Bristol-Myers Squibb

(Bristol-Myers Squibb)

Eyeing Hepatitis C, Bristol-Myers Snatches Inhibitex for $2B

By Features FOXBusiness

Bristol-Myers Squibb (BMY) shelled out $2 billion in cash over the weekend to scoop up hepatitis C treatment maker Inhibitex (INHX) in a transaction that carries a whopping 163% premium.

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The blue-chip pharmaceutical giant said it will pay $26 a share for Alpharetta, Ga.-based Inhibitex, which listed just 33 employees as of the end of September.

Inhibitex is a clinical-stage biopharmaceutical company focused on developing treatments for the hepatitis C virus. By acquiring Inhibitex, Bristol-Myers will get its hands on the company’s lead asset, INX-189, which has showed promising signs while in Phase II development.

“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,” Bristol-Myers CEO Lamberto Andreotti said in a statement. “There is significant unmet medical need in hepatitis C. This acquisition represents an important investment in the long-term growth of the company.”

Compared with Inhibitex’s Friday close of $9.87, the $26-a-share offer represents a hefty premium of 163%. The company’s market cap stood at just $773 million as of Friday. When debt is included, the total transaction value rises to $2.5 billion.

“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 Inhibitex CEO Russell Plumb.

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George Farmer, an analyst at Canaccord Genuity, said in a note he believes the Bristol-Myers bid underestimates the commercial potential of INX-189, according to StreetAccount. Canaccord, which upped its price target to $34 from $22, said it sees a high rationale for why the Bristol-Myers offer could be trumped by a competing bid. 

Shareholders owning about 17% of Inhibitex’s common stock have already agreed to tender their shares in this deal.

Bristol-Myers said it expects the acquisition to hurt its bottom line through 2016, negatively impacting EPS by 4 cents in 2012 and 5 cents in 2013.

Shares of Inhibitex surged 142.96% to $23.99 Monday morning, while Bristol-Myers slipped just 0.53% to $34.04.

Citigroup (C) served as a financial advisor on the deal to Bristol-Myers, while Credit Suisse (CS) advised Inhibitex.

The buyout comes after Gilead Sciences (GILD) scooped up hepatitis C drug maker Pharmasset (VRUS) for $11 billion in November.