Updated from 11:49 a.m. EDT

Anadys Pharmaceuticals ( ANDS) released new data on its lead hepatitis C drug Thursday demonstrating the drug's antiviral activity at three different doses, but patient dropouts due to rash raised concerns about the drug's safety and sent Anadys shares tumbling.

Anadys owns full rights to its drug ANA598 but wants to attract one of the larger drug companies involved in hepatitis C for a partnership or outright acquisition. The company has already shared the new data on ANA598 made public Thursday with prospective suitors under confidentiality agreements.

In the phase 1b study of 35 patients with hepatitis C, three days of treatment with ANA598 resulted in a median viral load reduction of greater than 2 log, or more than 99%, at all three dose levels tested, the company said.

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At the lowest dose, 200 mg twice daily, treatment with ANA598 resulted in a median 2.4-log reduction in the hepatitis C viral load. At the 400 mg twice-daily dose, the median viral load reduction was 2.3 log; while at 800 mg twice daily, the median viral load reduction was 2.9 log. None of the patients receiving placebo in the study reported significant reductions in viral load, by comparison.

Patients in the study with the genotype 1b form of hepatitis C reported a greater decrease in viral load across all three doses of ANA598 compared to patients with the genotype 1a form of the disease. Genotype 1b is the most common subtype of hepatitis C found in North America and Europe.

But three healthy volunteers treated with ANA598 in a separate 14-day safety study developed a rash severe enough to cause them to discontinue treatment and drop out of the study. Investors Thursday were more worried about this potential safety issue than the drug's efficacy, which is why Anadys shares are falling.

The final results of this phase Ib study of ANA598 were presented Thursday at the annual meeting of the European Association of the Study of the Liver, which began today in Copenhagen, Denmark. Anadys released initial data from this study in January.

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