Gilead Suffers First Hep C Drug Setback

Updated with new information, current stock price.

FOSTER CITY, Calif. (TheStreet) --Gilead Sciences (GILD) just had its first stumble in the race to develop an all-oral therapy for hepatitis C.

A two-drug regimen of Gilead's experimental GS-7977 plus ribavirin failed to suppress the hepatitis C virus in a group of difficult-to-treat patients who had also failed prior therapy, Gilead announced Friday.

Gilead's GS-7977 streak as the ultimate, flawless hepatitis C drug has now ended. Friday's negative results are a setback and not a fatal blow to the drug's future. However, Gilead spent $11 billion to gain control of GS-7977 through the acquisition of Pharmasset so any failure, no matter how small, is being magnified in the eyes of investors.

Gilead shares plunged 16% to $45.85 in Friday pre-market trading while investors bid up share in other hepatitis C drug stocks, including Idenix Pharmaceuticals (IDIX), Achillion Pharmaceuticals (ACHN) and Vertex Pharmaceuticals (VRTX).

Achillion is the biggest gainer Friday, up 20% to $10.52, because the company is developing two drugs -- a protease inhibitor and an NS5A inhibitor -- that may now play more important roles in future all-oral hepatitis C regimens. Achillion, like Idenix, has been mentioned as a potential takeover target..

In this study, ten hepatitis C genotype 1 patients with a prior "null" response to interferon and ribavirin were treated with a combination of GS-7977 plus ribavirin for 12 weeks. Within four weeks of completing treatment, six of eight patients relapsed, meaning the hepatitis C virus, which had been suppressed, came roaring back. Two patients have not relapsed, however they have only reached the two week post-treatment time point, Gilead said.

Null responders are among the most difficult to treat hepatitis C patients because prior therapy has not worked for them.

"These data answer an important question about the use of GS-7977 and ribavirin for the treatment of genotype 1 null responder patients, suggesting that additional direct acting antivirals may be necessary to effectively treat this patient population," said Norbert Bischofberger, Gilead's research chief, in a statement.

GS-7977 is a so-called nucleotide polymerase inhibitor, a potent class of hepatitis C drug believed to have a high barrier to viral resistance. This means the virus has a difficult time mutating or changing into forms that can fight off the drug. Friday's negative data, however, has raised questions about just how effective these "nukes" might be.

Genotype 1 is the predominant form of hepatitis C found in North America and Europe. It's also the most difficult form of the disease to treat. On a call with investors Friday morning, Gilead executives said the company is exploring further ways of treating genotype 1 patients, including adding other direct-acting antiviral drugs to the GS-7977-ribavirin combination or perhaps treating patients longer.

Further data on GS-7977 is coming soon, including important results from a study testing the drug in combination with ribavirin in genoptype 1 patients who have not been previously treated. Gilead is also studying GS-7977 in combination with an experimental drug from Bristol-Myers Squibb (BMY).

--Written by Adam Feuerstein in Boston.



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