Hepatitis-C to the Moon (BMY, INHX, ACHN, IDIX, VRTX)

You know how stocks sometimes react to news on peers… Today we are again seeing a run in the world of Hepatitis C drug candidates after news that Bristol-Myers Squibb Co. (NYSE: BMY) is reaching down to acquire Inhibitex Inc. (NASDAQ: INHX).  The deal calls for a massive premium at $2.5 billion valued at $26.00 per share.  In layman terms, this is a premium of about 160%. The deal was announced over the weekend and the company’s hepatitis drug candidate dubbed INX-189 is currently in Phase II studies.  Bristol-Myers views this as an adjacent acquisition because it is also developing treatments for this chronic liver disease.

Achillion Pharmaceuticals, Inc. (NASDAQ: ACHN) is up 13% at $8.98.  Idenix Pharmaceuticals, Inc. (NASDAQ: IDIX) is up a sharp 34% at $9.45 on strong volume today. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) is up 2% at $34.81 on the day after having been up 6%.  It recently won an FDA approval and its shares have a market cap of $7.25 billion.

If you feel like drug companies are reaching down and in many cases betting the farm on unproven companies, you are not alone.  The field of drug companies is highly mature.  Teh top biotech outfits now trade with valuations not much higher than the old Big Pharma drug companies.  Then there is a no-man’s land down to the biotech and emerging pharma players valued in the range of a few hundred million dollars to the low billions.

Inhibitex shares are up 140% at $23.74 and the prior 52-week range is $2.15 to $16.49.  For all practical purposes, Inhibitex was a story for later in 2013 or even beyond that.  The company is not expected to have revenues of its own during 2012.