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Pharmasset Winning Hepatitis Drug Race


But rivals such as Inhibitex and Abbott are moving along. Vertex loses value on competitive worries.

After a weekend of wowing scientific and investor communities, Pharmasset (VRUS) is rising Monday as the company moves forward with a next-generation treatment for the liver-wasting virus hepatitis C.

Another upstart, Inhibitex (INHX) doubled in price Friday after releasing its own good news: initial data from a middle-stage study of its hepatitis C drug showed the experimental treatment has promise.

Meanwhile, the reigning champ in this area of medicine, Vertex Pharmaceuticals (VRTX) is falling Monday as some investors believe that its sales are going to be hurt by Pharmasset's progress. Expect these stocks and another hepatitis drug developer -- Achillion Pharmaceuticals (ACHN) -- to bounce around as their treatments are highlighted during a major medical meeting on liver diseases that continues through tomorrow in San Francisco.

An emerging story line this year has been Pharmasset's rise as a potential challenger to Vertex. Mind you, Vertex is beating expectations with its new hepatitis treatment Incivek and it too released positive study data for its drug. (See Vertex Hepatitis Drug Beats Estimates.) Pharmasset doesn't have a drug on the market yet but it's impressed investors with its study data.

What's to like about Pharmasset? The goal for the next round of drugs to treat hepatitis C is to produce a therapy that can be taken without the injected older treatment interferon, which has serious side effects. Incivek is approved for sale in the US as a course of treatment to be taken with interferon. Pharmasset is working toward the first all-oral treatment for hepatitis C, which would most definitely hurt Incivek's sales if approved. The company, armed with -- so-far -- favorable data, plans to apply for US approval of its drug PSI-7977 in the second half of 2013.

"Despite an initial strong Incivek ramp, the growing data supporting less toxic and all-oral regimens makes us doubt the timing of peak sales and the rapidity of franchise erosion," RBC Capital Markets analyst Jason Kantor says in a note Monday morning about Vertex. Kantor lowered his rating on Vertex to a hold from a buy.

To be sure, it's becoming a crowded field of competitors. (See Buying Into a Hot Hepatitis C Drug Market.) Big pharma also is in the hunt. Merck (MRK) has a competitor to Icivek on the market: Victrelis. That drug was approved just before Vertex's product earlier this year but Incivek has captured the vast majority of sales. Abbott Laboratories (ABT) and Swiss drug maker Roche also are studying hepatitis C treatments. Last month, Abbott said it may have an interferon-free treatment on the market by 2015.

Shares of Vertex fell 8% to $33.69 in late-morning trading Monday. The shares are down 3% this year. Pharmasset, up more than 200% this year, rose another 3% to $71. Inhibitex jumped 13% Monday to $9.63 and is up almost 270% on the year. Achillion fell 4% Monday morning to $6.20. The stock is up 49% this year.

Twitter: @brettchase

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No positions in stocks mentioned.
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