It can be difficult -- and sometimes impossible -- for drugmakers to hit that sweet spot where a drug works with manageable side effects and an optimal dosing schedule. InterMune (Nasdaq: ITMN) and Roche haven't hit it yet, but at least it seems possible that the sweet spot exists.

Top-line data from a phase 2b study of their hepatitis C drug danoprevir suggest that the drug works well -- when combined with Roche's Pegasys and Copegus. All three doses had cure rates near 90% compared with 43% for placebo. The highest dose, 900 milligrams twice daily, had signals of liver toxicity issues and had been stopped. But the data at the two lower doses looked just as good with little sign of liver toxicity.

Rather than live on the edge of a safety signal, Roche and InterMune are going to test lower doses of the drug in combination with Abbott Labs' (NYSE: ABT) protease booster Norvir to see if a lower dose in combination can work just as well. Ideally, they'll also find a twice-daily or even once-a-day dose, which patients would prefer over the three times daily that the lowest dose was tested at.

Running another phase 2 trial instead of moving into phase 3 will put danoprevir further behind the front-runners: Merck's (NYSE: MRK) boceprevir and Vertex Pharmaceuticals' (Nasdaq: VRTX) telaprevir. But Roche and InterMune don't have much other choice.

By the time danoprevir makes it to market, the hepatitis C treatment space is likely to be crowded and there will be additional drugs from GlaxoSmithKline (NYSE: GSK), Abbott, and others coming up from behind. Maximizing the drug's efficiency, safety, and dosing schedule now should give InterMune and Roche a competitive advantage once danoprevir makes it to market.

Balancing safety and efficacy is not unlike investors balancing risk and reward. Tim Hanson says take more of both.