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Pharmasset Shares Skyrocketed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Pharmasset (Nasdaq: VRUS  ) soared a staggering 85% on Monday after Gilead Sciences (Nasdaq: GILD  ) struck a deal to buy the biotech for about $11 billion.

So what: The deal values Pharmasset at $137 per share and represents a whopping 89% premium to its Friday closing price. Gilead is making a huge bet on the booming market for new hepatitis C treatments, but judging from its 12% decline today, investors aren't exactly thrilled with the price being paid.

Now what: Gilead expects the deal to hurt earnings through 2014 but to add significantly to the bottom line after that. So while the short term looks bumpy, gaining a quick edge on giants like Abbott Labs (NYSE: ABT  ) , Johnson & Johnson (NYSE: JNJ  ) , and Merck (NYSE: MRK  ) -- all fiercely developing hepatitis C treatments of their own -- seems like a smart long-term move. In a market that is expected to explode to $16 billion in just three years, paying up will likely have some huge perks.

Interested in more info on Pharmasset? Add it to your watchlist.
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Gilead? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of Johnson & Johnson, Motley Fool newsletter services have recommended buying shares of Gilead, Abbott, and Johnson & Johnson, as well as creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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