The Case of the Not-So-Mysterious Hep C Data

Investors shouldn't be shocked by double-digit price changes in biotechs. Multiple times a week I write about clinical trial data or Food and Drug Administration decisions that send companies' share prices one way or another.

But double-digit changes without so much as a peep from the company? That's a little strange.


Price Change

Pharmasset (Nasdaq: VRUS  ) 34.6%
Vertex Pharmaceuticals (Nasdaq: VRTX  ) (8.4%)

Source: Capital IQ, a division of Standard & Poor's. Data from March 4-8.

Pharmasset's rise and Vertex's tumble are due to the same issue: an abstract published for an upcoming meeting of the European Association for the Study of the Liver. Pharmasset and the press are prohibited from talking about the data until the study is published, but the abstract became available to the public -- including investors -- on Monday.

The abstract reported on a combination of Pharmasset's two oral hepatitis C drugs -- PSI-938 and PSI-7977 -- in an early stage trial. When the two drugs were combined, 94% of patients had undetectable levels of virus after just 14 days.

Vertex is on the verge of getting its oral hepatitis C drug telaprevir approved, so it'll naturally fall anytime an up-and-coming drug shows positive results.

While the data are fairly amazing, let's keep this in perspective. The combination was only tested on 16 patients and it was only tested for 14 days. The virus could come back as it gains resistance to the drug -- called viral breakthrough. Vertex stopped some combinations of its oral drugs for that very reason.

There's also the potential for safety issues. None were seen in this small, short trial, but who knows what might pop up once the drug combinations is tested in a large number of patients for a longer period of time.

Investors need to be careful crowning Pharmasset the heir apparent to the hepatitis C thrown. Yes, Vertex and Merck (NYSE: MRK  ) will be overthrown eventually, but Pharmasset has a lot to prove and plenty of competition from Bristol-Myers Squibb (NYSE: BMY  ) , Gilead Sciences (Nasdaq: GILD  ) , and others that are also developing oral hepatitis C compounds.

Interested in keeping track of Pharmasset as it pushes further with its hepatitis C program? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Pharmasset.

Vertex is a Motley Fool Rule Breakers recommendation. Gilead Sciences is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

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