In recent years, there has been an increase in the acquisition of pharmaceutical companies. Bristol-Myers Squibb Co. has been one of the major players in this area of acquisitions as it has, in fact, entered into 18 such acquisition agreements since 2007.

Now, Bristol-Myers has recently agreed to purchase Inhibitex Inc., for approximately $2.5 billion in cash. Inhibitex is the second maker of hepatitis C drugs acquired in the past two months.

According to the terms of the deal, shareholders will receive about $26 per share. This premium represents around 126 percent of its trading price over the past 20 days, the second largest premium paid on record for a business acquisition of this size.

So why was Bristol-Myers willing to pay such a high price for this drug company? Apparently, Bristol-Myers was willing to pay such a high premium because of the recent acquisition of another hepatitis C drug company by California-based Gilead Sciences Inc., which we discussed in a November post. Bristol-Myers is now hoping that it will be able to compete in what is predicted to be a $20 billion market for these types of drugs.

Hepatitis C is a deadly virus transmitted by exposure to infected blood that is carried by as many as 170 million people worldwide. More than 350,000 of those infected will die from complications related to the hepatitis C virus. The newer versions of drugs that are being developed by these two pharmaceutical companies are hoping to be better able to cure the virus, but with fewer side effects than the drugs that are currently on the market.

Source: Bloomberg Businessweek, “Bristol Buys Inhibitex for $2.5 Billion to Compete in Hepatitis,” Jan. 8, 2012