Bristol-Myers’ $2.5 Billion Acquisition of Inhibitex: Oh, Well

You could see this coming. Last night, Bristol-Myers Squibb (BMY) abandoned an experimental hepatitis C compound after one patient died of heart failure and nine others were hospitalized during a Phase II study. The move comes less than a month after the drugmaker suspended the trial due to safety issues among patients and that decision, not surprisingly, immediately raised questions about the future of the medication (Pharma news).

The discontinuation is a huge disappointment for Bristol-Myers Squibb, which earlier this year agreed to pay $2.5 billion in cash for Inhibitex and its experimental compound, a nucelotide polymerase inhibitor that was renamed BMS-986094. The wisdom of that deal drew considerable skepticism, though, because the small drugmaker had completed only Phase I testing up to that point.

The race to develop hepatitis C treatments is a hot area as several drugmakers seek to gain approval of a new generation of medicines for treating an estimated 170 million patients worldwide. Among others that may benefit from the Bristol-Myers setback are Gilead, Vertex Pharmaceuticals (VRTX) and Achillion Pharmaceuticals (ACHN). The market is variously estimated at $20 billion for new pills that can work faster, but yield fewer side effects for patients with the liver infection.

BMY Revenue TTM Chart

BMY Revenue TTM data by YCharts

Although expensive, Bristol-Myers maintained that its rationale was sound, because hepatitis C is increasingly seen by Wall Street as the next huge market for new treatments. And since Bristol-Myers was also developing another compound, the deal would presumably offer a chance to become a big player in a growing field, especially since Gilead Sciences (GILD) had recently paid a whopping $11 billion for Pharmasset, another small player. Now, Bristol-Myers will take a $1.8 billion charge, according to a filing with the US Securities and Exchange Commission.

To read the remainder of this article, go to Pharmalot.

Ed Silverman is the editor of Pharmalot and a contributor toYCharts Pro Investor Service which includes professional stock charts, stock ratings and portfolio strategies.

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