The euphoria over Gilead Sciences' (Nasdaq: GILD) acquisition of Pharmasset (Nasdaq: VRUS) and Roche's purchase of Anadys Pharmaceuticals seems to have caused memory loss in investors.

But they got a reminder of reality today, when Pharmasset announced it was discontinuing all treatment arms in one of its phase 2b trials that contain the drug PSI-938. The drug candidate caused laboratory abnormalities in tests associated with liver function.

This is nothing new.

Pfizer could be further along in the hepatitis C race if ViroPharma and Wyeth's HCV-796 hadn't died back in 2008, before Pfizer bought Wyeth. HCV-796 suffered from the same potential liver issues as PSI-938. Ditto for InterMune (Nasdaq: ITMN) and Roche's danoprevir at high doses. Elevated liver enzyme levels are an issue with all drugs, but they're especially problematic for hepatitis C patients, since the virus attacks the liver.

And the list goes on. Boehringer Ingelheim had problems with one of its protease inhibitors. And trials involving Idenix Pharmaceuticals' (Nasdaq: IDIX) IDX320 were put on clinical hold by the FDA before the company eventually scrapped the compound.

Does the failure of PSI-938 and all the aforementioned compounds mean that Inhibitex (Nasdaq: INHX) and Idenix -- both down big today -- will also run into safety issues? Absolutely not. Liver toxicity is still a great mystery to drugmakers. If scientists understood what caused liver issues, they could design drugs that didn't cause it. And besides, Merck's (NYSE: MRK) Victrelis and Vertex Pharmaceuticals' (Nasdaq: VRTX) Incivek both made it through without major safety issues.

But the failure is a reminder that long-term safety data is still very important to get a drug through the clinical development marathon. Today's drops are justified because the companies were overhyped to begin with. Investors would be well served putting down the acquisition-euphoria Kool-Aid and picking up a history book.

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