Wednesday, December 21, 2011

2011 M&A of the Year Nominee: Gilead/Pharmasset

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

We're not sure we've got to sell this one, folks. Why vote for Gilead's acquisition of Pharmasset for IVB's M&A of the year?  We've got eleven billion reasons for you.

If the sheer enormity of Pharmasset's $11 billion price tag doesn't sway you -- and as a reminder it was by far the largest price paid for a clinical stage biotech, nearly four times the value of the previous record -- you mightn't have a pulse. But to be fair, bigger isn't always better, but in this case we've got more than just dollar signs to convince you.

Ask around, and you'll hear a range of responses from industry business development people. They range from the conspiratorial to the astounded to the unintelligible to the silent, wide-eyed, mouth-agape, frozen-faced and slightly head-bobbing look that you see on sitcoms that kind of says "holy crap, right?" The kind of silent, wide-eyed, mouth-agape, frozen-faced and slightly head-bobbing look that translates into DOTY votes.

Mostly, non-Gilead people think Gilead overpaid. The safety signal in a Phase IIb trial of PSI-938 that emerged last week would seem to support that view, but in reality the value attached to anything outside of PSI-7977, another of Pharmasset's hepatitis C polymerase inhibitors and the hottest drug candidate in the clinic, is probably minimal.

What's not up for argument is that Gilead now wholly owns the hottest molecule in the hottest clinical space around. Nevermind that they'll need to get it to market quickly and make it a blockbuster several times over without taking their sweet time about it to make the deal pay off.

Vote Gilead/Pharmasset for the size, sure. Vote for the deal because it demonstrates that even in today's troubled times, there's seemingly no ceiling on the value of a top asset -- even a Phase II one -- in the right hands. Vote for it because HCV will continue to be one of the most rapidly-evolving and intriguing development and commercial spaces to come along for some time. Or just because of that face people make when you ask them what they think of it.  That face is priceless.

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