Gilead expands hepatitis C R&D portfolio with $11 billion buy of Pharmasset

In its biggest M&D deal to date, Gilead Sciences (Nasdaq: GILD) says it has signed a definitive agreement to acquire fellow USA-biotech company Pharmasset (Nasdaq: VRUS) for around $11 billion, or $137 per share, in cash. The transaction has been unanimously approved by Pharmasset’s board of directors.

Shares of Gilead fell 11% to $35.687 in early morning-market trading yesterday, on concerns that it is paying too much for the company - an 89% premium to its closing price on Friday - in its bid to expand its investigational hepatitis C portfolio and entry into a market sector expected to reach $20 billion by 2020. Pharmasset shares surged 85% to $134.17.

The purchase “clearly sends a strong statement that Gilead is intent on becoming the leader in HCV over the next decade and wants the key drugs to make it happen,” said Michael Yee, an analyst with RBC Capital Markets in San Francisco, quoted by Business Week. Pharmasset's experimental drug, PSI-7977, “could add $3 billion to $5 billion in revenues over the long term,” he added.