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Fast-Rising BioCryst Hits Brakes After Patent Snafu


Hepatitis C drug developer's stock more than doubled this year, but some investors are bailing today after an Australian company was granted a patent covering BioCryst's experimental treatment.

BioCryst Pharmaceuticals' (BCRX) stock has been on a tear, more than doubling since the beginning of the year, on hope for an experimental hepatitis C drug.

The company hasn't even begun testing the drug in human studies but has said it wants to seek a partner to help pay for such trials.

After testing its drug BCX5191 in a pre-clinical study against a developmental drug being studied by Gilead (GILD), BioCryst's top medical officer William Sheridan said the company's drug "has the potential to be the backbone of best-in-class oral treatment regimens for hepatitis C patients."

The rapid acceleration of BioCryst's shares is another illustration of the hot hepatitis C drug market.

But the company hit a snag. In a Securities and Exchange filing Monday, BioCryst says the US Patent and Trademark Office granted a patent to an Australian company, Biota Holdings. The patent was "improvidently granted," BioCryst says. And the company will fight to "correct an apparent error" made by the patent office.

After falling by high double digits earlier in the day, BioCryst's shares dropped almost 10% to $5.01 in midday trading Tuesday.

Specifically, US officials issued a patent to Biota containing a claim that covers the structure of BioCryst's hepatitis C drug. Biota's patent application was filed almost a year and half after BioCryst's, according to the securities filing. The company doesn't offer up any explanation why the Australian company was awarded a patent.

BioCryst says its own patent is still pending and "intends to pursue its interest vigorously to seek a resolution." The company hired the Finnegan law firm, an intellectual property specialist, to represent it.

While he admits the event raises questions about BioCryst's rights to the drug, JMP Securities analyst Charles Duncan recommends buying the stock and sets an $8 price target. Duncan says his target is based on the sum of the company's business, including other drugs in development. BioCryst is developing flu drug peramivir as well as a gout treatment. (See Gout Drug Developer BioCryst Rises on Study)

Even when companies say they have the clear advantage in patent disputes, the process to appeal can be time-consuming. Ask Amarin (AMRN), which has been going back and forth with patent officials over an experimental heart drug.

BioCryst hopes to begin testing BCX5191 in humans during the fourth quarter of this year. Updates on the patent fight will be a catalyst for the stock going forward.

Twitter: @brettchase

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