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Bristol-Myers Missing Hep C Data Raises Red Flags, May Boost Gilead, Idenix

Stocks in this article: BMY GILD IDIX

NEW YORK ( TheStreet) -- Since my return from the European Association for the Study of the Liver (EASL) conference two weeks ago, I have been unable to get over the strange behavior of executives at Bristol-Myers Squibb (BMY). As I discussed in my EASL wrap-up, investors should view with suspicion Bristol-Myers' complaints about Gilead Sciences' (GILD) refusing to collaborate on a late-stage study of the hepatitis C drugs GS-7977 and daclatasvir partnership. Then there's Bristol-Myers' odd and prolonged silence about INX-189 -- the nucleoside polymerase inhibitor, or "nuc," acquired in the $2.5 billion Inhibitex deal.

I suspect something is wrong with Bristol-Myers' INX-189, which has since been renamed by the company as BMS-094. The red flags are popping up everywhere. If I'm right about Bristol-Myers being in trouble, Gilead's lead in the race to develop all-oral therapies for hepatitis C will expand and Idenix Pharmaceuticals' (IDIX) hepatitis C drugs become more attractive.

Let's examine the details:

1. New BMS-094 data should have been available by EASL. In mid-January, Bristol-Myers completed enrollment in a Phase II trial of BMS-094 in genotype 2/3 patients, an easier-to-treat subpopulation of hepatitis C. By the time the hepatitis C world gathered in Barcelona for EASL in April, Bristol-Myers likely had four-week and 12-week on-treatment viral response data from this study. These results will provide an important first look at BMS-094's efficacy and safety, yet Bristol-Myers said nothing about the data at EASL.

2. Bristol-Myers passed on a second chance to provide insight on BMS-094 during the company's first-quarter earnings conference call. At least 16 weeks have now passed since the study completed enrollment. By now, Bristol-Myers should have four-week sustained virologic response (SVR4) data, an early indication of cure.

Yet on its April 26 conference call, Bristol-Myers executives once again declined to provide a meaningful clinical update on BMS-094. Instead, Chief Scientific Officer Elliot Sigal spoke in generalities about the drug.

"We feel that there are multiple doses that are safe for human testing from 50 to 200 mg ," said Sigal , referring to BMS-094. "We will be getting more experience with 200 mg throughout this year. We will have safety data on a range of doses of 50 to 100 mg , which we will at least have internally and hopefully talk about towards the end of the year." Emphasis mine.

3. BMS-094 produces a toxic metabolite. At a scientific conference in 2010, Inhibitex presented preclinical data on the metabolic pathway for BMS-094, then known as INX-189. The first step in this metabolic pathway yields a byproduct called 1-naphthol, a chemical that is toxic to hepatocytes, or liver cells. (My source for the background data is a 1984 paper published in Biochemical Pharmacology.) To be fair, the clinical importance of 1-naphthol at BMS-094's potential clinical doses remains unclear. However, two other nucs in clinical development -- Gilead's GS-7977 and Idenix' IDX-184 -- do not produce 1-naphthol. As an investor, the presence of this toxic byproduct should be a big concern until proven otherwise.

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