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PRINCETON, N.J. ( TheStreet) -- Pharmasset ( VRUS) is starting late-stage clinical trials of its lead hepatitis C drug with the goal of becoming the first company to reach the market with an all-oral therapy against the chronic liver disease.

Three phase III studies will combine Pharmasset's once-daily experimental pill PSI-7977 with another oral medicine ribavirin. Most notably, the treatment regimen used in these studies will exclude weekly injections of interferon, a standard drug used today to treat hepatitis C.

If results from these PSI-7977 studies are positive, Pharmasset plans to seek U.S. and European approval in the second half of 2013. This strategy and timeline establishes Pharmasset as the current leader in the race to develop the first all-oral hepatitis C therapy, ahead of competitors including Vertex Pharmaceuticals ( VRTX), Abbott ( ABT), Bristol-Myers Squibb ( BMY) and Johnson & Johnson ( JNJ).

Roche ( RHHBY) recently acquired Anadys Pharmaceuticals to accelerate its development of an all-oral hepatitis C regimen.

"This would result in a launch of PSI-7977 in 2014, well ahead of expectations for a launch in 2015/2016," writes JP Morgan biotech analyst Geoff Meacham in a note to clients Tuesday morning.

Pharmasset is the top-performing biotech stock this year with a valuation that now tops $5 billion, largely because of previously presented data from ongoing mid-stage studies demonstrating PSI-7977's ability to eliminate the hepatitis C virus quickly and without concerns about resistance or rebound.

Pharmasset shares were up $7.89, or 11% to $78.36 in early Tuesday trading. Vertex shares were down 4% to $37.95 on concerns that the company's current hepatitis C drug Incivek faces earlier competition.

By announcing the start of PSI-7977 phase III studies Tuesday, Pharmasset is also engaging in a bit of gamesmanship against its competitors. The American Association for the Study of Liver Disease (AASLD) annual meeting, a closely followed confab for hepatitis C drug research, begins on Saturday. Pharmasset was already expected to garner a large share of the investor spotlight at the AASLD meeting, but Tuesday's announcement guarantees even more buzz.

The Pharmasset PSI-7977 phase III studies will enroll mainly hepatitis C patients with genotype genotype 2 and 3, a less common and more easily treated variant of the disease. The larger and more commercially lucrative opportunity is in patients with genotype 1, which is more difficult to treat. Vertex's Incivek and Merck's Victrelis are both approved as a treatments for genotype 1 patients. Pharmasset is also studying PSI-7977 in patients with genotype 1. --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; click here to send him an email.