Inhibitex Investors: Why Shares Popped 115%

There's no greater success in biotech investing then a binary event that propels shares like a rocket. Inhibitex (Nasdaq: INHX  ) investors certainly are enjoying the feeling after doubling their money overnight.

Unexpectedly positive efficacy and safety results tend to do that -- especially for a drug like INX-189, which treats the large and lucrative hepatitis-C market.

This has some analysts comparing Inhibitix with Pharmasset (Nasdaq: VRUS  ) and its hep-C drug candidate PSI-7977. That is a fair comparison, because unlike current treatments, both are oral medications and don't require peginterferon and its nasty side effects. The potential patient-friendliness of these "next-gen" drugs could make investor enthusiasm over the sales success of Vertex's (Nasdaq: VRTX  ) Incivek over Merck's (NYSE: MRK  ) Victrelis ultimately short-lived.

The danger here is if future clinical trial results don't play out as well. This happens all the time. And when a binary event goes bad, it goes really bad. Shares of Rexahn (AMEX: RNN  ) and OXiGENE (Nasdaq: OXGN  ) were both down more than 30% on Friday thanks to disappointing trial results for their respective drugs, Serdaxin and Zybrestat. Potential investors thinking about hopping on board now need to be aware of the dangers.

That said, Pharmasset currently sports a market cap nearly 8 times greater than Inhibitex, post-pop. Wall Street's newest biotech darling looks to have plenty of room to run.

Keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.

David Williamson owned no shares of the companies mentioned at the time of publication. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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