Pharmasset’s pumpkin carriage arrived this morning in the form of an $11 billion acquisition agreement from Gilead Sciences. The firm’s Cinderella story is a shining example of how sharply a drug development company’s future can hinge on the success of a single product candidate.
Earlier this month I wrote a blog post on how Pharmasset’s tremendously successful clinical trial results caused a jump in the company’s stock price and created a buzz in the already humming Hepatitis C drug market.
Pharmasset is the quintessential drug development firm, pinning all of its hopes and dreams on select candidates that could make or break its future, and operating at a loss in the meantime. Such development firms can sometimes go out of business due to one drug’s failure in clinical trials.
Others, like Pharmasset, can go from rags to riches in an instant based on their research successes, as larger companies — like Gilead Sciences — become willing to pay a high price to add potential new blockbuster drug treatments to their pipelines (new product launches being essential to keeping their own operations in the black).
In this instance, Gilead Sciences is looking to broaden its drug offerings in the Hepatitis C market, and is counting on the successful drug trials for Pharmasset’s lead candidate to generate a high return in future years.
Some analysts are wary of the $11 billion price tag, considering the possibility that the drug could still fail in the remaining clinical trial stages and FDA approval process, leaving Gilead with a lemon acquisition.
Others, however, believe that the existing trial data supports Gilead’s bold move. Only time will tell whether or not the acquisition is worth its princely price tag.