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Safety (Still) Trumps Acquisitions in Hep C

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The euphoria over Gilead Sciences' (Nasdaq: GILD  ) acquisition of Pharmasset (Nasdaq: VRUS  ) and Roche's purchase of Anadys Pharmaceuticals seems to have caused memory loss in investors.

But they got a reminder of reality today, when Pharmasset announced it was discontinuing all treatment arms in one of its phase 2b trials that contain the drug PSI-938. The drug candidate caused laboratory abnormalities in tests associated with liver function.

This is nothing new.

Pfizer could be further along in the hepatitis C race if ViroPharma and Wyeth's HCV-796 hadn't died back in 2008, before Pfizer bought Wyeth. HCV-796 suffered from the same potential liver issues as PSI-938. Ditto for InterMune (Nasdaq: ITMN  ) and Roche's danoprevir at high doses. Elevated liver enzyme levels are an issue with all drugs, but they're especially problematic for hepatitis C patients, since the virus attacks the liver.

And the list goes on. Boehringer Ingelheim had problems with one of its protease inhibitors. And trials involving Idenix Pharmaceuticals' (Nasdaq: IDIX  ) IDX320 were put on clinical hold by the FDA before the company eventually scrapped the compound.

Does the failure of PSI-938 and all the aforementioned compounds mean that Inhibitex (Nasdaq: INHX  ) and Idenix -- both down big today -- will also run into safety issues? Absolutely not. Liver toxicity is still a great mystery to drugmakers. If scientists understood what caused liver issues, they could design drugs that didn't cause it. And besides, Merck's (NYSE: MRK  ) Victrelis and Vertex Pharmaceuticals' (Nasdaq: VRTX  ) Incivek both made it through without major safety issues.

But the failure is a reminder that long-term safety data is still very important to get a drug through the clinical development marathon. Today's drops are justified because the companies were overhyped to begin with. Investors would be well served putting down the acquisition-euphoria Kool-Aid and picking up a history book.

Need help keeping up with the news? Add all the hepatitis C drugmakers to My Watchlist, the Fool's free watchlist service. Or add them individually:

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Pfizer, Gilead Sciences, and 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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