Biotech investors that prefer to play developmental companies for the potential of a lucrative payday just got one more reason to hold their course on Monday as drug giant Merck & Co. (MRK) said it is willing to pay an eye-popping premium to acquire Idenix Pharmaceuticals Inc. (IDIX), a company 22-percent owned by Novartis (NVS).

Cambridge, Massachusetts-based Idenix is mostly known for its pipeline of hepatitis C drugs in development, three of which are in clinical trials.  Although none have even completed a mid-stage trial at this point, investor hopes are high as measured by a market capitalization of $1.09 billion through Friday’s close at $7.23 per share.  Idenix posted a net loss of $34.1 million, or 24 cents per share, in the January to March quarter.  The company raised $106.6 million during the first quarter, ending the quarter with $205 million in cash and cash equivalents.

Merck agreed to pay $24.50 per share, or $3.85 billion, in cash to acquire Idenix and expand its position in the hot hepatitis C market.  The price tag represents a 239 percent premium to Friday’s closing price for IDIX.  Shares of IDIX had dipped as low as $2.93 late in October.

The boards of both companies have approved the transaction.

“Idenix’s investigational hepatitis C candidates complement our promising therapies in development and will help advance our work to develop a highly effective, once-daily, all oral, ribavirin-free, pan-genotypic regimen that has a duration of treatment as short as possible for millions of patients in need around the world,” said Dr. Roger Perlmutter, president, Merck Research Laboratories, in a statement this morning.

Companies are racing to develop new therapies to treat the hepatitis C virus (HCV), as new drugs have dramatically shortened dosing regimens and done so with greater efficacy in reducing viral load. Gilead Sciences (GILD) has been sharply criticized for the steep price it charges in the U.S. for its latest HCV drug Sovaldi, but the drug still tallied $2.3 billion in sales during Q1, its first full quarter on the market

Ironically, Gilead was charged by many analysts with overpaying when it spent $11.1 billion in 2011 to acquire Pharmasset, the company who at that time was completing Phase 2 clinical trials of the drug now known as Sovaldi.

Two of Idenix’s three drugs are in the same class as Gilead’s Sovaldi (a 2'-methyl-2'-fluoro nucleoside compound) and involved in patent interference lawsuits in the U.S. and Europe.  Merck also is in court with Gilead, claiming it deserves royalties on Sovaldi sales, saying it infringes on their patents also.  Gilead is fighting all claims.

Merck scientists must be seeing some great value in the Idenix pipeline as a complement to its own, which includes several HCV drugs in development, perhaps foreseeing a possible combination to create a one-pill treatment.  As it stands now, Merck’s lead candidate is a combination of MK-5172, a NS3/4A protease inhibitor, and MK-8742, a NS5A replication complex inhibitor.  The combo, which has garnered a vaunted Breakthrough Therapy designation from the FDA, just started a Phase 3 trial testing a broad spectrum of HCV patients.

CNBC reported this morning that when Idenix disclosed positive data six weeks ago on its once daily nucleotide IDX21437, the phone started ringing steadily, ultimately pitting AbbVie (ABBV), Johnson & Johnson (JNJ) and Merck into a behind the scenes bidding war for Idenix.

Looks like Merck won the battle, now let’s see how it fares in the war.