What Was Merck Thinking Buying Idenix Pharmaceuticals?

It's been a rocky road for hepatitis C drugmaker Idenix Pharmaceuticals (NASDAQ: IDIX  ) , but investors are smiling after Merck (NYSE: MRK  ) announced on Monday that it's buying the biotech for $3.85 billion, more than a 230% premium on Friday's closing price. Even investors who bought at the previous top a few years ago when investors had high hopes that every hepatitis C biotech was going to get bought still had a profitable ending.

Fellow hepatitis C drugmaker Achillion (NASDAQ: ACHN  ) was up big yesterday, with investors hoping that it'll get bought out as well, but investors should be careful here; there are diminishing potential returns as each hepatitis C drugmaker gets picked off. With Merck now owning Idenix Pharmaceuticals, there's one less company that might want to purchase Achillion.

Gilead Sciences (NASDAQ: GILD  ) traded down, presumably because investors are worried that Merck will become a stronger competitor with Idenix's assets, but there is upside for Gilead Sciences' investors: Merck's purchase is a sign that the pharma thinks there will be plenty of patients a few years from now, when Idenix Pharmaceuticals' drugs could make it to market.

Watch the following video for thoughts on the deal from senior biotech specialist Brian Orelli and health-care analyst David Williamson, including the potential wildcard: patents.

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