By Peter Loftus 

Merck & Co.'s $3.85 billion deal to acquire a developer of hepatitis C drugs underscores the pharmaceutical industry's bet that improved medicines for the liver disease represent a large, long-term market opportunity.

Merck agreed to acquire Idenix Pharmaceuticals Inc. for $24.50 a share in cash, more than triple the stock's Friday closing price of $7.23 The premium was fueled by a competitive bidding process, according to Merck. Idenix shares soared to $24.03 in midday trading Monday, while Merck shares were unchanged at $57.85.

The treatment of hepatitis C, a liver-damaging virus estimated to infect up to 150 million people world-wide, is undergoing a dramatic transformation. Newer medicines have higher cure rates, with fewer side effects and shorter treatment durations than older drugs. Rapid scientific advances the past few years have fueled a flurry of acquisitions, licensing deals and partnerships among drug companies jockeying for position.

Idenix, of Cambridge, Mass., has about 85 employees and no products on the market, and posted less than $1 million in revenue last year. But it is developing several potential new treatments for hepatitis C that have caught the attention of bigger drug companies.

Merck is primarily interested in IDX21437, an Idenix drug known as a nucleotide, or "nuke." Merck plans to combine the drug with two of its own drugs that work by different mechanisms for a triple-drug regimen that could potentially cure most types of hepatitis C in less than two months. That triple regimen, however, is probably about three years away from reaching the market, assuming clinical trials are successful and regulators approve it, analysts say. Merck hopes to bring the double-drug regimen to market first.

"The goal here is to cure everyone" with hepatitis C, Roger Perlmutter, chief of Merck's research-and-development unit, said in an interview Monday.

Merck had been planning to develop its own "nuke" for hepatitis C, but gaining one externally through the Idenix deal will "jump-start that program substantially," Mr. Perlmutter said.

Gilead Sciences Inc. has generated huge sales of its own hepatitis C "nuke" drug, Sovaldi, since it went on sale late last year. Gilead reported nearly $2.3 billion in first-quarter sales of Sovaldi, believed to be the best-selling prescription drug launch in history, and helped by a price tag of $1,000 per pill, or $84,000 for a standard 12-week treatment. Gilead acquired Sovaldi through its 2012 purchase of Pharmasset Inc. for $11.1 billion.

Sovaldi's high price has sparked criticism from insurers and state health officials, who say the expense is preventing the drug's use in some patientpopulations including prison inmates, who have high rates of infection.

Merck hopes the Idenix acquisition puts it on more solid competitive footing against Gilead and other companies with new and experimental hepatitis C regimens, such as Johnson & Johnson, AbbVie Inc. and Bristol-Myers Squibb Co.

The deal also gives Merck more hepatitis C patents when Merck and other companies are engaged in litigation with Gilead, claiming that Sovaldi violates their respective patents. Merck, Idenix and AbbVie each are involved in such litigation against Gilead, which has disputed the claims.

Mr. Perlmutter said Merck initially held discussions with Idenix for a potential partnership. But another company made a takeover offer, which prompted Idenix to begin a competitive bidding sales process, he said, resulting in the hefty premium. He said he didn't know which company made the initial takeover offer. An Idenix spokeswoman couldn't be reached.

The premium Merck is paying for Idenix is the largest this year on a percentage basis for deals valued at $1 billion or more, according to Dealogic.

"We believe Merck could quickly recoup the investment if successful," said J.P. Morgan analyst Chris Schott.

Still, there are risks to the deal in a fast-changing hepatitis C market. In 2012, Bristol-Myers paid $2.5 billion in cash to acquire Inhibitex Inc., which was developing a "nuke" for hepatitis C. But later that year, Bristol scrapped the drug after fatal cardiac side effects emerged in clinical trials.

Idenix itself discontinued development of a different "nuke" last year amid regulatory concerns sparked by the problems with the Bristol-Myers drug.

The newer Idenix "nuke" has been given to more than 100 patients in early-stage testing for durations of up to two weeks, with no signs of severe toxicity so far. The results have given Merck "some confidence this could go the distance," said Mr. Perlmutter.

Write to Peter Loftus at peter.loftus@wsj.com

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