Drug development is a risky prospect, especially for small specialty companies with only a few drugs in their pipeline. Panacos Pharmaceuticals
With the phase 1 trial for this version of bevirimat, Panacos' initial HIV therapy, this new compound is only about a year and a half behind the original bevirimat, depending on how long studies of the original are delayed. Management hasn't given any timelines for the drug's progress, but based on the history of bevirimat and other HIV compounds, phase 1 testing should be finished by the end of the year.
Panacos was smart to burn a little extra cash now and move its second-generation maturation inhibitor into the clinic. This gives it a backup plan in case its first maturation inhibitor program doesn't work out, which is a possibility. It's akin to not putting all its eggs in the first program's basket, and also will save loads of cash because there would be less need for dilutive financings if it ever has to revert to this backup compound.
Those defensive benefits aren't the only things to gain by bringing the new maturation inhibitor into the clinic. Panacos said that this new compound might be active against strains of the virus that become resistant to the original bevirimat, which is always a problem for long-term dosing of HIV therapies.
Companies that take only one shot and don't have backup compounds for their lead drugs are left with nothing if that compound fails or is delayed for a long time. As many investors know, diversification is a good strategy, so it's nice to see drug developers like Panacos acting in Foolish ways.
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Fool contributor Brian Lawler owns shares of Panacos and likes to eat paninis. The Fool has a disclosure policy.
