April 19, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of companies in the highly publicized hepatitis C sector are vacillating wildly today following news from Gilead Sciences (Nasdaq: GILD ) last night that its experimental drug 7977, acquired when it purchased Pharmasset, cleared the hepatitis C virus in 22 of 25 patients when combined with ribavirin after just 12 weeks. Gilead has been up as much as 17%, while rival Achillon Pharmaceuticals (Nasdaq: ACHN ) dipped 25%.
So what: To make things even more confusing, Idenix Pharmaceuticals (Nasdaq: IDIX ) also chose to release an update on its phase 1 hepatitis C drug IDX-719, which showed statistical reductions in virus load and announced it has completed enrollment in its phase 2 trial for IDX-184. Its stock had been up as much as 18% but is now flat for the day. Needless to say, the race is on to get the world's first hepatitis C drug approved that doesn't rely on interferon.
Now what: The real reason most of the sector is down is that Gilead's drug has the potential to make all other drug hopefuls obsolete. The sheer effectiveness and time frame with which GS-7977 has worked is beyond phenomenal, and there's a decent possibility that companies such as Achillon and Idenix are fighting a losing battle. This could also be bad news for Bristol-Myers Squibb (NYSE: BMY ) , which ponied up $2.5 billion for Inhibitex that barely out of phase 1 clinical trials. Michael Yee, an analyst at RBC Capital Markets, thinks GS-7977 could add $3 billion to $4 billion in revenue by as early as 2018. The race is definitely on, but I'm more than happy staying on the sidelines until valuations improve.
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