Take a competitor that gets taken out for 59% premium above its all-time high, add in a disease where clinical data tends to translate well from early trials to later ones, and you're left with some lofty valuations.
Yesterday, Inhibitex (Nasdaq: INHX ) pushed over the $1 billion market-cap level despite having no drugs in phase 3 development. Compare that with Exelixis (Nasdaq: EXEL ) and Amarin (Nasdaq: AMRN ) , which have both reported positive phase 3 results for their lead drugs but have smaller market caps.
That's hepatitis C for you. Gilead Sciences (Nasdaq: GILD ) paid $11 billion for Pharmasset (Nasdaq: VRUS ) . Vertex Pharmaceuticals (Nasdaq: VRTX ) has an instant blockbuster on its hands. Lofty valuations are nothing new; there's just a new set of players.
The reason for yesterday's excitement over Inhibitex was top-line data for its lead hepatitis C drug, INX-189. The highest dose, 100 mg per day, combined with ribavirin knocked down virus levels considerably, and the company doesn't think it's reached the maximum dose. Inhibitex plans to test 200 mg per day in combination with ribavirin and 300 mg on its own to see if they're more potent while still maintaining the stellar safety profile to date.
For most indications we'd laugh at phase 1 data. Beyond saying that the drug doesn't have any deleterious effects, phase 1 trials are essentially useless to investors. But for hepatitis C, the activity measured in phase 1 trials usually translates fairly well into phase 2 and phase 3 trials.
Inhibitex isn't out of the woods just yet. Safety issues can crop up as it tests the drug on larger populations, and longer treatment times are important for determining whether the virus levels will stay down. Rebounding is a big problem, because it means the virus has become resistant to the drug.
Even after the run Inhibitex has had, there's still upside if INX-189 is effective on its own or in combination with other medications. That is, if some larger drugmaker doesn't purchase it first.
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