Banking on Biotech: Investing in a Hepatitis C Drug

Brittney Barrett  |

Hepatitis C afflicts four times more people than HIV on a global basis, but help may be on the horizon. Biotech companies have been working for years to develop a treatment to the infectious disease that affects more than 3.2 million people in the U.S. and as many as 100 million worldwide.  Now, with research bringing companies closer than ever, it’s become a rat race to reach the finish first and present the best option.  Anyone who has been noticing the climbing shares of companies like Pharmasset (NASDAQ: VRUS) and Vertex Pharmaceuticals (NASDAQ: VRTX) can see that the hype is already pushing up share prices way high. Whoever cracks this code first is going to be a big winner and investors are putting in their bets. Colossal companies like Merck & Co. (NYSE: MRK), Gilead Sciences (NASDAQ: GILD), Bristol-Myers Squibb (NYSE: BMY) and Johnson & Johnson (NYSE: JNJ) have all entered the ring but the real winners look to be these smaller companies.

So far this year Pharmasset has risen 118%, but the shares will only continue to climb should they receive FDA approval. Only that's not a sure bet yet so investors considering the stock may do themselves a favor by holding out. The company is sure to face competitors before it reaches the finish line.

Merck, for instance, with late-stage clinical trials indicating that integration of the company’s boceprevir

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to standard hepatitis C therapy increases the viral cure rate  to 75%. The most recent reports on boceprevir have produced convincing results according to Dr. Raj Reddy, co-researcher of one of the studies and director of hepatology and medical director of liver transplantation at the University of Pennsylvania. He says studies indicate boceprevir, a protease inhibitor effectively increasesresponse rates in previously untreated patients when paired with peginterferon and ribavirin.

Meanwhile, telaprevir, from Vertex Pharmaceuticals also looks promising. Just yesterday it was noted that telaprevir has priority review status in the United States, Canada and European Union, for the treatment of patients with genotype 1 chronic hepatitis C. The US Food and Drug Administration (FDA) has decided upon May 23, 2011 as a target date for completion for the drug.

Vertex will maintain US distribution, development and commercialization within the U.S., but has engaged in partnership agreements with Johnson & Johnson (JNJ) for international dealings. The final approval of telaprevir will be beneficial for share prices of both companies.

As of last week, Vertex had experienced 38.4% return for the year. The company has a market cap of $9.8 billion and alongside its hepatitis C treatment has revealed promising research on a potential cystic fibrosis drug called VX-770. With eggs spread over two baskets, an investment in the company might feel slightly safer than alternatives that place huge amount of stress on a single product that could either thrive or bomb in stage 3 trials.

Inhibitex Inc. (NASDAQ: INHX) is another biotech outfit looking to leapfrog on the new research as patents become exhausted and open up the way for further progress. Just recently the company endeavored to raise new capital to fund a Phase 2 trial of a Hepatitis C Treatment. The company presented an 11 million share offering priced at a 12% discount to Wednesday's close as a means of building cash for the research. Even still though, with other companies fast approaching a successful treatment, developments may be delayed and not pack the same punch as whoever gets there first. Shares of Inhibitex slipped 4.5% to $4.43 premarket, compared with the $4.10 offer price. Despite the slip, shares of companies tripled in value over the last year.

Investors interested in cashing in on the Hepatitis C treatments should be wary, as the success of these stocks have the potential to produce huge gains but timing is everything here. If one treatment is approved and hits the market before another (right now telaprevir appears to be in the lead), that company will boom while the others decline. Investors are paying extremely close attention to these stocks and confidence and numbers waver with every report. Investors who choose to dabble should monitor meticulously both the progress of the companies they are invested in and its competitors.



DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

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