Hopefully drug developer ViroPharma (Nasdaq: VPHM ) was only on everyone's watch list today as shares were down more than 18% following the announcement that it was halting dosing of its hepatitis C antiviral compound in a phase 2 study.
ViroPharma's hepatitis C drug candidate, HCV-796, is being developed with partner Wyeth (NYSE: WYE ) . Of all the HCV polymerase inhibitor drug candidates it was the furthest along in testing after Idenix Pharmaceuticals' (Nasdaq: IDIX ) polymerase inhibitor failed in a phase 2 study two months ago.
What led ViroPharma and Wyeth to end dosing of HCV-796 was that 8% of patients taking the drug in the phase 2 study were experiencing higher liver enzyme levels compared to only 1% of patients in the standard of care arm of the study.
Elevations of liver enzymes are a concern for any drug because they often are an early indicator of liver-related disorders if whatever is causing the raised enzyme levels is not corrected. That this issue didn't show up in earlier human studies of HCV-796 is likely due to the short-term nature of the studies and the fact that hepatitis C is a disease that adversely affects the liver by itself.
If there is a small sliver of hope from the study results announced today, it is that HCV-796 was highly active in eliminating HCV for genotype-1 patients who have previously failed treatment with the standard of care. Twenty-three percent of those null responders (as ViroPharma calls them) had undetectable levels of the virus in their bodies after only 12 weeks of treatment. Undetectable hepatitis C viral loads are a strong indicator of later being declared cured of the disease; currently there are no good treatment options for these non-responder patients.
As the FDA likes to point out, though, raised liver enzyme levels are the No. 1 cause of all drug adverse events and, more worryingly, all new drug application rejections. At best, these results suggest that any path forward for HCV-796 would be as a second-line agent for hepatitis C genotype-1 patients failing existing therapies.
There is still a long-shot possibility for the drug if the liver enzyme issues can be corrected or reduced in future studies. Examples of possible solutions include either lowering the dosing of HCV-796 or shortening the treatment duration, but investors shouldn't hold their breath that the drug will remain in development.
These safety issues are definitely a major setback for HCV-796 but it's also worth noting that shares of ViroPharma are at dirt cheap levels right now. The company has a market cap of $580 million with operating income of at least $100 million expected this year and over $260 million in net cash as of the end of the second quarter.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.