Bloomberg News

Pharmasset, Gilead Say Trial Change Won’t Affect Takeover

December 28, 2011

(Updates share prices in 10th, 12th paragraphs.)

Dec. 16 (Bloomberg) -- Pharmasset Inc., the company that has agreed to be bought by Gilead Sciences Inc., said it will modify the design of a hepatitis-C trial after one of its experimental drugs was linked to liver-function abnormalities.

Both companies said they don’t expect the trial change to affect the deal. Pharmasset, of Princeton, New Jersey, will halt treatment arms that used a drug known as PSI-938, while continuing to test PSI-7977, another compound it is developing, the company said today in a statement.

Gilead, the world’s largest maker of HIV medicines, agreed to spend $10.8 billion to buy Pharmasset to ward off rival bidders and bolster its roster of potential therapies, Gilead President and Chief Operating Officer John Milligan said in an interview last month. Gilead, based in Foster City, California, is betting that Pharmasset’s treatments will lead a hepatitis C market that may reach $20 billion by 2020.

“Since this does not impact the development of PSI-7977, we do not believe the fundamental value of the deal has been impacted, and we remain committed to and look forward to completing the deal,” Amy Flood, a spokeswoman for Gilead, said today in an e-mail.

The study-design change doesn’t trigger a “key product event” clause in the takeover agreement, Pharmasset said in its statement. The company doesn’t have additional comment, said Andrew Cole, an outside spokesman.

Phase 2 Study

In the Phase 2 study, there were 235 participants treated with PSI-938 alone, or in combination with Pharmasset’s PSI-7977, the company said. While liver abnormalities were observed in those groups, they weren’t detected in patients who took PSI-7977 without PSI-938.

“This will not affect the transaction between Pharmasset and Gilead” because the deal is “based solely on PSI-7977,” Yaron Werber, an analyst for Citigroup Inc. in New York, said today in a note to clients. “There is a fair amount of data already with PSI-7977 and the drug looks clean.”

Both drugs are part of a class of compounds known as nucleotide analogs that are designed to prevent viruses from replicating.

“Based on our read of the deal terms and our conversation with Gilead this morning, we do not believe today’s development poses any risk to the deal going through” at a price of $137 a share, Brian Abrahams, a New York-based analyst at Wells Fargo & Co., said today in a note to clients.

Pharmasset declined 3.2 percent to $123.75 at the close in New York. Gilead dropped 3.5 percent to $37.16.

The Pharmasset announcement may have negative implications for Inhibitex Inc. and Idenix Pharmaceuticals Inc. Those companies are developing drugs “with similar structures” to PSI-938, Abrahams said.

Inhibitex, based in Alpharetta, Georgia, plunged 20 percent to $10.45, the biggest drop since Dec. 14, 2010. Idenix, based in Cambridge, Massachusetts, fell 8.6 percent to $7.09.

--With assistance from Ryan Flinn in San Francisco and Catherine Larkin in Indianapolis. Editors: Bruce Rule, Chris Staiti

To contact the reporter on this story: Molly Peterson in Washington at

To contact the editor responsible for this story: Reg Gale at

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