Anadys Stock Falls on Hep C Data

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Anadys Stock Falls on Hep C Data

04/23/09 - 12:00 PM EDT

Anadys Pharmaceuticals(ANDS Quote) released new data on its lead hepatitis C

drug Thursday demonstrating the drug's antiviral activity at three different

doses, but patient dropouts due to rash raised concerns about the drug's safety

and sent Anadys shares tumbling.

Anadys owns full rights to its drug ANA598 but wants to attract one of the

larger drug companies involved in hepatitis C for a partnership or outright

acquisition. The company has already shared the new data on ANA598 made public

Thursday with prospective suitors under confidentiality agreements.

In the phase 1b study of 35 patients with hepatitis C, three days of treatment

with ANA598 resulted in a median viral load reduction of greater than 2 log, or

more than 99%, at all three dose levels tested, the company said.

At the lowest dose, 200 mg twice daily, treatment with ANA598 resulted in a

median 2.4-log reduction in the hepatitis C viral load. At the 400 mg

twice-daily dose, the median viral load reduction was 2.3 log; while at 800 mg

twice daily, the median viral load reduction was 2.9 log. None of the patients

receiving placebo in the study reported significant reductions in viral load, by

comparison.

Patients in the study with the genotype 1b form of hepatitis C reported a

greater decrease in viral load across all three doses of ANA598 compared to

patients with the genotype 1a form of the disease. Genotype 1b is the most

common subtype of hepatitis C found in North America and Europe.

But three healthy volunteers treated with ANA598 in a separate 14-day safety

study developed a rash severe enough to cause them to discontinue treatment and

drop out of the study. Investors Thursday were more worried about this potential

safety issue than the drug's efficacy, which is why Anadys shares are falling.

The final results of this phase Ib study of ANA598 were presented Thursday at

the annual meeting of the European Association of the Study of the Liver, which

began today in Copenhagen, Denmark. Anadys released initial data from this study

in January.

Companies like Anadys first conduct brief studies in small numbers of patients

to quickly demonstrate a drug's safety and ability to quickly tamp down the

virus that causes hepatitis C.

Only if an experimental drug passes this initial test does a company then

advance to longer and bigger studies in which the drug being developed is

usually combined with existing hepatitis C therapies.

Just such a combination phase II study of ANA598 with the current standard of

care in hepatitis C will be ready to begin in the middle of the year, the

company said.

ANA598 is what is known as a non-nucleoside polymerase inhibitor. These drugs

act directly against specific enzymes to prevent the hepatitis C virus from

making copies of itself. That's different from current treatments for hepatitis

C, namely long-acting forms of interferon and a drug called ribavirin, which

work by stimulating the body's immune system to destroy the virus.

Pfizer(PFE Quote), Vertex Pharmaceuticals(VRTX Quote) and Merck>(MRK Quote) also

are working on non-nucleoside polymerase inhibitors for hepatitis C.

The future in hepatitis C treatment is moving toward combinations of direct

antivirals, in much the same way that HIV patients are treated today. A drug

like ANA598, therefore, may be valuable to a larger drug company that can

combine it with another drug already in clinical trials.

Anadys ended the first quarter with about $20 million in cash, which based on

its burn rate is enough to last another two or three quarters. Anadys,

therefore, needs to come to an agreement on a partnership and/or acquisition

relatively quickly or face having to raise more money in the public equity

markets

In the coming days at the EASL conference, companies like Pharmasset(VRUS

Quote), InterMune>(ITMN Quote), & (JNJ Quote) and Vertex will be

presenting new data on their respective hepatitis C drug candidates.

Anadys shares were down 35.5% to $3.80 in recent trading.