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Roche's All-Oral Hep C Therapy Could Be First, Not Best, to Reach Market

Stocks in this article: ANDS VRUS INHX ACHN IDIX RHHBY.PK MRK

BOSTON ( TheStreet) -- Roche's (RHHBY) purchase of Anadys (ANDS) likely provides the third drug in what might be the first (but not necessarily best) all-oral, interferon-free therapy for hepatitis C to begin phase III studies.

Being first to market with an all-oral Hep C therapy is important to Roche because the company has a lot to lose by lagging behind. Roche sells Pegasys, the leading interferon used to treat hepatitis C today, with sales of 1.1 billion Swiss francs through the first nine months of the year. Roche executives aren't stupid; they look ahead a few years and see Pegasys sales going away, similar to the patent cliffs hitting other Big Pharma drug blockbusters.

If Roche wants to maintain or grow its Hep C franchise, it has to figure out a way to develop an all-oral (interferon-free) therapy -- and fast.

One way of doing this is by acquiring or partnering Hep C drugs others consider to be weak or non-competitive on their own. That description fits Anadys' lead drug setrobuvir, which for $230 million, Roche is acquiring at a relatively low price.

InterMune's (ITMN) danoprevir, which Roche acquired last year, is also seen as a weak Hep C drug.

Roche could start relatively quickly a phase III study against Hep C that combines three oral drugs -- setrobuvir (from Anadys), RG7128 (partnered with Pharmasset) and Merck's (MRK - Get Report) currently approved Hep C drug Victrelis, predicts Brian Skorney, biotech analyst at Brean Murray, Carret & Co. Roche and Merck have already announced plans to collaborate on Hep C.

Another potential Roche all-oral regimen could include setrobuvir, RG7128 and danoprevir (acquired from InterMune).

These Roche triple combinations may require longer 24-week dosing (instead of faster 8 or 12 week dosing) and may not be as potent or effective as all-oral regimens being developed by Pharmasset and others, but Roche may figure that being first is more important than being best, adds Skorney.

In the interest of fairness, it's worth noting that Skorney had been bearish on Anadys going into today's Roche deal. He says he didn't think Roche would buy Anadys because he under-estimated the company's desire to move quickly to develop an all-oral Hep C therapy.

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