Second, Idenix completed a major secondary offering only two days after the Novartis breakup. Idenix sold 22 million shares at $8.00 per share or 28% below recent highs. Although I generally support equity issuances at management's discretion, the company still had at least $90 million in the bank. Shareholders should feel justifiably frustrated at this seemingly unnecessary rush dilution of the existing investor base. I worry that the timing signals dark clouds on the horizon.

Right before the Bristol-Myers news, Vertex Pharmaceuticals ( VRTX) announced impressive early clinical data for ALS-2200, a nucleotide analogue licensed from Alios BioPharma. After seven days of dosing, the eight treated patients showed a median 4.54 log reduction in viral load. That's near complete eradication of virus, for those of you unfamiliar with the logarithmic scale.

Unfortunately for Vertex, ALS-2200 has not cleared any meaningful long-term safety hurdles and the drug remains years behind Gilead's compounds. I would put Vertex on the "watch and wait" list, but that's it.

As I have discussed before, it's hard for me to get excited about the other Hep C players. Abbott ( ABT) has a seemingly decent trio of drug candidates in later-stage development, but the impending spin off of AbbVie -- Abbott's pharma business -- makes the new company nearly completely dependent on the multi-blockbuster rheumatoid arthritis drug Humira.

Johnson & Johnson's ( JNJ) TMC-435 looks solid but lacks an obvious companion unless the company partners with Gilead or physicians, on their own, decide to combine TMC-435 with Gilead's GS-7977 into an "off label" all-oral Hep C regimen -- an idea that BioMedTracker's Tucker believes is a real possibility. Finally, everyone wants me to like Achillion Pharmaceuticals, but there is no shortage of NS5A or protease inhibitors -- the company has two NS5As and a protease inhibitor -- so I can't get that excited.

Ironically given the longstanding investor skepticism, Gilead appears likely to dominate the Hep C market over the next decade. I still worry the company vastly overpaid for Pharmasset, but that concern will be meaningful only if something goes wrong and investors are looking for a cudgel with which to beat management. Otherwise, it's time for investors to start thinking logically about the real size of the Hep C treatment market. It's going to be hard for any company to make big money if there aren't enough Hep C patients to treat.

Disclosure: Sadeghi has no positions in any of the stocks mentioned in this article.

Follow Nathan Sadeghi-Nejad on Twitter.
Nathan Sadeghi-Nejad has 15 years experience as a professional health-care investor, most recently as a sector head for Highside Capital. He has worked on the sell side (with independent research boutiques Sturza's Medical Research and Avalon Research) and the buyside (at Kilkenny Capital prior to Highside). Sadeghi-Nejad is a graduate of Columbia University and lives in New York. You can follow him on Twitter @natesadeghi.

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