BioCryst, Presidio Merger Creates Yet Another Competitor in the HCV Segment

In an all-stock merger announced Thursday morning, BioCryst Pharmaceuticals (NASDAQ:BCRX) will acquire privately-held Presidio, Inc, creating a new business entity to focus on oral Hepatitis C (HCV) and hereditary angioedema (HAE) treatments. The merger will introduce a new player to the broad field of developmental oral hepatitis drugs, as companies like Gilead Sciences (NASDAQ:GILD), Abbot (NYSE:ABT), and Achillion (NASDAQ:ACHN) have moved to comprehensively treat hepatitis C without the use of interferon (read more here). The market is already reacting negatively to the news, and investors are likely trading the merger with some hesitancy. Significant work needs to be done to value this new entity, especially considering dilution and the numerous, unproven early-stage compounds.

Presidio brings two drugs to the new company: PPI-668, a pre-Phase II NS5A inhibitor; and PPI-383, a Non-nucleoside NS5B inhibitor that is set to enter its first Phase I study in the first half of next year. Add to the pipeline BioCryst’s Nucleoside NS5B inhibitor, BCX5191, which will be entering a Phase I trial by the end of the year, and the new company will have a cabinet of options to produce an HCV treatment. The segment, however, is becoming more and more crowded, and while BCRX may be able to someday create a quality combination, the molecules are still in early-stage development and have a long way to go before proving themselves in the clinic; something could still go terribly wrong and competitors are well-ahead of BioCryst. We also would have liked to see BCRX partner its late-stage gout product, ulodesine, and reveal some quality economics ahead of any merger propositions. BioCryst has been working towards a partnership for some time, and reiterated the importance of that strategic move in Thursday’s conference call. The company also develops the influenza treatment peramivir and the preclinical HAE treatment, BCX4161.

The market is likely to weigh on BCRX until it gets a better handle on the situation. In fact, it may not be until Phase II data is available from the plethora of early-stage drugs that investors begin exploring the new entity more closely. BCRX is an innovative company, but there’s now considerable pressure on management to produce results from a swelling – but early-stage – pipeline.