Following the announcement that Gilead (GILD) 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 7, Bristol-Myers Squibb (BMY) announced that it is proposing to acquire Inhibitex. I believe that Achillion is the third most attractive HCV drug developer 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 per share, 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 range and applying that mutiplier 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, at its proposed acquisition price the market value paid for Pharmasset would be $5.7 billion and similarly for Inhibitex the market capitalization would be $2.0 billion. I consider Pharmasset to be the most attractive 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 at most the $2 billion paid for Inhibitex. If a potential acquiror were to pay $2 billion in market value the acquisition price for Achillion would be $28.69. I would consider this to be the upper limit.
Based on all of the above, I would speculate that Achillion could potentially receive $14 to $29 per share in a takeover bid. There is, of course, no guarantee that Achillion will receive a takeover bid, just a reasonable possibility.