Skip to main content



) --Shares of hepatitis C drug developer


( INHX) whipsawed Wednesday on a mash of rumors, analyst chatter and speculation all tied to the safety of the company's lead drug INX-189.

With an important safety check on INX-189 expected this month or next, investors are clearly twitchy nervous -- more so since



shut down clinical work on a similar hepatitis C drug

last month due to liver toxicity.

Inhibitex shares lost as much as 16% of their value Wednesday on no apparent news, which naturally sent investor searching for an explanation. This is on top of an 8% drop in the stock on Tuesday.

At first, the Inhibitex weakness was attributed to the rival

Achillion Pharmaceuticals

(ACHN) - Get Achison, Inc. Class A Report

receiving FDA fast-track status for its hepatitis C drug. This explanation was quickly discarded for its utter stupidity.

Inhibitex, speaking through multiple sell-side analysts defending the stock, said nothing materially had changed with the INX-189 study. The stock began to recover.

Scroll to Continue

TheStreet Recommends

Most likely, Inhibitex sold off because of cautious and unpublished comments made by Bank of America/Merrill Lynch biotech analyst Rachel McMinn to her investor clients during a series of marketing meetings this week. McMinn is the axe on hepatitis C drug stocks so her comments carry a lot of weight.

Speaking about the upcoming data on INX-189, McMinn reportedly told her Wall Street clients that while the risk-reward in Inhibitex shares is still positive, the stock has dramatic downside if safety issues crop up.

"Preclinical toxicity

with INX-189 is there but no one knows if it will translate into a clinical concern," McMinn told her clients, according to an email sent by Bank of America brokers to investors earlier today. The email was sent to investors in an attempt to clarify McMinn's views on Inhibitex and the outlook on INX-189.

Inhibitex is conducting a phase Ib study that is evaluating a 200 mg dose of INX-189 plus ribavirin over 7 days in patients with genotype 1 hepatitis C. Another arm of the study evaluates 200 mgs of INX-189 plus interferon and ribavirin for 28 days in genotype 2/3 hepatitis C patients.

Interim results from these arms of the study are expected later this month or in February and should provide investors with a better perspective on INX-189's safety profile. Importantly, it's hoped that the liver toxicity that doomed Pharmasset's PSI-938 doesn't make an appearance.

Inhibitex was one of the

best-performing stocks of last year

due to the optimism and potential surrounding INX-189. The company is regularly touted as a takeover target, but only if INX-189 remains a solid hepatitis C player.

Another possible reason for the Inhibitex sell off was an alert issued today regarding a significant sale of stock by the company's second-largest holder, the hedge fund QVT Financial.

QVT Financial initially reported the sale of 5.2 million shares of Inhibitex stock on Nov. 4, according to Bloomberg. But an alert on the sale was issued again Wednesday, possibly spooking other investors who wondered why the hedge fund was dumping stock ahead of the important INX-189 clinical data.

QVT still owns 2.5 million shares of Inhibitex and the hedge fund's cost basis is believed to be below $2 a share, according to a person familiar with the fund's holdings.

Inhibitex shares are rebounding from the morning sell off, down just 3.5% to $9.74.

--Written by Adam Feuerstein in Boston.

>To contact the writer of this article, click here:

Adam Feuerstein


>To follow the writer on Twitter, go to


>To submit a news tip, send an email to:






and become a fan on


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;

click here

to send him an email.