Gilead Sciences, Inc. (NASDAQ:GILD) would raise $6 billion in debt and suspend share buybacks as part its $11 billion acquisition of Pharmasset, Inc. (NASDAQ:VRUS), according to a Wall Street analyst.
Cost of debt probably will be around 4-5% (average cost of Gilead's current debt is 3-5%), ISI Group analyst Mark Schoenebaum wrote in a note to clients.
Gilead Sciences would pay $137 a share to Pharmasset to boost its HCV pipeline. Pharmasset has three clinical-stage product candidates for the treatment of chronic hepatitis C virus advancing in trials in various populations.
Pharmasset's lead product candidate, PSI-7977, an unpartnered uracil nucleotide analog, has recently been advanced into Phase 2 and 3 studies in genotype 2 and 3 patients.
The acquisition of Pharmasset represents an important and exciting opportunity to accelerate Gilead's effort to change the treatment paradigm for HCV-infected patients by developing all-oral regimens for the treatment of the disease regardless of viral genotype, said John C. Martin, chairman and chief executive, of Gilead.
The $137 per share price in the transaction represents an 89 percent premium to Pharmasset's closing share price on Nov. 18, 2011, and 59 percent to Pharmasset's all-time high closing stock price.
Gilead expects the deal, which is anticipated to close in the first quarter of 2012, to be dilutive to earnings through 2014 and accretive starting in 2015.