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Inhibitex Auction Shows Battle for Hepatitis Drugs

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Bristol-Myers is buying Inhibitex for $2.5 billion but at least five other companies took a look at the biotech.

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A recent disclosure by hepatitis C drug developer Inhibitex (INHX) signals more deals ahead for companies jockeying for position in the race for a better treatment of the liver-destroying virus.

At least six companies showed an interest in buying Inhibitex and one offered the same price as winning bidder Bristol-Myers Squibb (BMY).

In a securities filing, Inhibitex says the half dozen companies took a look but only two bid: Bristol-Myers and "Company B." The other companies were identified by Inhibitex only as A, C, D and E. By mid-December, those other four companies dropped out of the running. Bristol-Myers announced its acquisition January 7.

Bristol-Myers jumped into the fray with its $2.5 billion ($26 a share) bid for Inhibitex, entering a crowded field of rivals. (See Bristol-Myers Enters Hepatitis Drug Race with $2.5 Billion Takeover of Inhibitex) That transaction would follow the recent sale of Pharmasset (VRUS) to Gilead Sciences (GILD) for $11 billion. Last year, two companies -- Merck (MRK) and Vertex Pharmaceuticals (VRTX) -- won approvals for vastly better drugs to treat the liver-destroying hepatitis C virus, which affects millions of Americans. Now the competition focuses on the next generation of hepatitis C treatments.

"The revelation that there were six parties looking at Inhibitex could intensify investor speculation that consolidation in the (hepatitis C) space could continue," ISI Group analyst Mark Schoenebaum says.

Who is Company B? Schoenebaum says his best guess is Merck or Johnson & Johnson (JNJ). J&J partnered with Vertex to help develop Incivek, the new treatment approved last year. Merck's Victrelis competes with Incivek but is a distant second to that drug. But there clearly are other interested parties.

Roche, which so far is exploring new treatments through partnerships and a small deal, also is a possibility, the analyst says. (See Roche Makes $230 Million Bet on Hepatitis Drug Developer Anadys) He notes other companies who may have looked at Inhibitex: Novartis (NVS), Abbott Laboratories (ABT) and Germany's Boehringer Ingelheim.

Canaccord Genuity analyst George Farmer says the takeover of Inhibitex by Bristol-Myers will significantly hurt the competitive chances of some of these same companies. In a note today, he says he believes another company will come forward with a higher offer than Bristol-Myers' $26 a share. Farmer recommends buying the stock and has a $34 price target.

"Players in the (hepatitis C) drug development space, including Merck, Johnson & Johnson, Roche, Abbott and Vertex that have committed significant resources toward development of novel agents would effectively be shut out of this market if Bristol-Myers were to acquire Inhibitex," Farmer says in his note.

Indeed, the field of potential takeovers is shrinking. Idenix Pharmaceuticals (IDIX) and Achillion Pharmaceuticals (ACHN) are two potential takeover candidates. Like Pharmasset and Inhibitex, Idenix is studying nucelotide polymerase inhibitors, drugs aimed at eliminating or reducing the need for the older treatment interferon in the regimen of hepatitis C patients. The injected interferon can produce serious side effects in patients.

Twitter: @brettchase

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