By John Kell
June 9, 2014

Merck (MRK) has agreed to pay about $3.85 billion to acquire hepatitis C drug developer Idenix Pharmaceuticals (IDIX), a bid to tap the industry’s rising interest in treating a disease that affects millions and can result in liver failure.

The pharmaceutical giant on Monday said it would pay $24.50 a share in cash to acquire its smaller peer, a deal that has been approved by both companies. The purchase price is more than triple the closing price of Idenix shares on Friday, when they ended the session at $7.23. Idenix’s shares traded as high as around $25 in 2005, but have been far under that price in recent years.

Idenix, like most small drug developers, hasn’t generated a profit in its history. But Merck’s planned acquisition of Idenix will give it a pipeline of three hepatitis C drug candidates that are currently in clinical development. Merck is also developing several treatments in the space, including the initiation of a Phase 3 clinical trial that was announced in April of this year.

Hepatitis C is a viral disease that causes inflammation of the liver that can lead to diminished liver function or liver failure, according to the Food and Drug Administration. An estimated 150 million people globally are chronically infected with hepatitis C, with about 3.2 million of those Americans. Most experience no symptoms and are unaware they have the disease until liver damage becomes apparent.

While Merck said the acquisition of Idenix’s hepatitis C treatments “complement” the company’s own therapies that are in development, such acquisitions can come with risks. Peer Bristol-Myers Squibb (BMY) in 2012 paid about $2.5 billion to acquire another hepatitis C drug developer, Inhibitex. But later that year, Bristol-Myers booked a $1.8 billion impairment charge after it discontinued Phase 2 development of a hepatitis C treatment it had acquired as part of that deal.

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