey. It may be worth $20 billion by 2020, said Michael Kishbauch, chief executive officer of Achillion Pharmaceuticals Inc., in a November interview.

Citigroup Inc. acted as financial adviser and Kirkland & Ellis LLP as legal adviser to Bristol-Myers, the companies said in the statement. Credit Suisse Securities provided financial advice to Inhibitex, while Dechert LLP gave legal counsel.



Alpharetta drug developer Inhibitex sold for $2.5 billion

The Atlanta Journal-Constitution

The weekend sale of Alpharetta-based Inhibitex to pharmaceutical powerhouse Bristol-Myers Squibb for $2.5 billion is one of the largest development-stage deals ever, an analyst who follows Inhibitex said.


Inhibitex, which is developing a treatment for hepatitis C, was offered $26 a share for its business -- a 163 percent premium over the Friday closing price of $9.87. Monday, Inhibitex shares rose to $23.70.

"It's one of the top 10 largest development-stage deals ever done," said Brian Skorney, a research analyst with Brean Murray Carret & Co. "Only 11 or so deals have been $1 billion or more."

A Bristol-Myers Squibb spokeswoman said the company does not yet know whether jobs at Inhibitex will stay in Alpharetta, move elsewhere or be eliminated. The company had 33 full-time employees as of last March; 25 of them were in in research and development.

Brian Williamson, assistant commissioner of Georgia's Department of Community Affairs, said he hopes the sale will mean more research jobs in Georgia.

Inhibitex received the first loan the state Department of Community Affairs made under its Life Sciences Facilities Fund, Williamson said, in December 2004 for $2.5 million. Williamson said while the state has had other successes through the program, Inhibitex has been the biggest in terms of the business's value. Inhibitex paid back its loan on time.

"It's a tremendous success, and we're thrilled to see it happen," he said.

The deal is the latest in a series of acquisitions by major players in the pharmaceutical industry. Each is looking to extend its revenue-generating product pipeline and capitalize on the potential market for a new form of hepatitis C treatment.

Last October, Roche bought Anadys Pharmaceuticals for $230 million. Gilead Sciences is about to close an $11 billion deal for Pharmasset struck in November.

Two other hepatitis C drug developers, Achillion and Idenix, remain independent, and industry speculation is that they will be the subject of similar interest.

A next-generation oral therapy, as opposed to shots, for hepatitis C could be a business worth more than $10 billion, by some estimates, offering companies that possess such a drug tremendous opportunity.

Skorney said the Inhibitex purchase is a risk, as not all drugs that look promising end up working as intended. But, he added, "The sheer potential has a lot of these pharmaceutical companies salivating."

For Bristol-Myers, a new in-demand drug would help fill the revenue vacuum created by the upcoming expiration of patent protection for top-sellers such as blood thinner Plavix. The company has been actively buying small companies to build its drug development.

Inhibitex has had its struggles. The company reported revenue of $1.9 million in 2010 and a loss of $22.7 million. John Kingery, the Department of Community Affairs' chief underwriter, said many similar companies that do research and development but don't yet have a product to sell are in similar situations.

Inhibitex's hepatitis C drug is still being tested, and is not yet for sale.

Charles Craig, president of Georgia Bio, said the purchase shows that companies that begin in Georgia can be successful on a larger scale. Talking about the state's successes, he said, can make it easier to bring other start-ups in the future.

Much of the research on hepatitis C has come out of Georgia, Craig said. In addition to Inhibitex's work, Pharmasset -- which sold in November -- was started by an Emory University professor.

"It just shows Georgia is a leading center of innovation when it comes to biotech drug development," Craig said . "It shows Georgia is leading the pack."


Bristol-Myers CEO: Transformation to biopharmaceutical company has brought new drugs, revenue

By Associated Press, Published: January 10

TRENTON, N.J. - Bristol-Myers Squibb Co.'s CEO said Tuesday that the company's five-year transformation into a biopharmaceutical company has already brought five new product launches and soon could bring two more approvals, for a new blood thinner and a diabetes drug that could be big sellers.

Lamberto Andreotti said the New York-based company's revamped pipeline also has added to revenue, and increased productivity - with about $2.5 billion in annual savings achieved so far - has boosted profit.


(Bristol-Myers Squibb, Robert Bruschini, File/Associated Press) - FILE - This March 2010 file photo released by Bristol-Myers Squibb Co., CEO Lamberto Andreotti is shown. Andreotti said Tuesday, Jan. 10, 2012, its transformation into a biopharmaceutical company has already brought five new product launches and soon could bring two more, for a new blood thinner and a diabetes drug that could be big sellers.

Speaking at the 30th Annual J.P. Morgan Global Healthcare Conference in San Francisco, he said Bristol's "String of Pearls" strategy of acquiring smaller biotech companies and experimental drugs is paying off. The company has already sold all its non-pharmaceutical businesses.

The results, Andreotti said, validate Bristol's unusual strategy. Most of its rivals have been diversifying by adding new types of businesses such as vaccines and over-the-counter medicines to smooth out the boom-and-bust cycles of brand-name prescription drugs generating billions in sales that suddenly crash when generic competition arrives.

"Diversification can take many forms. We have not felt the need to diversify into OTC or generics or diagnostics," Andreotti said.

Instead Bristol-Myers has a mixture of chemical-based pills and biologic drugs "manufactured" in living cells, across a range of diseases from diabetes and rheumatoid arthritis to cancers and the HIV and hepatitis C viruses.

"Business development remains our top priority," Andreotti told the analysts, although the company is still doing share repurchases - like most big drugmakers seeking to boost their stock price.

As an example, he said Bristol is aiming to replace the current tough-to-endure mix of injections and pills for hepatitis C, which causes nasty, flu-like symptoms over several months and still doesn't cure many patients. Bristol has four experimental hepatitis C drugs in development "that have the potential to change the standard of care in patients," to a pill-only regimen that works better and is easier to tolerate, he said.

That goal is behind Saturday's news that Bristol plans to buy hepatitis C drug developer Inhibitex Inc. of Alpharetta, Ga., for $2.5 billion, Andreotti said.

He said Bristol's key new products include Yervoy, launched last March. It's the first drug to significantly increase survival in patients with advanced melanoma. Andreotti said a big study released last summer showing blood thinner Eliquis reduced strokes, internal bleeding and death significantly should bring approvals for large patient groups.

Eliquis, or apixaban, was developed jointly with Pfizer Inc. and approved in Europe in May for preventing clots in patients getting hip or knee replacement surgery. The companies now hope to get it approved in the U.S. for stroke prevention - which would include millions more patients - after the Food and Drug Administration announced a priority review with a March 28 target date for a decision.

Meanwhile, dapagliflozin, a new type of drug for Type 2 diabetes, could get a ruling from the FDA at the end of this month, but agency advisers have raised concerns about higher rates of bladder and breast cancer in study of patients getting the drug.

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