The annual meeting of the American Association for the Study of Liver Diseases kicks off this week, but biotechs with hepatitis C drugs may be busier talking with potential partners than with hepatologists during the event.

Earlier this month, Roche AG snatched up Anadys Pharmaceuticals Inc., sparking speculation that other potential acquirers might follow suit. Roche paid a 256 percent premium to gain access to Anadys' non-nucleoside polymerase setrobuvir (ANA598). (See BioWorld Today, Oct. 18, 2011.)

"That premium makes me believe there were other bidders," Piper Jaffray analyst Edward Tenthoff told BioWorld Insight. "There may have been a player or two that walked away unsatisfied."

"Nucleotide polymerase inhibitors, protease inhibitors with certain characteristics and NS5A inhibitors would currently be seen as higher conviction to get to the interferon-free, pan-genotypic regimen that is the goal for everyone in this space," said Tom Russo, an analyst with Robert W. Baird.

Inhibitex Inc., Idenix Pharmaceuticals Inc. and Achillion Pharmaceuticals Inc. all fit that theme. Inhibitex and Idenix have nucleotide polymerase inhibitors – INX-189 and IDX184, respectively – while Achillion has a protease inhibitor, ACH-1625, and a second-generation NS5A inhibitor, ACH-2684.

When looking for an acquisition or a licensing agreement to make a combination treatment, larger firms like Roche are searching for drugs that are complementary to what they already have in house. Finding molecules with different modes of action that can solve problems with resistance is high on the list. The stage the drugs are at is also important. Ideally firms would like to test their hepatitis C drugs in combination with other molecules that will come on the market around the same time. (See BioWorld Insight, June 20, 2011.)

Figuring out what a potential acquirer might want is the easy part; determining when they might make a move is a little tougher.

Russo thinks waiting for Phase II data makes sense. "Our thesis is that the highest conviction bet in the hep C space can be placed when you have four weeks of efficacy, which has high predictive power for cure, and then a full duration of dosing worth of safety, which is typically 12 weeks," Russo said.

Anadys was already there, Achillion is expected to announce data for ACH-1625 before year's end and Inhibitex is expected to have data for INX-189 in the first quarter of next year.

On the other hand, potential acquirers might pull the trigger earlier, fearing that the drugs will get snatched up by a competitor. "I think of this as penguins along the edge of the ice float. It took the first one to go in to incentivize the others to go," Jaffray's Tenthoff said.

An alternative to an acquisition – the nonexclusive collaboration – can be a good way for both sides to get a feel for each other.

This year, Pharmasset Inc. used the strategy, pairing its nucleoside analogue polymerase inhibitor PSI-7977 with Bristol-Myers Squibb Co.'s NS5A inhibitor BMS-790052, and made a similar nonexclusive pact to combine the drug with TMC435, a protease inhibitor from Johnson & Johnson unit Tibotec Pharmaceuticals Inc.

Which is more likely, a takeout or partnership? "We expect to see both," said Baird's Russo, "potentially nonexclusive collaborations first, perhaps subsequently followed by a takeout."