Difficult Obstacles for SciClone

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With all the new technologies and discoveries, some drugmakers are undoubtedly going to be left in the dust. SciClone Pharmaceuticals (Nasdaq: SCLN), with its lead drug Zadaxin, might be one such drugmaker.

On Thursday, SciClone announced that patients in a large phase 3 trial testing Zadaxin as a treatment for hepatitis C had completed dosing and that top-line clinical trial data would be announced in the fourth quarter.

Zadaxin has been tested for a range of indications including hepatitis B, melanoma, and hepatitis C. In February, SciClone released "blinded" data from one point in this phase 3 study showing that 31% of patients who had failed with other hepatitis C therapies had no detectable levels of the virus in their bloodstream at the end of 48 weeks in the trial.

The most commonly used hepatitis C standard-of-care drugs from Schering-Plough (NYSE: SGP) and Roche have cured up to 16% of patients in clinical testing. The catch with comparing the Zadaxin phase 3 data with this data is that the interim look at the Zadaxin trial contains both placebo and drug-treated patients -- that's what "blinded" means -- so the high response rate could theoretically be mostly placebo patients (or vice-versa, if you are a SciClone optimist). Also, this 31% response rate was at the end of treatment, so we'll need to wait for the full results to see where the long-term hepatitis C cure rates from this study will fall.

There are other potential issues for Zadaxin as well. But the bigger problem is that even in a perfect-case scenario -- it makes it onto the market at this point (despite significant hurdles) -- data from other compounds like Vertex Pharmaceuticals' (Nasdaq: VRTX) protease inhibitor telaprevir show them to be extremely effective in similar patients. So they may be ahead in the race to be the next hepatitis C drug onto the market. Being second on market and potentially inferior to the competition is not a winning recipe for commercial success with a drug.

Zadaxin is already approved for marketing in hepatitis B in China, which is undoubtedly the Wild West of pharmaceuticals, so who knows how Zadaxin will fare over there. But its potential as a treatment for hepatitis C in the U.S. and European Union looks rough at this point because of formidable competition.