Anadys Pharmaceuticals (ANDS) has been sharing updated and still-confidential clinical data on its lead hepatitis C drug in the hopes of attracting a deep-pocketed partner.

That hepatitis drug, ANA598, first leapt to investors' attention in January when Anadys released initial antiviral activity data from a small phase I study.

Since then, Anadys has completed treatment of additional hepatitis C patients with two higher doses of ANA598. Results will be made public later this month at a European hepatitis C conference.

Anadys owns full rights to ANA598 but wants to attract one of the larger drug companies involved in hepatitis C for a partnership or outright acquisition. To get the deal-making juices flowing, the company has been sharing the new ANA598 data under confidentiality agreements.

"What I think we can say is that on the basis of that data, and being able to share it under confidentiality with companies, we were able to expand the group of companies committed to a full due diligence process around ANA598," said Anadys CEO Stephen Worland last Thursday at a conference sponsored by BioCentury, a biotech industry trade publication.

Anadys shares rocketed from under $2 to more than $4 when the first data on ANA598 were released in early January showing the drug to have potentially strong antiviral effect against the hepatitis C virus.

The stock climbed higher, topping $7 in mid-February, as market speculation ramped about a potential Anadys partnership deal.

Anady shares were down 5.2% to $6.05 in recent trading.

ANA598 has only been tested in a handful of hepatitis C patients so far, but paucity of data has not been a major hindrance for similar deals already completed in the hepatitis C market.

Last month, Vertex Pharmaceticals ( VRTX) purchased ViroChem, a fellow hepatitis C drug developer, for about $377 million. Roche has also dished out big money for drug development partnerships with Pharmasset ( VRUS) and InterMune ( ITMN).

ANA598 is what is known as a non-nucleoside polymerase inhibitor. These drugs act directly against specific enzymes to prevent the hepatitis C virus from making copies of itself. That's different from current treatments for hepatitis C, namely long-acting forms of interferon and a drug called ribavirin, which work by stimulating the body's immune system to destroy the virus.

The future in hepatitis C treatment is moving toward combinations of direct antivirals, in much the same way that HIV patients are treated today. A drug like ANA598, therefore, may be valuable to a larger drug company that can combine it with another drug already in clinical trials.

Anadys is not saying who's been knocking on its door to get a look at the ANA598 data, but that hasn't stopped market watchers from speculating.

In a note to clients last week, JMP Securities analyst Liisa Bayko said nine potential partners/acquirers for Anadys were in the hunt: Schering-Plough ( SGP), Merck ( MRK), Boeringher Ingelheim, Bristol-Myer Squibb ( BMY), Gilead Sciences ( GILD), Novartis ( NVS), Johnson & Johnson ( JNJ), Vertex and Pfizer ( PFE).

"We believe that management is executing an M&A mergers and acquisitions process engineering to bring all serious contenders to the table simultaneously to maximize shareholder value," said Bayko. She has a market outperform rating on Anadys, but her firm has no banking relationship with the company.

Anadys ended the first quarter with about $20 million in cash, which based on its burn rate is enough to last another two or three quarters. Anadys, therefore, needs to come to an agreement on a partnership and/or acquisition relatively quickly or face having to raise more money in the public equity markets.

At the time of publication, Feuerstein's Biotech Select model portfolio was long Gilead Sciences and Vertex.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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