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Bristol-Myers Squibb to acquire Inhibitex for $2.5 billion
by Jeffrey Bouley  |  Email the author


NEW YORK & PRINCETON, N.J. & ATLANTAŚBristol-Myers Squibb Co. (BMS) and Inhibitex Inc. have signed a definitive agreement under which BMS will acquire Inhibitex for approximately $2.5 billion, a price that has been approved by the boards of directors of both companies, with Inhibitex's board agreeing to recommend that Inhibitex's shareholders tender their shares in the offer. In addition, shareholders with beneficial ownership of approximately 17 percent of Inhibitex's common stock have entered into agreements with BMS to support the transaction and to tender their shares in the tender offer.  
Inhibitex is a clinical-stage biopharmaceutical company dedicated to developing innovative products that can treat or prevent serious infections, and its primary focus is on the development of nucleotide/nucleoside analogs for the treatment of infection by the hepatitis C virus (HCV). The company's lead HCV asset is INX-189, an oral nucleotide polymerase (NS5B) inhibitor in Phase II development that reportedly has exhibited "potent antiviral activity, a high barrier to resistance and pan-genotypic coverage. "  
According to BMS, nucleotides/nucleosides are emerging as an important class of antivirals that may play a critical role as the backbone of future direct-acting, antiviral-only combination approaches to HCV treatment.  
"The acquisition of Inhibitex builds on Bristol-Myers Squibb's long history of discovering, developing and delivering innovative new medicines in virology and enriches our portfolio of investigational medicines for hepatitis C," said Lamberto Andreotti, CEO of BMS, in a news release about the deal. "There is significant unmet medical need in hepatitis C. This acquisition represents an important investment in the long-term growth of the company."  
Many market-watchers think the acquisition of Inhibitex's HCV pipeline is important specifically to offset expected losses from its blood-thinning drug Plavix (clopidogrel), which posts estimated annual sales of between $6 billion and $7 billion, when it loses patent protection in May in the United States and in early 2013 in Europe. BMS co- markets Plavis in partnership with Sanofi.  
Merchant Securities analyst Navid Malik says BMS "needs to buy its way out of trouble" and adds that hepatitis C is "a very competitive space now and this is a sign that Bristol-Myers Squibb wants to be a part of that."  
In fact, in November, Gilead Sciences Inc. announced a definitive agreement to acquire Pharmasset Inc. for $11 billion to add a strong HCV presence in the market to complement its reputation in HIV treatment. Pharmasset currently has three clinical-stage product candidates for the treatment of chronic hepatitis C virus (HCV) advancing in trials in various populations.  
"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," notes Les Funtleyder, a healthcare strategist at Miller Tabak & Co., echoing Malik's insights.
"This transaction puts INX-189 and the company's other infectious disease assets in the hands of an organization that can more optimally develop them and which believes as strongly as we do in INX-189's potential in the treatment of chronic HCV," said Russell Plumb, president and CEO of Inhibitex, in an official statement. "Bristol-Myers Squibb's expertise in antiviral drug development, and its existing complementary portfolio, will assure that the potential of INX-189 is realized as part of future oral combination therapies for millions of patients in need around the world."
"Bristol-Myers Squibb continues to drive advances in the field of hepatitis C research and development through internal development and selective partnerships," notes Dr. Elliott Sigal, executive vice president, chief scientific officer and president of R&D for BMS. "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."
The transaction is expected to be dilutive to earnings for BMS through 2016, with an expected impact on earnings per share of approximately $0.04 in 2012 and approximately $0.05 in 2013.  
Under the terms of the definitive agreement, BMS will commence a cash tender offer to purchase all of the outstanding shares of Inhibitex's common stock for $26 per share. The closing of the tender offer is subject to customary terms and conditions, including the tender of a number of shares that constitutes at least a majority of Inhibitex's outstanding shares of common stock (on a fully diluted basis) and expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. The agreement also provides for the parties to effect, subject to customary conditions, a merger to be completed following the completion of the tender offer which would result in all shares not tendered in the tender offer being converted into the right to receive $26 per share in cash. The merger agreement contains a provision under which Inhibitex has agreed not to solicit any competing offers for the company. BMS will finance the acquisition from its existing cash resources. The companies expect the tender offer to close approximately thirty days after commencement of the tender offer.  
This offer represents a premium of approximately 126 percent of Inhibitex's share price over the previous 20 trading days, putting it on record as the second- largest premium for a biotechnology or pharmaceutical company worth more than $500 million, according to data compiled by Bloomberg since 1999. The record is currently held by Genzyme Corp. for its 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," notes Funtleyder, whose fund holds BMS shares.  
As many as 170 million people globally carry the hepatitis C virus, and current drugs, given through injection, can have side effects that make therapy difficult to endure. The next generation is designed to be taken as pills that can offer a higher cure rate and fewer side effects. 

Code: E01111201



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