Updated with new information.



) --

Bristol-Myers Squibb

(BMY) - Get Report

suspended a mid-stage study of its experimental hepatitis C drug BMS-094 due to a serious safety issue -- a major blow to the company's research pipeline that is also likely to rejigger the way Wall Street views other companies' efforts to develop an all-oral therapy against the viral liver disease.

BMS-094 belongs to the highly coveted and potent class of hepatitis C drugs known as nucleotide polymerase inhibitors, or "nucs" for short. If Bristol is forced to shelve BMS-094 permanently, competitors with their own nucs still in development --

Gilead Sciences

(GILD) - Get Report


Idenix Pharmaceuticals



Vertex Pharmaceuticals

(VRTX) - Get Report

-- stand to benefit as long as the toxicity that derailed BMS-094 is specific to that drug and is not a class effect.

For Bristol, the blowup of BMS-094 is even more painful because the drug was the sole reason behind the $2.5 billion acquisition of Inhibitex last January.

The safety issue that forced Bristol to suspend the phase II study of BMS-094 is believed to be heart failure, according to ISI Group analyst Mark Schoenebaum. Bristol is not positive that BMS-094 caused the heart failure but the company is "very concerned" and is taking the extraordinary step of evaluating all patients treated with the drug for potential heart problems, said Schoenebaum in an email to clients.

"We recommend that investors assume BMY's

Bristol's nuc is dead," writes Schoenebaum.

The blow up of BMS-094 due to toxicity is not necessarily a surprise.


contributor Nathan Sadeghi-Nejad first

raised safety concerns about BMS-094

in a column last May after returning from a European liver disease meeting where the drug was conspicuously absent.

"I suspect something is wrong with Bristol-Myers' INX-189, which has since been renamed by the company as BMS-094," wrote Sadeghi in the very prescient

column last May

. "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' hepatitis C drugs become more attractive."

Gilead's GS-7977 is the most advanced nuc in clinical development, with multiple phase III studies already underway. Idenix is moving its nuc IDX-184 into phase II combination studies. On Monday, Vertex announced the first erly-stage, proof-of-concept data for its nuc ALS-2200 that showed the drug's potency to be comparable to that of GS-7977.

"This is clearly a significant positive for Gilead, who sees what we previously perceived as their most significant potential competitor in the Hep C space effectively taken out of the race," writes Brean Murray Carret analyst Brian Skorney in a Thursday morning research note. "We expect increased focus on Vertex andIdenix as the only other companies with nucs in clinical development that could be entertained as a

GS-7977 competitor. But the increased scarcity value resulting from the Bristol failure should be carefully measured against anincreased risk. Nucleos(t)ide analogs for Hep C have run into safety issues in mid‐stage studies at an alarming rate."

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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