Sector Snap: Hepatitis C drug developers advance

Inhibitex climbs on study data and Pharmasset rises; competition hits Vertex shares

Associated Press

NEW YORK (AP) -- Shares of hepatitis C drug developers Pharmasset Inc. and Inhibitex Inc. climbed Monday after they reported positive clinical trial data for their drugs. But Vertex Pharmaceuticals Inc. shares slipped as the threat of competition increased for its own hepatitis C treatment approved this year.

Inhibitex and Pharmasset both presented data on their drugs at a meeting of the American Association for the Study of Liver Diseases in the past several days.

On Friday, Inhibitex reported positive early results from a trial of its experimental drug INX-189. On Sunday, Pharmasset presented data on its most advanced drug, PSI-7977, saying that 100 percent of patients in a study responded to the drug. On Saturday, it reported data on a cocktail of drugs including another of its treatments, VX-222.

The Food and Drug Administration approved Vertex's drug Incivek in May. Analysts have predicted billions of dollars in sales for Incivek, which was one of the first new treatments for hepatitis C to reach the market in several decades.

But analysts say Pharmasset's and Inhibitex's competing drugs could pose stiff competition.

"Emerging competitive data suggest a potentially very limited role for Incivek in future regimens," said RBC Capital Markets analyst Jason Kantor.

Kantor said Incivek is selling well, but newer drugs continue to look stronger as more data is reported. Eventually, he predicted, combinations of Pharmasset's PSI-7977 and other new drugs will command the field. He downgraded shares of Vertex to "Sector Perform" from "Outperform" and cut his price target for the stock to $48 from $59.

Kantor said he is becoming more optimistic about an experimental cystic fibrosis drug Vertex is developing, but key data on that is not expected until late 2012.

Citi Investment Research analyst Yaron Werber said Pharmasset's main Hepatitis C drug is about a year and a half ahead of Inhibitex's, but competition among hepatitis C treatments will increase.

"We cannot ignore that Inhibitex may also be a player if this early data continues to hold up on efficacy and safety," Werber wrote in a note to clients.

Shares of Inhibitex jumped $1.75, or 20.5 percent, to a $10.32 by Monday afternoon. They had more than doubled in value Friday, finishing at $8.54 after closing at $3.96 Thursday.

Pharmasset stock rose as much as 8.1 percent to an all-time high of $74.45 Monday morning but later returned most of those gains. By early afternoon, the shares were trading up $2.82, or 4.1 percent, at $71.71. They have more than tripled in value in 2011 as PSI-7977 and other drugs have advanced through clinical testing.

Vertex stock lost $2.84, or 7.8 percent, falling to $33.79. It's down 34 percent since Incivek was approved on May 23. The shares reached an all-time high of $58.87 earlier in May.

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