Merck to acquire Idenix for $3.85 billion

Deal is intended to expand Merck’s pipeline of promising investigational therapies for hepatitis C and cut into Gilead’s market-leading position

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WHITEHOUSE STATION, N.J.—Merck isn’t just looking at the market potential of adding more hepatitis C expertise and more investigational therapies for the disease to its pipeline with the planned acquisition of Idenix Pharmaceuticals Inc. for $3.85 billion. It’s also looking to dislodge Gilead from what might have seemed to many to be a nigh-unassailable market stranglehold in the hepatitis C virus (HCV) realm thanks to Sovaldi, which earned its status as the best drug launch ever with $2.3 billion in sales in its first quarter.
 
“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.”
 
That’s the official lingo from the news release about the deal, expected to close in the third quarter of this year, which places the value of Idenix at $24.50 per share—more than three times Idenix’s closing price of $7.23 a share on June 6.
 
But Forbes perhaps has one of the most detailed assessments of what the acquisition of Idenix truly means for Merck, with Perlmutter noting in an interview that with some 170 million people being HCV-infected worldwide, it’s “impossible” to treat “a substantial fraction” of those people 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 strains of HCV that may respond only to certain drugs or drug combinations. Moreoever, 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.
 
Wall Street Journal coverage of the story 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 WSJ 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 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.


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