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Avatar universal

Gilead / Pharmasset - I don't get it

Hi All,

Can anybody explain to me (business naive) why Pharmasset would want to sell up to Gilead when it might just have a worldwide blockbuster hepc tx within a few years of approval?  If the tx proves to be as good as the hype then it is sure to earn far more even than the hefty 11billion pricetag.

Looking at the price chart for VRUS there's been no lack of investors, so I don't see why Pharmasset wouldn't bring their drug through approval and cash in big time then as the first to offer a non-ifn tx.

So what am I missing in this picture?  Why is Pharmasset cashing in now - BEFORE the results of most of it's phase 2 trials?

dointime    
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446474 tn?1446347682
Consolidation in the pharma and biotech industry has been going on for many years as in many other industries. So the Gilead would purchase Pharmasset is not unusual in that case. What is unusual is the price Gilead paid. 70 times Pharmasset book value, or the value of its assets minus liabilities, topping the industry's previous record of 60 times when Barr Laboratories Inc. bought Duramed Pharmaceuticals Inc. in 2001.

Another way to look at it...Why did Pharmasset agree to sell? That is easy. $$$. The stock holders of Pharmasset moneys tripled. Time to retire!

This is a huge gamble. If Gilead wins they stand to make billions. If Pharmasset's technology (nucleoside chemistry) fails Gilead could lose 11 Billion or more. But right now appears to out perform anything out there. SVR=100%.

This is more evidence that the hepatitis market is predicted to be huge in the coming years. This is a good thing for all of us with hep C. A lot of R&D will be done to develop new and more effective and shorter treatments. Gilead is gambling that we are now in a new world as far as the treatment of hepatitis.

So instead of developing all the different antiviral technologies in house Gilead purchases Pharmasset's (core competency in nucleoside chemistry) and add it to their experience with protease inhibitors and non-nucleoside polymerase inhibitors.

The antiviral C change in the industry could really put hepatitis on the radar for most of the public with hepatitis C and to a lesser extent hep B that are infected, but don't even know it, as well as for us who have failed previous treatment. The choices that will be available in the next 5-10 years will allow doctors to individualize treatment to patients unique factors that will give the greatest odds of cure.

I am not sure how much you know about Gilead, but mainstay of revenue is their treatment for HIV. I remember when they where a small company here in the Bay Area ten years or so. They have shown a very steady robust growth in their drug pipeline and and what once was a small company has grown tremendously over the years. Gilead has expertise in antivirals based on its history developing HIV drugs and has already moved into the Hepatitis B ad C worlds. This move to acquire Pharmasset could make then the dominant player in the treatment of hepatitis with the addition of Phamasset's technology and pipeline. In the future they could also acquire other companies that are now developing hepatitis antiviral treatments. Many of these companies are small fish compared to Gilead now and could be purchased also. Remember Gilead is competing with some of the biggest fish in the entire pharma/biotech Industry. Roche/Genetech, Merck, Bristol-Myers Squibb and Johnson & Johnson.

Hector


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Avatar universal
is everything.

Consider this.  People who serve on the board of VRUS all own stock.  People who serve on the board often get a bonus if stock prices go up.  They may get a "golden handshake" if they are let go when the new company takes over.  they may also get a huge sort of signing bonus for steering the helm while ownership is transferred.  A friend of mine got a 50K bonus when his services were no longer needed as board member; this was on a 2 million dollar deal.  This one was worth..... around 11 billion dollars.  Work the math. : )

http://blogs.wsj.com/health/2011/11/22/big-paydays-for-pharmasset-employees-from-gilead-deal/?mod=yahoo_hs

The question is..... what will it mean to us on the user side of the equation?  Already we are seeing that prices for these drugs are becoming greater than the ability of private payers and even insurance companies to pay.

willy
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Avatar universal
Hector & Willy

I can see why Gilead would want to buy.  It's just that I expected the Pharmasset guys to exhibit unlimited greed and ride their winner all the way.  Or would that be called entrepreneurial skill?  Admittedly 11 billion is a big slice of cake, but wouldn't a Steve Jobs have stayed on the gravy train?  

Anyway they all did what they did and hopefully the drugs live up to their promise.  I'd like to know what data Pharmasset used to convince Gilead that it was worth 11 billion.

I do feel apprehensive about what Gilead will do with the Pharmasset drugs pipeline, the cost to the end users being just one of my concerns.  I had some confidence that Pharmasset were smart enough to get the job done, so I just hope that Gilead doesn't screw it up.

Many thanks for your replies,
dointime            
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Avatar universal
I see the same sort of thing in technology.  You think a company would want to ride it out and make it big on their own but it seems sometimes the biggest profit is to let a bigger fish come along and buy you for a whopping good price and you just keep doing what you've been doing....only you've got a sh!tload more cash in your bank account and you can do even bigger things now and perhaps go on to a more lucrative position because the company that bought you makes that possible. That's probably way too simplistic and I can't say I understand the finer intricacies, it's just I see it in other sectors as well besides pharmaceuticals.
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Avatar universal
Many make it big along the way, did you know the CEO of Vertex is one of the highest paid CEO's in the state of MA.? Think about that,  Bostons a   financial hub, Harvard, MIT labs etc.It's all about IPO's, stock options and exercising them at sometimes pennies on the dollar. Not singling any company out, it's rampant among many. Granted, many work for pennies on the dollar and payday comes in the form of stock and options on stock.
Early investors lend money in the form of convertible debt (loan for stock), and they want to be paid as well. Rights to drug marketing are traded for cash to develop the drugs. Biotech is cash intensive, average drug takes something like $1.3 billion to bring to market.
So bird in the hand is worth two in the bush.
As Hector mentioned, big pharma needs growth, expiring patents/generic drugs- competition. Paid valuations on the "rumor" can be at extreme multiples.

And Pharmasset management has not been starving along the way
http://www.secform4.com/insider-trading/1301081.htm
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Avatar universal
PS: and you got to love all those options that were awarded last month @ 83.52 sh..a very happy Thanksgiving indeed for VRUS management!!!
(CEO got 210,000 last month--...errrr @ $133/sh-- $27,930,000, nice kicker)
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Avatar universal
For PSI to have just one drug wouldn't be worth it. My doc says the big boys are going to have the whole DAA package.
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Avatar universal
proactive - my head is spinning with all this.  Seems there's more ways of making a buck in this than bets at the racetrack.  Well, I did ask and thanks for all your info.  

Now that everybody's been paid I wonder who even still cares if the drugs work or not, aside from us that is.

Trish & penn, very interesting info thanks.  I'm getting the picture.  Also great info on Gilead Hector although they've been lacklustre in the HCV field.

dointime  
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374652 tn?1494811435
Hi, what do you mean lackluster for Gilead?  I'm only one person, but my experience with their combo drugs is nothing short of miraculous,  Also the clinic where I treated, has been an HIV center for years and they spoke highly of Gilead.  I was treated extremely well.....and Gileads control and oversee was perfect for me.. I was lucky,
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Avatar universal
Your result was indeed fantastic and congratulations on that.

However other have not been so lucky.  jsf52 and adamben101 recently failed on the Gilead trials, although adamben is doing ok now that SOC has been added.  Gilead also had to withdraw one of their drugs during trials, for safety reasons.  Actually, you are the only one that I know of who did ok.

So that is what I mean by lackluster.

dointime
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Avatar universal
Gilead has been extremely successful with HIV meds but by their own CEO"s admission , not so much in the HCV pipeline.

Lets hope they can hammer this one home...
Will
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374652 tn?1494811435
in the trial at the center we had many people who did as well as I did.  I guess it was the combination of all the drugs, and the object is to eliminate the interferon, so that is a problem,
the only person i personally know of who did not do as well is a woman in the Gilead trial who did not get the PI's with the SOC, so she had to continue for the 48 weeks on SOC.  while I only had to do the 24 weeks.  
in the beginning of the trial the center had 3 people who were und in the second week.  so I think they are on the right track.  
and dointime,, i feel i did better than ok,,,, i was amazed that I had 8 million at start and after first lab I was 150, then next lab und.  anywho I think that is incredible...  thank goodness
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Avatar universal
"and dointime,, i feel i did better than ok,,,, i was amazed that I had 8 million at start and after first lab I was 150, then next lab und.  anywho I think that is incredible... "

Well I am sorry that I seem to have drawn your indignation.  This after I did say that you had a fantastic result.

It is well documented that the DAA's are very fast acting and people do commonly become UND in a few weeks.  And yes, that is amazing.  In fact it happened to me also, on telaprevir.  However it is equally well known that this is no guarantee of SVR.  In your case it was ... thank goodness.  

One thing that all the Gilead trial participants say is that the standard of care they received was exemplary, and I acknowledge this.  Still, at the end of the day, it's the SVR numbers that are the proof of the pudding.  I'd be delighted to be proved wrong when the results of the Gilead trials come in.  

dointime

  
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Avatar universal
I don't know a whole lot about Gilead's history w/ hep c research.  What I do know is that they hired Dr. John McHutchison last April and he's a heavy weight researcher of hep C.  In fact, he's the one who found the IL28B gene.  Since I know McHutchison from the time that he was my doctor I can only believe that this was a major boost for Gilead and that they are continuing to put together the best that they can acquire for their hep research.  

Personally, I don't care who hits the all oral goal first, I just want to benefit from the dedication of those who are endeavoring to find an easier cure for those of us w/ hep C.  
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Avatar universal
"The philosophy is very simple. Good drugs save lives and a major side effect is they can also make you rich,"

http://www.reuters.com/article/2011/11/23/us-pharmasset-founder-idUSTRE7AM29U20111123?feedType=RSS&feedName=innovationNews&rpc=43
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408795 tn?1324935675
Gilead is huge, and located in California.  By buying up Pharmasset they strategically bring together the East coast with the West.  Two mastermind companies merging as one to provide the HepC community with options for tx.  great idea!!
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374652 tn?1494811435
I dont think its indignation, its just that I wanted to contribute my experience and that there were others who did very well.  and....... well I do have a special place in my heart for this study, although I'm not exactly totally out of the woods.  Anywho,,, I sure hope these drugs work for everyone, and I have also heard that Gilead is a good company,, this came from a friend who is HIV + and works with the studies,,,  Gawd, I hope for the best...... I have no beef with you.... its hard to discuss sometimes without face to face..... My fur does  rise once in a while, but I look at it and chuckle, what an idiot I am to take offense at anything.....its just the monkey mind and then the watchful mind takes over... wishing you the best. Mary
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374652 tn?1494811435
"and dointime,, i feel i did better than ok,,,, i was amazed that I had 8 million at start and after first lab I was 150, then next lab und.  anywho I think that is incredible... "
very strange indeed I don't know where I got that OK from..... amazing how when I just checked myself here, I found I completely misread something.... I often wonder just how much I do that and thank goodness I dont have a job where its a matter of life and death,   hope  I didn't ruffle your feathers at all.... Mary
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1735424 tn?1357433558
great quote and right on.

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Avatar universal
""I coined that name," Schinazi said of Pharmasset. "It's actually 'pharmaceutical assets' and the idea was to create assets that would be sold to companies. That was the initial business plan."

Great article Proactive - and answers my question.  This guy is turning over pharma companies like people used to flip houses.  And good luck to him.

Mary - no offence taken at all.  Loyalty to those who helped you is an admirable quality.  Anybody who has you on their side is lucky.

willbb - Lets hope they can hammer this one home..."
I'll second that!

dointime    
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