Pharmasset Shares Skyrocketed: What You Need to Know

Brian D. Pacampara, The Motley Fool
Updated

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Pharmasset (NAS: VRUS) soared a staggering 85% on Monday after Gilead Sciences (NAS: GILD) struck a deal to buy the biotech for about $11 billion.

So what: The deal values Pharmasset at $137 per share and represents a whopping 89% premium to its Friday closing price. Gilead is making a huge bet on the booming market for new hepatitis C treatments, but judging from its 12% decline today, investors aren't exactly thrilled with the price being paid.

Now what: Gilead expects the deal to hurt earnings through 2014 but to add significantly to the bottom line after that. So while the short term looks bumpy, gaining a quick edge on giants like Abbott Labs (NYS: ABT) , Johnson & Johnson (NYS: JNJ) , and Merck (NYS: MRK) -- all fiercely developing hepatitis C treatments of their own -- seems like a smart long-term move. In a market that is expected to explode to $16 billion in just three years, paying up will likely have some huge perks.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Gilead, Abbott, and Johnson & Johnson. The Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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