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Expert Financial Analysis and Reporting

Now That Pharmasset and Achillion Have Received Takeover Bids; Is Achillion Next? (ACHN, $9.72)

Following the announcement that Gilead was proposing to acquire Pharmasset (VRUS), I postulated in a note written on November 11, 2011 that Inhibitex (INHX) and Achillion (ACHN) were the next possible targets as big pharma companies seek to put together HCV drug assets. On January 13, Bristol-Myers announced that it proposed to acquire Inhibitex. I would reiterate that Achillion is the third most attractive target after Pharmasset and Inhibitex.

The question is what a potential acquirer might pay for Achillion. Gilead announced that it was acquiring Pharmasset at $137, which was an 81% premium to the closing price on the day before the takeover bid. Bristol-Myers is offering to pay $26 which is a 182% premium to the $9.87 close of Inhibitex last Friday. Using an 81% to 182% premium to Achillion’s close last Friday of $7.92 would result in a potential takeover bid of $14.20 to $22.33.

Looked at in another way, the market value paid for Pharmasset would be $ 5.7 billion and for Inhibitex the market capitalization would be $2 billion. I consider Pharmasset to be the best of these three companies with Inhibitex second. Hence, I would anticipate that on this basis the market valuation placed on Achillion by a potential acquiror would be less than that paid for Inhibitex. If a potential acquiror were to pay $2 billion in market value the acquisition price would be $28.69. I would consider this as the upper limit.

Based on all of the above, I would speculate that Achillion would receive $14 to $29 in a takeover bid.

Tagged as + Categorized as Company Reports


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