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.
That's hepatitis C for you. Gilead Sciences
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.
Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Exelixis. Motley Fool newsletter services have recommended buying shares of Gilead Sciences, Vertex Pharmaceuticals, and Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.