Merck makes big HCV move with Idenix deal

$3.85-billion acquisition aims to expand Merck’s hepatitis pipeline and dethrone Gilead

Jeffrey Bouley
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WHITEHOUSE STATION, N.J.—With Gilead’s Sovaldi dominating the hepatitis C virus (HCV) treatment news, both because of its effectiveness and being the best drug launch ever with $2.3 billion in sales in its first quarter, Merck has decided to make its own ripples in the HCV discussion lately with the planned acquisition of Idenix Pharmaceuticals Inc. for $3.85 billion. That’s $24.50 per share, which is more than three times Idenix’s closing price of $7.23 a share on June 6.
 
The move seems intended not simply to add to Merck’s HCV expertise and pipeline prospects, but also as an opening gambit to go head-to-head with Gilead soon.
 
“Idenix has established a promising portfolio of hepatitis C candidates based on its expertise in nucleoside/nucleotide chemistry and prodrug technologies,” said Dr. Roger Perlmutter, president of Merck Research Laboratories. “Idenix’s investigational hepatitis C candidates complement our promising therapies in development and will help advance our work to develop a highly effective, once-daily, all oral, ribavirin-free, pan-genotypic regimen that has a duration of treatment as short as possible for millions of patients in need around the world.”
 
Even before the early June announcement of the Idenix acquisition, Merck clearly had designs on claiming a good chunk of the HCV market and cutting into Gilead’s share of it, with Merck CEO Kenneth C. Frazier telling CNBC in early May that he expects Merck’s planned HCV therapy to be a “formidable competitor” and noting that “over time, the best drug wins,” touting his company’s option as being all-oral with once-a-day dosing, no reliance on interferon, the ability to work across many genotypes and utility for patients who have comorbidities.
 
Forbes offered one of the more detailed assessments of what the acquisition of Idenix really means for Merck, with Perlmutter noting in an interview that with some 170 million people being HCV-infected, it’s “impossible” to treat “a substantial fraction” of those people globally in just a few years. As such, there will continue to be market opportunities for new therapies entering the market.
 
But even beyond that particular kind of opportunity, Perlmutter points out there will be patient populations that might tolerate a therapy based on Merck and Idenix’s compounds better than they can Sovaldi, and that certain strains of HCV may respond only to certain drugs or drug combinations. Moreover, Perlmutter is aiming at trying to put out a therapeutic that can cure HCV infection faster than Sovaldi.
 
Finally, he has his eyes on testing Merck drugs along with Sovaldi, but to move quickly on that, Merck needs a nucleoside analog—the same class of drug as Sovaldi—and the acquisition of Idenix makes that possible.
 
It is also worth noting that neither Merck nor Idenix are strangers to going up against Gilead. Idenix has already sued Gilead for patent infringement with regard to Sovaldi, and the U.S. Patent and Trademark office is looking into that matter. For its part, Merck has been seeking royalty payments on sales of Sovaldi, claiming the drug infringes its own patents. Gilead is challenging both claims.
 
Wall Street Journal coverage of the acquisition deal notes that Merck is primarily interested in the nucleoside IDX21437, which Merck plans to combine with two of its own drugs that have different mechanisms of action and might cure hepatitis C in less than two months. With that prospect three or more years away from market, though, a double-drug regimen is more likely to see the market first.
 
As J.P. Morgan analyst Chris Schott said in the Wall Street Journal article of the high premium Merck is paying for Idenix, “We believe Merck could quickly recoup the investment if successful.”
 
Idenix is a biopharmaceutical company engaged in the discovery and development of medicines for the treatment of human viral diseases, whose primary focus is on the development of next-generation oral antiviral therapeutics to treat HCV infection. The company currently has three HCV drug candidates in clinical development: two nucleotide prodrugs (IDX21437 and IDX21459) and an NS5A inhibitor (samatasvir). These novel candidates are being evaluated for their potential inclusion in the development of all-oral, pan-genotypic fixed-dose combination regimens.
 
“Merck has established a strong legacy of leadership and innovation in treating hepatitis C,” said Idenix President and CEO Ron Renaud in the news release about the deal. “This agreement creates shareholder value by positioning Idenix’s strong portfolio of candidates for future success with a leading healthcare company with the experience and commitment to develop fixed-dosed combinations with the potential to impact the global burden of hepatitis C.”
 
Merck’s research and development portfolio includes several HCV medicines in development, the leading of which is a combination of MK-5172, an investigational HCV NS3/4A protease inhibitor, and MK-8742, an investigational HCV NS5A replication complex inhibitor. The combination of these two investigational candidates has received Breakthrough Therapy designation from the U.S. Food and Drug Administration for the treatment of HCV. In April 2014, Merck announced the initiation of Phase 3 clinical trials for MK-5172/MK-8742 to evaluate the combination with and without ribavirin in various genotypes and across a broad range of patient populations with chronic HCV.
 
Under the terms of the agreement, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Idenix. The closing of the tender offer will be subject to certain conditions, including the tender of shares representing at least a majority of the total number of Idenix’s outstanding shares (assuming the exercise of all options), the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. Upon the completion of the tender offer, Merck will acquire all remaining shares through a second-step merger.

Jeffrey Bouley

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